[Senate Hearing 110-972]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-972


                     THE CONDITION OF OUR NATION'S
          INFRASTRUCTURE AND PROPOSALS FOR NEEDED IMPROVEMENTS

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   ON

ADDITIONAL INVESTMENT PROGRAMS THAT ARE DESIGNED TO LEVERAGE PUBLIC AND 
                  PRIVATE INVESTMENT IN INFRASTRUCTURE


                               __________

                        TUESDAY, MARCH 11, 2008

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs


      Available at: http: //www.access.gpo.gov /congress /senate /
                            senate05sh.html




                  U.S. GOVERNMENT PRINTING OFFICE
50-392                    WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001
















            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

               CHRISTOPHER J. DODD, Connecticut, Chairman
TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         WAYNE ALLARD, Colorado
EVAN BAYH, Indiana                   MICHAEL B. ENZI, Wyoming
THOMAS R. CARPER, Delaware           CHUCK HAGEL, Nebraska
ROBERT MENENDEZ, New Jersey          JIM BUNNING, Kentucky
DANIEL K. AKAKA, Hawaii              MIKE CRAPO, Idaho
SHERROD BROWN, Ohio                  ELIZABETH DOLE, North Carolina
ROBERT P. CASEY, Pennsylvania        MEL MARTINEZ, Florida
JON TESTER, Montana                  BOB CORKER, Tennessee

                      Shawn Maher, Staff Director
        William D. Duhnke, Republican Staff Director and Counsel
                       Dawn Ratliff, Chief Clerk
                      Shelvin Simmons, IT Director
                          Jim Crowell, Editor














                            C O N T E N T S

                              ----------                              

                        TUESDAY, MARCH 11, 2008

                                                                   Page

Opening statement of Chairman Dodd...............................     1

Opening statements, comments, or prepared statements of:
    Senator Shelby...............................................     3
    Senator Menendez.............................................     4
    Senator Hagel................................................     5
    Senator Carper...............................................     7
    Senator Corker...............................................     8

                               WITNESSES

David G. Mongan, President, American Society of Civil Engineers..    10
    Prepared statement...........................................    43
    Response to written questions of:
        Senator Johnson..........................................   101
        Senator Crapo............................................   102
Felix G. Rohatyn, Trustee, Center for Strategic and International 
  Studies........................................................    12
    Prepared statement...........................................    61
    Response to written questions of:
        Senator Johnson..........................................   103
        Senator Crapo............................................   104
Tracy Wolstencroft, Managing Director and Head, Public Sector and 
  Infrastructure Banking, Goldman, Sachs and Company.............    14
    Prepared statement...........................................    65
    Response to written questions of:
        Senator Johnson..........................................   105
        Senator Crapo............................................   106
Ron Blackwell, Chief Economist, American Federation of Labor and 
  Congress of Industrial Organizations (AFL-CIO).................    16
    Prepared statement...........................................    69
Janet F. Kavinoky, Director, Transportation Infrastructure, and 
  Executive Director, Americans for Transportation Mobility, U.S. 
  Chamber of Commerce............................................    18
    Prepared statement...........................................    82
    Response to written questions of:
        Senator Crapo............................................   107
        Senator Johnson..........................................   108

              Additional Material Submitted for the Record

Statement of Marc H. Morial, President and CEO, National Urban 
  League, Inc....................................................   110

 
 THE CONDITION OF OUR NATION'S INFRASTRUCTURE AND PROPOSALS FOR NEEDED 
                              IMPROVEMENTS

                              ----------                              


                        TUESDAY, MARCH 11, 2008

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:09 a.m., in 
room SD-538, Dirksen Senate Office Building, Senator 
Christopher J. Dodd (Chairman of the Committee) presiding.

       OPENING STATEMENT OF CHAIRMAN CHRISTOPHER J. DODD

    Chairman Dodd. The Committee will come to order, and let me 
begin by thanking our witnesses for being here this morning on 
a subject matter that is gaining more and more interest every 
single day because of the obvious issues here.
    What I am going to do is take a few minutes for an opening 
statement, turn to my friend and colleague from Alabama, 
Senator Shelby, for any opening comments he may have, as well 
as, of course, Chuck Hagel, who has been instrumental and 
tremendously helpful on this subject matter. Jack Reed is here 
as well, and anyone else who has short opening statements. Then 
we will get to our witnesses and have a good conversation this 
morning about an issue that is one of those areas which is 
developing strong bipartisan support, one of those things you 
do not see with great frequency around here, but the idea of 
doing something in the area of infrastructure seems to be 
moving in that direction.
    We gather here this morning to examine the issue of 
paramount importance: the condition of our Nation's 
infrastructure and proposals for needed improvements to it. I 
believe this is an urgent priority for our Nation for two 
fundamental reasons: first, because the safety and health of 
all Americans is directly and adversely affected by the 
deterioration of our roads, bridges, mass transit, drinking 
water, wastewater removal, and other vital components of our 
national structure.
    The National Highway Traffic Safety Administration reports 
that approximately 14,000 Americans die each year at least in 
part because our roads and bridges are crumbling before our 
very eyes. Congestion on our roads causes tons of carbon 
dioxide and other pollutants to be pumped into the atmosphere 
day after day. These emissions compromise the health of 
children and adults and contribute to global warming, which 
poses immense risks to the future of all humans.
    Tens of millions of Americans receive drinking water in 
their homes every day from pipes over 100 years old. I would 
just point out as an aside here that the leading stories in 
this city over the last several days have been the quality of 
the drinking water in this city. There have been serious issues 
raised about it. People are now talking about buying bottled 
water here in the Nation's capital because of the contaminants 
allegedly which are in our drinking water here.
    As I said, some of the pipes in our cities literally were 
built in the 19th century. Here in our Nation's capital, in 
Georgetown, one of the most exclusive areas in this city in 
terms of residential cost, wastewater is still conveyed through 
wooden sewage pipes that were built in the 19th century. That 
is the sewage system here in the Nation's capital, in 
Georgetown.
    In the city of Milwaukee, over 400,000 people were sickened 
several years ago with flu-like symptoms caused by a strain of 
bacteria in the municipal drinking water system. The bacteria 
strain was eventually linked to inadequate treatment of the 
drinking water in that city.
    If Americans needed any more proof of the health and safety 
risks they face from our crumbling infrastructure, they got it 
on August 1 of last year, when a major transportation artery in 
Minneapolis abruptly collapsed without warning, causing the 
deaths of 13 people and injuring 100 more.
    The second reason why renewing our Nation's infrastructure 
is of utmost importance is that our national prosperity is at 
stake if we do not act. From the days of the Roman aqueducts to 
the present, a Nation's ability to grow and prosper has always 
relied upon its ability to effectively move people, goods, and 
information. Ask any American today how we are doing in 
achieving this objective, and chances are the response would be 
the same: We can do better.
    When the average American spends 51.5 hours a year in 
traffic congestion, we can do better. When you have 33 percent 
of all urban and rural roads in poor, mediocre, or fair 
condition, obviously I think we can all do much better than 
that. And when the United States invests less than 2 percent of 
its gross domestic product on infrastructure, while countries 
like China and India invest between 7 and 12 percent, we can do 
far better than that.
    There is no question in my mind then that our Nation's 
infrastructure needs are enormous and immediate. The question 
for us as policymakers is this: How do we meet these needs? 
Clearly, the status quo is not in and of itself sufficient. The 
American Society of Engineers estimates that an investment of 
$1.6 trillion over 5 years is required just to bring our 
current infrastructure to an acceptable level. That is just 
maintenance and repair. That is not doing anything new. That is 
just maintaining and repairing the existing infrastructure, 
$1.6 trillion. That translates into $320 billion a year just to 
upgrade existing structures to serve the needs of our Nation. 
At this moment in history, when we are contending with the 
prospect of significant long-term budget deficits, we must 
explore other creative and fiscally responsible ideas by which 
to fund our Nation's infrastructure needs.
    Senator Chuck Hagel of Nebraska and I have offered one such 
idea: a national infrastructure bank which would establish a 
unique and powerful public-private partnership using limited 
Federal resources. It would leverage the significant resources 
and innovation of the private sector. It would tap the private 
sector's financial and intellectual power to meet our Nation's 
largest and most critical structural needs.
    I note that, as today's witnesses demonstrate, support for 
this initiative spans the ideological spectrum, which, in my 
view, speaks to its promise. Some might say that our 
legislation is too expensive or that we cannot afford to 
implement such a policy. I would say, as many of our witnesses 
will this morning, we cannot afford not to implement it given 
these costs today at $1.6 trillion, as I will ask our witnesses 
at some point what projected costs would be 5 and 10 years from 
now if we failed to act at all.
    The budget resolution on the Senate floor this week 
establishes a reserve fund for the specific purpose of meeting 
our infrastructure needs, and I want to commend Kent Conrad and 
Judd Gregg, the Chair and Ranking Member of the Budget 
Committee, for establishing that fund. It is evidence of a 
growing consensus in the U.S. Congress and the country that 
complacency can no longer substitute for action in this area.
    So let us be clear. The cost of leading this challenge will 
be great. It is not insignificant at all. But the cost of 
failing to meet in our view is even greater, far greater. From 
the Erie Canal to the interstate highway system, every 
generation of Americans has answered the call to build a safe, 
stronger, and more prosperous America. Our time to do the same 
has come for this generation, and that time is short, and for 
the sake of our Nation's future, we cannot fail, in my view.
    I appreciate the willingness of our witnesses this morning 
to share their insights with the Committee today, and we look 
forward to your testimony.
    With that, let me turn to my Congress from Alabama.

             STATEMENT OF SENATOR RICHARD C. SHELBY

    Senator Shelby. Thank you, Mr. Chairman.
    Today we are discussing, as the Chairman has pointed out, a 
very important issue confronting our Nation: infrastructure 
development. Infrastructure needs across the Nation are vast 
and vary from community to community. Our roads, bridges, 
airports, public transportation, and water and sewer systems 
are aging, and communities are outgrowing the capacity of 
existing structures, in some cases creating potentially 
dangerous public health situations.
    Some have estimated the cost to address our aging national 
infrastructure to be about $1.6 trillion over 5 years, or $320 
billion a year. By any measure, this would require a sizable 
commitment of Government resources. The demand on the Federal 
budget is not expected to contract in the coming years. It is 
clear that we must find a way to balance our significant 
infrastructure needs without other demands on our Federal, 
State, and local budgets. Therefore, I believe, as Chairman 
Dodd has pointed out, it is important that we continue to 
develop and pursue alternative ways of financing our 
infrastructure needs.
    There are many ideas about how to do this, some of which 
will be discussed here today. I expect that as we continue to 
examine these ideas, others will emerge as well. Nevertheless, 
I believe we can all agree that this is a matter that we must 
address in a thoughtful and comprehensive way that considers 
the needs of rural and urban communities alike.
    Thank you, Mr. Chairman, for calling this hearing.
    Chairman Dodd. Thank you very much.
    Senator Hagel. Excuse me. I am sorry. Senator Menendez. 
Then we will go to Senator Hagel. Bob.

              STATEMENT OF SENATOR ROBERT MENENDEZ

    Senator Menendez. Thank you, Mr. Chairman. I want to thank 
you for holding this hearing on the tremendous infrastructure 
challenges we face, and I think this is a critical conversation 
to be had, and I am proud to be a cosponsor of your 
legislation.
    The reality is that when we talk about infrastructure, we 
are not just talking about roads and bridges; we are talking 
about strengthening our communities, bolstering our economy, 
and making investments for the future of our Nation.
    When our Nation's infrastructure is weak or crumbling, we 
are not talking about hypothetical effects. The impact is 
tangible. When infrastructure is neglected or less than sturdy, 
we see the effects in our neighborhoods on subway cars or as we 
travel down the highway. And, sadly, as we all learned 
recently, when a bridge crumbles, the result is not just 
cracked concrete. It is communities that are torn apart and 
lives that are lost.
    And it should not take a tragic loss of life in Minnesota 
to make us realize that we already have needed investments that 
continue to slip from our list of national priorities. As the 
American Society of Civil Engineers has noted and reminds us, 
25 percent of our Nation's bridges are either structurally 
deficient or functionally obsolete. This includes over 2,000 
bridges in my home State of New Jersey. And when our 
infrastructure is hanging in the balance, so is our economy. 
According to a recent article in The Atlantic by Bruce Katz and 
Robert Puentes of the Brookings Institution, congestion of our 
roadways, railways, ports, and airports cost our economy $78 
billion in 2005. Half of these costs were in the Nation's 
largest ten municipal areas, including the regions surrounding 
Philadelphia and New York City in my home State of New Jersey. 
This just shows how important it is that we not only provide 
the funding to meet our needs but that we target funding to the 
areas of greatest need and to the areas that will do most to 
boost our flagging economy.
    And, finally, my State of New Jersey is just one prime 
example for the potential of economic growth that can be 
spurred by dedicated national efforts to finance infrastructure 
projects. The Northern New Jersey Port and Railyard System is 
an economic engine for the entire region. Some $150 billion in 
goods passes in and out of the ports of New York and New Jersey 
each year. Port commerce in New Jersey is responsible for more 
than 230,000 jobs throughout the region. But this economic 
engine cannot run by itself. In order to meet projected 
increases in the volume of cargo, it will require billions of 
dollars of investment to better connect our domestic markets to 
the port.
    To help prepare our region for the challenges ahead, I have 
worked to secure over $80 million for something we call the 
Liberty Corridor Project, which is truly a multi-modal, multi-
faceted project that merges commerce, rail cargo, innovation, 
and economic growth. The corridor not only clears critical 
choke points in our cargo rail system and makes critical 
railroad improvements, but it solidifies the region's place as 
a thriving economic center. None of this is possible without 
capital, without the vision to invest now for the future, and 
without seeing that each piece of the puzzle comes together to 
create a bigger plan. And we are looking at how we go beyond 
that. We are looking at a new passenger train tunnel across the 
Hudson River along with the Port Authority of New York and New 
Jersey, looking at how we connect in a time in which our 
regional context and regional approaches are so critical to 
unlocking the economic potential.
    So these are just some dimensions of the challenge ahead, 
and, Mr. Chairman, we look forward to working with you to move 
it forward.
    Chairman Dodd. I thank the Senator very much, and I thank 
you for cosponsoring the bill as well. It is a big help to us.
    To my co-author in this effort, Senator Chuck Hagel. Thank 
you, Chuck.

                STATEMENT OF SENATOR CHUCK HAGEL

    Senator Hagel. Mr. Chairman, thank you, and I wish to also 
thank our witnesses for their time and efforts this morning. 
There are those who are here this morning, like John Hamry from 
CSIS, and others who, as you know, Mr. Chairman, had a lot to 
do with helping shape and frame the legislation that we have 
introduced, and to all of you who were so helpful and involved, 
we thank you very much.
    In 1955, President Dwight Eisenhower said, ``The uniting 
forces of our communication and transportation systems are 
dynamic elements of the very name we bear--United States. 
Without them, we would be a mere alliance of many separate 
parts.''
    We will hear from our witnesses today about the state of 
our Nation's infrastructure. Maintaining and upgrading our 
infrastructure to a 21st century standard is a national project 
that our political system needs to embrace for the 
competitiveness, safety, and unity of the Nation.
    The Dodd-Hagel National Infrastructure Bank legislation is 
not the entire solution, but it can be a part of the solution. 
We are in need of new, creative 21st century solutions. The 
Federal Government does not and will not have the resources to 
appropriate the required funding necessary to meet our future 
national infrastructure needs. That has been well documented in 
study after study.
    The legislation that we are considering this morning could 
provide the foundation for this 21st century framework to 
capitalize on our national infrastructure. The Infrastructure 
Bank, a public entity similar in nature to the Municipal 
Assistance Corporation that one of our witnesses, Ambassador 
Rohatyn, led in New York City in the 1970s and 1980s, would 
have the ability to leverage private capital to supplement the 
current levels of public spending. A public entity that can 
focus private sector investment onto public infrastructure 
could help provide the necessary investment for 21st century 
infrastructure in America.
    Our global competitors are investing astounding amounts of 
capital into their infrastructure projects, and these countries 
have all recognized the need for private investment to 
supplement public financing for their infrastructure projects. 
One example: In 2005, public-private partnerships in the United 
Kingdom totaled almost $60 billion. That represents almost 20 
percent of total infrastructure spending in the United Kingdom.
    As Eisenhower recognized when he authorized the building of 
the interstate highway system, the United States must now 
recognize that the building and maintenance of our 
infrastructure is a critically important national priority. 
This legislation that we will discuss this morning can help our 
country make the needed new, long-term investments in 
infrastructure.
    And I might add, Mr. Chairman, in a further commentary on 
your statement regarding the water system in Washington, D.C., 
we met yesterday with the Governor of Pennsylvania, and he went 
into some rather considerable detail on what he is facing in 
the State of Pennsylvania regarding infrastructure needs, basic 
infrastructure needs, over 100 years old. I do not think we 
need to go much beyond the local news here in Washington, in 
addition to the water system, as to the problems that we are 
seeing evolve regarding the transportation system in Northern 
Virginia. It was noted over the last couple of days that there 
is no money in the budget, will not be money available in the 
budgets of the States of Virginia and Maryland for these big 
projects. We surely do not have it at the Federal Government 
level. So what happens? Those critically important projects, 
just transportation, will be left on the drawing board. That 
will cut directly into our competitive position in the world.
    So I think this is as big an issue, Mr. Chairman, that we 
will face. Certainly the next President in his or her 
administration is going to have to deal with this. And I am, 
again, thankful that we have not just witnesses but those who 
would come forward and help us deal with this issue because it 
affects every American.
    Thank you.
    Chairman Dodd. Thank you, Senator, very much.
    I want to particularly thank Senator Hagel. This was 
working with Felix Rohatyn and Warren Rudman, Bob Kerrey, CSIS, 
and I also want to recognize John Hamry in the audience as well 
over the last couple of years. I know that I was telling the 
story yesterday that last August we had finished up the work 
and were trying to decide when to announce this effort of ours. 
And I made a strong case to Senator Hagel that we probably 
ought to wait until September, that no one followed any news in 
August. Indeed, we had put in this strong effort and to have a 
press conference in August just was not going to get any 
attention on the subject matter. But Senator Hagel, as is the 
case, was persuasive and said we ought to do it in August, so 
we did it. We had a press conference together and announced 
this bill of ours.
    Besides Senator Hagel and me, I think there were two other 
people who showed up to hear this brilliant idea that we had 
worked on for 2 years at 10 o'clock in the morning. By 5 
o'clock in the afternoon, Senator Hagel and I were on almost 
every TV screen in America because tragically, at 4 o'clock, 
the bridge in Minneapolis went down. And once again, people's 
interest in this subject matter piqued, but as we have learned 
historically, it is usually out of tragedy that subject matters 
like this gather public attention and then fade once again as 
other issues dominate the news.
    And so I want to thank him for his efforts. It has been 
just terrific to work with him, and I am going to say this 
privately to him, but we are all going to regret your departure 
from this body when you move on. But you have been great to 
work with, and I hope we can get something done in this 
Congress that will bear your name because it deserves it. You 
have been a great asset in this effort.
    Senator Carper.

             STATEMENT OF SENATOR THOMAS R. CARPER

    Senator Carper. Thanks, Mr. Chairman. Thanks for pulling 
this together on what we all agree is an important issue. Thank 
you all for joining us today and for your testimony and 
responses to our questions.
    As we all know, we are facing worsening congestion in our 
roads and in our sky, in addition to limited capacity on our 
rail lines. Meanwhile, both the use and demand for freight and 
passenger rail are growing, and I for one think that is a good 
thing. Amtrak ridership was up some 15 percent, revenues were 
up some 15 percent in the first quarter of this fiscal year. It 
is clear to me that American people want more transit options 
and want better transit infrastructure in both urban and in 
rural areas, too.
    We need to find ways to strengthen our current public works 
programs and also to fully meet our Federal commitments to 
States for infrastructure construction and repairs.
    Focusing effective investments in our transportation 
infrastructure is not only good for travelers, but I think it 
is good for our economy. The administration has estimated that 
roughly 48,000 jobs are created for every billion dollars of 
transportation infrastructure investments--48,000 jobs. Last 
March, Senator Voinovich and I introduced the National 
Infrastructure Improvement Act. This legislation would create a 
commission, a blue-ribbon commission--something we are pretty 
good at doing around here, but this is one that will actually 
do some good--a blue-ribbon commission to examine the state of 
infrastructure throughout our country, including rail and 
including roads and bridges, but not trying to replicate the 
work that was done on another commission created out of 
SAFETEA-LU, but beyond that, but to tell us to look at flood 
control structures, water, wastewater, too, bridges and levees, 
too.
    The commission would then make recommendations to the next 
Congress and to the next President about how to maintain our 
current infrastructure needs while meeting future needs and 
safety requirements. The idea is to prioritize what our 
infrastructure needs are and also to suggest how we might pay 
for them.
    It is my hope that the analysis and the recommendations of 
this Commission would improve collaboration among Federal, 
State, and local governments, while allowing us to pinpoint 
infrastructure needs and priorities. The tragedy in 
Minneapolis, which the Chairman just alluded to, last year 
underscored the urgent need for such a commission and the 
reinvestment in our infrastructure nationwide. Our legislation 
has passed the Senate; it is pending in the House.
    As I have often said, if a job is worth doing, it is worth 
paying for. I firmly believe that it is essential that all 
stakeholders in these matters come together and try to form 
some kind of consensus, not only what our long-term goals might 
be, but also how to get there and how we should pay for it.
    As we all know, these are not simple issues. The state of 
our infrastructure significantly impacts the quality of our 
environment, the growth of our economy, and our daily quality 
of life. Given these high stakes, we must take bold and 
innovative actions to bring our transportation, our housing, 
our energy, and telecommunications sectors into the 21st 
century while it is still the 21st century.
    I am grateful for the opportunity, Mr. Chairman, we have to 
hear today from our witnesses, and I look forward to their 
testimony. Thank you.
    Chairman Dodd. Thank you very much, Senator.
    Senator Corker.

                STATEMENT OF SENATOR BOB CORKER

    Senator Corker. Mr. Chairman, I thank you and Senator Hagel 
for bringing for this legislation. In my short tenure here in 
the Senate, I have noticed that we have a tendency to focus on 
the ``urgent'' instead of the ``important'' in many cases, and 
I appreciate both of you bringing attention to this. I look 
forward, as usual, to listening to these wonderful panelists. 
And I will not say anymore. I will wait to listen to them.
    Thank you so much.
    Chairman Dodd. Well, thank you very much. I will leave the 
record open, by the way, for other members who come for any 
opening statements they would care to make this morning. And 
just let me state that all statements and supporting 
documentation from members as well as witnesses will be 
included in the record as well.
    Let me briefly introduce our very good panel here this 
morning. David Mongan is the President of the American Society 
of Civil Engineers, has 35 years of experience as a civil 
engineer; past Chair of the Council on Federal Procurement of 
Architectural and Engineering Services. He received a 
Bachelor's degree (1971) and Master of Science degree (1976) in 
Civil Engineering from the University of Maryland and a 
Master's in Business Administration (1981) from Loyola College 
of Baltimore, Maryland. He received the Civil Engineer of the 
Year Award in 1998 from the ASCE Maryland Section and the 
Engineer of the Year Award in 1999 from the Engineering Society 
of Baltimore.
    Felix Rohatyn is no stranger to this Committee. He has been 
before us on numerous occasions, and truth in advertising, he 
is a very good friend of mine, a good friend of Chuck Hagel's, 
as he is of many members, Democrats and Republicans, in the 
Congress and elsewhere. He is currently Vice Chairman of Lehman 
Brothers, previously served as the Ambassador to France. Prior 
to his appointment, Felix was Managing Director of Lazard 
Freres and became a partner in 1961. Probably best known--for 
many things, but not the least of which was his negotiations, 
which he led, enabling New York City to resolve its financial 
crisis in the late 1970s when he was Chairman of the Municipal 
Assistance Corporation. And Felix has been tireless in his 
concern about this subject matter, and we thank you immensely 
for your service to our country in numerous capacities at the 
local, State, and national level. So, Felix, it is an honor to 
have you before the Committee this morning as well.
    Tracy Wolstencroft is a partner of Goldman Sachs, a member 
of the firm-wide Partnership Committee, the Investment Banking 
Operating Committee, and currently head of the Public Sector 
and Infrastructure Banking Group. His responsibilities at 
Goldman Sachs have included extensive senior management 
positions in the United States, Latin America, Japan, and 
China; a member of the Council on Foreign Relations, a member 
of the Board of Trustees of the National Geographic Society, 
the Nature Conservancy, and New York State Board, and he is 
also a member of the Board of Directors of the International 
Rescue Committee, and, Tracy, we thank you for your work in 
this area as well.
    Ron Blackwell is the Chief Economist of the American 
Federation of Labor and Congress of Industrial Organizations, 
the AFL-CIO, where he coordinates the economic agenda. The 
federation represents the AFL-CIO on corporate and economic 
issues affecting American workers and union strategies. From 
1996 to 2004, Ron was Director of the AFL-CIO Corporate Affairs 
Department. Before joining the labor movement, Ron was the 
academic dean in the Seminar College of the New York School of 
Social Research in New York, where he taught economics, 
politics, and philosophy. He serves on the Board of Directors 
of the Industrial Relations Research Association, the Research 
Advisory Council of the Economic Policy Institute, and the 
Board of Manufacturing and Engineering Design of the National 
Academies. I should point out, Ron--and we thank you for being 
here--I know that John Sweeney had hoped to be here this 
morning as well, along with Tom Donohue, I might add, of the 
Chamber of Commerce, but we are pleased to have you and have 
your background and experience as well.
    Janet Kavinoky is the Director of Transportation 
Infrastructure in the Congressional and Public Affairs Division 
of the U.S. Chamber of Commerce. In this capacity, she serves 
as the Chamber's senior lobbyist and policy expert on all 
transportation infrastructure ideas. In addition, she is the 
Executive Director of the Americans for Transportation 
Mobility, a national business-labor-construction industry 
coalition that unifies transportation stakeholders to support 
increased Federal investment in interconnected multi-modal 
transportation systems.
    And with that, I thank all of you for joining us this 
morning. We will begin with you, Mr. Mongan, and your 
testimony. Again, I will ask you to try and keep it to around 5 
to 7 minutes, if you can, so we can get to the questions.

 STATEMENT OF DAVID G. MONGAN, PRESIDENT, AMERICAN SOCIETY OF 
                        CIVIL ENGINEERS

    Mr. Mongan. Mr. Chairman and Members of the Committee, good 
morning. I am David Mongan, current president of the American 
Society of Civil Engineers, and I am pleased to appear before 
you today to testify for ASCE on the condition of the Nation's 
infrastructure and proposals for needed improvements.
    ASCE concluded in our 2005 Report Card for America's 
Infrastructure that the Nation's infrastructure deserved an 
overall grade of D.
    We said then that America's aging and overburdened 
infrastructure threatens the economy and quality of life in 
every State, city, and town in the Nation. We estimated that it 
would take an investment of $1.6 trillion by 2010 to bring the 
Nation's aging, existing infrastructure into good working 
order.
    Nothing approaching that level of investment has been made. 
We continue to underinvest in infrastructure at the national 
level. The total of all Federal spending for infrastructure as 
a percentage of our gross domestic product has steadily 
declined.
    The American Society of State Highway and Transportation 
Officials concluded that total spending on America's roads and 
highways should be about $155 billion each year to improve 
transportation infrastructure conditions nationally. The 
Federal investment in 2008 totaled approximately $41 billion, 
barely a third of the investment needed.
    The Congressional Budget Office recently estimated that 
America's investment in surface transportation infrastructure 
by all levels of government equaled about 1.5 percent of gross 
domestic product. In comparison, the Chinese Government 
invested an estimated 2.5 percent of GDP in highway 
construction alone in 2001.
    In 2007, the Department of Transportation reported that the 
cost to maintain only the Nation's highways would require an 
annual investment of almost $80 billion in 2004 dollars by all 
levels of government.
    Even at this level, however, congestion would worsen, 
according to the report, because it would finance too little 
new highway capacity.
    The DOT report, however, may understate the need. The 
American Road and Transportation Builders believe that Federal 
highway spending in the next surface transportation bill would 
have to start at $54.5 billion in fiscal year 2010 and grow to 
$61.5 billion by fiscal year 2015 to maintain the physical 
condition and operating performance.
    In January, the Environmental Protection Agency reported 
that we must invest at least $202 billion to prevent combined 
sewer and sanitary sewer overflows at the Nation's 16,000 
publicly owned wastewater treatment works. In 2002, the EPA 
estimated that the projected gap in what 23 spend on treatment 
systems and what is needed will be between $330 billion and 
$450 billion by 2019. This investment ``gap'' in drinking water 
systems is equally stark: approximately $100 billion over 20 
years.
    The Corps of Engineers operates and maintains 240 locks at 
195 locations along 12,000 miles of inland waterways. The 
average lock is 53 years old. Locks have a 50-year service 
life. It costs about $600 million to replace a lock. If we were 
to replace those that definitely need to be replaced, that are 
beyond their life, we would need to spend $72 billion. Simply 
to rehabilitate the other half would cost another $30 billion. 
That is more than $100 billion to invest to bring our 
antiquated waterway system into the 21st century.
    At the current spending rate, the budget in the 
administration's fiscal year 2009 of $180 million annually, it 
would take the Corps 20 years simply to fund all of the inland 
waterways projects authorized in the WRDA 2007.
    The National Infrastructure Bank Act of 2007, your S. 1926, 
would begin to address a problem that is rapidly approaching 
crisis levels--the physical deterioration of the Nation's 
infrastructure. The establishment of a National Infrastructure 
Bank. that would be an independent body to evaluate and finance 
capacity-building infrastructure projects of substantial 
regional and national importance is essential. We believe this 
bank of 2007, this act of 2007 is essential to beginning the 
long-term effort to maintain and replace the economically vital 
infrastructure systems across the Nation.
    ASCE supports the establishment of a Federal multi-year 
capital budget for public works infrastructure construction and 
rehabilitation. This budget would be similar to those used by 
State and local governments. The capital budget must be 
separated from non-capital Federal expenditures. The current 
budgeting process at the Federal level has a short-term, 1- to 
2-year, focus. Infrastructure, by its very nature, is long 
term.
    Let me say a few words about the use of public-private 
partnerships in funding U.S. infrastructure.
    Public-private partnerships are contractual relationships 
between public and private sectors in infrastructure 
development. They have been practiced worldwide in both 
developed and developing countries with multiple objectives 
including promoting infrastructure development, reducing costs, 
increasing construction and operation efficiencies, and 
improving service quality by incorporating private sector 
knowledge, expertise, and capital.
    There are barriers to public-private partnerships: social; 
unfavorable economic and commercial conditions; procurement 
framework; lack of mature financing technologies; and others. 
But although those partnerships appear to provide some help for 
financially strapped communities to provide basic 
infrastructure, they do come at a price. The Government 
Accountability Office cautioned in February that these 
partnerships may be useful in boosting highway investments but 
that they are not a panacea
    Thank you, Mr. Chairman. That concludes my testimony, and I 
would be pleased to answer any of the Committee's questions.
    Chairman Dodd. Well, thank you very, very much. I 
appreciate your work and your effort in this regard, and you 
have highlighted very, very well some of the growing costs you 
were talking about.
    Felix, it is a pleasure to have you with us, and once 
again, thanks for coming down. I know you have got a touch of 
that flu a little bit.

 STATEMENT OF FELIX G. ROHATYN, TRUSTEE, CENTER FOR STRATEGIC 
                   AND INTERNATIONAL STUDIES

    Mr. Rohatyn. I wanted to thank you, Mr. Chairman, and I 
wanted to say hello to Senator Shelby, whom I had the pleasure 
of seeing often, but not often enough, when I was stationed in 
Paris and he was coming back and forth dealing with 
intelligence matters.
    Senator Shelby. Thank you.
    Mr. Rohatyn. Glad to see you again, Senator.
    I do not really know where to start because, you know, I 
have been living with this issue for a long time, as you have, 
and when you really look at the reality of where we are, it is 
really so awesome, but you do not really know where to start 
because there are so many things that really have to be done. 
But we might as well face them.
    I would like to talk about a couple of things that have 
been mentioned here which people do not pay very much attention 
to because they sound technical but they are very important. I 
am talking about the need for a capital budget in the United 
States. We cannot go on having an accounting system for the 
total world, for our business, et cetera, except for our 
Government, which treats investment the way--as an expense and, 
therefore, skews the whole budget process by telling people 
that we are spending money when, in effect, we are investing 
money. And when we actually do not invest and call it something 
else, we are equally at risk.
    The bank that we are talking about was modeled on a number 
of institutions of a similar type that exist in the world. One 
is the European Investment Bank, which finances European 
infrastructure and, in particular, the high-speed rail network, 
which is the envy of the world. When you can go from Paris to 
London in 2 hours and not even realize you are in a train, you 
do two things: You transport people in comfort, and at the same 
time, you take a lot of pressure off the air system because it 
is better to go by train than to wait at the airport. So you 
have offsetting things which I think are worth talking about.
    The other thing is I think there has to be a little more 
confidence in Government in order to accomplish anything, and 
especially something as large as infrastructure. I think one of 
the reasons that we are so far behind on infrastructure is that 
we have managed as a national pastime to turn Government into 
some kind of joke and, therefore, to think that whatever 
Government touches is gone. And I do not think you can invest 
for 30, 40, 50 years, as we are going to have to do in this 
matter, unless people begin to trust and have some faith in 
Government's ability to at least be a partner of the private 
sector in terms of this kind of thing.
    And the importance of it, I can give you a small example. 
When we were dealing with New York City's bankruptcy and we 
were close to a solution. we needed some money from President 
Ford--not a lot, maybe a billion dollars. And we were raising 
$20, $25, $30 billion as a package from the labor unions, from 
the banks, and to some extent from the city. And we could not 
move anybody until President Ford finally relented and gave us 
a credit line of about $1 billion seasonally, which in terms of 
what we were doing was a pittance. But as soon as the Federal 
role was spelled out and was involved, everybody came in--the 
unions, the banks, the institutions--and we were able to, A, 
avoid bankruptcy and with the result that speaks for itself, 
and show that Government on some of these issues has to be 
present. It cannot take a pass on this.
    I think I would just like to also look at one or two other 
things. The worst category in my friend's balance sheet about 
the United States is school construction, which has a D. Now, 
we are a country that says we are a country that says we are 
going to teach the kids, we are not going to leave anybody 
behind, education is our biggest priority. But we are letting 
these kids study in buildings that have leaky roofs, where the 
cafeteria is almost floating away, where nobody pays any 
attention, and nobody talks about school construction. And yet 
I think that would be one of the things that I would certainly 
push as having a priority in terms of investments that can be 
made nationally.
    Now, I know the issue of keeping education and all of the 
related things separate from Government, but I think building 
decent schools where the roofs are waterproof is not a luxury 
that we should be ashamed of, but something we should really go 
after.
    I am a refugee. I came to this country in 1942, and I read 
a lot of American history because I came from a place where 
there was no history, or the history that existed was pretty 
bad. And I became fascinated to see what American Presidents 
did in terms of investing in the country, beginning with 
Jefferson and the Louisiana Purchase, following with Lincoln 
and the intercontinental railroad. And even going to things 
that do not appear to be hard assets, but at least as 
important, like the GI Bill of Rights, which educated this 
country and which housed it, actually with mortgages that were 
not re-settable, like some of our present models.
    So I come to plead for the inclusion, the intelligent 
inclusion of Government. The Chinese are spending money hand 
over fist. They are building 80 airports in the next 10 years. 
They are building nuclear power. They are building 200,000 
kilometers of rural roads over there. And we cannot compete 
with that unless we have a national effort and we devote the 
assets, but at the same time we are careful of the management 
of this bank, which will be very delicate issues: the earmarks, 
which have become a symbol of American budgeting, which I think 
is something we can well do without, in my view, and the money 
that will have to be put in, but it will clearly have to be put 
in by a partnership of business, labor, and Government.
    And I was delighted to read the statement of my colleague 
here from Goldman Sachs with respect to a possible role for the 
private sector and the size of the potential commitments.
    So I thank you, Senator, Mr. Chairman, I thank you, Senator 
Shelby, and my old friend, who is unfortunately leaving all of 
us, but hopefully he will not be too far away from us, Mr. 
Hagel.
    Chairman Dodd. Thank you very much. Felix, thank you for 
your comments this morning. In the prepared statement, which I 
urge my colleagues to look at, Felix explains, I think very 
clearly, exactly how the financial arrangement could work, at 
least under this idea, which is in a paragraph or so I think 
very succinctly describes how you leverage resources here to 
work for us. I appreciate your inclusion of that and your 
general comments this morning about the value of the 
investments that have been made historically on infrastructure.
    I was telling a group of students the other day down on the 
front steps of the Capitol, as all of us from time to time meet 
with students from our State, that all during the conduct of 
the Civil War, Abraham Lincoln insisted that the work on the 
Nation's capital continue. And so even as troops were gathered 
on the other side of the Potomac threatening the city, the work 
went on. And the importance of investing in the infrastructure 
with the symbols of us were tremendously important as well, 
beyond just the jobs that were created or the work that needed 
to get done. And, of course, the intercontinental railroad, we 
were actually spending money investing in that railroad while 
we were also investing in the needs of the military and the 
Civil War. The case was made to him over and over again to stop 
that spending, but he insisted it go forward all during that 
crisis. And there are wonderful examples of that throughout 
history. So, Felix, we thank you for your historical 
perspective as well.
    Mr. Rohatyn. If I could just quickly, since you mentioned 
the financials of the bank----
    Chairman Dodd. Yes, please.
    Mr. Rohatyn. I sort of neglected to even mention it. I 
think--and we used the number of $60 billion as the original 
capital of the bank. But, obviously, the $60 billion is only 
the beginning of an investment program, and I think we think--
and I am sure my colleagues agree with that--that this bank 
with a capital of $60 billion could be leveraged on a 3:1 basis 
very safely--very safely. That would give you another $180 
billion to put on the top of the $60 billion, which is $240 
billion. Then when you begin the partnership with the private 
sector, which will only be allowed in if they take a share of 
the investment, you can get to very important numbers very soon 
in a very safe way. And then at that point, the issue of 
management and being careful of the management and having it 
picked correctly, et cetera, becomes paramount.
    But it is not an unimaginable thing to structure the 
finance of this bank, especially when you begin to think of all 
of this as an investment and not as an expenditure.
    Chairman Dodd. That is great.
    Tracy, thank you for being with us.

 STATEMENT OF TRACY WOLSTENCROFT, MANAGING DIRECTOR AND HEAD, 
 PUBLIC SECTOR AND INFRASTRUCTURE BANKING, GOLDMAN, SACHS AND 
                            COMPANY

    Mr. Wolstencroft. Chairman Dodd, Senator Shelby, Members of 
the Committee, good morning. Thank you for the opportunity to 
appear before you today. My name is Tracy Wolstencroft. I am a 
Managing Director at Goldman Sachs and head of its Public 
Sector and Infrastructure business. I am pleased to share with 
you my perspective on the condition of the Nation's 
infrastructure and the proposals for needed improvements.
    During my 22 years at Goldman Sachs, I have had the 
opportunity to live and work in markets around the world, and I 
have seen the commitment that other countries, as has been 
mentioned here this morning, have made to infrastructure. In 
mature industrial countries such as the United States, it is 
all too easy to take for granted our physical infrastructure. 
Today, the infrastructure investment deficit in the United 
States is among the largest in the world--estimated in the 
findings of the Dodd-Hagel bill at approximately $4 trillion 
over the next 20 years, and that is just for transit, water, 
highway, and housing alone.
    Closing this deficit will not be easy, and it will not 
happen quickly. Governments at every level must play a major 
role in providing revenue streams and financing capacity--as in 
many ways they already do. For example, the Federal Government 
provides $40 to 50 billion each year for transportation, funded 
largely by the 18-cents-per-gallon gas tax. State and local 
governments primarily finance their needs through the tax-
exempt bond market, a market that has currently $2 trillion 
dollars of outstanding obligations. But closing the 
infrastructure deficit will require tapping all available 
sources of capital: tax-exempt debt, Federal Government 
financing tools, and private sector funds as well.
    Take, for example, the Capital Beltway. The Capital Beltway 
is less than 10 miles from where we are this morning. Every day 
more than 100,000 drivers use the Beltway, totaling 
approximately 20 million hours per year--often in slow-moving 
or bumper-to-bumper traffic. This congestion harms the region's 
economy, its environment, and its quality of life. But in 
December, the Commonwealth of Virginia finalized an agreement 
with a private consortium to construct two additional lanes in 
each direction along a 14-mile segment, together with other 
significant improvements, including two High Occupancy Toll, or 
HOT, lanes. This massive construction effort will create more 
than 4,000 jobs each of the next 5 years, providing a much-
needed economic stimulus.
    Additionally, this almost $2 billion project--like many 
others--could not have been financed through one source alone. 
In this case, the Commonwealth of Virginia is providing more 
than $400 million in grants; the Federal Government through the 
U.S. Department of Transportation is facilitating financing of 
about $600 million; there is an additional $600 million coming 
from the tax-exempt municipal bond market; and the private 
joint venture of Fluor Corporation and Transurban Group is 
contributing $350 million of capital.
    This is just one example of why we at Goldman Sachs believe 
that, where appropriate, partnerships with the private sector 
can play an important role in supplementing taxpayer dollars. 
The Capital Beltway also illustrates the power of using market-
based mechanisms supported by new technology such as open-road 
tolling and dynamic pricing to generate funding. Tolls paid to 
use the optional HOT lanes will provide the revenue stream 
necessary to build and maintain the improvements. As States 
grapple with fiscal pressures, it will in some cases be not 
only appropriate, but also necessary to rely on all of these 
capital tools.
    Already, an increasing number of States are following the 
lead of nations such as the U.K. and Canada, as has been 
referenced in earlier comments, in leveraging user fees such as 
tolls or water charges to support tax-exempt and private 
financings, much as the utility industry charges fees to help 
finance new, clean power plants. When it comes to generating 
the revenues needed to pay for the massive up-front costs of 
infrastructure, there is no free lunch. This Nation needs the 
political will to make revenue decisions that may be unpopular, 
including in some instances instituting or increasing user fees 
such as tolls. And if governments are able to identify those 
revenues, they will be able to tap into huge pools of private 
capital, possibly leveraging State and local pension funds such 
as the California Public Employees' Retirement System, or 
CalPERS, which recently announced a pilot $2.5 billion 
allocation to infrastructure to ``take advantage of major 
investment opportunities in the construction of roads, bridges, 
airports, utilities, water systems, and other projects.''
    As we explore creative ways for the private and public 
sectors to work together, so too there should be more 
innovation within the public sector. It is clear to me that 
initiatives along the lines of a federally sponsored bank such 
as that proposed in the Dodd-Hagel National Infrastructure Bank 
Act could act as an important catalyst. In addition to the 
tangible benefits of the Dodd-Hagel approach, I believe this 
bill also provides an important statement that our national 
leaders recognize the urgency of our infrastructure deficit and 
are prepared to make the issue a national priority.
    I conclude by thanking Chairman Dodd, Senator Shelby, 
Senator Hagel, and Members of the Committee not only for 
inviting me to testify but. more importantly, for taking this 
progressive step toward helping the United States and its 
infrastructure deficit.
    Chairman Dodd. Thank you very much. Excellent testimony.
    Ron, thank you for being with us this morning.

     STATEMENT OF RON BLACKWELL, CHIEF ECONOMIST, AMERICAN 
 FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS 
                           (AFL-CIO)

    Mr. Blackwell. Thank you, Senator Dodd, Ranking Member 
Shelby, and other Senators, for inviting us here to present the 
views of the AFL-CIO and the American labor movement on this 
very municipality issue.
    The American economy is the most productive economy in 
history. It generates nearly $14 trillion in product and 
income. But key to our Nation's success and prosperity has been 
and I hope will continue to be the commitment, the productivity 
of American workers but also the world-class infrastructure 
that we have built over American history, as has been 
mentioned.
    Unfortunately, our infrastructure is deteriorating, as Mr. 
Mongan mentioned, and the figure of $1.6 trillion of unmet need 
over a 5-year period is impressive, particularly when you 
consider the infrastructure systems we will need if we are 
going to successfully meet the fierce competition in a 21st 
century global economy.
    As we meet today, however, we face an economic crisis that 
poses a number of serious and interrelated challenges. We must 
recover from the recession that now seems to be underway. We 
must find a more sustainable growth path for the economy other 
than asset-based inflation. We have to find a way to rebuild 
the global competitiveness of our country. And we have to find 
a way to more broadly share the prosperity that our country 
enjoys.
    In different ways, the rebuilding of our Nation's 
infrastructure plays a crucial role in addressing each of these 
challenges, and we recommend to you to think about the work of 
this Committee in that context.
    A bursting housing bubble last summer and the resulting 
crisis in the U.S. subprime mortgage market have triggered a 
full-blown credit crisis, which is now dragging the American 
economy into a recession and slowing world growth.
    The Federal Reserve has responded promptly. The Congress 
has passed a stimulus package of $168 billion. And while these 
steps are welcome, we do not believe they will be sufficient to 
avert a recession, and, more importantly, they do not address 
the long-run challenges economically of our country that got us 
into this mess to begin with.
    The AFL-CIO supports a second fiscal stimulus package that 
includes measures like extended unemployment and expansion of 
the food stamp program and money to States and localities to 
keep them from cutting their budgets to provide important 
services. But we also think there is a role here for putting 
forward some of the important infrastructure programs that we 
have, particularly in the area of rebuilding our country's 
schools. Seventy-five percent of our schools are in a 
dilapidated condition. I graduated from one such school in 
Alabama many, many years ago. But there is no excuse, as Felix 
pointed out, for us to have schools that are not up to top 
quality if we are asking our children to get an education, and 
that is one of the principal resources of this country.
    But we also have deteriorating highways and bridges that 
are in the condition that we saw in Minnesota. For those 
projects that we can move really quickly, we need to be moving 
on them. This is spending money that is good for the economy, 
but it is also spending money on things that are important for 
our development.
    The second challenge we face is to get our economic growth 
path on something other than asset inflation. Since the 1990s 
with equities, and since the 2000s with housing, we have been 
living on borrowed money. The only thing that is moving in this 
economy is debt-financed consumer spending. We are borrowing 
money from the central banks of our trading partners--in this 
case, some of the poorest countries in the world, ironically--
in order to buy things in order to consume. We have to turn the 
driver for this economy away from consumption spending and away 
from debt-financed consumption spending. And I believe in 
public investment, but, of course, the key to that, of course, 
is sound macro policy, careful coordination of the Federal 
Reserve and the Treasury to focus on maximizing growth and 
consistent with reasonable price stability. But I think there 
is an important role here for public investment, and if the 
public investment is well planned and well timed, then, of 
course, it crowds in private investment and, therefore, 
complements it over the course of the business cycle. And, 
again, it is adding into--more importantly, it is adding into 
the productive capacity of the country long term. And the third 
thing about we have to focus--and this is perhaps most 
important--we have to focus on a world-class infrastructure if 
we have a hope of dealing with the competitive challenges this 
country is going to face. We are now borrowing $800 billion a 
year to pay for the things that we no longer produce but we 
still consume.
    Nobody believes that is sustainable. Sooner or later, we 
are going to have to find a way to produce more of the value 
equivalent of what we consume, or we will be forced one way or 
another to consume less. I do not think the American people 
find that an acceptable course for the future of American 
history. I think we have to find a way to improve our 
competitiveness, and I think one of the keys to that is 
investing in the public infrastructure that the country has 
relied on historically to date to allow us to be--for economic 
activity and firms in the United States to be productive going 
into the future.
    And, fourth, we have to restore some balance between 
workers and their employers in order for our prosperity to be 
more fairly shared. I think the fundamental thing there is we 
have got to have a minimum wage that is at least one-half of 
the average wage in the private sector, and we have to have an 
Employee Free Choice Act which allows workers to organize and 
bargain collectively for their share of economic growth. But I 
think here, too, public investment plays a very important 
point, and projects that are run on this kind of basis can 
generate enormous numbers of very good jobs. I think the 
Department of Transportation, as was mentioned, has estimated 
that each $1 billion of public investment generates almost 
48,000 new jobs. If the DOT is right and Mr. Mongan is right, 
then if we just met our existing needs through this mechanism, 
we would be generating something like 15 million jobs that we 
do not have now over the course of the next 5 years.
    America's workers are the most productive workers in the 
world. We are now working longer hours than workers in any 
other country, longer even than Japan that used to be famous in 
this regard. But, we believe, provided a world-class 
infrastructure and working with companies that share our 
commitment to the country, we believe that there is no reason 
why we cannot build a strong and internationally competitive 
American economy in the United States into the indefinite 
future.
    Thank you again for the opportunity to present the views of 
the AFL-CIO.
    Chairman Dodd. Thank you very much.
    Ms. Kavinoky.

   STATEMENT OF JANET F. KAVINOKY, DIRECTOR, TRANSPORTATION 
     INFRASTRUCTURE, AND EXECUTIVE DIRECTOR, AMERICANS FOR 
       TRANSPORTATION MOBILITY, U.S. CHAMBER OF COMMERCE

    Ms. Kavinoky. Mr. Chairman, Mr. Ranking Member, 
distinguished Members of the Committee, thank you very much for 
the opportunity to testify on behalf of the U.S. Chamber of 
Commerce regarding the condition of our Nation's infrastructure 
and the proposals for needed improvements. My name is Janet 
Kavinoky. I am the Director of Transportation Infrastructure at 
the Chamber, as well as the Executive Director of the Americans 
for Transportation Mobility Coalition.
    Today, my remarks are going to focus on the needs of the 
transportation system, but we know that from interstate 
highways to information superhighways, from airports and water 
ports to wastewater systems, from rail lines to transmission 
lines and power plants, our infrastructure is in crisis, and it 
is evident that now is the time to build a robust, thoughtful, 
and comprehensive plan for our world-class 21st century 
infrastructure.
    We have to face this fundamental fact as a Nation: We are a 
growing people with a growing country and an aging 
infrastructure. We have to fix what we have, and then if we 
want more capacity, we have got to buy it. No one is giving 
roads or rails or runways away for free. We are going to have 
to find and invest more public dollars in our infrastructure. 
And there is no single answer to the question of how do we pay 
for it, and that is good, because it means we have options. But 
all of the options have to be on the table.
    Yes, this means that, along with other things we are going 
to talk about today, we are going to have to consider an 
increase in the Federal fuels user fees, especially for 
highways and transit. This could take the form of a 
straightforward increase in a fee that hasn't been raised in 15 
years--as long as the proceeds are appropriately dedicated. But 
this Nation cannot afford to rule out any funding sources.
    In highways and transit alone, many reports have quantified 
the significant gap between needs and available resources. And 
my other panelists here today have focused on many other areas 
with tremendous needs.
    We also know that all across infrastructure categories, 
simple inflation has eroded the purchasing power of available 
revenue sources, and measured up to construction cost 
inflation, the purchasing power is even less. The cost of 
materials used to fix pavements has increased 33 percent in the 
past 3 years. Steel, oil, and concrete are all more expensive, 
and many structures have reached the end of their useful design 
lives.
    So the Chamber commends Senators Dodd and Hagel and others 
for their commitment to considering financing tools that 
broaden our views of how the Federal Government contributes to 
infrastructure investment.
    While the Chamber will continue to fight for adequate 
systemic Federal funding to address our Nation's enormous 
needs, there is a need for additional options to supplement, 
not supplant, traditional revenue sources and funding 
approaches. We agree with Senator Dodd that the Federal 
Government is not doing enough to address important national 
and regional transportation issues from a systemic perspective.
    The National Infrastructure Bank would create an 
independent entity tasked with evaluating and financing 
capacity-building infrastructure projects of substantial 
national and regional significance. In contrast, Section 1301 
of SAFETEA-LU is really the first programmatic effort to 
address highways and transit projects of national and regional 
significance, and, unfortunately, inadequate funding diluted 
its impact and congressional earmarking of the entire program 
distorted its intent.
    The National Infrastructure Bank Act would support projects 
with clear national benefits and complex State, local, and 
private institutional and financing challenges that require 
Federal assistance through a process outside of earmarking 
practices. By emphasizing infrastructure projects with a 
potential Federal investment of at least $75 million and 
evaluating projects based on factors such as economic impact, 
reduction in traffic congestion, and environmental benefits, 
this legislation would do much to ensure that projects are 
targeted and that planning is as comprehensive as possible.
    The Nation's infrastructure is the backbone of the U.S. 
economy. It is the physical platform of the U.S. economy, and 
the needs are staggering. And it is clear that chronic 
underinvestment is a major contributing factor to the problems 
across all modes of transportation. However, the public must 
trust and have confidence that programs will deliver real 
solutions to real problems; otherwise, they are not going to 
support increased investment.
    So the Chamber looks forward to returning to this Committee 
to discuss the next surface transportation authorization bill 
and the future of highway and transportation policy programs 
and funding, because this country's current approach to 
delivering infrastructure is not set up for today's robust 
economy or the economy of the future.
    For our part, the Chamber is engaging the business 
community on infrastructure issues through our Let's Rebuild 
America Initiative and through the Americans for Transportation 
Mobility Coalition. We are waging battle in the media to make 
infrastructure a core national economic priority. We are 
educating and engaging the public, identifying regulations that 
get in the way of private investment, and speaking out on the 
need for increased public investment.
    All transportation and infrastructure stakeholders have 
started coming to the table--public leaders, the private 
sector, and all modes, all industries, builders, carriers, 
users, and shippers alike. We are going to put an end to the 
intramural squabbles that have divided stakeholders. We have 
rolled up our sleeves and we have started to work. We are 
looking forward to working with you to rally around and unite 
the country around the urgent and compelling mission to rebuild 
America.
    Thank you very much for the opportunity to be here today, 
and I look forward to answering your questions.
    Chairman Dodd. Well, thank you very, very much, and I thank 
all of you again for excellent testimony here this morning. And 
I will keep an eye on the clock here, too, for 6 or 7 minutes 
for each of us here, and since there are only about five or six 
of us here, we will be able to do this sort of informally.
    Let me begin by asking a question. I do not know whether 
you have the answer in front of you or not, but to put this in 
perspective, I think we all understand. We have talked about 
the $1.6 trillion being fundamentally for maintenance and 
repair of the existing structures. There is nothing in that 
number, at least that I am aware of, that talks about any new 
investments here, talking about, Felix, what you raised, the 
issue of the high-speed rail systems between London and Paris, 
Brussels and Paris, for instance. Today, people would not think 
of taking a flight given the efficiencies of being able to 
travel by rail in terms of efficiency of time.
    But how has this number changed, if at all? Today we are 
talking about $1.6 trillion, putting aside the need for new 
investment. What was the number 5 years ago? And what would be 
the projected number for failure to act 5 years from now? Just 
looking at that maintenance number, to put this in some--give 
people some idea of how that number has changed and will change 
if we do not act. Any ideas at all? Tracy, I do not know, I 
look to you or Felix as----
    Mr. Rohatyn. My recollection----
    Chairman Dodd. Do you want to turn that microphone on, 
Felix?
    Mr. Rohatyn. I am sorry. My recollection is that over the 
years, as I was speaking from time to time to the U.S. 
Conference of Mayors--and they usually use the Society of Civil 
Engineers as their guidebooks--the deficit was increasing by 
about $200 billion every couple of years, something like that.
    Chairman Dodd. Yes. Do you have that?
    Mr. Mongan. When we did our report card in 2001, we 
estimated that the cost would be $1.3 trillion, and understand 
that about 40-plus percent of that is already being spent at 
all levels of government. So this is a total number, not just 
all new money but to supplement. So we need to be up to 1.3. We 
are now saying $1.6 trillion over 5 years, so you can see we 
have increased some $300 billion just in our estimate from 2001 
to 2005. And I would say that when we do the report card next 
year and issue it in 2009, that number is going to approach 
well over $2 trillion.
    Again, it is not all new money; about 40 percent is already 
there in State, local, and Federal budgets.
    Mr. Wolstencroft. Mr. Chairman, I might just add, just 
breaking down that number into a smaller project, but still a 
large one, if you look at what Denver is doing right now with 
their rapid transit initiatives, when that initiative was 
initially proposed, it was 2004, and they estimated a cost of 
$4.7 billion. Today, that is over $6 billion for all the 
inflation that goes with construction costs. So Denver is faced 
with a real practical example of increasing costs and now how 
do you fund that gap. In their case, they are going to take it 
from all different pools of capital, whether it be from the 
State, whether it be from the Federal Government, who is 
offering a grant, particularly because of the transient nature 
of what they are investing in.
    There is also a potential for a private investor, and then 
there is pay-as-you-go on the back of sales tax that the 
community will incur. It is a small example in the trillions of 
dollars, but it is a very, I think, relevant example in terms 
of how that cost has moved. Within 3 years, it has gone up 
substantially.
    Chairman Dodd. Ron, did you have anything to add?
    Mr. Blackwell. We do not have an independent estimate, but 
I would caution you against using simple extrapolations of 
historical trends, because we are entering a global labor 
market, and as Felix mentioned, in China, India, the former 
Soviet Union, they are building enormous capacity. So we are 
facing extremely fierce competitive conditions. You think of, 
for example, broadband where we are way down in the field in 
terms of our broadband technology, both coverage and the speed 
of the technology that we have in this country, or what we are 
going to need with energy independence or what we will need 
with environmental sustainability.
    I just think it is going to be a qualitatively more serious 
advance, and when we have--even with the demand that we have, 
as I was suggesting, it is a demand which could be 15 million 
jobs a year, we have unemployment in the building trades that 
is double what it is for people overall. But we do not have 
enough construction personnel to produce at that level at this 
point in time, because I think you have a qualitatively 
different demand for our country.
    Chairman Dodd. So it is not just a matter of what costs 
were 4 or 5 years ago and what costs are today, but you are 
going to add this element of global competition and so forth 
that is going to exacerbate those numbers beyond that.
    The number I have bandied about over the years when people 
have said what is the job production out of this, the number 
that comes back to me is somewhere in the neighborhood of 
45,000 to 50,000 jobs per billion dollars on average of 
investment in ``infrastructure.'' Is that a number--is that 
correct or roughly correct? Or is it unfair to try and draw 
those conclusions about employment?
    Mr. Blackwell. That is the DOT estimate. I would assume 
this--it sounds high to me, frankly, but it does vary a lot 
over what kind of investment you are putting it into.
    Chairman Dodd. Yes. Janet, do you have a comment?
    Ms. Kavinoky. Mr. Chairman, that number of 47,500 jobs is 
actually jobs supported per billion dollars of investment, so 
it is direct, indirect, and induced. There is a real need, 
actually, for the basic economic research to update that kind 
of information and productivity information, because that 
number was first created in 1996 and has not been updated since 
then.
    Chairman Dodd. Who does that? Who would be the----
    Ms. Kavinoky. The Federal Highway Administration sponsored 
the original research, and it was only Federal highway 
construction dollars. It certainly does not take into account 
the potential jobs created and supported through other forms of 
infrastructure investment.
    Chairman Dodd. Let me ask you, I have looked at this, and 
we have been talking about the stimulus package and the one 
that we just enacted, and there have been some legitimate 
issues about how effective that stimulus package can be, and I 
suspect you may hear from my colleague from Tennessee his views 
on this. And I share some of them as well about the effect of 
all of this. But the issue was raised, in fact, in an op-ed 
piece in the New York Times by Stephen Roach, suggesting that 
investing in infrastructure could be an effective strategy in 
dealing with the current economic slowdown. Not that that ought 
to be the sole reason for it but, nonetheless, as an added 
benefit from all of this, and he said, ``Fiscal initiatives 
should be directed at laying the groundwork for future growth, 
especially by upgrading our Nation's antiquated highways, 
bridges, and ports.''
    We have all talked about the importance of this for long-
term economic growth, and I think everyone agrees with that. I 
would be interested in any quick response and whether or not 
you think there is any short-term benefit to such a series of 
ideas we are talking about here. Does anyone want to comment? 
Yes, Felix.
    Mr. Rohatyn. One of the arguments usually made against 
infrastructure as a solution to economic downturns is that it 
takes too long to get going. I am not sure that now there is 
not so much stuff that is sort of in the drawers and ready to 
go if we had this kind of a plan that you could get--that you 
could gear up I think a lot more rapidly today than you might 
have 5, 6 years ago. And I certainly think that is worth 
including in your thinking, mostly because I personally am very 
pessimistic about the economy and, therefore, I think that we 
are facing a potentially very difficult downside to this 
recession that we have refused to admit we were in. And I think 
one of the things that might be helpful, both psychologically 
and practically, is putting on the table as many of these 
programs as possible in terms of quick-acting infrastructure 
like redoing some road--you know, things that are not terribly 
sophisticated, but doing it and creating a little management 
structure that will facilitate that.
    Chairman Dodd. Comments, Ron.
    Mr. Blackwell. I would only add to that--and I mentioned it 
in my testimony--I think school repair is a good candidate.
    Chairman Dodd. I agree.
    Mr. Blackwell. But I would also point out that if it is 
properly done, this is a much more stimulative measure than tax 
decreases, for example, which may or may not be spent and which 
may or may not be spent for goods that generate a stimulus in 
the American economy.
    Chairman Dodd. I point out here that the staff has just 
told me here that over $2 billion worth of transit projects 
have been identified and are ready to go within 6 months, 
according to the American Public Transit Association, so your 
point, Felix, that there is an existing backlog here that would 
not require a tremendous amount of time.
    I noted here and I was listening, Ron, to your testimony 
talking about the energy costs, and we were just doing some 
numbers. I mentioned in my statement that there is in excess of 
51 hours of travel time on our existing road system of sitting 
in congestion that consumers spend. That translates on a yearly 
basis to delays of 4.2 billion lost work hours, I might point 
out, 2.9 billion gallons of wasted fuel, and about $78 billion 
in congestion costs combined. We borrow $1 billion every day to 
buy foreign oil; 59 percent of the oil that we use is consumed 
in transportation costs. So you begin to think about 
transportation needs, diversifying, thinking about it 
holistically in a way. I mean, if we ended up having--I am not 
going to advocate this too loudly because I need it often 
enough, but if we had fewer shuttle flights going to New York 
from Washington, maybe more people would use the Acela and mass 
transit systems. And we do not--it is always a competition 
where you compete and end up not utilizing structures or 
finance them and subsidize them effectively enough. And it 
occurs to me here just in energy costs alone how infrastructure 
could make a huge inroad both in the consumption as well as the 
related problems associated with the burning of fossil fuels, 
just to make the point.
    Let me turn to Senator Shelby.
    Senator Shelby. Thank you, Chairman Dodd.
    Felix, good to have you here before the Committee again. 
You have been here in many capacities as an investment banker, 
as adviser to the President and so forth. I believe myself that 
you were probably one of the hardest working Ambassadors we 
have ever had, and I have seen a lot of Ambassadors. When you 
were Ambassador to France, because I met with you a number of 
times, you were traveling all over France. You were seeing how 
we could do business in France, what we needed to do and so 
forth. You know a lot about infrastructure, but more than that, 
you and Tracy know a lot about investments. You are investment 
bankers, basically.
    I have no illusion about us passing taxes, more taxes, as 
what some people advocate right now, for our infrastructure 
needs. I do not think that Congress is going to move to do this 
because if you would add that to the cost of energy today, as 
oil has passed $100 a barrel, and probably going up, so forth, 
I do not know what we will do.
    We all need--you are absolutely right, all of you, about 
infrastructure. Some of it needs rehabbing, and as we continue 
to grow with 300 million people, we are going to need new 
infrastructure. We are going to need new sewers, water plants, 
schools, highways, rail--you name it. And the question is: How 
do we get there? How can we afford it? Well, some people 
believe that financing is about leveraging, taking some money 
and leveraging it. And the toll roads, for example, we are 
looking--in my State of Alabama, the Governor had the Secretary 
of Transportation down recently about looking at two or three 
projects as possible toll roads that would be quicker, faster, 
and so forth, taking some money and leveraging it.
    But I think we have got to look at every avenue of how do 
we finance this, because we are going to have to have it or we 
are going to fall behind down the road. I think you point that 
out.
    So how do we leverage the money that we get, that we have? 
How do we attract investment into our infrastructure? Because 
if you have got a good project, you can get it financed. It 
will be financed. And look at the money in the world. Where is 
a lot of our money going to be? Senator Dodd alluded to it. We 
are importing, I have been told, about 65 percent of our oil. 
At the rate we are going, we will be importing 80 percent of 
our oil. We are exporting our wealth. We are creating great 
sums of wealth, sovereign wealth in countries. They are looking 
for a place to invest it. Why couldn't we leverage some of that 
for our infrastructure needs? Because we will still be in 
control of the infrastructure. It will be in our country, and 
if they could get a decent return off of it, how do we do that, 
Felix? You and Tracy.
    Mr. Rohatyn. Well, Senator, I think you should be an 
investment banker, clearly, but I think----
    Senator Shelby. I would like to work with you.
    Mr. Rohatyn. I would be delighted.
    Senator Shelby. You would not hire me, though. You would 
not hire me.
    [Laughter.]
    Mr. Rohatyn. I personally think that one of the things we 
are going to do sooner or later is to go borrow $1 trillion 
from the Chinese, because that is where the money is, just as 
we are going with these wealth funds to have the Arab countries 
and people make the investment. But nothing comes free, and the 
big advantage of infrastructure over marketable investment is 
that you cannot take it with you. So that if you have investors 
from countries that turn out to be not too friendly, they are 
not going to walk away with the infrastructure because it is 
very hard to move.
    But ultimately I do think that we are going to have to have 
much closer cooperation with the NATO countries, with Europe, 
with China, with Japan on the financial level, and that our 
central banks ought to work together, or at least cooperate 
with each other so that we don't see part of Europe increasing 
interest rates while we reduce interest rates.
    Now, that is a whole other subject, but clearly the money 
is not where we are at this point, so we have to try to get it 
back as peacefully as possible and as economically as possible. 
And that can cover a lot of possibilities.
    Senator Shelby. Tracy, how do we leverage some money, some 
public money, to build infrastructure that we cannot afford 
today but would be good investments----
    Mr. Wolstencroft. Well, Senator Shelby, I----
    Senator Shelby [continuing]. But that we must afford?
    Mr. Wolstencroft. I think one of our core takeaways from 
thinking about this is that we need to look to multiple sources 
of capital and think about ways to leverage any one component 
of it.
    One comment I would just add to Felix's remarks is that the 
pension funds, in particular, are looking for long-term assets 
to offset their long-term liabilities. And when they look at 
infrastructure, why does CalPERS decide to allocate, albeit a 
small percentage, but a small percentage which is a large 
number $2.5 billion--why do they do that? Because they know if 
they invest in infrastructure there will be an inflation-
protected mechanism embedded in that infrastructure investment. 
And that is very comforting to them for the comments the 
gentleman to my left has said about how these costs are moving.
    So one point of leverage is all that private capital that 
is out there, whether directly or indirectly, that is 
interested in taking a long-term asset into their books to 
offset long-term liabilities.
    The other point of leverage----
    Senator Shelby. Quality assets, too.
    Mr. Wolstencroft. And quality assets, too. This 
infrastructure is not going anywhere.
    Senator Shelby. Well, this would not be a subprime asset. 
This would be a quality asset, right?
    Mr. Wolstencroft. I do not know if I should say, ``No 
comment,'' but----
    [Laughter.]
    Senator Shelby. Well, you can answer any way you want to.
    Chairman Dodd. Don't go there, though.
    Senator Shelby. Well, I think we need to go there because 
what we----
    Mr. Wolstencroft. I will stick to infrastructure.
    Senator Shelby. If we had invested in America what we have 
invested in the subprime, all the institution, people, in our 
infrastructure, it would probably be a higher quality 
investment, and we would have created a heck of a lot more 
jobs, wouldn't we, Ron?
    Mr. Blackwell. That is absolutely right.
    Senator Shelby. Go ahead.
    Mr. Wolstencroft. The only other part of leverage I would 
say is the actual projects themselves need to make sense, and 
one of the things that can be leveraged are the revenue streams 
that can come off of these assets. And there is a balance of 
what is the revenue stream and what is the political will to 
make that revenue stream happen.
    Senator Shelby. David.
    Mr. Mongan. If I could just add, there are a third of the 
States that by statute do not even allow public-private 
partnerships for transportation. So from our perspective, one 
of the things that has to happen is that we have got to correct 
that problem with those States to even allow----
    Senator Shelby. Statutorily, sure.
    Mr. Mongan [continuing]. This financing mechanism to be put 
in place.
    Senator Shelby. Well, I hope that my State of Alabama moves 
down that way fast.
    Thank you, Mr. Chairman.
    Chairman Dodd. Thank you very much, and those are very good 
questions. And one of the things in our bill, of course, is we 
talk about regional and national infrastructure needs and not 
so much the local ones, so that we are talking about large 
projects here, minimum projects of $75 million or more, I think 
is the number we have in our bill, to get beyond what would be 
local issues that ought to be resolved locally, entirely, but 
more the larger ones that we have in mind here.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman. I appreciate all 
of the testimony of the witnesses. I think there is basically 
the proposition here that the longer it takes, the more it 
costs; the more it costs, the greater the deficit at the end of 
the day. And that does not include the deficit in the global 
competition context. So there is a whole continuum of 
challenges here, and it only grows bigger.
    I want to take off--I did not intend to, but having 
listened to Senator Shelby's questions and having a little 
experience of what is going on in my home State of New Jersey, 
talk about political will. The reality is how we describe this. 
Senator Shelby says that the Congress does not have an appetite 
for any taxes to fund this, and I appreciate that. But it is 
how what we call, how we describe it. Certainly products that 
need to get to the market that take longer to get there, that 
have higher fuel costs, that is an indirect tax. We may not 
call it a tax, but ultimately it is a tax to the consumer.
    Similarly, if we are going to use the capital assets of the 
Nation's roadways, for example, to go to the private 
marketplace and seek to capitalize on it or monetize on it, at 
the end of the day beyond the opportunities to have long-term 
stability in some of those investments, as you described, Mr. 
Wolstencroft, is also a desire for a rate of return, and that 
rate of return is not going to be, you know, simply the 
collection of existing toll revenues without some increases in 
them.
    Is that a fair statement?
    Mr. Wolstencroft. Well, I would say that there are two 
rates of return on which this political will gets balanced. 
There is the economic rate of return on one side of the 
equation, and there is the social rate of return on the other. 
And one of the aspects, as you referenced in your own home 
State, that is being debated right now is if New Jersey were to 
do something, if there were the political will or political 
comfort to increase tolls with respect to the New Jersey 
Turnpike or the Garden State Parkway and that increased tolls 
were to be leveraged, what would that money be used for? And 
the comfort with which the citizens of New Jersey take from 
where would that money be spent, and in that case primarily on 
infrastructure-related projects, not the least of which could 
be the ARC tunnel underneath the Hudson River, then I think 
they can see that there is a return for them for which they are 
asked to pay an increase in their tolls. And then the financial 
return comes from that increased revenue stream, how much more 
capital can be leveraged against it.
    Senator Menendez. And that is a raging debate right now 
because even though the connection has been made between the 
investment of where those revenues would go, it largely would 
be for infrastructure and also to pay down a degree of debt, 
which, therefore, creates greater opportunities and annual 
revenue flows to be able to deal with less interest on debt. 
And yet we do not quite have a public who looks at it in that 
context.
    So as we deal with the broader challenge, Mr. Chairman, 
that is why I particularly appreciate your bill, because while 
I think we should look at these opportunities, at the same time 
I recognize that notwithstanding political will, sometimes you 
just--I think part of our challenge is to get the public on 
board to understand that it is both short- and long-term 
investment in our country. And that is why I like the 
Chairman's bill because he talks about--along with Senator 
Hagel, they talk about this in a way that I think is important, 
which is in the context of investment, not just simply repairs 
and what-not but investment, and looking how that investment 
yields returns, financially, socially, employment, 
economically--I think there are many different dimensions, and 
I think we need to pursue that.
    Speaking about rates of return, one of the things I am 
concerned about is I saw this Brookings Institution report, and 
it said something along the lines that our transportation 
dollar has declined from 20 percent of rate of return 30 years 
ago to as little as 1 percent today. Do we agree with that? Has 
anybody seen that report?
    Ms. Kavinoky. Yes, sir, I have seen that report, and, in 
fact, there have been a couple of others recently, including a 
report by Sir Rod Eddington in the U.K. that talk about the 
varying rates of return on different investments.
    I think part of the reason you see that kind of decline--
and I am not sure that if numerically that is correct--is 
because at one point we were building new capacity and we were 
actually adding infrastructure very broadly, and today we are 
talking about replacing it or rebuilding it. So when you are 
replacing something, you are not going to get that great a 
boost in productivity. But if you are talking about expanding 
capacity, which has to be part of this equation in 
infrastructure broadly, then you are going to see some real 
benefit.
    Senator Menendez. And that is why I am concerned about how 
the analysis goes. I think the rate of return is greater than 
that, and particularly the way the Chairman's bill is, I think 
it has a variety of factors to be factored in that improves the 
effective rate of return, and it is something that merits a lot 
of our consideration.
    For example, a hundred of our Nation's metropolitan areas 
generate 75 percent of our economic output--75 percent of our 
economic output. They handle 75 percent of the sea cargo of our 
Nation and 80 percent of the air traffic. And yet nearly all of 
those metropolitan areas are experiencing increased congestion 
on the roads, in the skies, and on the rails. And so I look at 
your own testimony and see that you speak about how in the mega 
port of the East Coast, the port of New York and New Jersey, 
where most of that operation happens on the New Jersey side--I 
used to represent that specifically in the House, am privileged 
to represent it all now as the totality of the State. You say 
that that is going to triple in volume by 2020. We agree. But 
the problem is in order to achieve the benefit of that, you 
have to have the infrastructure nexus to make it work and to 
compete against Canadian ports and others, foreign ports that 
ultimately have huge investments--the Port Huron tunnel, the 
rail connections, natural deepwater ports, what we have to be 
dredging.
    So these are, I believe, critical elements of how we have 
to talk about these issues, because certainly we recognize--you 
know, one of our initiatives is to create something we call the 
Liberty Corridor under the National Corridor Program. And it is 
using transportation dollars, Mr. Chairman, in a way that would 
leverage far beyond. It is to create a corridor in the 
country--it is already underway--that goes from idea to 
marketplace and does everything in between. So you do research 
and development, design, manufacture, export promotion, and the 
export through a world-class seaport and airport and, 
therefore, bring all of the synergies using transportation 
dollars as the nexus to create the corridor. But looking 
beyond, how else do you create a multiplier factor to add to 
the economic benefit?
    And so I think when we look at this whole nature of 
infrastructure, I think there are many ways to consider the 
multiplier factor here and to promote it as part of the 
equation as to how we value these things. And we certainly look 
forward to working with many of you on that opportunity as well 
as with the Chairman.
    Chairman Dodd. That is a great point, and that is exactly 
what we are trying to do here as well. There is an ad on 
television--and I am going to presume it is accurate because 
all ads on television are accurate, as we know. But the one 
that suggests that--it is one of the train cargo companies that 
points out that they can carry one ton of cargo 430 miles for 
the cost of one gallon of gasoline. It puts a very--and I have 
checked with some people, and they tell me that is a fairly 
accurate statement. But just that idea that one ton of cargo 
traveling 430 miles at the cost of one gallon of gasoline 
exactly makes your point in the sense of the synergies here of 
looking at where the benefits, economic benefits, social 
benefits, environmental benefits, all of the issues that you 
want to be calculating when you think about these issues of 
alternative ideas that assist in delivering our goods and 
services and competing in a global marketplace.
    Senator Hagel.
    Senator Hagel. Thank you, and to our witnesses, thank you 
again for your informed testimony. I want to make a general 
comment and then ask a question specifically focused on some of 
the testimony that you have given this morning as it relates to 
European and Asian nations as to how they are approaching their 
infrastructure and investing and forming effective public-
private partnerships. But let me make this observation.
    As I have listened to the five of you this morning, and I 
read your testimony this morning--the testimony was available--
and as Senator Dodd and I and others have been involved with 
this over the last year and studying it, with the assistance of 
Felix and John Hamry and Warren Rudman and others, it has 
become clear to me that the larger context of what we are 
dealing with is going to have to be factored into how we 
approach these 21st century challenges requiring a 21st century 
frame of reference.
    What I mean by that is that we are hostage here to a 
narrowness of channelized policies. That is what earmarks are. 
And the national interest somehow gets sidetracked because who 
is looking out for the national interest? Well, we are supposed 
to be, but it does not always work out that way.
    All of these dynamics are woven into one fabric. Felix 
noted relationships with our European allies. You specifically 
noted NATO. Well, of course, it affects our investment. It 
affects our tax structures. And we cannot come at this just in 
an isolated frame of reference of this is infrastructure and 
everything else does not count or there is on peripheral vision 
here.
    And I think that is the larger challenge that we have. 
Obviously, we have to focus on the things that Chris and I are 
trying to do in this bill, incentivize and break down these 
barriers, for example, as was noted by David a few minutes ago, 
States. Most States do not allow any kind of public-private 
partnership investment funding. There is an area. The 
relationships between States and the Federal Government, a 
myriad of studies that have to go into everything before we can 
do anything. We cannot site a nuclear power plant in this 
country, essentially, because we just keep getting it tied up 
in court, and it goes on and on. And I am not minimizing the 
seriousness of siting of a nuclear power plant that citizens 
have every right to challenge these things. But until we break 
through this narrowness and come at this in a much larger frame 
of reference, then what we are trying to attempt to do here is 
going to be trivialized and minimized.
    Now, I know that is beyond the ability of this Committee to 
deal with that and all of you, but, nonetheless, to me at 
least, it is an important frame of reference to bring to this 
as we then start to work our way through how we have to proceed 
and harness the resources that are available. Certainly I think 
this country represents the most creative thinking of any 
nation maybe in the history of man over the last 200 years. It 
is a Nation of laws. It has the right structure. It has great 
wealth. It has got the biggest and, probably most importantly, 
the most flexible economy in the world. I would not trade our 
position in the world with any country, but I think we are 
losing sight here of how we harness that for the greater 
interest. Talk about schools. I mean, my goodness, we are 
undermining the very foundation of one of the reasons we are a 
great country--public education.
    So I know you know these things, and so this leads me to 
this question, and I would start with Tracy's and Felix's 
answers, and anyone obviously who would like to join in on this 
and respond, I would appreciate it.
    How has the U.K. made this work? How have some of these 
European nations made this work? The Chinese are different, I 
recognize that. That is a different system, and I am not 
advocating that system. But certainly with the free states of 
Europe, they have made something work here, and they are 
continuing to make it work. And where could those parallels be 
in what we are doing or should there be or how do they make it 
work? And what can we learn from that? We will start with you, 
Felix. Thank you.
    Mr. Rohatyn. Well, Senator, I think--I wish I could answer 
that. That is a very, very difficult question. I think the 
structure of most of these countries is so different from 
ours--Germany, with a lender; the U.K., which operates quite 
differently; France, which is kind of frozen with their union-
business relationship and the Government.
    So what they have, I think, traded off in many ways is a 
rather freer economy in exchange for more security. So you have 
rather heavy social service systems and a social safety net 
that goes very far in exchange for a rather rigid relationship 
between business and labor, probably more rigid than anything 
we would think about.
    But as I was thinking when you were talking about the big 
infrastructure projects that are coming up here and that are 
going to require big investments, that at that point maybe you 
do have to sit down with labor as well as business in order to 
strike some kind of understanding about the rules of the game 
and who are the winners, and hopefully without losers.
    So, ultimately, that is what we did in New York City. We 
sat the unions down with the bankers at the table and the 
Governor and the mayor, and we negotiated sacrifice and 
benefit, and tried to kind of stabilize the two as much as 
possible.
    I think maybe that is something we ought to look at at some 
point.
    Senator Hagel. Thank you.
    Tracy.
    Mr. Wolstencroft. Senator Hagel, I think part of--there are 
several things that intersect here, one in the U.K. and then 
separately with respect to Asia. If you go back to the U.K., it 
was in the mid-1990s that they basically took a close look at 
how much they had been spending on infrastructure over the 
previous couple of decades. They realized they needed to spend 
more, and they did not have the capital to do it at the Federal 
level, if you will, at the public sector level. And so what 
they looked for are ways that they could, together with the 
private sector, combine forces. And at this point, there is the 
private finance initiative, or PFI, as they call it in the 
U.K., which document roughly 700 projects well over $100 
billion that have been done in the intervening years, a lot of 
that with respect to schools and hospitals as well as 
transportation systems.
    In part, they embraced the private sector because they saw 
it was an opportunity to get capital, and they did not have at 
that time the capital at their own Federal level equivalent or 
in the markets.
    Second, it was an opportunity for them, if you will, to 
share business risk, both with respect to the operating of the 
asset on an ongoing basis, but also the startup of that 
project. And quite simply, the U.K. I think would say today 
that if they had not embraced this, the schools, some of the 
schools they have and hospitals they have, they just would not 
have been built because the business risk of building them at 
the time was, if you will, more comfortably borne in the 
private sector as well as the capital being sourced from that.
    China is a different--as you referenced, totally different. 
You mentioned President Eisenhower in the beginning. I would 
argue that China is going through a period right now not that 
dissimilar to what we went through as a country post-World War 
II as they are building their infrastructure, whether that be 
roads, whether that be airports, in order to support a growing 
economy.
    Senator Hagel. Thank you.
    David.
    Mr. Mongan. The environmental climate in the U.K. and 
France and other countries is very different than the 
environmental climate that we have in the United States. If we 
tried to build the interstate highway system today, we simply 
could not do it under our current climate or it would have 
taken, you know, a hundred years to do it.
    I think we need to have the environmental community at the 
table also, along with business and Government, because we need 
to have their buy-in and we need to recognize that they have an 
important role in this process, and they should not be co-opted 
out of it.
    Senator Hagel. Thank you.
    Ron.
    Mr. Blackwell. No country is a model for any other country, 
but I believe that every country can learn something from the 
experience of every other country. The observation I would make 
is that those--China to Denmark, as different as they are from 
one another, they have two things in common to distinguish 
themselves from us, and that is important for this Committee. 
One of those is they have a national economic strategy, and the 
second ball is they have an investment strategy. And the two 
things are closely combined.
    We have a school in Washington that believes that we cut 
taxes and hope for the best. We have another school that says 
we balance budgets and hope for the best. I would argue that 
looking at the competitive world that I see, neither one of 
those schools, or put them together, are going to get us down 
the road. To Mr. Menendez's point, we are consuming every ounce 
of family income in this country, on average. And we are 
borrowing it from our trading partners. How is that going to 
get us down the road? We have enormous advantages from where we 
stand, but we cannot stand still and expect the world to line 
up and allow us to borrow at the level that we are currently 
borrowing from the world. We have got to invest money. And if 
we are going to invest money, we are going to have to use many 
sources for that money, private and public. But you are going 
to have to use some public money from where we are right now.
    But to get over the political hurdle, we are going to have 
to convince the American people that we are actually investing 
it, not simply spending it for a favorite project back home 
that we call investment, but something that can be certified in 
a credible way as contributing to our country's capacity to 
pull its weight in the world and exercise its role of economic 
leadership that only the United States can continue to play.
    But I think it starts with a strategy beyond where we are 
now, and it centers on the need to invest the resources that we 
need to maintain the prosperity of our country.
    Senator Hagel. Thank you.
    Janet, did you have anything?
    Ms. Kavinoky. You know, let me just mention, I think that 
my colleague here is absolutely right. When you look at the 
headlines from other countries that have come up, even from 
Mexico, for example, from India, from China, their national 
governments are making strong statements about the importance 
of infrastructure to their country, and they are following up 
those statements with real commitments of dollars.
    We have been calling for in the transportation community 
and in the business community for years now a new vision for 
transportation, for example. But if you look over the last 30 
years, there are a lot of really great vision statements that 
have been written, and they have been followed up by just 
hollow holes of no real action. So we do have to make a 
commitment in this country. We do have to say all of the 
funding and financing strategies are on the table. And I am 
proud to say that infrastructure is one of the places where the 
labor community and the business community work together. We 
sit down every month in the context of our coalition between 
the Chamber and three labor unions to talk about what we are 
doing on infrastructure, because we all know it is about the 
economy and it is about jobs. And that is one place where we 
can really come together.
    Senator Hagel. Thank you, Mr. Chairman.
    Chairman Dodd. Thank you, Chuck, and that was a great 
question, and great answers to it as well. Before I turn to Bob 
Corker here, this is what--as someone who has been sitting here 
with Chuck and others for years here, we just do not deal with 
big ideas. It has been a lot of small bore politics for so 
long, and this is an idea that is not new. It has been kicking 
around forever. And the difference is with Felix and John and 
others over the last couple of years, pulling these ideas 
together, we have got an idea--it is not the only one. I should 
have made note at the outset of these comments, Ron Wyden and 
John Thune have a bill in on a bonding idea with 
transportation, which is not antithetical to this idea at all. 
In fact, it complements what we are talking about here, and I 
want to commend them for it. This is not the only idea, but it 
is one way to galvanize, I think, attention.
    Chuck said something yesterday in a meeting we had with Ed 
Rendell and representatives of Mayor Bloomberg and Governor 
Schwarzenegger, and that was that what we are trying to do here 
is create a structure--I ought to let Chuck articulate this, 
but we are not going to try and micromanage this thing, but we 
want to put in place a structure here that would allow us to 
then begin to deal with this. And whether you are talking about 
$60 billion or $20 billion or $80 billion, we mention those 
numbers because of what we think we can generate, really put 
out an idea. The more important part of what we are talking 
about is creating a structure that would allow us to begin to 
deal with this issue on a national basis here with the full 
recognition that we are not going to do this through the 
appropriations process. Just forget about it. It is stupid to 
keep talking about it in that sense here. This is going to 
require private capital to come in. There is great wealth out 
there that we need to attract to bring into this system. And 
how do you do it in a way that allows us to prioritize what 
these projects ought to be, that are national in scope, that 
deal exactly with the underlying economic problems we face?
    So the strategies in economic policies really need to be at 
the forefront. This creates at least an architecture by which 
you can deal with that. And that is the value of this idea more 
than anything else. And every day we wait on creating an 
architecture for this delays our ability to deal with these 
questions. So this is creating an architecture more than 
anything else, and I do not know if I am reflecting your views 
correctly enough, Chuck, but I thought it was a very good point 
you made. More than anything else, that is what we are 
interested in. We are not going to debate and argue about 
dollars here. Too often we get into that argument, and then we 
miss the larger picture, and that is, building the structures 
that will then allow us to be able to do this, so whatever 
level we determine we are capable of doing at any given moment.
    Senator Corker. Mr. Chairman, I thank you, and I think the 
two of you have actually done a great service bringing this 
forward. It is a privilege to be a Member of this Committee, 
especially post-Iowa. I want to tell you, we have had some 
awesome topics to discuss here over the last several months, 
and I really do appreciate the focus of this hearing and the 
ones we have had in the past.
    Because of the batting order in this Committee, I have a 
chance to sort of hear most all the questions and many of the 
comments that are made by our panelists before I ever say 
anything. And I want to say to all of you, I think you have 
made excellent testimony, intelligent testimony. I know that 
some of your comments have been laced with little political 
comments that I think have been helpful, too. I know the 
comment about the earmarks is a good one. I can tell you as a 
new Member of the Senate, what we do with earmarks is 
tremendously irresponsible. There is no way that we can have 
any kind of continuum of infrastructure investment that makes 
sense as long as we do that. And I certainly hope that somehow 
or another we will have the will within this body to stop that 
as soon as possible or cause it to be coherent, which it 
absolutely is not.
    I know the Chairman mentioned the stimulus package, and I 
will not pile on any more about that. I am sure that there is a 
lot of infrastructure that could have been built with what we 
discussed earlier.
    I do want to mention one comment before I move to this 
bill. Ron, you made a great testimony. I know you mentioned the 
Freedom of Choice Act. I was not sure how that played into 
infrastructure exactly, but since you did bring up sort of a 
non sequitur, I did want to say that I was down in Colombia a 
couple weekends ago meeting with the President down there, who 
has done an outstanding job. I was hoping John Sweeney would be 
here, although I thought your testimony was outstanding. I do 
hope that somehow or another you all will quit leveraging the 
House on the Colombia Free Trade Agreement. I know that you 
mentioned the fact that we have a trade imbalance. This is an 
opportunity for us to manufacture and ship goods into our 
country tariff-free, and it is an embarrassment to our country 
that that bill is being held hostage. And I know that you all 
are planning a big roll on that, and I hope that somehow or 
another we will solve that problem. It is a tragedy to have 
such a great ally in Colombia and for us to be acting the way 
we are. So, please, with a smile on my face--I was a union 
card-carrying member when I started my career and have 
tremendous regard for your organization.
    But on to the bill, I know that the Chairman mentioned that 
this is an architecture bill, and I would like to understand 
the merits of this actual arrangement. Is it because it is off 
balance sheet? Is it because of some of the procedures that 
Chuck Hagel just mentioned that keep us from being able to move 
ahead as quickly as possible? Is it because of the planning 
that would cause a bill like this to--I am talking about this 
specific bill. We all agree, and I think it is wonderful that 
labor and business and Government is coming together on this 
infrastructure piece. It is something that is important. But 
the bill itself, what is it about this particular bill that we 
think would actually increase investment? And if one of you 
could actually walk through a deal, take a billion dollar 
investment and sort of walk through the mechanics of how it 
works. Much of these hearings is about informing us, but it is 
also about informing the public. And if you could walk through 
an example, I think that would be outstanding.
    Mr. Wolstencroft. I will try to answer your question. The 
first overall comment with regard to your comments, Mr. 
Chairman, on the bill and infrastructure in general is that the 
way we would react to it, the way I would react to it, is that 
you are taking something where we have been playing defense and 
now saying let's have an offensive strategy here with respect 
to the investment in infrastructure for all the reasons that 
have been characterized this morning.
    To us, one of the great aspects of this bill was it says 
there are multiple pools of capital out there that need to be 
relied on, and to take your question, I will go back to what I 
referenced at one point with respect to Denver RTD, which 
started off with a $4.8 billion estimated cost of financing for 
what is a 120-mile rail network for the broader Denver area, 
you know, up to Boulder and all the surrounding areas, both 
light rail as well as heavy rail. And when they went to the 
people of the Denver community, they said it is going to cost 
$4.8 billion, this is what we need from you. By the time they 
could actually start to build the network, that cost, for 
reasons related to inflation, as Ron and others have commented 
on, is now in excess of $6 billion.
    So the first question is: Where do we get the money? And if 
they did not have multiple places to actually get that money 
from their constituents directly, from the State, from the 
Federal Government in the form of grants coming out of the 
Department of Transportation, and from the private sector, they 
would not be able to be moving forward as they are right now 
with respect to that project. And the nature of infrastructure 
investing almost by definition is a large number--I mentioned 
the Capital Beltway earlier, a $2.5 billion project--and there 
is a role the Government can play, and this bill contemplates 
this, which is not only to give capital but to promote 
innovation with respect to the stated infrastructure project, 
whether that be related to congestion pricing or that be to 
environmental. There is nothing wrong--you could argue that 
good infrastructure policy is good environmental policy for the 
reasons that we described this morning, and this bill is one 
component of--provides one component of where capital could 
come from inside the Federal Government. But I think it 
purposely says it is not the only place that is needed.
    Senator Corker. Go ahead, Ron.
    Mr. Blackwell. I would just like to comment on what is 
attractive about this bill. from our point of view especially, 
is not only that it allows access to resources that would not 
otherwise be appropriate, but it does provide a single point of 
view from which all potential investment needs and projects can 
be evaluated across function and at different geographical 
levels and make decisions about it and hopefully have 
monitoring capability to follow these projects through to make 
sure they are adding the value we need, because I think that is 
essential to--these are big expensive items. We have to make 
sure that we get the biggest bang for the buck. We do not want 
to tax anybody any more than we have to. We do not want to tax 
anybody any less than we have to. But we have to make sure that 
if we spend the money that we are getting something out of it. 
And I think right now this structure does not exist in the 
Federal Government. There is no such perspective.
    While I am making this kind of comment, I would strongly 
associate myself with the initial point which Mr. Rohatyn 
mentioned, which is that we have to have a capital account in 
the Federal budget. You could not run a business without a 
capital account. You could not run a union without a capital 
account. But we are trying to run the Federal Government 
without a capital account, and I just don't understand how we, 
you know, get down the road. But it seems to me this is--what 
is so exciting about this project is it establishes some point 
of view and a framework for thinking about these big 
expenditures which our country has to make, and if it is done 
right, it will give the credibility that the Government now 
does not have when it says that we need to spend X amount of 
dollars. And hard-pressed working families are saying, ``I do 
not trust the Government to do that.'' This would be an 
instrument that would guide Government policy and give the 
American people and the American voters some confidence that 
the Government is trying to do the right thing.
    Senator Corker. Would one of you just walk through--take a 
$1 billion investment in a bridge, and explain to me how a 
deal--I know it is going to--each deal is going to have 
different components, but how would it actually work? At the 
end of the day, somebody has got to pay the investment back, 
and it is not unlike, it seems to me, funding a project with, 
you know, Treasury debt that, you know, somebody from China is 
funding anyways. But explain to me how a deal--how it 
additionally leverages money and causes the project to move 
along economically and in a better fashion? Maybe Ron or the 
Ambassador--not Ron, but Tracy or the Ambassador might be best 
at doing that.
    Mr. Wolstencroft. Well, there are two important aspects to 
the actual financing of, let's say, a $1 billion--whether it be 
a bridge or road, which is, first of all, what are the--what is 
the revenue stream coming off that infrastructure asset? And is 
it robust enough to allow for capital to be invested in that 
project knowing that they will earn some return or a return, 
whether that be capital in the form of a public-private 
partnership or that be capital in the form of Federal or State 
or other money?
    But at the end of the day, that capital has to get paid 
back, and if that project, if that asset does not have an 
underlying revenue stream, an underlying cash-flow----
    Senator Corker. Through tolls or----
    Mr. Wolstencroft. Tolls, so there would be, I think, an 
easy conceptual mechanism.
    Senator Corker. What would be another mechanism to generate 
the revenue to pay Goldman back if he invested $200 million 
into a $1 billion bridge project?
    Mr. Wolstencroft. Well, tolls would certainly represent the 
most easily identifiable stream with respect to infrastructure 
assets as we are seeing this, for example, in the Pennsylvania 
Turnpike where a public-private partnership is being 
contemplated. It is certainly being seen with respect to what 
New Jersey is going through with the whole concept of a public 
benefit corp, which will, in effect, own the New Jersey public 
road system, the New Jersey Turnpike and the Garden State. And 
as you can see, as Senator Menendez references, there is quite 
a debate going on with respect to what will that revenue stream 
look like, what will that toll look like, and how will citizens 
become comfortable with it.
    But the whole--one important takeaway is the whole 
investment interest in infrastructure assets is in part derived 
from a notion that that revenue stream will move as inflation 
does. And, therefore, an investor in that infrastructure asset 
will be inflation protected, if you will, with respect to the 
return. And that is in part why you see private equity 
expressing an interest or you see pension funds who are in some 
ways investing in private equity or by themselves interested in 
these assets.
    Senator Corker. What is----
    Senator Hagel. May I add one thing, Mr. Chairman? In answer 
to your question, tax credit bonds are also one of the 
mechanisms and incentives that would be used here, too, and 
this gets into, of course, Felix and Tracy's business. But many 
of these large financiers and investment institutions could use 
some flexibility in these tax credit bonds to apply where they 
have large debt obligations and so on, which gets into pretty 
high level finance, and that would be one of the options here 
as to why--to answer your question, why would something like 
this be attractive to a large investment firm. And you two may 
want to pick up on that in any way you would like, or leave it 
as it is. But that is an important part of the flexibility of 
what we would be talking about here, too.
    Senator Corker. Which that would be created by additional 
legislation to create some flexibility there, or is there----
    Senator Hagel. Well, it is in the bill. It is in the bill 
itself that gives this bank, this infrastructure bank--of 
course, it is backed--it is essentially similar to a GSE, 
guaranteed by the U.S. Government. We are not changing hands 
here. We would put together the bank under the leadership of 
five directors. We would put together the financing package, 
the structure of that package and the incentives that the 
investment or the investors would receive. But it is all laid 
out in the bill itself, Bob, and we would be glad to sit down 
with you and go over it.
    Senator Corker. So the bank would actually have the ability 
to, if you will, award Federal tax revenues that otherwise 
would be generated by not having tax credit bonds to cause this 
to work. And I am sure there would be some ceiling and floor on 
their ability to do that.
    Senator Hagel. It gives the bank the flexibility to make 
decisions within a framework and a context of what it is 
legally able to do and what it can operate within, what 
framework it can operate within to make those kinds of 
arrangements. And there is a long list of flexible deals, so 
there is not one rigid formula that is used to attract that 
investment.
    Chairman Dodd. Although we cap it at $60 billion.
    Senator Hagel. Yes, the overall cap. But these are numbers, 
too, as the Chairman would note, when we first put it together, 
this is just a bill right now. The testimony, I suspect, this 
morning that we heard may well alter some of this, too. I mean, 
if people come back, colleagues, with suggestions----
    Chairman Dodd. We ought to raise that $60 billion. You 
know, the $60 billion is the point at which you begin to 
leverage on outside capital. The value of that number relates 
to what does it leverage.
    Senator Hagel. Well, Felix addressed that, too. And, by the 
way, as you know, the Chairman of the Financial Services 
Committee in the House, Mr. Frank, is a cosponsor of this bill. 
So he is going to have some input on this, and I would hope 
that he will have some hearings soon as well. But this is just 
like any bill, Bob, in its initial pages and frameworks and----
    Chairman Dodd. It is $100 billion less than the stimulus 
package.
    Senator Corker. Well, you know, I am not going to have any 
more fun with you on that. I think we----
    [Laughter.]
    But I appreciate your continuing to bring it up because 
it----
    Mr. Wolstencroft. Senator Corker, I think there is--just to 
answer your question from a different dimension, there is also 
what is called availability-based payments, which is another 
way--apart from tolling, which is also used. The Port of Miami 
tunnel would be an example of this, where the Port of Miami, 
not that dissimilar to what Southern California did with an 
asset called the Alameda Corridor years ago, said how do we get 
traffic out of the ports into the country quicker, or how do we 
get it so that it is not going through the city of Los Angeles 
or how do we get it so it is not going through the city of 
Miami. In this particular case, Miami said, Where are we going 
to get the money to do this? And, importantly, where are we 
going to get someone who is prepared to take the risk to build 
this tunnel. In this particular case, they were able to find a 
French construction firm, Bouygues, who was prepared to do it, 
together with capital coming from Babcock & Brown, to say we 
will deliver this tunnel to you, and if we deliver it to you on 
the dimensions that we and you agree to--i.e., the public and 
private partnership--then the payment that we will ask from you 
is X. And so that is a case where the city or the State--it is 
really no typical infrastructure deal--would say we will pay 
you X, that is worth it to us, that is a good deal. And I think 
that raises another aspect of these infrastructure 
transactions. Clearly, the public-private--Felix referenced--no 
one is taking these hard assets away from us. They are 
investing in them. But an important asset that goes into the--
in terms of what you get from the private sector is not only 
capital, but you are allowed to engage into a contract, and 
that contract can be a tremendous value in terms of laying out 
for you, well, what is going to happen to that asset over time, 
what will be the investment, what will be the capital 
expenditure that is ongoing. The Indiana Toll Road would be a 
perfect example of that where the initial proceeds were just 
under $4 billion, but the capital that is prepared to invest by 
the private sector in that road over time is hundreds of 
millions of dollars. And when that public-private partnership 
is entered into, you know that as part of the deal.
    So part of this is making sure that both sides, but 
certainly the public sector gets a good deal.
    Senator Corker. Go ahead, Ron.
    Mr. Blackwell. Just in this way, Tracy earlier mentioned a 
difference between the social return and the economic return. I 
am not sure exactly what he meant, but I would say that you 
need to think about the private return versus the public return 
when you think about public-private partnerships, because it 
seems to me that might be one of the factors that affects what 
is appropriate for the private partnerships. For example, the 
most successful public investment that I know of is the GI 
Bill, and the GI Bill educated these young men and women coming 
back from the Second World War. They were enormously more 
productive because of that. They earned enormously more income 
as a result of that. And they paid a tax return that was a very 
handsome return, as big as any I know, from that program.
    That was not a private opportunity. That was just a pure 
public return. But it came back through the increased economic 
output of those people, and it even came back and accrued to 
the Government, which basically financed that deal through 
public channels.
    It may well be the case when you are looking at large 
projects that some are appropriate for private finance, and 
others that are very important for the Nation may be suitable 
only for public finance.
    Senator Corker. Mr. Chairman, I know we are pressing up 
against everybody's lunch schedule. If I could ask just one 
more brief----
    Chairman Dodd. Certainly.
    Senator Corker. On the issue of inflation and the fact that 
the private sector investment over time has great benefit to 
the private sector investor because of the inflation aspect 
down the road, who generally sets the terms? In other words, if 
you invested X in a toll road, you know, you are one-off. I 
mean, it is just an investment that you have made. Who 
typically makes the decisions about the tolls increasing, if 
you will, and, therefore, your percentage of the take, if you 
will, increasing? How is that normally set up?
    Mr. Wolstencroft. Well, there are a number of 
constituencies that are part of that. Certainly inside the very 
States where that infrastructure asset is either going to be 
built or exists and now there is need for investment in that 
infrastructure, toll roads being a perfect example, New Jersey 
is right in the middle of this, where, if you will, that amount 
of toll increase is right now being debated as Governor Corzine 
goes from one town to another explaining why toll increases are 
necessary, and very specifically how the revenue stream that 
will result from that can be capitalized in a way that that 
money can then be used to invest in infrastructure for New 
Jersey, either transportation or otherwise. But it is set by 
the people, if you will, and then there is the private sector 
who ultimately decides is that a rate of increase, inflation or 
otherwise, that they can be comfortable with.
    Senator Corker. Mr. Chairman, thank you again. You all have 
made excellent testimony. This hearing could not be more 
timely, and I thank you for bringing it forward.
    Chairman Dodd. Well, thanks very, very much, and let me 
underscore the point about capital budgeting. I remember 20 
years ago testifying before the House committees on a capital 
budget, and we talk about this every Congress or two, and 
nothing much happens. But I want to associate myself with the 
remarks of colleagues and others who have suggested that this 
is insane that we have gone as long as we have without a 
capital budget in this country and the problems associated with 
that.
    Let me also mention on the earmark issue, I know the word 
has become a pejorative, but it is important to understand what 
it is. It is a reflection of exactly the absence of what we 
should be doing and what this bill tries to do. Most of the 
members that we serve with are not corrupt individuals trying 
to steal Federal money. I mean, what you are getting is a 
primal scream in many communities about infrastructure needs. 
And so whether it is building a hospital or a school or a road 
that needs help or whatever, these are not bad ideas, 
necessarily. And the fact that the system is so collapsed here 
that we do not have a process whereby we authorize and 
appropriate that comes forward, but deal with these monolithic, 
huge continuing resolutions and the like, that things get 
thrown on them. It is a failure of the system to actually deal 
with this intelligently in many ways.
    That is not to say there are not wasteful programs that end 
up in earmarks, but an awful lot of them are decent ideas 
coming from local communities with legitimate needs that they 
have out there, and our system has collapsed to such a degree 
that we do not deal with it. And so you end up with people who 
are in a position, people who sit on the Appropriations 
Committee, to have an upper hand when it comes to getting those 
things included. So we are not making intelligent decisions 
about prioritizing where the needs ought to be. It ended up 
going--if you happen to sit in the right position, you get it, 
but I think it is important to keep that in mind. Why has this 
happened? Earmarks, where did they come from and what has 
occurred around here that has caused this explosion of this 
particular phenomenon that is occurring. And I think it is 
important to step back and understand that as well.
    And, last, I want to just raise something again. Chuck 
brought this up a bit, I think, in some of your responses, and 
we do not include this in our legislation. But the issue of how 
we fast-track--we are talking about national and regional 
infrastructure needs, and obviously a lot of what we are 
talking about here has huge social implications. I was just 
looking at some numbers here. A third of all flights as a 
result of infrastructure needs were canceled or delayed last 
July because of infrastructure, human, air traffic control, 
lack of people on the ground. Thirty-five hundred of our dams 
are unsafe in the country--3,500 we are told. Traffic on our 
roads has gone up 40 percent in the last 7 or 8 years, and our 
capacity has only increased by less than 2 percent. So you are 
having a massive demand, and we are not keeping pace with it 
all.
    I do not know if any of you have been on Route 95 in 
Connecticut, but if you are coming out of New York heading up 
to Boston on a Friday, or almost any day, it is a traffic jam, 
and you are sitting there. You can sit there literally for 
hours. And you talk about fuel loss, environmental impact, 
hours lost of work, all of the social implications as a result 
of a system that has just become totally incapable of dealing 
with the capacity that has increased it all.
    So aside from the cost of having alternative systems that 
move people and what price you pay for that, the social 
benefits to our country, or whatever word you want, social 
benefits, cultural benefits, other environmental benefits, all 
I think can be at least ameliorated by dealing with these 
issues as well, which are critically important. But how we deal 
with the regulatory process in a way that would allow for 
things to move forward--and that is not to exclude people from 
the table. But you are going to have a problem getting that 
private investment if, in fact, it looks as though it is 
impossible to come to conclusions or that things can be so 
stopped or slowed to such a degree that it does not get done.
    So we need to be thinking as well about how you deal with 
these issues in a way that will allow these large regional or 
national projects to go forward, considering the legitimate 
issues that we ought to weigh, but not becoming such an 
encumbrance that it makes it impossible for these to go 
forward. And that is an element here that we really have not 
tried to incorporate in this bill, but one that is going to 
have to be a part of our consideration as you go forward.
    The last point I wanted to make, I do not know how many of 
you have ever read David McCullough's biography of Harry 
Truman, but one of the great chapters in that book is that 
period in Truman's life--I forget what the title was in 
Missouri, Road Commissioner or Secretary of Transportation, 
whatever it was. But he went out, and they were literally 
dealing with just thousands of miles of dirt roads. And he went 
out and literally went town to town, not unlike what Jon 
Corzine is doing--a former Member of this Committee, I might 
point out--in New Jersey. But he went out, and if people know 
where their dollars are going, the big problem you have, I 
think, with taxpayers, they see their taxes being raised, and 
where does it go? What am I getting for this? And I think if we 
are--in this area here, if people can see the correlation 
between whatever that fee may be or toll may be, then actually 
how their lives are improved dramatically, economic 
opportunities increase, jobs are produced, the country 
benefits. People are not stupid. You show that correlation and 
it is real enough to them, as Truman proved back with a very 
resistant constituency, obviously, to any increase in their 
taxes, but was able to demonstrate the economic benefit to that 
State because he went out and sold the idea and it worked. In a 
sense, that becomes the job of those of us who sit on this side 
of a dais as well.
    The easy answer is to demagogue on these issues and only 
talk about the one-dimensional aspect here without talking 
about the multi-dimensional aspects of what our country can do 
for our citizenry in this generation by improving the 
infrastructure needs of our Nation. And that is really what 
Chuck and I are trying to achieve here, by creating that 
structure and that architecture that allows us then to begin to 
answer these questions without relying on an earmark system 
that is going to be the alternative in the absence of a 
national agenda that identifies this problem and provides the 
means by which we can solve it.
    So any concluding comments any of you want to make here, by 
the way, on this, our panel?
    [No response.]
    Chairman Dodd. Well, you have been great. Great witnesses. 
Felix, we thank you. You have been a champion of this idea. 
John Hamry behind you, sitting here, deserves special 
recognition as well for dedicating the CSIS resources to this.
    Mr. Rohatyn. What about you, Mr. Chairman, and Senator 
Hagel, who have been carrying the ball on this?
    Chairman Dodd. Well, we are plugging away here, and I am 
going to sign up Bob Corker. He is going to be a major 
supporter of this bill, I just know it. I can feel it coming.
    Senator Corker. I love the idea of it. The capital 
budgeting, the planning, every aspect of it I really do like, 
and I hope that actually as part of this bill we will have a 
moratorium on earmarks so we can actually move ahead in an 
intelligent manner. But I appreciate your comments.
    Thank you.
    Chairman Dodd. This Committee will stand adjourned.
    [Whereupon, at 12:23 p.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



RESPONSE TO WRITTEN QUESTIONS OF SENATOR JOHNSON FROM DAVID G. 
                             MONGAN

    Under S. 1926 the minimum threshold for a project to be 
eligible for assistance appears to be $75 million and there is 
a preference for projects that can attract private interest 
leveraging. In South Dakota, however, a $20 million project is 
a big project, and with around 10 people per square mile, my 
state does not have the traffic densities that are needed for 
viable highway toll projects. Yet there are important 
infrastructure needs in South Dakota that will serve national 
and regional interests. S. 1926 represents a thoughtful 
approach to helping meet infrastructure needs but, as noted, it 
seems that projects in a state like mine have been more or less 
left out. I'm optimistic that this can be rectified without 
changing the basic approach of the bill. So, I am looking at 
developing language to add to the bill with some type of 
alternate criteria for projects in low population density 
states, which I may define as a state with a population density 
of 25 or fewer persons per square mile. I have the following 
questions regarding alternate criteria for projects in a low 
population density state:
    ASCE believes that the bill could be amended to allow a 
federal dollar threshold for Bank-funded projects to be set on 
a sliding scale based on population to account for different 
types of projects in states with different infrastructure 
needs. There need not be a fixed dollar amount for each type of 
infrastructure or for each project within a given 
infrastructure category across all states without regard for 
local needs or resources. The key to the allocation of funds is 
found in the ratings system that directs Bank funds toward 
projects of regional or national significance, that improve the 
environment, or that promote economic growth.

Q.1a. Assuming a highway project threshold in such states in 
the range of $15-20 million, what thresholds would you suggest 
for the other types of eligible projects (water, etc.), or 
should the thresholds all be the same?

A.1a. The threshold for wastewater and drinking-water 
infrastructure could be in the range of $3 million to $5 
million, depending upon immediate watershed needs and the size 
of the population served. Some projects now receive only 
$500,000 or $1 million from EPA grants, but ASCE believes these 
sums do not begin to close the national investment gap.

Q.1b. If one were to set an even lower dollar threshold for 
projects on Indian Reservations, what might that be?

A.1b. The threshold should remain the same for projects 
designed to serve similar populations (i.e., rural communities) 
with similar infrastructure needs, regardless of whether they 
are located within Tribal lands.

Q.1c. Congestion reduction is not an appropriate evaluation 
criteria for projects in a state like mine. And, as noted, we 
don't have the population or traffic densities to make 
leveraging very practical. Assuming that congestion reduction 
and leveraging were made not applicable to review of projects 
in a low population density state, are there any other criteria 
in S. 1926 that you would recommend be made inapplicable to 
review of projects from a low population density state, in 
order to ensure that projects from such a state would have as 
fair a chance of approval as projects from elsewhere?

A.1c. A possibly useful metric for highway construction 
projects could employ vehicle miles traveled per 100,000 
residents in order to establish a national formula on a sliding 
scale for the distribution of Bank funds. This would shift the 
focus from pure population measures.

Q.2. What other suggestions do you have for enhancing 
infrastructure investment in a low population density state?

A.2. ASCE is currently supporting the creation of a federal 
water infrastructure trust fund that could distribute money 
through the State Revolving Loan Fund (SRF) programs 
established under the Clean Water Act and the Safe Drinking 
Water Act. The proposed legislation (as yet not introduced in 
Congress) would provide assistance to rural and small publicly 
owned utilities in planning, developing, and obtaining 
financing for eligible projects.
    In addition, ASCE supports enactment of the Dam 
Rehabilitation and Repair Act (S. 2238), which authorizes the 
Federal Emergency Management Agency to spend $200 million over 
five years to upgrade high-hazard dams. Although these dams are 
rated as hazardous solely due to their proximity to populated 
areas, the funding itself is not allocated based on state 
population.
                                ------                                --
----


 RESPONSE TO WRITTEN QUESTIONS OF SENATOR CRAPO FROM DAVID G. 
                             MONGAN

Q.1. As I understand it, under S. 1926, a project is ineligible 
unless it involves a Federal commitment of at least $75 
million. In a rural state, $20 million is a big project and $50 
million is a very big project. In rural states, projects can be 
much less expensive than $75 million and still be regionally or 
nationally significant. To avoid excluding projects in large 
tracts of America from eligibility under the bill, I would 
consider setting a separate, lower dollar threshold for 
projects in a low population density state. I don't see any 
reason why such an approach would adversely impact the basic 
thrust of the bill. Do you?

A.1. ASCE believes that the bill could be amended to allow a 
federal dollar threshold for Bank-funded projects to be set on 
a sliding scale based on population to account for different 
types of projects in states with different infrastructure 
needs. There need not be a fixed dollar amount for each type of 
infrastructure or for each project within a given 
infrastructure category across all states without regard for 
local needs or resources. The key to the allocation of funds is 
found in the ratings system that directs Bank funds toward 
projects of regional or national significance, that improve the 
environment, or that promote economic growth.

Q.2. I believe that infrastructure legislation should be 
responsive to the needs of all the states and must distribute 
funds, both for highways and transit uses, in a way that 
recognizes the national interest in and across rural states, 
not just in more populated states. I don't see a clear prospect 
that this could be the case under S. 1926 absent a change in 
the project dollar threshold as indicated above. What are other 
changes to that bill, perhaps as part of a set of provisions 
for projects in low population density states, that would help 
ensure that projects in low population density states have as 
reasonable a chance of obtaining approval as projects from more 
densely populated states and areas?

A.2. The bill could be amended to provide for varying Bank 
allocations based on population, as is the case with current 
federal gasoline tax distributions to the states. The goal is 
to provide equal access to financial assistance to all areas of 
the country within the infrastructure categories covered by the 
Act.
                                ------                                


RESPONSE TO WRITTEN QUESTIONS OF SENATOR JOHNSON FROM FELIX G. 
                            ROHATYN

Q.1. Under S. 1926 the minimum threshold for a project to be 
eligible for assistance appears to be $75 million and there is 
a preference for projects that can attract private interest 
leveraging. In South Dakota, however, a $20 million project is 
a big project, and with around 10 people per square mile, my 
state does not have the traffic densities that are needed for 
viable highway toll projects. Yet there are important 
infrastructure needs in South Dakota that will serve national 
and regional interests. S. 1926 represents a thoughtful 
approach to helping meet infrastructure needs but, as noted, it 
seems that projects in a state like mine have been more or less 
left out. I'm optimistic that this can be rectified without 
changing the basic approach of the bill. So, I am looking at 
developing language to add to the bill with some type of 
alternate criteria for projects in low population density 
states, which I may define as a state with a population density 
of 25 or fewer persons per square mile. I have the following 
questions regarding alternate criteria for projects in a low 
population density state:
Q.1.a. Assuming a highway project threshold in such states in 
the range of $15-$20 million, what thresholds would you suggest 
for the other types of eligible projects (water, etc.), or 
should the thresholds all be the same?

A.1.a. As I noted in responding to Senator Crapo's concerns, I 
fully agree with him and Senator Johnson that the national 
infrastructure bank must fund projects in low-population states 
and regions. Regarding the first part of Senator Johnson's 
question, I believe that dollar thresholds for all projects 
should be the same in order to achieve the best possible 
allocation of federal investment dollars. But if this creates a 
potential bias in favor of big projects with only limited non-
local benefits, I would suggest that projects be accepted for 
review if they are of a certain dollar size or are represented 
to have national (non-local) benefits in excess of a certain 
level.

Q.1.b. If one were to set an even lower dollar threshold for 
projects on Indian Reservations, what might that be?

A.1.b. Projects on Indian Reservations should be subject to the 
same threshold and criteria. If Congress were to seek subsidies 
for these projects, they should be separately accounted for and 
appropriated, preferably as part of the application for Bank 
assistance.

Q.1.c. Congestion reduction is not an appropriate evaluation 
criteria for projects in a state like mine. And, as noted, we 
don't have the population or traffic densities to make 
leveraging very practical. Assuming that congestion reduction 
and leveraging were made not applicable to review of projects 
in a low population density state, are there any other criteria 
in S. 1926 that you would recommend be made inapplicable to 
review of projects from a low population density state, in 
order to ensure that projects from such a state would have as 
fair a chance of approval as projects from elsewhere?

A.1.c. It is probably the case that projects in low-density 
areas--for example, rural highway segments--do not alleviate 
congestion to the extent that urban projects may, but they are 
more likely to ease commercial traffic for out-of-state users. 
That is, a highway in a rural area benefits non-local people 
more than projects in an urban area. I think this is a leveling 
factor in the allocation of investment dollars.

Q.2. What other suggestions do you have for enhancing 
infrastructure investment in a low population density state?

A.2. I also would favor block grants to states for projects of 
smaller scope than those of interest to the Bank. Moreover, 
states could create their own financial institutions analogous 
to the Bank for local needs.
                                ------                                


 RESPONSE TO WRITTEN QUESTIONS OF SENATOR CRAPO FROM FELIX G. 
                            ROHATYN

Q.1. As I understand it, under S. 1926, a project is ineligible 
unless it involves a Federal commitment of at least $75 
million. In a rural state, $20 million is a big project and $50 
million is a very big project. In rural states, projects can be 
much less expensive than $75 million and still be regionally or 
nationally significant. To avoid excluding projects in large 
tracts of America from eligibility under the bill, I would 
consider setting a separate, lower dollar threshold for 
projects in a low population density state. I don't see any 
reason why such an approach would adversely impact the basic 
thrust of the bill. Do you?

A.1. I completely agree with Senator Crapo that the national 
infrastructure bank should not exclude projects in low 
population states. I would suggest, however, that rather than 
set up different rules based on population density, we develop 
a formula that establishes a threshold federal commitment or 
purported federal benefits over a different threshold. This 
would account for the likelihood that, for example, interstate 
highway improvements in low-density areas would have 
proportionately greater non-local benefits than comparable 
projects in major urban areas. I also would favor a population-
based block grant to states for projects below these 
thresholds, which also would help states with relatively 
smaller projects.

Q.2. I believe that infrastructure legislation should be 
responsive to the needs of all the states and must distribute 
funds, both for highways and transit uses, in a way that 
recognizes the national interest in and across rural states, 
not just in more populated states. I don't see a clear prospect 
that this could be the case under S. 1926 absent a change in 
the project dollar threshold as indicated above. What are other 
changes to that bill, perhaps as part of a set of provisions 
for projects in low population density states, that would help 
ensure that projects in low population density states have as 
reasonable a chance of obtaining approval as projects from more 
densely populated states and areas?

A.2. My answer to the first question applies here as well. In 
addition, I would note that in contrast to low-density states, 
high-density states will have greater capability to support 
projects locally. For that reason, I would hesitate to create 
specific carve-outs for states in different situations at this 
point. The point of the proposal is to invest federal dollars 
in the best possible manner, and it is not clear to me that, 
given the changes I proposed in answering Senator Crapo's first 
question, low-density states would be at a severe disadvantage 
in terms of unmet needs.
                                ------                                


  RESPONSE TO WRITTEN QUESTIONS OF SENATOR JOHNSON FROM TRACY 
                          WOLSTENCROFT

    Under S.1926 the minimum threshold for a project to be 
eligible for assistance appears to be $75 million and there is 
a preference for projects that can attract private interest 
leveraging. In South Dakota, however, a $20 million project is 
a big project, and with around 10 people per square mile, my 
state does not have the traffic densities that are needed for 
viable highway toll projects. Yet there are important 
infrastructure heeds in South Dakota that will serve national 
and regional interests. S. 1926 represents a thoughtful 
approach to helping meet infrastructure needs but, as noted, it 
seems that projects in a state like mine have been more or less 
left out. I'm optimistic that this can be rectified without 
changing the basic approach of the bill. So I am looking at 
developing language to add to the bill with some type of 
alternate criteria for projects in low population density 
states, which I may define as a state with a population density 
of 25 or fewer persons per square mile. I have the following 
questions regarding alternate criteria for projects In a low 
population density state:
Q.1.a. Assuming a highway project threshold in such states in 
the range of $15-$20 million, what thresholds would you suggest 
for the other types of eligible projects (water, etc.), or 
should the thresholds all be the same?

A.1.a. I believe the setting of minimum thresholds is a policy 
decision best left to the Congress. In the interest of 
simplicity; a single minimum threshold may be advisable.

Q.1.b. If one were to set an even lower dollar threshold for 
projects on Indian Reservations, what might that be?

A.1.b. I have no specific expertise to add on the appropriate 
threshold for projects on Indian Reservations.

Q.1.c. Congestion reduction is not an appropriate evaluation 
criteria for projects in a state like mine. And as noted, we 
don't have the population or traffic densities to make 
leveraging very practical. Assuming that congestion reduction 
and leveraging were made not applicable to review of projects 
in a low population density state, are there any other criteria 
in S. 1926 that you would recommend be made inapplicable to 
review of projects from a low population density state, in 
order to ensure that projects from such a state would have as 
fair a chance of approval as projects from elsewhere?

A.1.c. Congestion reduction is just one of a series of criteria 
outlined in S. 1926, many of which should apply equally to 
projects in low population density states--including for 
example the promotion of economic growth, environmental 
improvement, and mobility improvements.

Q.2. What other suggestions do you have for enhancing 
infrastructure investment in a low population density state?

A.2. The key task for enhancing infrastructure investment in a 
low population density state--as with any state--is to identify 
funding sources to pay for this investment Although the 
National Infrastructure Bank may provide federal financing 
support (e.g., loans with low interest rates), ultimately any 
project must be paid for (or loans must be repaid with) a 
funding source such as state tax revenues or user fees such as 
tolls. In addition, as you know Federal law permits the 
establishment of State Infrastructure Banks to enable the 
creation of revolving loan funds capitalized by Federal grants.
                                ------                                


   RESPONSE TO WRITTEN QUESTIONS OF SENATOR CRAPO FROM TRACY 
                          WOLSTENCROFT

Q.1. As I understand it, under S. 1926, a project is ineligible 
unless it involves a Federal commitment of at least $75 
million. In a rural state, $20 million is a big project and $50 
million is a very big project. In rural states, projects can be 
much less expensive than $75 million and still be regionally or 
nationally significant. To avoid excluding projects in large 
tracts of America from eligibility under the bill, I would 
consider setting a separate, lower dollar threshold for 
projects in a low population density state. I don't see any 
reason why such an approach would adversely impact the basic 
thrust of the bill. Do you?

A.1. The criteria in S. 1928 establish that the definition of 
``qualified infrastructure projects'' should be limited to 
those projects of ``regional or national significance,'' as 
this will help to ensure that federal support is directed to 
projects that will have the greatest impact on the various 
public policy objectives defined in the legislation. I defer to 
the Congress to define the appropriate dollar threshold, and to 
decide whether or not to set different minimum thresholds for 
different types of states (e.g., by population density).

Q.2. I believe that infrastructure legislation should be 
responsive to the needs of all states and must distribute 
funds, both for highways and transit uses, in a way that 
recognizes the national interest in and across rural states, 
not just in more populated states. I don't see a clear prospect 
that this could be the case under S. 1926 absent a change in 
the project dollar threshold as indicated above. What are other 
changes to that bill, perhaps as part of a set of provisions 
for projects in low population density states, that would help 
ensure that projects in low population density states have as 
reasonable a chance of obtaining approval as projects from more 
densely populated states and areas?

A.2. I would defer to the Congress on the policy decision of 
whether or not to support smaller projects in low population 
density states. Should the Congress decide to do so, one option 
would be the provision of technical assistance to help in 
securing alternative financing sources.
                                ------                                


 RESPONSE TO WRITTEN QUESTIONS OF SENATOR CRAPO FROM JANET F. 
                            KAVINOKY

Q.1. As I understand it, under S. 1926, a project is ineligible 
unless it involves a Federal commitment of at least $75 
million. In a rural state, $20 million is a big project and $50 
million is a very big project. In rural states, projects can be 
much less expensive than $75 million and still be regionally or 
nationally significant. To avoid excluding projects in large 
tracts of America from eligibility under the bill, I would 
consider setting a separate, lower dollar threshold for 
projects in a low population density state. I don't see any 
reason why such an approach would adversely impact the basic 
thrust of the bill. Do you?

A.1. The Chamber recognizes that that the absolute size of a 
project is not always related to its national or regional 
significance. For example, the Federal Aid Highway Program 
allows states with varying budgets to classify certain projects 
as large-scale, although they may cost significantly different 
amounts.
    If the goal of S. 1926 is to make assistance available to 
any project of regional or national significance, the Chamber 
supports alternative criteria beyond dollar amount to determine 
the project's significance and eligibility for a financing 
commitment from a national infrastructure bank. For example, if 
a state is the entity requesting financing assistance in the 
form of direct loans, letters of credit or loan guarantees, the 
size of a project relative to the state's budget, or the 
potential economic impact of the project relative to the 
state's economic footprint could be taken into account.

Q.2. I believe that infrastructure legislation should be 
responsive to the needs of all the states and must distribute 
funds, both for highways and transit uses, in a way that 
recognizes the national interest in and across rural states, 
not just in more populated states. I don't see a clear prospect 
that this could be the case under S. 1926 absent a change in 
the project dollar threshold as indicated above. What are other 
changes to that bill, perhaps as part of a set of provisions 
for projects in low population density states, that would help 
ensure that projects in low population density states have as 
reasonable a chance of obtaining approval as projects from more 
densely populated states and areas?

A.2. The Chamber recognizes that this is a common dilemma in 
national legislation. There are a wide variety of quantitative 
and qualitative criteria that could be taken into account 
beyond a project dollar threshold. Examples include a 
quantitative cost-per-capita measure and a qualitative 
assessment of the importance of the project to the regional and 
national economy. An effective cost-benefit analysis would need 
to be relative to size, population served, and a host of other 
factors.
    However, the Chamber believes that a national 
infrastructure bank should be a financial institution that is 
explicitly chartered with providing financing to large projects 
of regional and national significance; by definition, financing 
implies the need for projects that can generate revenue streams 
to repay lenders or provide returns to equity holders. 
Therefore, it would meet only certain infrastructure needs and 
should not be considered a substitute for direct, user-fee 
based Federal funding through highway and transit authorization 
bills. A national infrastructure bank is only one of the tools 
that could be used to meet transportation and other 
infrastructure needs. Given the purpose of S. 1926, it is 
reasonable to assume that many projects in low-population 
density states will not meet the requirements of national or 
regional significance, no matter how flexible the criteria is.
                                ------                                


RESPONSE TO WRITTEN QUESTIONS OF SENATOR JOHNSON FROM JANET F. 
                            KAVINOKY

Q.1. Under S. 1926 the minimum threshold for a project to be 
eligible for assistance appears to be $75 million and there is 
a preference for projects that can attract private interest 
leveraging. In South Dakota, however, a $20 million project is 
a big project, and with around 10 people per square mile, my 
state does not have the traffic densities that are needed for 
viable highway toll projects. Yet there are important 
infrastructure needs in South Dakota that will serve national 
and regional interests. S. 1926 represents a thoughtful 
approach to helping meet infrastructure needs but, as noted, it 
seems that projects in a state like mine have been more or less 
left out. I'm optimistic that this can be rectified without 
changing the basic approach of the bill. So, I am looking at 
developing language to add to the bill with some type of 
alternate criteria for projects in low population density 
states, which I may define as a state with a population density 
of 25 or fewer persons per square mile. I have the following 
questions regarding alternate criteria for projects in a low 
population density state: Assuming a highway project threshold 
in such states in the range of $15-20 million, what thresholds 
would you suggest for the other types of eligible projects 
(water, etc.), or should the thresholds all be the same?

A.1. The costs of different types of infrastructure projects 
are likely to vary, and the Chamber believes that setting 
different thresholds for various types of infrastructure is 
reasonable. The Chamber does not have the type of data to 
sufficiently advise you on specific thresholds, but recommends 
you consult with the American Society of Civil Engineers, a 
group that is well versed in all kinds of infrastructure, and 
would have the expertise and figures to assist you in 
determining such numbers.
    Projects that are regionally or nationally significant but 
cannot generate sufficient revenue streams to be considered for 
project financing can--and should--be addressed in traditional 
infrastructure authorization bills.

Q.2. If one were to set an even lower dollar threshold for 
projects on Indian Reservations, what might that be?

A.2. The purpose of the infrastructure bank is to take feasible 
projects that can draw private capital, and serve as a lender 
of last resort. This bank is not designed to replace the 
Federal Aid Highway Program, to be a federal grant program, or 
to spread money broadly around the country. Rather, it is 
designed so that critical projects of national and regional 
significance have sufficient funding to be completed. The 
Chamber believes that concerns over projects on Indian 
Reservations are better suited to be addressed in the next 
surface transportation authorization.

Q.3. Congestion reduction is not an appropriate evaluation 
criteria for projects in a state like mine. And, as noted, we 
don't have the population or traffic densities to make 
leveraging very practical. Assuming that congestion reduction 
and leveraging were made not applicable to review of projects 
in a low population density state, are there any other criteria 
in S. 1926 that you would recommend be made inapplicable to 
review of projects from a low population density state, in 
order to ensure that projects from such a state would have as 
fair a chance of approval as projects from elsewhere?

A.3. Without changing the fundamental purpose of the bill and 
significantly altering the role of the federal government, some 
projects will remain ineligible for funding from the bank. 
However, there are projects outside of congestion reduction 
that may match the intent of the legislation. The Chamber 
believes that the role of the federal government is to ensure 
that national needs are met and to follow its constitutional 
obligation to protect interstate commerce. For example, 
projects enhancing the connectivity of major economic regions 
to one another and connecting less populated areas to economic 
centers are certainly in the national interest. Furthermore, 
the federal government bears a significant part of the 
responsibility to ensure that legacy assets, such as the 
Interstate Highway System, are maintained and improved and to 
maximize utilization of existing networks. Any of these 
projects may fit the criteria for a project of regional or 
national significance.

Q.4. What other suggestions do you have for enhancing 
infrastructure investment in a low population density state?

A.4. Every funding option and financing strategy must be on the 
table in order to provide the needed infrastructure in any 
state. Perhaps the single most important issue at all levels of 
government is fiscal stability: identifying stable revenue 
streams for direct pay-as-you-go investment or those that can 
be leveraged for project financing. In addition, speeding 
project delivery times and removing barriers to investment will 
also expand the opportunity to maintain, modernize and expand 
infrastructure.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



