[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                  LONG-TERM FINANCING OPTIONS FOR THE 
                  HIGHWAY TRUST FUND INCLUDING MEMBER 
                               PROPOSALS 

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

                                HEARING

                               before the

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 23, 2009

                               __________

                           Serial No. 111-29

                               __________

         Printed for the use of the Committee on Ways and Means

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

63-001 PDF                       WASHINGTON : 2011 

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 WAYS AND MEANS

                 CHARLES B. RANGEL, New York, Chairman

FORTNEY PETE STARK, California       DAVE CAMP, Michigan
SANDER M. LEVIN, Michigan            WALLY HERGER, California
JIM MCDERMOTT, Washington            SAM JOHNSON, Texas
JOHN LEWIS, Georgia                  KEVIN BRADY, Texas
RICHARD E. NEAL, Massachusetts       PAUL RYAN, Wisconsin
JOHN S. TANNER, Tennessee            ERIC CANTOR, Virginia
XAVIER BECERRA, California           JOHN LINDER, Georgia
LLOYD DOGGETT, Texas                 DEVIN NUNES, California
EARL POMEROY, North Dakota           PATRICK J. TIBERI, Ohio
MIKE THOMPSON, California            GINNY BROWN-WAITE, Florida
JOHN B. LARSON, Connecticut          GEOFF DAVIS, Kentucky
EARL BLUMENAUER, Oregon              DAVID G. REICHERT, Washington
RON KIND, Wisconsin                  CHARLES W. BOUSTANY, Jr., 
BILL PASCRELL, Jr., New Jersey       Louisiana
SHELLEY BERKLEY, Nevada              DEAN HELLER, Nevada
JOSEPH CROWLEY, New York             PETER J. ROSKAM, Illinois
CHRIS VAN HOLLEN, Maryland
KENDRICK B. MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
DANNY K. DAVIS, Illinois
BOB ETHERIDGE, North Carolina
LINDA T. SANCHEZ, California
BRIAN HIGGINS, New York
JOHN A. YARMUTH, Kentucky

             Janice Mays, Chief Counsel and Staff Director

                   Jon Traub, Minority Staff Director

                                 ______

                SUBCOMMITTEE ON SELECT REVENUE MEASURES

                RICHARD E. NEAL, Massachusetts, Chairman

MIKE THOMPSON, California            PATRICK J. TIBERI, Ohio, Ranking 
JOHN B. LARSON, Connecticut          Member
ALLYSON Y. SCHWARTZ, Pennsylvania    JOHN LINDER, Georgia
EARL BLUMENAUER, Oregon              DEAN HELLER, Nevada
JOSEPH CROWLEY, New York             PETER J. ROSKAM, Illinois
KENDRICK B. MEEK, Florida            GEOFF DAVIS, Kentucky
BRIAN HIGGINS, New York
JOHN A. YARMUTH, Kentucky

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also, published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.





























                            C O N T E N T S

                               __________
                                                                   Page

Advisory of July 16, 2009 announcing the hearing.................     2

                               WITNESSES

The Hon. James L. Oberstar, a Representative in Congress from the 
  State of Minnesota.............................................     5
The Hon. John L. Mica, a Representative in Congress from the 
  State of Florida...............................................    17
The Hon. Peter A. DeFazio, a Representative in Congress from the 
  State of Oregon................................................    19
The Hon. John J. Duncan, a Representative in Congress from the 
  State of Tennessee.............................................    26
The Hon. Kendrick Meek, a Representative from the State of 
  Florida........................................................    33
The Hon. Kevin Brady, a Representative from the State of Texas...    42
The Hon. Ken Calvert, a Representative from the State of 
  California.....................................................    36
The Hon. Jerry Moran, a Representative from the State of Kansas..    47
The Hon. Corrine Brown, a Representative from the State of 
  Florida........................................................    40
The Hon. Roy Kienitz, Undersecretary of Policy, United States 
  Department of Transportation...................................    56
Peter A. Picknelly, President, Peter Pan Bus Lines, Springfield, 
  Massachusetts..................................................    63
Robert L. Darbelnet, President and Chief Executive Officer, 
  American Automobile Association (AAA), Heathrow, Florida.......    71
C. Wick Moorman, President and Chief Executive Officer, Norfolk 
  Southern Corporation, Norfolk, Virginia........................    79
Barbara J. Windsor, President and Chief Executive Officer, Hahn 
  Transportation, New Market, Maryland...........................    94
Allen D. Biehler, Secretary, Pennsylvania Department of 
  Transportation, Harrisburg, Pennsylvania.......................   116
James M. Whitty, Manager, Office of innovative Partnerships & 
  Alternative Funding, Oregon Department of Transportation.......   122
Janet Kavinoky, Director, Transportation Infrastructure 
  Congressional & Public Affairs and Executive Director, 
  Americans for Transportation Mobility Coalition, United States 
  Chamber of Commerce............................................   133
Edward Wytkind, President, Transportation Trades Department, AFL-
  CIO, Washington, D.C...........................................   160
Don Weaver, Vice President, Weaver-Bailey Contractors, El Paso, 
  Arkansas, and Chair of the Associated General Contractors of 
  America, Washington, D.C.......................................   168

                       SUBMISSIONS FOR THE RECORD

Kurt J. Nagle, Statement.........................................   181
Leif Wathne, Statement...........................................   186
Andrew Maybee, Statement.........................................   187
Gigi B. Sohn, Statement..........................................   187
National Transportation Policy Project (NTPP), Statement.........   191


                  LONG-TERM FINANCING OPTIONS FOR THE
                  HIGHWAY TRUST FUND INCLUDING MEMBER
                               PROPOSALS

                              ----------                              


                        THURSDAY, JULY 23, 2009

             U.S. House of Representatives,
                       Committee on Ways and Means,
                   Subcommittee on Select Revenue Measures,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:00 a.m., in 
Room 1100, Longworth House Office Building, the Hon. Richard E. 
Neal [chairman of the subcommittee] presiding.
    [The advisory of the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

 Neal Announces Hearing on Long-Term Financing Options For the Highway 
                 Trust Fund, including Member Proposals

July 16, 2009

By (202) 225-5522

    House Ways and Means Select Revenue Measures Subcommittee Chairman 
Richard E. Neal (D-MA) announced today that the Subcommittee on Select 
Revenue Measures will hold a hearing on possible long-term measures to 
finance the Highway Trust Fund, including specific Member proposals 
that have been introduced in the 111th Congress.&2The hearing will take 
place on Thursday, July 23, 2009, in the main Committee hearing room, 
1100 Longworth House Office Building, beginning at 10:00 a.m.
      
    Oral testimony at this hearing will be limited to Members of the 
House of Representatives and other invited witnesses. However, any 
individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

FOCUS OF THE HEARING:

      
    The hearing provides Members the opportunity to speak on behalf of 
specific proposals they have introduced that would affect the long-term 
funding for the Highway Trust Fund. Following the Members' testimony, 
invited witnesses will comment on those and other proposals.
      

BACKGROUND:

      
    The current authorization of surface transportation programs 
expires on September 30, 2009. Federal highway and transit expenditures 
are derived from the Highway Trust Fund. The Highway Trust Fund was 
established in the Highway Revenue Act of 1956 (P.L. 84-627) to meet 
certain financial obligations incurred for the construction of the 
interstate highway system and other federally financed highways, and 
was codified in Section 9503 of the Internal Revenue Code by the 
Highway Revenue Act of 1982 (P.L. 97-424). The Trust Fund was designed 
to be a self-financing mechanism using new and existing highway user 
taxes.
    Recently, the balance of the Highway Trust Fund has fallen 
dramatically. Last year, $8 billion was transferred from the general 
fund of the U.S. Treasury to the Highway Account. In order to guarantee 
long-term stability for surface transportation programs, any long-term 
reauthorization must also include a stable source of revenue to support 
program funding.
    In announcing the hearing, Chairman Neal stated, ``An efficient and 
functional transportation network is crucial to maintaining the 
livelihood of the American people and the growth of the American 
economy. This hearing will address options before the Congress to 
provide the necessary long-term funding for investment in an 
economically sound and environmentally responsible way.''
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://democrats.waysandmeans.house.gov, 
select ``Committee Hearings.''Select the hearing for which you would 
like to submit, and click on the link entitled, ``Click here to provide 
a submission for the record.'' Once you have followed the online 
instructions, complete all informational forms and click ``submit'' on 
the final page. ATTACH your submission as a Word or WordPerfect 
document, in compliance with the formatting requirements listed below, 
by close of business Thursday, August 6, 2009. Finally, please note 
that due to the change in House mail policy, the U.S. Capitol Police 
will refuse sealed-package deliveries to all House Office Buildings. 
For questions, or if you encounter technical problems, please call 
(202) 225-1721.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies on electronic submissions for printing the official 
hearing record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons, 
and/or organizations on whose behalf the witness appears. A 
supplemental sheet must accompany each submission listing the name, 
company, address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://democrats.waysandmeans.house.gov.

                                 

    Chairman NEAL. Let me call this hearing to order. And I 
would encourage our witnesses to take their seats. Let me 
welcome all to this hearing by the Select Revenue Measures 
Subcommittee to explore options for financing our long-term 
transportation infrastructure needs.
    We are fortunate today to be joined by the bipartisan 
leadership of the House Transportation and Infrastructure 
Committee who come here this morning united in their message 
for a 6 year reauthorization bill. This committee has 
responsibility over the revenues generated to support any 
authorization. And many of our witnesses today will tell us 
that current revenues will not be sufficient to cover the cost 
of maintaining and improving our transportation infrastructure.
    As we heard in our last subcommittee hearing a month ago 
focusing on the needs of the system, all 50 states need 
substantial revenue simply to maintain the current state of 
infrastructure, and certainly more to improve it.
    Scottish Poet Robert Louis Stevenson said, ``I travel, not 
to go anywhere, but to go. I travel for travel's sake. The 
great affair is to move.'' For me, Americans traveling for 
travel's sake no longer carries the same joy it once had. The 
current state of our infrastructure, increasing congestion, and 
safety concerns are major reasons why. Whether it is the family 
cross-country road trip or a business visit across state, 
Congress must ensure that the infrastructure that delivers 
these travelers is safe, efficient and modern.
    Let me now recognize Mr. Tiberi for his opening statement.
    Mr. TIBERI. Thank you, Mr. Chairman. As we have heard from 
witnesses at last month's transportation hearing held by this 
subcommittee and the Oversight Subcommittee, the demand for 
additional highway spending continues to grow. At the same 
time, concerns have been raised about the viability of the 
current Highway Trust Fund financing structure, as well as the 
fairness of the current structure. The Congressional Budget 
Office projects that simply extending the current Highway Trust 
Fund revenue and spending levels would result in a total 
shortfall of more than $70 billion over the fiscal year period 
of 2010 to 2015.
    As we are all aware, however, many reauthorization plans 
propose spending much, much more than the current level. Today, 
we will have an opportunity to hear about various proposals to 
pay for the new spending. We look forward to hearing today from 
our colleagues in the House, from stakeholders in our 
communities and from the Administration, which has proposed a 
more limited reauthorization and has already ruled out an 
increase in the gas tax.
    I know, Mr. Chairman, that the topic of this hearing is 
long-term financing options, but I think it is important to 
emphasize, as I did at last month's hearing, the near-term 
shortfall in the Trust Fund that is staring us in the face. It 
is my understanding that there will be a shortfall of more $3 
billion, perhaps as much as $7 billion, between now and the end 
of September. Based upon what I am reading in the papers, it 
sounds like this hole may be plugged by another transfer from 
the general fund of the Treasury, which is currently more than 
$1 trillion in the red for this fiscal year.
    I would like to make a couple of observations. The 
shortfall is not a surprise. We have known about it for months. 
And even now with the deadline looming, I am not confident that 
we have a true picture of how much funding will be required to 
keep the Trust Fund in operation through the end of September, 
given the conflicting estimates that I have read over the last 
couple of days.
    I hope today's hearing will shed additional light on how 
the Majority plans to address the looming shortfall because 
this near-term issue needs to be more closely examined, and 
time is obviously running out.
    Thank you, Mr. Chairman. I yield back.
    Chairman NEAL. Thank you, Mr. Tiberi. And you should know 
that the Majority side here is very interested in getting the 
Minority side fully involved in how we finance the short-term 
needs.
    Mr. TIBERI. Thank you.
    Chairman NEAL. We are very fortunate this morning to have a 
panel of experts from Congress and around the country to share 
their thoughts on our transportation needs. We look forward to 
their testimony here today, and we thank you for your 
participation. Without objection, any other Members wishing to 
insert statements as part of the record may do so. All written 
statements, written or proposed by the witnesses, will be 
inserted into the record as well.
    Chairman NEAL. I do not think there is anybody that I have 
ever met that knows more about transportation or has a longer 
institutional memory than our first witness, Chairman Oberstar. 
And I would recognize Chairman Oberstar for his statement.

STATEMENT OF THE HONORABLE JAMES L. OBERSTAR, A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF MINNESOTA

    Mr. OBERSTAR. Thank you very much, Mr. Chairman. And I 
thank all the members on both sides of the aisle for their 
participation, most of whom I have known for a great many 
years. And I was very touched by your opening quote of Robert 
Louis Stevenson who also wrote: ``The greatest adventures in 
life are those we do not go forth to seek.'' I think you could 
tie that to transportation, because transportation is an 
adventure. Everyday we go out on the roadways of America, as I 
did this morning, I could have driven from my hometown of 
Chisholm to Duluth, 90 miles in the time it took me to go 17 
miles in Washington traffic this morning. That is an adventure 
none of us want to go forth to seek.
    We have been working for two and a half years on the future 
of transportation, holding hearings on the operation and 
effectiveness of the existing Surface Transportation Act. Mr. 
DeFazio chairs that subcommittee. Mr. Duncan has been his 
partner on the Republican side. We've had over 100 hours of 
hearings, with over 200 witness, including testimony from all 
participants and players. We have thoroughly reviewed the 
issues, evaluated the reports of the two national commissions, 
the National Transportation Policy and Revenue Study Commission 
and the National Transportation Finance Commission. Both of 
which highlighted the shortfalls of investment that is needed 
to bring our system up to a state of good repair and to advance 
that system to a state of higher level of efficiency.
    Out of all those ideas and testimony, I distilled a 
proposal which is on the screen, and I hope on the desks in 
front of you. The column on the left simply recites the 
evolution of the Highway Trust Fund from 50/50 revenues, 50 
federal out of general revenues, 50 state out of state funding, 
until the Interstate Highway System in 1956 and the 
establishment of the Highway Trust Fund. And we had the gas tax 
that funded the Interstate Highway System, gave us the greatest 
mobility of any country in the world, expanded our gross 
domestic product from $345 billion in 1956 to roughly $13 
trillion that we have today, largely because of that mobility 
created by the Interstate Highway System.
    It was this Committee on Ways and Means that provided the 
financing, three cents fuel tax or ``user fee'' it was called 
on gasoline then was 30 cents a gallon. President Eisenhower 
signed the bill in September. Construction began in September 
of 1956 but in February of 1957, the Bureau of Public Roads 
said three cents is not going to be enough, we need another 
penny. That one cent was reported out of this Committee, 
brought to the House floor and passed on a voice vote. You 
cannot pass a prayer on a voice vote today in this body or the 
other body, but there were Members of Congress who stood on the 
brink of history, and looked forward to the future, and said we 
are going to be investing in a program, we are going to be 
taxing ourselves for a transportation system that we may not 
even use in our lifetime, and some of them did not. They 
invested in the future. And they did the right thing, they laid 
the foundations. Now, that Trust Fund and the system of surface 
transportation funding at the federal level is in need of 
serious overhaul.
    So, our bill, 775 pages, incorporates these principles that 
are in the schematic I laid out: Restructure the Department of 
Transportation, create a Council on Intermodalism and an under 
secretary for intermodalism, and require all the modal 
administrations in DOT to meet with each other. They have not 
done that in 40 years. I was also on the committee staff when 
we created the Department of Transportation in 1966. I have 
watched it over all these years. Those modal administrators 
have not done as much as what you are doing on this committee, 
sitting at the same table and talk with each other, in 43 
years. It is time to fix that.
    We will require them to establish a national strategic 
plan, oversee the Mega Projects Program, meet at least monthly, 
and bring into that circle the Corps of Engineers and the U.S. 
Coast Guard and Amtrak, which does not appear to be on this 
schematic. And then we are going to take the 108 categories of 
funding and condense those down into four major formula 
programs and simplify the process, eliminate 75 categories, and 
give states greater flexibility. It will establish a national 
program and require states to develop 6 year national strategic 
investment plans with annual benchmarks of reporting so that 
the public knows both in those states and nationally where 
their transportation dollars are going, how they are being 
used, and whether progress is being made toward the goals that 
the states are setting.
    We will have the critical asset investment category, which 
was cited time and again, especially in the two national 
reports, as the most critical need. It will bring our Surface 
Transportation Systems up to a state of good repair, by fixing 
the bridge decking, the highways that we drive on, the 
potholes, and make the system work. It is not working now. And 
we are going to provide the funding and the structure for 
highway safety improvement, the surface transportation program, 
congestion mitigation and air quality improvement. Our plan 
includes a major emphasis on rural roads and a freight 
improvement formula. And on the second page, we will have--I do 
not know how you get to the second page, there you go. My staff 
wants me to learn the computer. I tell them, ``If I learn it, 
then who needs you?''
    [Laughter.]
    Mr. OBERSTAR. So we move from a highly prescriptive program 
to a performance and outcomes-based surface transportation 
program in which there is a true partnership between the 
Federal Government and the states. And we restructure the 
Federal Highway Administration, create an Office of Expedited 
Project Delivery. It is intolerable that it takes 3 years to do 
a simple mill and overlay grind on the road surface that we now 
have and put it back in place. It is intolerable it takes 14 
years for a transit project from idea to rider-ship, we can 
condense that from 14 years to, as we have structured it, to 
actually 3 years.
    And then we are going to deal with the major metropolitan 
areas of this country where 80 percent of the congestion is 
situated and create Metropolitan Mobility Centers and give them 
a wide range of private and public sector tools to deal with 
their revenue needs and to address the congestion, and again 
develop 6 year investment plans with annual benchmarks of 
achievement and annual accountability and reporting.
    You cannot ask people to continue paying for a system that 
is not working. We are re-creating transportation and providing 
a system that will work more efficiently, address the needs of 
this country, and move our people and goods in our society more 
effectively.
    Unfortunately, the current Administration is not ready to 
move with a new idea, but we are. And we are not waiting for 
them. We do not have time for an 18 month head start program on 
transportation for the folks over at the White House, so we are 
moving ahead.
    Unfortunately, in the Highway Trust Fund, revenues have not 
kept up with needs. We should have indexed the highway user fee 
a long time ago, but that got lost in the process.
    So we have two needs, we need an infusion to various points 
raised. We need an infusion to carry the program under current 
law through the end of this fiscal year, not an extension of 
law. The law stays in place. Before the August recess, this 
Committee has a responsibility to provide $3 billion intra-
governmental transfer to the Highway Trust Fund, as was done 
last year. It was $8 billion. Carry us through the end of the 
fiscal year. And in the month of September, we can enact our 
larger program. With your participation, we can then address 
the long-term financing needs.
    The total shortfall by October 2nd will be $1.9 billion. We 
suggest a $3 billion transfer to cover that $1.8 billion and 
whatever re-estimate may result in August by the Office of 
Management and Budget and the Federal Highway Administration. 
They make a monthly adjustment of their numbers, and that 
number could go up or could go down, but we need a little a bit 
of cushion in there. We do not need $20 billion or $27 billion 
to carry us through the end of the fiscal year. And the $3 
billion is simply a portion of what the Trust Fund is owed for 
not receiving interest from the Treasury on gas tax revenues 
deposited in the Treasury over the last 12 years for the use of 
Highway Trust Fund revenues for disaster relief. When that 
money should have come out of general revenues, it was taken 
out of the Trust Fund over the past year, $6.8 billion, and 
other lost revenue over these years.
    There are a number of revenue options that Mr. Mica, Mr. 
DeFazio and other members of your witness panel today will 
discuss, long-term financing options that can generate over 
$250 billion. What we need is $144 billion long term to bridge 
the gap between current services of current law and the $450 
billion figure of our surface transportation program out over 
the next 6 years. We need a 6 year bill, not an 18 month bill. 
States need continuity, dependability.
    Contractors need to know that when they start a project, 
the funds will be there at the end of it and not have to have a 
stop/start the process. That has been the genius of the Highway 
Trust Fund, a dependable revenue stream, and that is what we 
are asking you. There are a whole series of proposals about 
issuing long-term Treasury bonds to finance increased funding. 
Mr. DeFazio has an interesting proposal on the transaction tax, 
on speculative trading of crude oil futures. Mr. Mica and I 
have talked about a number of his ideas engaging private sector 
financing. All of those ideas are welcome. We will take any 
dollar you can scare up for us for the Trust Fund. And Mr. 
Calvert also will come to you with a very interesting proposal 
for intermodal development at port from a container type of 
fee.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Oberstar follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Thank you, Chairman Oberstar.
    Our friend, Mr. Mica, is recognized to testify.

 STATEMENT OF THE HONORABLE JOHN L. MICA, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. MICA. Thank you, members of the Ways and Means 
Committee for the opportunity to present some of our ideas, and 
you have to make some of the choices on finding viable 
financial solutions for our highway and national 
infrastructure.
    Let me say first of all that we all know that the need is 
great. We are looking at 9.5 percent unemployment. I have a 
statement from the Pennsylvania DOT secretary who said for 
construction workers, unemployment is 21 percent. I have some 
places in my district that have 15 percent unemployment and 
construction is probably equal to this 21 percent we are seeing 
across the nation. Nothing can put people to work faster than 
building our nation's infrastructure, nor can we more wisely 
invest the people's money and have something tangible after we 
have expended the funds.
    One of the problems we are having with the current stimulus 
package, and also even the limited amount of dollars that went 
into infrastructure, was the inability to get the money is out. 
This is not what I have said. CBO and others have said that, 
there has been difficulty in getting that money out. I believe 
that we can increase the dollars available and actually get 
more dollars from what we are spending without raising taxes.
    So the first thing I propose for the record is my 437 day 
plan, which is speeding up the process, such as we did with the 
bridge that collapsed over the Mississippi River in 
Minneapolis, that horrible tragedy, but we built that bridge in 
437 days. And this is a proposal, we have some of the elements 
in our bill, maybe you could adopt more, that would allow us to 
move these projects which will save time and money and get 
people working and infrastructure built. So, that is my first 
priority.
    The second is I think that we can do a lot more public/
private partnerships, and we will have some specific 
suggestions on that. And that is also taking private dollars 
and bringing them into the infrastructure game and setting the 
rules for that.
    The gas tax as we know it, folks, is basically dead, 18.4 
cents per gallon is less money coming in. Cars are driving 
further on one gallon of gas, and we are going to alternative 
fuel. So even if you raise the gas tax by $5 a gallon, at some 
point folks are not going to be using just gasoline. They are 
going to be plugging their car in, using other means, so that 
is dead. I would propose that we look at some alternatives. One 
that I might suggest is abolish the 18.4 cent per gallon gas 
tax and move to a flat tax. A flat tax instead of having 18.4 
cents per gallon would join 45 states and the District of 
Columbia with a flat sales tax. Right now, 7.5 percent, down 
from 18.4 cents, would raise a similar amount of money. Of 
course, we would have to have a cap so it does not go up too 
much. We would have to have a floor so it does not in fact 
evaporate our revenue.
    But there are more creative ways and fairer ways until we 
probably get down the pike to a vehicle miles travelled tax, 
some sort of chip that actually calculates the weight of the 
vehicle, the miles traveled, the type of fuel used, and then 
you pay on that basis.
    But I believe that in addition to abolishing the gas tax, 
there are a whole host of alternative financing options, not my 
proposals necessarily but some by the Revenue Commission that 
was created under the past SAFTEA-LU bill. Some of those 
include increasing the cap on private activity bonds raising 
$450 billion. The current cap is $15 billion, you could go to 
$45; create a new federal program to fund state infrastructure 
bank, $72 billion. One billion invested in an infrastructure 
bank, properly leveraged, will yield $12 billion in a year, and 
provide additional funding for TIFEA loans. That could create 
$24 billion in revenue. Create a national infrastructure bank, 
that is a whopping $300 billion. And just $5 billion a year in 
an infrastructure bank can be leveraged to fund $50 billion in 
projects. And, finally, what I mentioned in the beginning, the 
second part of my plan is not only speeding up the process but 
also bringing in public/private partnerships, defining, tolling 
and some of the things that we have not done that can create 
dramatic revenue.
    So, I am asking that members of the Ways and Means 
Committee not shove this aside. Mr. Oberstar and I believe that 
we must go forward with a 6 year bill. This is the only job 
stimulus hope that the people of this country have.
    Let me tell you, I brought this dollar too to demonstrate 
one thing. This is one dollar, and take this one dollar on 
infrastructure, ladies and gentlemen. Right now, according to 
my state of Florida, my local district secretary told me he is 
getting projects for 25 to 30 percent lower. So for 75 cents, I 
can get a dollar's worth of project right now. We will never 
have a bargain on building the country's infrastructure again.
    So I urge you, with Mr. Oberstar, not to put this off. The 
problem is not going to go away. In fact, it is going to get 
worse. In fact, right now, the proposal is to take the money 
from general treasury, which could not be a worse--there could 
not be a worse solution. Here, if we take the money that we 
have got, we spend it more wisely, and we expand it, we can get 
a bargain for the buck. So, I urge you to do that, and I would 
like this dollar submitted as part of the record.
    [Laughter.]
    [The prepared statement of Mr. Mica follows:]
    [Not available at time of print.]
    Chairman NEAL. Thank you, Mr. Mica. And you should know 
that I share your position, along with Mr. Oberstar, that we 
should go forward as well.
    Mr. DeFazio is recognized for testimony.

 STATEMENT OF THE HONORABLE PETER A. DEFAZIO, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF OREGON

    Mr. DEFAZIO. Thank you, Mr. Chairman. Thank you for your 
interest in this subject and holding this hearing today.
    I think if everyone in the hearing room were quiet for a 
moment and we listened, we would basically be able to hear 
America's infrastructure crumbling around us. A status quo 
bill, as recommended by the Administration and supported by two 
committees in the Senate, guarantees that we will not even 
begin to deal with the backlog of deferred maintenance, $80 
billion of deferred maintenance on our transit systems in 
America. That means people are dying, as they did in 
Washington, D.C., because of our lack of investments in those 
transit systems. And if we continue down that path with a 
status quo bill, more people will die. More accidents will 
happen.
    We have 160,000 bridges on our National Highway System that 
are either load limited, structurally deficient or functionally 
obsolete, again causing accidents, causing delay, adding to 
cost for business and consumers all across America, people 
stuck in traffic. We could go on at some length. Those are all 
the things that will not be addressed by an 18-month extension.
    There is another thing we walk away from, we walk away from 
one million jobs a year if we support a status quo bill. That 
is what the White House proposal and the Senate proposal would 
do. If we failed to pass this bill with enhanced and additional 
investment, we walk away from one million jobs a year. And I 
think we could use those jobs and that investment in America.
    Obviously, it is difficult to find the funding we need to 
get to a $450 billion bill, we need $140 billion of additional 
revenue. We have proposed a number of things. Mr. Mica has 
talked about an infrastructure bank, yes, that is great except 
guess what, infrastructure banks mean the local district or 
state has to pay the loan back. There is no transit system in 
the world that makes money. An infrastructure bank is going to 
do nothing for transit. Unless you want to have toll roads 
everywhere, the infrastructure bank is not the solution to our 
bridge or highway problem. So I believe we need additional 
investment.
    I have tried to accommodate the concerns of the White House 
and others to find ways outside the traditional gas tax. It 
seems to me the one no-brainer that we could adopt would be to 
stop losing ground and that is when the construction industry 
comes back, and it will, and when construction inflation kicks 
in again, index the gas tax to the cost of construction 
inflation. If we had done that back in 1993, we would not be in 
this state of disrepair. We would have been able to make a much 
bigger investment. We have lost more than a third of the value 
of that dollar Mr. Mica showed us since 1993.
    You could take a second step, you could take the 
anticipated and scoreable estimates on construction cost 
inflation over the term of the bill, and you could use it to 
finance bonds. CBO says that we could, this is an informal 
analysis from CBO, but basically a one penny increase in the 
gas tax could back a 10 year bond of $13 billion. So if we go 
back to historic construction inflation, say if the economy 
recovers in 18 months or 2 years, and we index the gas tax, we 
could put $50 or $60 billion up front in the Trust Fund in the 
first year and pay it back out of those small increments that 
would come in the gas tax in the later years of the bill.
    If you want to be more ambitious, and I think we should be, 
you could look at taxing a barrel of crude oil. The idea would 
be to move some of the burden and the cost upstream from 
America's consumers, from the truck drivers, from the 
individual passenger vehicle owners and others, and move it 
upstream. If you put a dollar per barrel tax, you would raise 
approximately $24 billion over 6 years for one dollar on a 
barrel. Now, remember last year, there was one day when the 
speculators drove up the price of oil $24 in one day. Well, $24 
would be perhaps a bit steep to put on a barrel of oil but a 
dollar or say $5 would virtually pay the bill. And the prospect 
is that some of that would come out of the OPEC countries. It 
would restrain their capability of manipulating and jacking up 
the price. It could come out of some of the people further 
upstream. It could come out of the obscene profits of Exxon-
Mobil. It could come out of some of the speculators and others.
    Yes, some of it would get passed on to the consumers but 
since we are talking about a competitive industry here, the 
provision of fuel to the American people, of course they could 
not pass on all those costs, so there would be some way of 
sharing the burden there. So a $5 tax per barrel would raise 
almost what we need for the bill.
    And, finally, I was inspired flying back to Oregon a couple 
of weeks ago reading the paper where the paper said the price 
of crude oil had doubled this year, demand is flat, and it is 
all due to speculation. And I started thinking about that and I 
thought, well, what if we just taxed speculative trades? And 
the Commodity Futures Trading Commission conveniently divides 
the world between hedgers and speculators, so we would protect 
hedgers like airlines, trucking companies, steamship lines, 
railroads, others who are ultimate consumers of fuels, but the 
financial speculators would pay a very modest fee.
    If we put a two-tenths of one percent tax, two tenths of 
one percent, on crude oil trades and a half percent tax on 
crude oil options, estimates are that could raise $190 billion 
over 6 years, which means we could pay for the bill, and we 
could pay for something else, maybe part of healthcare or we 
could reduce the deficit with some of that money or you could 
make the tax a little lower and just come out even.
    Now, there are some who say, ``Oh, my God, the liquidity in 
the market setting and all the things that happen that are 
beneficial because of speculation,'' you would still have a lot 
of robust trading among hedgers, and I think some speculators 
would still trade. Some of them are not just trading on the 
two-tenths of one percent margin, and there would still be a 
market. But we assume that the price of oil would fall 
dramatically because a lot of speculators would get out of the 
market, and we assume that that trading would drop by 60 
percent. That still raises the $190 billion.
    So, Mr. Chairman, I think there are ways to get to the 
investments the American people need and want, produce the 
jobs, give people the help they are going to get out of 
traffic, fix our broken system, repair the bridges, invest in 
our transit systems, and make America competitive once again 
and put the joy back in traveling.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. DeFazio follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. I certainly thank the witnesses.
    Mr. MICA. Mr. Chairman?
    Chairman NEAL. Yes, Mr. Mica?
    Mr. MICA. If I may, our ranking member of the subcommittee, 
Mr. DeFazio's counterpart, is not able to be with us; Mr. 
Duncan. And I would ask unanimous consent to submit his 
statement for the record.
    Chairman NEAL. So ordered.
    [The prepared statement of Mr. Duncan follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. MICA. It is shorter too.
    Chairman NEAL. Thank you very much. We will get to Mr. 
Calvert shortly. Since we have the opportunity to interact with 
many of the witnesses on an everyday basis, it strikes me that 
hearing from some of the witnesses that are here as well on a 
busy day might not be a bad idea as we go forward. Is there 
anybody who would like to be recognized to question our 
colleagues here?
    Okay, I want to thank you for your very thoughtful 
testimony. And certainly the engagement that you offered, I 
think will be very helpful to us down the road.
    Let me call up our second panel this morning.
    Mr. Meek, you are recognized to offer your testimony.

 STATEMENT OF THE HONORABLE KENDRICK MEEK, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. MEEK. Mr. Chairman, it is an honor to come before the 
subcommittee. I guess I am just changing seats here from where 
you are and other members are at this particular time to be a 
witness, and I am glad to have the opportunity to do so.
    Mr. Chairman, I have already entered my full testimony for 
the record. And I wanted to just share with the committee 
members and the members that are not on the committee, that 
this hearing is going to be very, very significant to moving 
forward, moving on transportation issues. And I have a piece of 
legislation, which is H.R. 1806, the Freight Rail 
Infrastructure Capacity Expansion Act of 2009. I filed this 
legislation because I welcome the opportunity to mitigate not 
only congestion on our highways and remain competitive in the 
global market but alsoconserve energy and reduce harmful 
emissions and lessen the cost of highway maintenance.
    My legislation provides a 25 percent tax credit for 
infrastructure investment and new tracks, intermodal 
facilities, yards, locomotives and projects that will expand 
rail capacity. Railroads will be eligible for the credit but so 
will shippers or any other entity that invests in new rail 
capacity.
    The second investment incentive would allow the expensing 
of all qualified rail infrastructure capital expenditures. This 
will be an outstanding step towards making sure that we expand 
our rail capacity.
    I think it is also important to note that my bill also 
requires compliance with the Federal Wage Act, the requirements 
under the Davis-Bacon Act as a condition of eligibility for the 
tax credit and expensing allowances provided by the bill.
    I think it is important also, Mr. Chairman, to point out to 
the committee that this dramatic increase in volume will be 
able to assist transportation of freight in the United States 
of America.
    The U.S. Department of Transportation predicts the doubling 
of freight volume moving across the nation by 2035 which will 
be able to assist our economy in competing with other global 
markets.
    And I also want to add for the committee, for the record 
here, Mr. Chairman, when we look at freight rail, it plays an 
important role in reducing not only congestion but also carbon 
emissions. We can move one ton of freight 436 miles on a single 
gallon of fuel. One train can pull 280 trucks, take 280 trucks 
off of the road and also allow us to break down as it relates 
to the level of traffic that we have on the road now.
    I think it is very important, Mr. Chairman, in these very 
tough times that this industry has put forth a number of 
dollars towards building capacity. This bill will provide jobs 
in this very difficult time in our country's history, and will 
also allow us to be ahead of many other countries that are 
still dealing with the issue of freight capacity.
    There is an article, Mr. Chairman, I would like to also 
enter into the record, just talking about the investment of 
transportation. I did not want to keep Chairman Oberstar here 
for a very long time, but it is in this edition of Newsweek. 
And I happened to read this article, it is Newsweek on July 27, 
2009 and it is on page 13, and it talked about the need for 
speed.
    It is talking about high-speed rail, but it is also talking 
about infrastructure and capacity. It mentions in Germany, 
there are $58 billion in subsidies over 5 years in incentives, 
$58 billion in Germany. And in France, there is a 1,180 miles 
of track that has been laid and the train that is the second 
fastest train in the world, an investment has been made of $45 
billion. Thirteen billion has also been placed in other 
countries but it says here as it relates to our investment it 
is in the millions.
    And I think when we have an industry, such as the freight 
industry in moving freight and cargo in our country, willing to 
put forth the dollars to increase capacity, then we can 
definitely meet them with the two initiatives that I have 
pointed out here into the record of the 25 percent tax credit 
for infrastructure investment and also making sure that those 
who put forth expenditures in increasing capacity, that they 
are incentivized to do so. These are very rough times. There 
are a lot of jobs that can be created. It is green. It is 
something that we can all embrace on the bipartisan level. And 
I can say that both of the incentives that I have identified 
here this morning have support on both sides of the aisle, and 
it is American. It cannot be outsourced. And it is green. And 
it is a beautiful, beautiful piece of legislation.
    [Laughter.]
    Mr. MEEK. So I am hoping that we can see fit to add this, 
not only see this bill move forward but also be added to any 
legislation that moves through this subcommittee. Thank you so 
very much, sir.
    [The prepared statement of Mr. Meek follows:]
          Prepared Statement of the Honorable Kendrick B. Meek
    Chairman Neal, Ranking Member Tiberi, and fellow Members of the 
Subcommittee:
    I am pleased that Chairman Neal and Chairman Lewis held the Joint 
Ways and Means Subcommittee Hearing on June 25, 2009, to review highway 
and transit investment needs. Chairman Neal and Ranking Member Tiberi, 
I thank you for holding this Subcommittee hearing today, and allowing 
me the opportunity to tell you about my legislation that I filed--H.R. 
1806, the Freight Rail Infrastructure Capacity Expansion Act of 2009.
    I filed the Freight Rail Infrastructure Capacity Expansion Act of 
2009 because I welcome the opportunity to help our nation mitigate 
congestion on our highways and remain competitive in the global market, 
as well as conserve fuel, reduce harmful emissions, and lessen the 
costs of highway maintenance. We need a coherent federal policy 
regarding freight movement in general, and its role in congestion in 
particular.
    The dramatic increases in the volume and value of goods moved via 
surface transportation modes over recent decades is evidence of a need 
for a coherent federal policy regarding freight movement in general And 
its role in congestion in particular. Arguably, traffic congestion is 
the biggest problem that faces the nation's highway system. Miami is 
the 8th most congested city in the U.S. The hours of delay per traveler 
per year in Miami is 50. Congestion in Florida's largest 5 urban 
areas--Miami, Tampa-St. Petersburg, Orlando, Jacksonville, Sarasota-
Bradenton--costs drivers in those areas $5 billion annually in lost 
time and extra fuel costs. Most experts agree that urban road traffic 
congestion has intensified and becomes more widespread during the past 
quarter century.
    Many observers are concerned that unless there are significant 
increases in freight infrastructure investment, especially investment 
targeted at bottlenecks, the transportation network could become 
inefficient and a drag on the economy. As the nation faces escalating 
fuel prices, increasing traffic congestion and an ever-growing need for 
more freight transit, railroads will be a major part of the answer. 
Although trucks continue to transport about 75% of the total value of 
shipments in the U.S., rail can be seen as an efficient, cost-
effective, and environment-friendly substitute for a good deal of this 
traffic.
    Even though railroads are investing record amounts in capital 
spending, it will not be nearly enough to meet expected future demand. 
A report by the American Association of State Highway and 
Transportation Officials (AASHTO) states that America needs an 
additional $2 billion a year in rail infrastructure investment in order 
for the railroads to maintain market share and meet the country's 
minimum future freight transportation needs.
    Our economy cannot prosper if we have a shortage of transportation 
capacity. Already, transportation gridlock costs our economy hundreds 
of billions of dollars each year, a tab that will only grow if we do 
not address our transportation capacity challenges. My legislation is 
one way to help address this challenge while also providing a valuable 
economic stimulus.
    For these reasons, I have filed legislation which provides a 25% 
tax credit for infrastructure investments in new track, intermodal 
facilities, yards, locomotives and other projects that expand rail 
capacity. Any and all businesses that make capacity-enhancing 
investments, not just railroads, would be eligible for the credit; 
i.e.,shippers. A second investment incentive would allow for expensing 
of all qualifying rail infrastructure capital expenditures. This 
incentive recognizes the extremely capital-intensive nature of the rail 
industry, where capital expenditures exceed 17 percent of revenues.
    My bill also requires compliance with federal wage rate 
requirements under the Davis-Bacon Act as a condition of eligibility 
for the tax credit and expensing allowance provided by the bill.
    The U.S. Department of Transportation is predicting a doubling of 
freight volumes moving across our nation by 2035, and a growing body of 
government and academic research shows that if the U.S. economy wants 
to grow at its current level, freight transportation must increase3 its 
capacity. Freight rail plays an important role in reducing highway 
congestion. Railroads can move one ton of freight 436 miles on a single 
gallon of fuel. One train can take 280 trucks of the road--the 
equivalent of 1,100 autos--reducing congestion and pollution while 
saving energy.
    Based on data from a study by the American Association of State 
Highway and Transportation Officials, for each 1 percent of long-haul 
freight moved by rail instead of by truck, fuel savings would be around 
110 million gallons per year and annual greenhouse gas emissions would 
fall by around 1.2 million tons.
    We know that President Obama is all for increased infrastructure 
investment. We know from the last Subcommittee Hearing that there will 
be a significant economic effect on the transportation network, and the 
economy as a whole, unless there are significant increases in freight 
infrastructure investment, especially investment targeted at 
bottlenecks.
    In addition, we need to reduce the percentage of greenhouse gases. 
Because railroads are, on average, three or more times more fuel 
efficient than trucks, and because greenhouse gas emissions are 
directly related to fuel consumption, every ton-mile of freight that 
moves by rail instead of truck reduces greenhouse gas emissions by two-
thirds or more--without negatively impacting our economy.
    I feel strongly that freight rail represents our nation's best 
opportunity to mitigate congestion on our highways and remain 
competitive in the global market, as well as conserve fuel, reduce 
harmful emissions, and lessen the costs of highway maintenance. Add the 
fact that the railroad industry is committed, and prepared to begin 
construction immediately, putting thousands to work within weeks, 
positively affecting the amount of domestic and international trade 
capacity within months.
    An investment in a rail infrastructure tax credit would be a 
measure we could all be very proud of.

                                 

    Chairman NEAL. Thank you, Mr. Meek.
    The gentleman from California, Mr. Calvert, is recognized 
for testimony.

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

    Mr. CALVERT. Thank you, Chairman Neal, Ranking Member 
Tiberi, and the Members of the Committee. I thank you for 
giving me the opportunity to testify before you today.
    It is no secret that one of the biggest challenges in this 
Congress will be to find necessary revenue streams to pay for 
investments in our country to fix the problems we are having in 
transportation today. Throughout the country, Americans are 
well aware that our transportation infrastructure is directly 
linked to our nation's economic competitiveness. We know this 
because our constituents certainly have told us so, not only 
verbally but with their pocketbooks. Back in my own 
congressional district in California, a super majority of the 
constituents have voted on more than one occasion to raise 
local sales tax revenue and dedicate that revenue to 
transportation projects.
    Additionally, local governments have imposed transportation 
mitigation fees on development of new homes and commercial 
businesses. In short, our local communities have been pursuing 
a wide range of innovate revenue streams to address 
transportation challenges that exist now and will certainly 
worsen in the future.
    Given the broad consensus that existing federal revenue 
channels are inadequate to match the transportation needs, I 
believe this committee should pursue a wide range of revenue 
streams.
    Today, I would like to focus my comments on the potential 
benefits of a freight fee, which is by no means a silver bullet 
but can certainly provide significant benefits in addressing 
our nation's goods movement challenges.
    My congressional district is more than 50 miles from the 
Port of Los Angeles in Long Beach. Yet, my constituents see and 
feel the impact of trade and the goods movement it brings every 
single day. Freight moving to and from our ports and highways, 
along our rail lines and at the various places where our roads, 
rail lines and warehouses intersect results in overwhelming 
congestion.
    In addition, the growing interaction between commuters and 
freight affects them both in equally negative manner. As many 
of you know all too well, the challenge posed by movement of 
goods is not exclusive to southern California. Gateway 
communities all over the nation are experiencing decreased 
burdens of infrastructure surrounding air, land and sea ports.
    In a proactive attempt to address the freight challenges 
introduced along with my colleague Jesse Jackson, Jr., the 
``Our Nation's Trade Infrastructure Mobility and Efficiency 
Act,'' or recently called the ON TIME Act, the bill H.R. 947, 
which was introduced February 20th of this year, will fund the 
construction of high priority transportation projects, which 
would alleviate congestion in our nation's trade gateway 
corridors through a dedicated trade-based funding stream.
    Let me explain exactly what the ON TIME Act would do. The 
bill directs the U.S. Department of Transportation to designate 
key trade transportation corridors or National Trade Gateway 
Corridors extending out from every official land, sea and 
airport entry in the United States, of which there are 350 in 
the United States.
    Project eligibility under the ON TIME Act would be limited 
to transportation projects located within designated National 
Trade Gateway Corridors. Furthermore, the legislation limits 
funding to surface transportation projects as highway 
improvements, truck climbing lanes, truck bypasses, great 
separations and interchanges on key freight routes. Publicly-
owned intermodal freight transfer facilities' improvements for 
the transportation link, which is out of port facilities also 
would qualify as eligible projects within the boundaries of a 
port terminal.
    The bill grants the project selection authority not to the 
United States Department of Transportation or Congress. To 
ensure all interested parties have an opportunity to engage in 
the project selection process, the legislation requires states 
to seek input from local governments, transportation agencies, 
port authorities, regional planning authorities, as well as 
public and private stakeholders.
    The ON TIME Act also requires each state to establish a 
process for rating proposed projects in accordance with the 
purposes of the legislation.
    The ON TIME Act derives its trade-based dedicated funding 
stream through the establishment of a capped nominal ad valorem 
fee on all goods entering or existing through the official 
ports of entry. The ad valorem fee will be based equal to .75 
percent of the stated value of the shipment, with a cap of 
maximum fee of $500, whichever is less.
    The money generated by the establishment of the fee will be 
deposited in the National Trade Gateway Corridor fund, which 
the ON TIME Act establishes as a separate trust fund account 
with the United States Treasury.
    The fee established in the ON TIME Act is designed to 
ensure that it would be paid by the beneficial cargo owner 
rather than the transportation service providers, such as the 
ship, trucking or railroad companies. Additionally, the fee is 
designed to be collected and administered by existing Federal 
Government agencies through the use of existing forums and 
processes to the fullest extent possible not creating 
additional bureaucracy.
    The bill apportions the funds collected by the newly 
established fee to the transportation improvement projects 
within the National Trade Gateway Corridor in which it is 
collected. Therefore, all funds generated from the application 
of the fee on goods imported or exported at the Port of 
Charleston, for example, would be apportioned to the 
transportation projects within the National Trade Gateway 
Corridor designated for the Port of Charleston.
    While I remain strongly committed to a number of core 
principles contained in this bill, such as ensuring that the 
collected funds are spent where and how they are intended and 
preventing the creation of any new bureaucracies, I would 
welcome the insight and expertise of all of you on how to help 
fix our nation's freight infrastructure.
    I am confident we can all work together to create a 
solution to ease the congestion bogging down the freight and 
the communities in these gateway communities. And I certainly 
thank you and look forward if you have any questions.
    [The prepared statement of Mr. Calvert follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Thank you, Mr. Calvert.
    The gentle lady from Florida, Ms. Brown, is recognized to 
testify.

 STATEMENT OF THE HONORABLE CORRINE BROWN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Ms. BROWN. Thank you very much, Mr. Chairman. And I 
appreciate the opportunity to speak to the committee today 
concerning the serious need for increasing freight rail 
capacity in this country. I want to thank Chairman Rangel for 
his strong leadership in support of transportation issues. And 
I also want to publicly thank Mr. Oberstar and DeFazio and Mr. 
Mica for their work and dedication to develop a surface 
transportation reauthorization bill. I refer to Mr. Oberstar as 
the ``transportation guru,'' and I think a lot of people in 
this room would agree with that.
    The need for additional rail capacity: Congestion has 
become a major problem across all modes of surface 
transportation. Current trends and studies all suggest a 
growing congestion problem on our freight rail network. Since 
deregulation in 1980, Class 1 freight ton-miles have increased 
93 percent, while miles of track have decreased by 40 percent.
    The Department of Transportation estimates that the demand 
for freight rail transportation will increase by 88 percent by 
2035. A study conducted by the Cambridge Institute found that 
the cost of improvement needed to accomplish rail demand in 
2035 is estimated at $148 billion in 2007 dollars.
    Short line rails are dealing with the same capacity and 
financial problems facing the Class 1 rails. Private and 
government studies indicate that it will cost $13 billion to 
bring the national short line system up to the necessary level 
of efficiency.
    Environmental friendly: You cannot find a greener 
transportation mode than rail. In 2007, freight railroads moved 
a ton of freight an average of 436 miles per gallon of diesel 
fuel more than three times as far as you could move it on the 
highways. A single intermodal train can take 280 trucks off the 
highway, reducing congestion and improving greenhouse gas 
emissions.
    Short lines are also environmental friendly. They use 
approximately 184 million gallons of fuel to move 10.6 miles 
car loads of freight annually while trucks require 540 million 
gallons to move the same freight.
    My strong support for a tax credit: My subcommittee has 
held numerous hearings on the subject of rail capacity and how 
to deal with the expected growth, and we have a very strong 
support for a rail tax credit. In fact, the financial segment 
has expressed a strong willingness to invest in rail if the 
rail tax credit was enacted into law.
    Short line tax credits: An extension of the short line tax 
credit is a no brainer. It is a system that works, and it will 
help to improve the ailing infrastructure provisions.
    The legislation, H.R. 1789, which a Transportation 
Committee member introduced, one, to show that we support it, 
but also to express the need for tax credits. Last week, the 
Department of Transportation had solicitation for high-speed 
rail in a city, a passenger rail. The response was $102 
billion. Well, we cannot just come up with those dollars from 
the Federal Government. We have got to figure out a way of how 
we can bring in our partners.
    Just last Friday, I took the train up from Washington to 
New York. And of course we were on the Amtrak system, but what 
we saw was that we need to fix our bridges, we need to fix our 
tunnels. And the tax credit would be one way to bring in our 
partners.
    With that, I am hoping that we would include a tax credit 
in any bill that moves. We have a dire need to fund our 
infrastructure transportation system. And we know for every 
dollar, every billion dollars that we invest in transportation, 
it generates 44,000 jobs.
    Thank you, Mr. Chairman, for giving me the opportunity to 
speak to the committee. And one of the things that I have 
learned since I have been in Congress, you can get things done 
if you do not mind who gets the credit. So I am just hoping 
that you all will move the tax credit and the short line.
    Thank you.
    [The prepared statement of Ms. Brown follows:]
           Prepared Statement of The Honorable Corrine Brown
         a Representative in Congress from the State of Florida
    Thank you Mr. Chairman. I appreciate the opportunity to speak to 
your committee today concerning the serious need for increased freight 
rail capacity in our country. I also want to thank Chairmen Oberstar 
and DeFazio for all their hard work and dedication in developing the 
surface transportation reauthorization bill. I refer to Mr. Oberstar as 
the ``transportation guru'' and I think a lot of the people here would 
agree with me.
    Congestion has become a major problem across all modes of surface 
transportation. Current trends and studies all suggest a growing 
congestion problem on our passenger and freight rail network. Since 
deregulation in 1980, Class 1 freight ton-miles have increased 93%, 
while miles of track have decreased 40%. Passenger trains are also 
seeing increased ridership, with demand expected to grow. Amtrak 
ridership is at its highest levels since their operations began in 
1971, and we will soon implement High Speed Rail on corridors 
throughout the United States.
    The Department of Transportation estimates that the demand for rail 
freight transportation will increase 88 percent by 2035. At the request 
of the National Surface Transportation Policy and Revenue Study 
Commission, the railroad association commissioned an assessment of the 
capacity of the nation's rail system to accommodate the estimated 
increase in rail freight traffic. The National Rail Freight 
Infrastructure Capacity and Investment Study, conducted by Cambridge 
Systematics, Inc., found the costs of improvements needed to 
accommodate rail freight demand in 2035 is estimated at $148 billion 
(in 2007 dollars). The Class I railroads anticipate that they will be 
able to generate approximately $96 billion of their $135 billion share 
through increased earnings from revenue growth, higher volumes, and 
productivity improvements, while continuing to renew existing 
infrastructure and equipment. This would leave a balance for the Class 
I freight railroads of $39 billion or about $1.5 billion per year.
    Short Line railroads are dealing with the same capacity and 
financing problems facing the class I railroads. Private and government 
studies indicate it will cost $13 billion to bring the national short 
line system up to the necessary level of efficiency.
    There are many reasons why we should look to freight rail as part 
of the solution to our transportation challenges. Moving more freight 
by rail brings with it enormous environmental advantages. In 2007, 
freight railroads moved a ton of freight an average of 436 miles per 
gallon of diesel fuel, more than three times as far as it could move on 
a highway. Freight trains also help reduce greenhouse gases. According 
to the U.S. Environmental Protection Agency, freight trains are cleaner 
than trucks, emitting only a third as many greenhouse gases to move the 
same volume equivalent distances. And freight rail also helps reduce 
highway congestion. A single intermodal train can take 280 trucks off 
the highways.
    Short lines are also environmentally friendly. They use 
approximately 184 million gallons of fuel to move 10.6 million carloads 
of freight annually, while trucks require 540 million gallons to move 
the same freight. Short lines keep 30 million truckloads a year off the 
highway, saving $1.3 billion per year in highway damage costs.
    The problem is that railroads don't have enough capacity to handle 
the expected freight traffic increase. Unless that capacity is 
increased, more and more freight will have to move onto the nation's 
already congested and strained highways.
    A 2007 study indicated that $148 billion should be invested to 
expand the capacity of the freight rail network by 2035 in order to 
keep up with demand. Railroads are already investing heavily to 
maintain, upgrade and expand their networks--more than $9 billion in 
capital improvements last year. That same study indicated that the 
freight railroads could raise about 70 percent of the expansion funds 
themselves. But that leaves a gap of about $1.4 billion annually 
between what the railroads themselves can invest and what is needed.
    One way to help bridge the gap is through a modest program of tax 
incentives. Several pieces of legislation have been proposed in this 
Congress that provides tax credits for rail projects that add capacity 
to the nation's rail network, and I strongly support those efforts.
    I introduced legislation, H.R. 1789 with Transportation Committee 
Ranking Member Mica that would combine both the Class 1 and short line 
railroad tax credits and includes fair wage provisions. We introduced 
this legislation to express the support of the transportation committee 
for these valuable and necessary tax incentives.
    The incentive could be utilized not just by railroads but also by 
others who invest in those projects, such as a shipper who builds a 
spur to a plant or a trucking company that invests in an intermodal 
terminal.
    The short line tax credit provision extends the current incentive 
for short line railroads to invest in track rehabilitation by providing 
a tax credit of 50 cents for every dollar the railroad spends on track 
improvements.
    If that money is invested, highway congestion, stress on bridges 
and transportation-related greenhouse gas emissions can all be reduced 
while existing passenger rail capacity for High Speed Rail, Amtrak and 
local commuter trains can be retained.
    As we begin to reauthorize the next surface transportation bill, it 
is critical that the need for additional rail capacity for both freight 
and passenger rail be addressed. The future of ground transportation is 
on our rails, whether it is taking freight off congested highways or 
moving people on high speed rail corridors.
    There is no one solution that will solve rail congestion. However, 
providing tax incentives to the Class 1 and short line railroads would 
allow the government and the private sector to work together to 
increase and improve both freight and passenger rail capacity.
    With that, I would again thank the subcommittee for allowing me to 
testify at today's hearing and would encourage the committee to include 
these rail capacity tax credits in the financing title of the Surface 
Transportation Authorization Act of 2009 (STAA).

                                 

    Chairman NEAL. That, by the way, is no small matter as you 
know, Ms. Brown. I thank the gentle lady for her testimony.
    The gentleman from Texas, a member of the Ways and Means 
Committee, is recognized.
    Mr. Brady.

  STATEMENT OF THE HONORABLE KEVIN BRADY, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. BRADY. Thank you, Mr. Chairman. First, let me tell you 
this is an impressive looking dais, and I like seeing it from 
this angle. I think it is important for you to hold this 
hearing. I appreciate you and Ranking Member Tiberi doing this. 
Ways and Means is charged with designing the financing 
structure to support America's transportation goals, and we 
ought to be aggressively engaged in doing this.
    I am a veteran of three highway reauthorization bills. This 
year, instead of submitting earmarks, I submitted four key 
reforms. I did that because we looked at just the local 
projects in our district that totaled $4 billion, and realized 
that acquiring $10 million of earmarks will not move our 
district toward mobility or for hurricane corridors or anything 
we really need.
    I wanted to quickly touch on those four reforms. The first 
one is the vision. I think we need to call for a new national 
mobility summit, bring together the best and brightest state, 
local and federal transportation experts to formulate a new 
21st century vision. And leaders would deliver that vision to 
Congress by October 1st of next year. I think we all agree that 
having a new strategic vision for transportation ought to 
include a comprehensive view, rail, barge, ship traffic, 
aviation, highways and transit, that integration is the way 
mobility works at the community level. It needs to start, the 
vision for America needs to start that way as well. I think our 
vision has been adrift since the completion substantially of 
the interstate system. Let's come up with a new one.
    The second reform is accelerating projects and saving 
money. Congress and the White House, we ought to work together 
to accelerate mobility projects, make more efficient use of 
federal transportation dollars by streamlining the burdensome 
regulatory progress. We are wasting money and losing time. We 
learned from the I-35 bridge in Minneapolis that we can 
streamline these processes and still maintain a safe, 
environmentally friendly transportation system.
    The third reform is that highway taxes should be spent on 
highways. We have to do more to ensure that the federal fuel 
taxes are not diverted to other non-transportation projects, 
such as in the past snowmobile trails, daycare centers and 
museums. It is unfair to taxpayers. It shortchanges our 
transportation goals and undercuts confidence in our system. We 
ought to require that a minimum of 95 percent of federal fuel 
taxes be spent directly on highways, bridges, transit research 
and the Smart technologies to improve mobility.
    Finally, how do we finance it? Now, I think the way we do 
it, and the fourth reform I suggest is to sunset the Highway 
Trust Fund in two and a half years. Let's force Congress to 
work through a new financing mechanism for the infrastructure 
in America. Too often we kick the can down the road, and we 
have done that unfortunately on both sides of the aisle. I 
think we ought to put the pressure on ourselves to develop a 
reliable and adequate financing stream to fund a new integrated 
transportation system. We ought to explore the traditional 
financing sources, but we also ought to look at a new 
infrastructure tax credit, modeled on Congressman Meek's 
legislation dealing with the Railroad Investment Tax Credit, 
drawing new private capital to help improve our ports and our 
barge traffic, our local roadway projects and our rail spurs 
and other investment. I think that could be a key way to bring 
more dollars to the problem. And I think, again, the Rail 
Investment Tax Credit is so critical because our challenge in 
the future is not cars, it is cargo.
    The freight rail on our highways is going to be the real 
problem America has to face, and I think being able to move 
some of that freight onto our rail and barge and other areas is 
key.
    Mr. Chairman, private activity bonds were created in the 
last reauthorization bill, capped at $15 billion. We ought to 
look at how that tool is working and can it be improved.
    And, finally, let's fix what is wrong with the current 
highway funding system. Let's focus on a new vision. Let's find 
the funds to invest in the infrastructure. I think too often we 
jump to step three without doing the first two.
    Again, Chairman, thanks for having us today.
    [The prepared statement of Mr. Brady follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. I thank the gentleman.
    And, Mr. Moran, the gentleman from Kansas, is recognized to 
offer testimony.

  STATEMENT OF THE HONORABLE JERRY MORAN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF KANSAS

    Mr. MORAN. Mr. Chairman, thank you very much. I appreciate 
you and Mr. Tiberi allowing me this opportunity. I want to 
speak to part of what my chairman, Ms. Brown, spoke about 
earlier, the Railroad Short Line Rehabilitation Tax Credit.
    The tax credit was originally enacted for a 3 year period 
beginning in the year 2005 and was extended again by Congress 
in 2008. That tax credit now expires at the end of this year, 
and the gentleman from North Dakota, Mr. Pomeroy, and I have 
sponsored H.R. 1132 to extend this credit for an additional 3 
years.
    The importance of the short line railroad industry is in 
who and where they serve. America's 500 short lines operate 
nearly 50,000 miles of track or almost a third of the national 
railroad network. For large areas of the country, and 
particularly for rural areas like Mr. Pomeroy's and mine, short 
lines are the only connection to the national railroad network. 
For the small businesses and farmers in those areas, the short 
line's ability to take a 25 car train 75 miles to the nearest 
Class 1 railroad interchange is just as important as the Class 
1's ability to attach that block of traffic to the 100 car 
train moving it across the country.
    My Kansas grain farmers cannot make the journey to the 
export markets in the Gulf without Class 1 railroad service, 
but they cannot even start the journey without the short line 
service. And short lines do not just serve rural areas. Indeed, 
every member of this subcommittee but one has one or more short 
lines operating in their congressional districts.
    The majority of short lines are created by entrepreneurs 
who purchase the marginal or money-losing lines of Class 1 
railroads. Much of the track would have otherwise been 
abandoned and most of it could not justify much of an 
investment by the previous owners. To smaller, local 
businesses, short lines have been very successful in turning 
these into profitable lines on a profit and loss basis, but 
they serve such small customers that do not ship much volume, 
so it is difficult for them to fund the enormous cost related 
to deferred maintenance.
    Today, short lines reinvest on an average of 30 percent of 
their annual gross revenues in repairing and upgrading their 
infrastructure. Even with that, government and private studies 
indicate that unmet infrastructure needs on all U.S. short 
lines run some place between $10 and $13 billion.
    The Short Line Tax Credit provides 50 cents for every 
dollar the railroad invests in track rehabilitation up to a 
credit cap equal to $3,500 per mile of track owned by the 
company. It has leveraged hundreds of millions of dollars of 
private investment in vulnerable railroad infrastructure. The 
National Railroad Tie Association estimates that the credit has 
allowed the short lines to purchase and install 750,000 ties a 
year over and above their normal purchases.
    Let me give you a couple of important reasons for extending 
the Short Line Tax Credit. First, the primary beneficiaries of 
the tax credit are not the short lines, they are the railroad 
shippers. They are their customers. When the short line 
railroad upgrades track, those shippers receive faster, safer 
and more competitively priced services. Most important, they 
can utilize the newer, heavier long load railroad cars that are 
becoming the standard for Class 1 carriers. The heavier cars 
require a much stronger track structure. And if the short line 
track is not upgraded to handle them, the shippers must send 
product by truck to the nearest Class 1 railroad.
    Attached to my statement is a sampling of testimonials from 
shippers that speak to the benefits. And I hope that members 
will take the time to briefly take a look.
    Also, in today's recession, short line rehabilitation 
creates jobs and does it immediately. Most short lines do not 
have the in-house manpower to undertake rehabilitation projects 
and must hire contractors and laborers to do the work. Short 
lines are constantly installing new rail, ties and ballasts, 
the amount limited only by funding availability. If extra work 
becomes available tomorrow, the work gang that is currently 
installing ties and rail between milepost A and milepost B will 
be hired to keep going to milepost C because virtually all 
short line capital investment is made on existing company-owned 
rights away, there is no regulatory or environmental delay. 
There is an immediate benefit.
    When the tax credit was originally introduced, it attracted 
268 cosponsors, a widely supported piece of legislation. As of 
today, there are 120 cosponsors to Mr. Pomeroy's bill, H.R. 
1132, and we are collecting more each and everyday. I hope you 
will include this measure in whatever legislation is available 
as a vehicle before this tax credit expires at the end of the 
year.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Moran follows:]
            Prepared Statement of The Honorable Jerry Moran
         a Representative in Congress from the State of Kansas
    Chairman Neal, Ranking Member Tiberi, and Members of the 
Subcommittee, I appreciate the opportunity to speak on behalf of the 
short line railroad rehabilitation tax credit. The tax credit was 
originally enacted for a 3 year period beginning in 2005 and extended 
for two more years in 2008. The credit expires at the end of this year 
and Congressman Pomeroy and I have sponsored H.R. 1132 to extend the 
credit for an additional 3 years.
    The importance of the short line railroad industry is in who and 
where they serve. America's 500 short lines operate nearly 50,000 miles 
of track, or almost a third of the national railroad network. For large 
areas of the country and particularly for rural states short lines are 
the only connection to the national railroad network. For the small 
businesses and farmers in those areas, the short line's ability to take 
a 25-car train 75 miles to the nearest Class I railroad interchange is 
just as important as the Class I's ability to attach that block of 
traffic to a 100-car train moving across the country. My Kansas grain 
farmers cannot make the journey to export markets in the Gulf without 
Class I railroad service. But they can't start the journey without 
short line service.
    And short lines do not serve rural areas exclusively. Indeed all 
but one Member of this subcommittee has one or more short lines 
operating in his or her district.
    The majority of short lines are created by entrepreneurs who 
purchase the marginal or money losing lines of the Class I railroads. 
Much of this track would otherwise be abandoned and most of it could 
not justify much investment by the previous owners. As smaller, local 
businesses, short lines have been very successful in turning these into 
profitable lines on a P&L (Profit and loss) basis. But they serve small 
customers that do not ship in volumes large enough to fund the enormous 
cost of eliminating this deferred maintenance. Today, short lines 
reinvest on average nearly 30 percent of their annual gross revenues in 
repairing and upgrading their infrastructure. Even with that, 
government and private studies indicate that the unmet infrastructure 
needs on all U.S. short lines run between $10 and $13 billion.
    The short line tax credit provides 50 cents for every dollar the 
railroad invests in track rehabilitation up to a credit cap equal to 
$3,500/mile of track owned by the company.
    It has leveraged hundreds of millions of dollars of private 
investment in vulnerable railroad infrastructure. The National Railroad 
Tie Association estimates that the credit has allowed short lines to 
purchase and install 750,000 ties/year over and above their normal 
annual purchases.
    Let me give you a couple of important reasons for extending the 
short line tax credit.
    First, the primary beneficiaries of the credit are railroad 
shippers. When their short line railroad upgrades track they receive 
faster, safer and more competitively priced service. Most important, 
they can utilize the newer heavier load railroad cars that are becoming 
the standard for the Class I industry. These heavier cars require a 
much stronger track structure and if the short line track is not 
upgraded to handle them, the shipper must sent his product by truck to 
the nearest Class I railroad. Attached to my statement is a sampling of 
shipper testimonials that speak to these benefits and I hope Members 
can take the time to briefly review those statements.
    Also, in today's recession, short line rehabilitation creates jobs 
and does so immediately. Most short lines do not have the in-house 
manpower to undertake rehabilitation projects and must hire contractors 
and laborers to do the work. Short lines are constantly installing new 
rail,ties and ballast, the amount limited only by funding availability. 
If extra work becomes available tomorrow, the work gang that is 
currently installing ties and rail between milepost A and B would be 
hired to keep going to milepost C. Because virtually all short line 
capital investment is made on existing company owned right-of-way there 
is no regulatory or environmental delay.
    When the tax credit was originally introduced it attracted 268 co-
sponsors. As of today we have 120 co-sponsors on H.R. 1132 and are 
collecting more each day. I hope you will include this measure in 
whatever legislative vehicle is available before the credit expires 
this December.

                                 

    Chairman NEAL. I thank the gentleman. I believe there are 
no questions of this panel, but we are going to recognize now 
Mr. Blumenauer and then Mr. Pomeroy for statements.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. And I deeply 
appreciate your leadership in convening yet another one of 
these hearings that are so important for our committee. This, 
as you know, has long been an interest of mine. As I listened 
to our colleague, Mr. Brady, I agreed with the points that he 
brought forward, but I do feel that we already have the vision 
that he is talking about. This has been created, and we are 
going to hear from witnesses again today, that will talk about 
the vision for the transportation system. We have heard from 
Mr. Oberstar and Mr. DeFazio about what their weaving into it. 
I think there is an emerging consensus about the vision for 
transportation.
    And I could not agree more about the notion of having more 
value in the system. But, again, here there is no need to delay 
to understand how to get more value out of each dollar.
    Our former colleague, Secretary LaHood, and I spent two 
days in Portland earlier this month where people were brimming 
with ideas about how to squeeze more out of each dollar, 
streamline the process, and we will hear more about that today.
    It does require at the end of the day more money. And I 
appreciate what our friends are saying about the rail tax 
credit. I cosponsored it before, I will cosponsor it again. I 
think they are right on. I think the potential of a freight fee 
ought to be explored.
    And Mr. Calvert mentioned what local communities are doing. 
And as I have been working on this issue around the country, I 
am struck that local communities are far beyond Congress. They 
are stepping up, they are raising property taxes, they are 
raising sales taxes, even in difficult times, to move forward.
    And we do not have to repeal the gas tax to create a crisis 
for Congress to act. We have had testimony, Mr. Chairman, and 
again I appreciate your doing this, where people are talking 
about the crisis right now. We do not have enough money to even 
fund our current inadequate transportation system. And, as Mr. 
Mica pointed, we are in a downward cycle in terms of what is 
going to happen with greater fuel efficiency, electric cars, 
hybrids, the Highway Trust Fund is in a death spiral.
    I think it is very clear what we should be doing, and I 
think our witnesses today have given us good advice. We ought 
to adjust the transportation funding sources for inflation. We 
ought to look at new sources. I am pleased that I was able to 
get into our cap and trade legislation before it left the 
House, something that is going to be in the neighborhood of $40 
billion that will be used to green the transportation 
infrastructure.
    But I would call particular attention, Mr. Chairman, to 
legislation that I am dropping today that would extend the 
demonstration project for Vehicle Miles Traveled, a user fee 
that is much more effective than the gas tax. When the gas tax 
was originally enacted, it was a very good approximation for 
road use. It no longer is a good approximation for road use, 
and it is becoming more and more inaccurate over time.
    You are going to hear from one of the witnesses today about 
an experiment we have done in Oregon where people have 
voluntarily decided they will pay at the pump based on miles 
traveled, not gallons used. And you will hear that it has been 
successful. We have got the technology. People, when they 
understand it, feel comfortable with it.
    And it has the potential of dramatically expanding what we 
can do not just to raise revenue in a more equitable fashion, 
by people who really use the system, it can be used for 
truckers, it can be used for motorists. We can add into this 
more benefits for users of highways that can streamline their 
process in terms of not just how they pay for it but parking, 
tolling, actually some things that could affect how they get 
access to the roadways. I have legislation that would extend 
the pilot project to every state in the union so people will 
feel comfortable with it.
    They will understand how it works, will benefit from it 
because every single expert witness that we will hear from 
acknowledges that unless we fix the system, the wheels fall 
off, as Mr. Mica says. We have to have something akin to a real 
user fee. And, finally, that is going to get the support we 
need for the additional revenue.
    President Eisenhower and President Reagan understood a user 
fee made sense, and they supported actually increasing those 
user fees, like the gas tax. I think it will give us a broad 
base of support to move forward. I appreciate the courtesy in 
making some brief comments, and look forward to working with 
the committee on following through with this.
    Chairman NEAL. We thank the gentleman. The gentleman from 
North Dakota, Mr. Pomeroy, is recognized.
    Mr. POMEROY. Thank you, Mr. Chairman. I will be very brief. 
I want to first of all commend my name sake, Congressman 
Blumenauer, the Earl part, he is really one of the visionaries 
in Congress, not just on this committee but in Congress, on 
infrastructure. And I am very pleased, Mr. Chairman, that you 
are holding this hearing and you have held other hearings, 
giving us an opportunity across the committee to begin to catch 
up a little bit on the learning curve given the difficult 
decisions that are in front of us.
    I want to speak not on grand vision but really on a very 
specific point, and that is the need for continuing the Section 
45G Railroad Track Maintenance Tax Credit for short line 
railroads. I commend Jerry Moran, it has been my pleasure to 
work with him from the time we initially passed this tax 
credit, because our areas represent vast areas producing bulk 
commodities and yet we have had the main Class 1 railroads 
basically diminishing their service areas, identifying central 
track and leaving others, in ways that do not comprehensively 
serve the market needs of the agriculture districts we 
represent.
    Well, I note that while the short lines are particularly 
important to areas like Congressman Moran's and mine, they are 
also playing a role in metropolitan and more heavily developed 
areas, including the chairman's district, the ranking member's 
district, and are really found throughout the representation of 
Congress.
    A couple of problems: The assets acquired really require 
some investment. We are all familiar with the notion of hand-
me-down clothes. Well, they have got hand-me-down track, and it 
takes some investment to bring it up and that is especially 
true in light of the second feature these days. They are often 
having to run unit trains, which have much heavier trains than 
the track was initially designed for. So not only do they have 
dated infrastructure, they have got to bring that 
infrastructure up to what 21st century transportation needs 
are, and that is a tremendous investment.
    These are pretty small scale economic entities. Without the 
capital wherewithal to really make the investment. So, we have 
found that a tax credit has worked very well. My friend, the 
Chair, has noted the role of the tax credit in leveraging 
infrastructure investment. We have got we think at least two to 
one leverage, for the tax credit we get an equal amount of 
private capital. In Congressman Moran's district, there is some 
representation that the dollar of tax credit has leveraged $7 
of private capital. That is a pretty efficient way to address 
what is an undeniable infrastructure need relative to short 
line railroad.
    I have a statement, Mr. Chairman, I ask that would be 
included in the record. Again, I commend Congressman Moran for 
his leadership in this area. I so appreciate the work of Chair 
Brown on helping us along on this one, and look forward to the 
work of this subcommittee, Mr. Chairman. Thank you.
    [The prepared statement of Mr. Pomeroy follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Without objection, your statement will be 
included in the record.
    And if Mr. Meek would like to talk about his beautiful 
initiative.
    Mr. MEEK. No, everything is beautiful. I am from Florida. 
But let me just say, Mr. Chairman, in response to my colleague 
Mr. Blumenauer, who I have a great deal of respect for. In my 
14 years of public service, I can count on one hand the people 
I have served with that have a true legislative mind focused on 
solutions. When I was in the Florida Legislature, there was a 
member, and Chairwoman Brown may remember this person, his name 
is Alzo Redick, serving out of Orlando. We had a great debate 
on the floor. He stood up and said to all of the members, 
``Listen, people did not elect us to describe the problem but 
to be able to find solutions to the problem.''
    I want to thank you for identifying the green initiatives, 
and cosponsoring the legislation. But, the freight rail 
companies have put forth 17 percent of all revenues towards 
rail infrastructure and they are required through federal 
legislation to deal with the safety crossing, and that creates 
jobs. That is the reason why I am supporting this bill strongly 
because I want to create jobs not only in Florida but also in 
the Midwest. And you know, Mr. Chairman, the train leaves the 
station and Midwest and rural communities and coal land and all 
of those areas are left behind.
    Our discussion here today is very fruitful. I think it is 
important to note that the policy that has been put forth by 
the committee of substance, from the Transportation Committee, 
it all goes toward incentivizing those U.S. companies, U.S. 
jobs and creating those jobs in this recession. And in some 
parts of America, whether urban or rural, there is a depression 
because no one is providing these jobs.
    So, Mr. Chairman, you know that we will continue to discuss 
this. I want to thank you for allowing me to testify today.
    Chairman NEAL. Thank you very much. I want to thank the 
panelists. And if there are no questions, we will let them move 
along. And we will call up our third panel.
    First, let me welcome back to the subcommittee Roy Kienitz, 
the undersecretary of policy at the U.S. Department of 
Transportation. Next, I am pleased to welcome Mr. Peter 
Picknelly, the president of Peter Pan Bus Lines in Springfield, 
a continuing generation of successful businesspeople and also 
most benevolent to many causes in and around the Springfield 
area and a great employer in our region. And he is here on 
behalf of Peter Pan Bus Lines, a member of the American Bus 
Association board of directors, and also I think he has brought 
his daughter to Washington to do a great tour afterwards. And 
we are delighted that he is here as well.
    We would also like to recognize Mr. Robert Darbelnet, the 
president and CEO of the American Automobile Association, or 
AAA, as it is well known. We also want to welcome Mr. Wick 
Moorman, the president and CEO of Norfolk Southern Corporation, 
testifying on behalf of the American Railroad Association.
    And, finally, we will hear from Ms. Barbara Windsor, the 
president and CEO of Hahn Transportation in New Market, 
Maryland, who is testifying on behalf of the American Trucking 
Association.
    Let me recognize Mr. Kienitz for his opening statement.

   STATEMENT OF THE HONORABLE ROY KIENITZ, UNDERSECRETARY OF 
       POLICY, UNITED STATES DEPARTMENT OF TRANSPORTATION

    Mr. KIENITZ. Thank you, Mr. Chairman. It is good to see the 
members again to discuss this important topic. Thanks for 
having us again. I will try to be mercifully brief. Our 
approach to this issue I think is to begin with first 
principles, which is what are the objectives that we want the 
system for transportation investment to achieve, and the ones 
that the Secretary has been articulating I think are reasonably 
clear. We want to enhance the economic competitiveness of the 
country, create the safest transportation system we can have, 
deal with the environmental impacts and create an 
environmentally sustainable system, and really invest in 
community livability as much as possible. Those are sort of the 
four main points that we see as the organizing principles.
    The reauthorization is really an opportunity to re-examine 
the structure on the revenue side and on the spending side, 
with the principal question being: Are we collecting revenues 
and spending revenues in a way which has the greatest effect in 
enhancing our ability to achieve those goals?
    We have a system now whereby the costs that occur to 
consumers are largely not frankly on the tax side. The federal 
gasoline tax of 18.4 cents is of course on a worldwide basis 
not particularly high, but there are very high costs which 
occur to families on their private expenditure side, car 
ownership, car insurance and other things. So one of the things 
we want to look at is not just the ability of investments made 
with government funds to deal with system issues but also their 
ability to deal with family issues, access to jobs, family 
expenditures, things like that. So we want to be able to look 
at the question of how we are managing costs in the aggregate, 
not just on the government side of the balance sheet but also 
on the family and business side of the balance sheet.
    You want a system obviously that is in a state of good 
repair. That is something that Mr. Oberstar has emphasized and 
that is an emphasis with which I think it is impossible to 
disagree. There is a long way to go there. I know that many of 
the state DATs have put increasing emphasis in the last decade 
into really trying to put their money into state repair 
programs, and that has shown some benefit over time, but I 
think we all recognize that a lot more effort needs to be made 
there.
    And, finally, a third point also emphasized by Mr. Oberstar 
and the members of his committee, is the performance of the 
system. Congestion is obviously an indicator of that but there 
are many other performance indicators that we want to look at, 
and that is community quality of life, environmental outcomes 
as well.
    So, the principles that we would apply to looking for or 
examining any proposal for financing a system is, one, is it 
adequate to meet a level of need that the country has, just in 
terms of sheer size. That is an obvious question. Second, and 
this is something that has already been alluded to, is the 
system sustainable over time? I have certainly been in this 
business for 20 some years now, and I remember every year 
people come and say, ``Well, everyone is about to drive 
electric cars, and there will not be any more gas tax,'' and 
for about 19 of the last 21 years, that has not been true, and 
now all of a sudden actually it is starting to be true. So the 
long-predicted flattening out of revenues from the gas tax is 
actually now occurring. The recession is obviously a big piece 
of that in the recent run up in gas prices. But underlying 
that, you have a long-term flattening out in the ability of 
that tax to generate critical revenues and that is obviously a 
real issue.
    Third, the funding system that we adopt, should contribute 
to the idea of intermodalism or multi-modalism or flexibility. 
I am very encouraged by the level of support that we saw in the 
previous panel for freight transportation financing systems, be 
it container fees or other types of things. I think those get 
at very important sets of problems, but one of the difficulties 
we have in this transportation financing and funding system is 
the degree to which both the revenue and the expenditures are 
sliced up into little pieces. We have transit funds. And we 
have highway funds. And we have bridge funds. And we have rail 
funds. And we have air quality funds. And we have environmental 
funds.
    And each of those separate little pieces constrains the 
ability of the people who are trying to manage that system on a 
day to day basis to actually address the high priority needs, 
and that balancing act becomes harder. So even though that 
might be an effective way to generate revenue to do some 
important projects, I think stepping back, our goal would be a 
system in which whatever revenue is collected is more broadly 
available so that the folks in New York City are going to spend 
it frankly in a dramatically different way than the rural 
areas. So that is the sort of flexibility we think will be most 
effective.
    A fourth principle is the system we have now started out, 
as Mr. Oberstar mentioned as being really about a set of 
national needs and slowly over the years has turned into a 
program which does not focus very much on national needs and 
responds to a lot of local and regional desires. And that is 
not inappropriate, but I think we have gotten to the point 
where we do not really have an articulated set of national 
goals, and we do not have a program that is built around trying 
to achieve those goals. The financing system should hopefully, 
in our view, come back to that.
    And, finally, whatever amount of money is raised through 
the system, it is going to be a limited amount of money. Given 
that, we need to do the best we can to make sure we are 
designing and selecting really the best projects out there. The 
state of the art, certainly on the maintenance side, has 
improved the technical systems that the states mostly use to 
design and select state of good repair projects have become 
very good. I think there is still a lot more learning to be 
done when we are talking about big capacity enhancement 
investments, be it on high-speed rail or highways or freight 
projects. That is going to be an area of focus for us.
    Obviously, many suggestions have been made by the two 
financing commissions and by various members of this body and 
folks around the country about how to generate revenues for the 
system, and in particular how to generate revenues that are 
well above the revenues generated now. We obviously are looking 
at those. We are aware of a lot of them. I do not come to you 
today with a proposal or a particular area of support. I think 
the view of the Administration has been that that is a tough 
nut to crack and may take some time to do it well. And for that 
reason, we are supporting an extension of the program at the 
current funding level. But, obviously, we will be happy to work 
with this committee and all the Members of the House on these 
issues as we go forward.
    [The prepared statement of Mr. Kienitz follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Thank you, Mr. Kienitz.
    Now, we would like to recognize Mr. Picknelly. And, again 
by way of introduction, he owns the second largest bus line in 
America.
    Mr. Picknelly.

   STATEMENT OF PETER A. PICKNELLY, PRESIDENT, PETER PAN BUS 
               LINES, SPRINGFIELD, MASSACHUSETTS

    Mr. PICKNELLY. Chairman Neal, Ranking Member Tiberi, and 
Members of the Subcommittee, it is an honor to appear before 
you on behalf of Peter Pan Bus Lines to discuss the uniquely 
beneficial role that inner city buses play in providing service 
on our nation's highways.
    Peter Pan Bus Lines is one of the largest privately owned 
bus companies in the United States, providing inner city bus 
service to over 100 communities throughout the Northeast. Inner 
city buses are a vital part of our nation's transportation 
system. According to the American Bus Association, we carry 
more than 700 million passengers per year, roughly the same 
number as commercial airlines. More people ride inner city 
buses in two weeks than take Amtrak in a year.
    Inner city buses are the greenest mode of transportation, 
emitting less CO2 per passenger mile than any other mode of 
passenger transportation. Inner city buses are the most energy-
efficient transportation mode, getting more passenger miles per 
gallon than any other form of transportation.
    Inner city buses are a major factor in reducing congestion. 
Imagine what Washington, D.C. traffic would be like if the more 
than 6 million tourists that now travel to D.C. by motor coach 
every year came in their own cars instead.
    Inner city buses serve rural America. Over 2,000 
communities are served by inner city buses, far more than are 
served by the airlines and Amtrak combined.
    Inner city buses provide affordable transportation for 
those who truly need it. Sixty percent of Peter Pan customers 
have household incomes under $35,000. Eighteen percent have 
income of under $10,000.
    Inner city buses are operated by small businesspeople, each 
owning an average of eight motor coaches.
    Inner city buses operate with far less federal subsidies 
than any other mode of passenger transportation. According to 
the Nathan Report, in the decade ending in 2005, public transit 
received 55 percent of all federal subsidies. Airlines received 
37 percent, Amtrak 8.2 percent, and inner city buses received 
only three-tenths of one percent.
    The small amount of inner city bus subsidy is primarily the 
partial exemption from the federal fuel tax. I strongly believe 
that it is in the public's interest for this exemption to 
continue. The exemption is critically important to our 
industry. Its annual cost is relatively small, approximately 
$34 million in 2005 dollars. The exemption was first enacted in 
the 1970s in response to the energy crisis and is still 
necessary today. The exemption should remain so that inner city 
buses can continue to provide congestion reduction, service to 
small towns, affordable transportation and preservation of 
small business. And, most importantly, we need it. We simply 
cannot pass the increased cost on to our customers with their 
limited incomes.
    Last year, in the height of the fuel crisis, we attempted 
to raise some of our fares between $2 and $4, the result was a 
mass exodus of passengers, and we had to rollback the 
increases.
    We are also facing costs of ever-increasing federal 
mandates. These include chair lifts on every bus, more 
expensive EPA-mandated engines, new safety requirements, while 
at the same time we are confronted with new federally-
subsidized rail competition on many of our New England routes.
    If affordable inner city bus transportation is to survive, 
we and our customers need the existing fuel tax exemption to 
continue. If the federal fuel tax is to be increased, we must 
preserve the current 70 percent exemption.
    Thank you for giving me this time to testify. Thank you.
    [The prepared statement of Mr. Picknelly follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Thank you, Mr. Picknelly.
    Mr. Darbelnet is recognized to testify.

STATEMENT OF ROBERT L. DARBELNET, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, AMERICAN AUTOMOBILE ASSOCIATION (AAA), HEATHROW, 
                            FLORIDA

    Mr. DARBELNET. Thank you very much, Chairman Neal, Ranking 
Member Tiberi, and Members of the Subcommittee. On behalf of 
our 51 million AAA members, I would like to commend you for 
holding this hearing on a topic which for far too long has been 
shoved aside.
    I doubt if you have very many opportunities to have some of 
your taxpayers appearing before you and advocating that their 
burden be increased, but that is the essence of my message to 
you this morning. And let me briefly explain why and under what 
conditions we would be supportive of an increase in the gas 
tax.
    As to why we are taking this position, first, the nation's 
transportation infrastructure is in dire need of an upgrade. 
This has been well-documented. You acknowledged it in your 
opening comments. I will not expand upon that.
    Second, even if what we have in terms of infrastructure was 
in good condition, it still is falling short of our growing 
needs as a nation. And, as a result, taxpayers across the 
country are paying the price in the form of endless hours in 
congestion, motorists dying in crashes that could be avoided if 
we were doing a better job of maintaining our roads, and seeing 
the nation fall behind in terms of its competitiveness from a 
global perspective.
    As to the third reason why we are taking this position, and 
this may be something that has not received a lot of visibility 
or attention, as motorists over the last few years, we have 
been enjoying the effect of a decrease in the actual tax we are 
paying for the use of our roads. When you set the tax at 18.4 
cents in 1993, we understood what the burden was. But over the 
intervening period, during which no adjustment has been made to 
the level of the tax, in today's dollar, that burden has 
actually declined by about 6 cents. Furthermore, we are all 
buying more fuel-efficient vehicles. For example, if the car I 
was driving in the year 2000, 9 years ago, was getting 18 miles 
per gallon, and if today I am driving a vehicle that gets 23 
miles per gallon, I am actually paying 27 percent less in terms 
of the tax for every mile I travel on our highway or highways. 
If you combine the effect of inflation and those more fuel-
efficient vehicles, we are actually paying as motorists about 
half of what we were paying when you set the rate.
    All right, let's turn to the conditions under which an 
increase in the gas tax would be something that we would 
support and encourage our members to support. First, we need a 
major reform in the manner in which we decide what is going to 
be spent and where it is going to be spent. The motorist, the 
taxpayer, does not want business as usual. We want 
accountability. We want to be able to see the benefits that 
result from our tax dollars being spent on the transportation 
infrastructure. And it is possible to demonstrate that but not 
under the current approach.
    Second, we need a national vision for transportation in 
this country. And I am sorry to tell you that we do not have 
one. That is not to say that the Department of Transportation 
and the people who work there do not do a lot of things that 
are very beneficial to transportation in this country, but if 
you turn to DOT and you looked for an overall vision for the 
nation's transportation infrastructure, you cannot find it. If 
it is there, it is very well guarded.
    And, third, if we are going to support such an increase, it 
is going to have to be in a form that is fair to all of the 
users of the transportation networks. Motorists are certainly 
willing to pay their fair share but there are other users of 
the infrastructure, and we believe that they need to make their 
proportionate contribution to the overall effort.
    We recognize that you are faced with a rather difficult and 
perhaps unpleasant task because you are asked to consider the 
possibility of raising the burden of taxpayers, particularly at 
a time when everyone is looking for additional ways to reduce 
rather than increase what they spend. But if you consider the 
dire circumstances of the nation in terms of the transportation 
infrastructure, if you recognize that over time you will not be 
deriving more funds from the current taxing techniques that are 
in place, and if we consider the importance of maintaining a 
national network that allows us to be competitive in the global 
economy, I think you will recognize that you have no choice but 
to consider the adjustment that has been recommended by now two 
commissions and a host of other organizations, all in favor of 
an increase in the gasoline tax.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Darbelnet follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Thank you.
    Mr. Moorman is recognized to testify.

  STATEMENT OF C. WICK MOORMAN, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, NORFOLK SOUTHERN CORPORATION, NORFOLK, VIRGINIA

    Mr. MOORMAN. Thank you, Mr. Chairman. And my thanks to you 
and the subcommittee for this opportunity to appear today on 
behalf of both Norfolk Southern Corporation and the Association 
of American Railroads to discuss why the freight railroad 
infrastructure tax incentives that you have heard about make 
sense for America. America needs more transportation and it 
needs it now. The Department of Transportation projects that 
freight demand will almost double by the year 2035, and today's 
transportation network is simply not up to it. Railroads are 
the most affordable and environmentally responsible way to meet 
this demand, and that is why tax incentives for rail capacity 
expansion will be good public policy.
    Many people do not realize that the railroads own their 
infrastructure and pay property taxes on it that benefit the 
localities in which we operate. Railroads also reinvest 
substantial sums in the network, a record $10.2 billion in 
capital improvements last year alone. It is also worth 
mentioning that railroads pay nearly all of the costs for their 
infrastructure. And since 1980, we have spent more than 40 
percent of our total revenues, $440 billion, to maintain, 
improve and expand our networks.
    Even in today's tough times for business, freight railroads 
continue to make major investments in their systems, and this 
year, in fact, will be the third highest capital expansion 
program that the freight rails have had in their history.
    Our company, Norfolk Southern, for example, just this month 
announced plans to spend more than $300 million on new 
intermodal terminals in Pennsylvania, Alabama, and Tennessee. 
They will support local economic development, as well as our 
Crescent Corridor Rail Initiative, which you can see 
illustrated behind me, and every major railroad in the United 
States and Canada has similar projects on the boards.
    Yet, as much as we are investing right now, it is not 
enough. One recent study found that $148 billion in investment 
in freight rail capacity expansion is required over the next 25 
years just for the railroads to maintain their current market 
share. Now, of that $148 billion, the railroads themselves can 
generate about $96 billion, leaving a $52 billion gap. And 
unless a way is found to eliminate this shortfall, it is 
estimated that up to one third of the key rail corridors in 
this nation will become congested, leading to decreased service 
levels and serious national transportation problems.
    As significant as the $52 billion shortfall seems, the 
number is actually probably significantly higher for several 
reasons. The first is that the study was predicated just on the 
railroads maintaining their market share and not diverting 
additional traffic from the highway. Second, the study does not 
account for any additional capacity for increased passenger 
service in some of the nation's freight-owned rail corridors. 
Third, the study was written before the congressionally-
mandated requirement of the installation of positive train 
control, with its estimated $6 to $8 billion price tag. And, 
finally, the study's estimate of $96 billion in railroad 
investment did not account for the current uncertainties in the 
railroad's ongoing coal-related revenues when climate change 
legislation is enacted.
    The bottom line is that there is a significant funding 
challenge in front of us, and tax incentives to expand freight 
rail capacity are a sensible way to help bridge this gap. The 
cost of these incentives would be about $300 million a year, 
but they would generate about a billion in economic stimulus. 
They would create some 20,000 jobs and yield other enormous 
public benefits, which you have already heard about today in 
terms of fuel reduction, fuel efficiency, reduction in CO2 and 
other emissions, reduced highway congestion and increased 
safety.
    Now, the Crescent Corridor, which I mentioned before, the 
board behind me shows what it could mean for Virginia alone in 
terms of these benefits. Our state partners, like Virginia, are 
increasingly aware of all of these benefits and Governor 
Rendell of Pennsylvania has taken a leadership role in 
mobilizing the nation's governors to promote freight rail 
transportation.
    I would urge this committee to join the states in a federal 
partnership by moving the Freight Railroad Investment Tax 
Credit bill, which I will now call a ``beautiful, beautiful'' 
piece of legislation. You will hear me say that a lot. The 
legislation was introduced by Representatives Meek and Cantor. 
It will help this country's world-leading freight railroads 
meet the challenges of the projected 70 percent growth in 
freight traffic over the next 25 years in our nation.
    Thank you.
    [The prepared statement of Mr. Moorman follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Ms. Windsor is recognized to testify.

STATEMENT OF BARBARA J. WINDSOR, PRESIDENT AND CHIEF EXECUTIVE 
       OFFICER, HAHN TRANSPORTATION, NEW MARKET, MARYLAND

    Ms. WINDSOR. Mr. Chairman and Members of the Subcommittee, 
thank you for the opportunity to present testimony on the long-
term financing options of the Highway Trust Fund. My name is 
Barbara Windsor. I am president and CEO of Hahn Transportation 
of New Market, Maryland. We are a tank truck company that moves 
petroleum products and cement throughout the mid-Atlantic 
region.
    Today, I appear before you representing not just my company 
but also the American Trucking Association where I currently 
serve as a second vice chairman.
    Mr. Chairman, before I begin my formal testimony, I would 
like to express the gratitude of the trucking industry, both 
the company owners, but more importantly our drivers, for your 
past efforts to provide tax relief for the driver meal 
deductions. It has meant a great deal to the industry, and we 
would like to thank you.
    The decisions Congress makes about how to finance the next 
highway bill will have dramatic impact on our industry and the 
U.S. economy. Over 80 percent of all cargo, as measured by 
value, moves by truck. And America's commercial truckers 
contribute 40 percent of all taxes paid into the Highway Trust 
Fund.
    As all of you are painfully aware, there are no easy 
answers on how we will finance our highway program. ATA 
believes the best way to fund the next highway bill remains the 
fuel tax. Gasoline and diesel fuel taxes remain a stable source 
of revenue for at least the next 15 to 20 years.
    The fuel tax has many attributes: It is very inexpensive to 
administer, it is well accepted by the public, it is difficult 
to evade, it is tied directly to the highway use, and, unlike 
tolls, is collected by all miles driven, thereby maximizing 
revenue collections. ATA's members will support increasing the 
tax on diesel fuel provided the revenues go to improving the 
ability to move our nation's freight.
    ATA has requested that there be established a dedicated 
freight program to address one of our most critical 
transportation needs, and that is congestion relief. Reform of 
the current program coupled with a vision for the future must 
occur in order to justify additional revenues. In short, ATA 
members are willing to pay for a value received.
    ATA agrees that the private financing of highway 
infrastructure will play a role in addressing transportation 
needs for new roads. However, we are very concerned about 
attempts by some states to carve out the most important 
segments of the existing interstate system for long-term leases 
to the highest bidder. The trucking industry opposes the 
imposition of tolls on existing lanes of the interstate highway 
system other than the conversion of the HOV lanes into the HOT 
lanes.
    Mileage-based taxes are receiving considerable attention as 
a long-term alternative to a fuel tax. ATA has reservations 
about such fees. Vehicle Miles Traveled, or the VMT taxes, 
would pose significantly more problems with respect to tax 
evasion. Today, fuel taxes are paid at the rack by around 1,300 
facilities owned by approximately 300 companies. Auditing by 
the Internal Revenue Service, while still a challenge, is 
manageable. A vehicle-based tax would cause the number of 
taxpayers to explode, essentially, every licensed driver and 
registered vehicle. A VMT tax also would involve very 
significant investments in vehicle and road-side or service 
station-based infrastructure. ATA supports the user pay concept 
and strongly believes a multi-modal funding mechanism should be 
established for multi-modal project eligibility.
    Lading taxes, container taxes, custom fees and other 
freight-related charges have been mentioned as ways to generate 
new revenue without directly taxing highway users. However, a 
close review of the various proposals reveals significant legal 
and administrative barriers.
    We join with the organizations in calling for the immediate 
establishment within the U.S. DOT of a technical working group 
to explore the various options and recommend to Congress a 
feasible user fee. We also believe that the existing tax 
refunds and exemptions should be carefully reviewed by this 
committee as part of the reauthorization process.
    Today, these special carve-outs for off-road use, 
government fleets and others are estimated to cost the Highway 
Trust Fund $1 billion annually.
    Mr. Chairman, I would like to conclude now my testimony 
with a comment regarding the relationship between the 
infrastructure needs and the recently House-passed climate and 
energy legislation. As we have discussed, the Highway Trust 
Fund is funded in large measure by the federal tax on gasoline 
and diesel. While we support that, these taxes are nonetheless 
a cost of doing business. However, the climate and energy 
legislation is likely to significantly increase the cost of 
fuel. This increase could very well jeopardize the ability of 
the trucking industry to both fund much needed infrastructure 
needs and absorb these additional costs to fuel brought about 
through the climate and energy legislation.
    Thank you for this opportunity to testify, and I look 
forward to answering any of your questions.
    [The prepared statement of Ms. Windsor follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Thank you, Ms. Windsor, for your testimony. 
Mr. Picknelly, you testified about the partial exemption from 
the federal fuel tax that buses are currently eligible for. 
What is the history of that exemption and is it still relevant?
    Mr. PICKNELLY. The history is it was enacted in the 1970s 
during the fuel crisis of that decade, and it was designed to 
encourage bus rider-ship. It was recognized then, as it still 
is today, that the bus is the most fuel-efficient way of moving 
people. So it enabled the bus operators to increase service at 
lower fares, encouraging people to take the motor coach versus 
their own car. I think it is even more relevant today, 
Congressman, because we have such a dependency on foreign oil, 
and we have global warming, for all of which the bus is a 
solution. If more people were to take the bus, we would be 
using much less foreign oil. A bus can take 55 people from 
Washington to New York City on less than 30 gallons of fuel. 
And it is the greenest mode of transportation out there, so I 
think today it is even more relevant than it was in the 1970's.
    Chairman NEAL. Thank you. And, Mr. Darbelnet, you testified 
that AAA has opposed congestion pricing when no reasonable 
substitute has existed as an alternative route, but do you 
support priced roads as an alternative to congestion pricing. 
Can you give us an example of a priced road and explain why it 
is better than congestion pricing?
    Mr. DARBELNET. Well, thank you. We are accepting of the 
fact that pricing access to roads is a reasonable way of 
dealing not only with our need to fund the nation's 
infrastructure but also to affect behavior. What we are very 
concerned about are situations where there is no alternative 
but to take a road for which there is an additional charge. So 
to the extent that we use road pricing or tolling on new 
capacity or on parallel capacity, we aslo believe that there 
should always be a free alternative.
    Chairman NEAL. Thank you. And I am going to relinquish the 
chair to Mr. Thompson, only because Speaker Pelosi has 
requested that I be in her office for a meeting on the Medicare 
reimbursement geographic disparity issue. And coming from 
Massachusetts, you should know that is a pretty big issue. And 
I hope I am on the same side of it that she is.
    Mr. Thompson. Mr. Tiberi is recognized to inquire.
    Mr. TIBERI. Thank you, Mr. Chairman. We will miss you. Ms. 
Windsor, you testified at the end of your testimony that the 
increase with respect to the issue of the House-passed version 
of cap and trade, and I quote, ``This increase could very well 
jeopardize the ability of the trucking industry to both fund 
much-needed infrastructure needs and absorb these added costs 
to fuel brought about through the climate and energy 
legislation.'' Could you elaborate because what you did not 
talk about was as a trucking company owner and operator, what 
sort of impact the legislation and what you have supported, and 
that is a gas tax increase, the two of them combined or just 
the cap and trade legislation would have on jobs in the 
trucking industry?
    Ms. WINDSOR. Yes, we have had reservation concerning the 
cap and trade. We have spoken to some people, and we have been 
advised by one field distributor that it could increase our 
diesel fuel as much as 70 to 90 cents per gallon. With a fleet 
average of 6.2 miles per gallon, that would be an 
extraordinarily heavy increase to us on a day to day basis.
    As we saw last year, when diesel fuel was $4 per gallon, 
many small companies were put out of business because they 
could not absorb those exorbitant fees, that on top of the 
diesel fuel that we already pay, the taxes.
    Mr. TIBERI. What does the average member have in terms of 
employees, in the trucking association, what is the average?
    Ms. WINDSOR. I beg your pardon?
    Mr. TIBERI. The average member of your association, how 
many employees do they have, do you know?
    Ms. WINDSOR. Well, the majority of our trucking companies 
are 20 trucks or less.
    Mr. TIBERI. Okay.
    Ms. WINDSOR. And, of course, we have the large companies 
also, that would be thousands and thousands.
    Mr. TIBERI. But the majority are small----
    Ms. WINDSOR. Small.
    Mr. TIBERI. Operators?
    Ms. WINDSOR. Small operators.
    Mr. TIBERI. Thank you. Mr. Moorman, I want to just comment, 
thank you for your investment in central Ohio, Rickenbacker and 
Columbus.
    Mr. MOORMAN. It is a great place for us.
    Mr. TIBERI. And I have seen firsthand the investments that 
you are making and appreciate that. Mr. Kienitz, before you got 
here, I don't know if you heard Mr. Oberstar's testimony with 
respect to the shortfall of $3 billion, and I have read the 
Administration believes it is anywhere between $5 and $7 
billion. Where do you believe that disparity is, and do you 
believe the $3 billion would cover the shortfall or is it in 
your opinion $5 to $7?
    Mr. KIENITZ. Thank you, sir. The $5 to $7 number was 
something we released probably two months ago now, and these 
are all sort of projections based on what we think tax revenues 
will be and what we think payments out will be. We have been 
obviously tracking that. And I had a long meeting with our 
budget folks the day before yesterday to try to nail down this 
exact question. I think Mr. Oberstar referred to our current 
projection. What we do is we report projections of balances of 
once a week in the Trust Fund from here out until October. And 
so the lowest negative number on that sheet is $1.9 billion. I 
think he correctly stated that. I think he also correctly 
referred to the fact that the mid-year budget adjustment that 
happens every August is coming up. The last several of these 
have been downward adjustments for the Highway Trust Fund, and 
so past history would indicate that we could expect potentially 
more of that. And so you are in the two's and something there.
    The only thing is the way that the cash management works in 
the Trust Fund is that we get payments twice a month from the 
Treasury Department, and we get bills submitted everyday by 
states. And so this question of what the weekly snapshot number 
is depends entirely----
    Mr. TIBERI. So you think the $3 billion would cover it?
    Mr. KIENITZ. I do not think the $3 billion would cover it.
    Mr. TIBERI. Do you think it would need $5, $6, $7?
    Mr. KIENITZ. I think our view is still at a minimum $5 is 
the number that is safe.
    Mr. TIBERI. You heard Mr. Mica talk about this Vehicle 
Miles Traveled tax. What is the Administration's position today 
on that?
    Mr. KIENITZ. At this point, it is not something we are 
supportive of at this moment.
    Mr. TIBERI. But you could be?
    Mr. KIENITZ. I certainly would not want to speculate on 
that.
    Mr. TIBERI. Okay. How about Mr. DeFazio's tax that he 
talked----
    Mr. KIENITZ. This is the tax on futures trades. I had an 
exchange with him at a hearing that he chaired last week on 
this point. We have our economic team looking at that. I think 
one of the issues they are examining is how would the presence 
of such a tax change the behavior of folks in that industry. In 
particular, whether it push those trades offshore where they 
are not subject to taxation by the United States.
    Mr. TIBERI. How about the taxing of barrels of crude and 
imported refined gasoline?
    Mr. KIENITZ. Not something that we are supporting right now 
that I know of.
    Mr. TIBERI. How about indexing the gas tax that he talked 
about?
    Mr. KIENITZ. Neither that.
    Mr. TIBERI. Not supporting that at this point in time?
    Mr. KIENITZ. I do not think so, no.
    Mr. TIBERI. Maybe later?
    Mr. KIENITZ. Once again, I would leave that for later.
    Mr. TIBERI. Okay, thank you. Thank you, Mr. Chairman.
    Mr. THOMPSON. [Presiding.] Thank you. Mr. Secretary, while 
you are on the tax hot seat here.
    Mr. KIENITZ. Yes, sir?
    Mr. THOMPSON. Can you tell me why you would believe that 
the Administration would not be supportive of the miles 
traveled tax?
    Mr. KIENITZ. I think our view right now is that this summer 
is the middle of one of the deepest recessions that has been 
seen in this country certainly since I have been in this 
business, and maybe in 40 or 50 years, and so now is not the 
time to do that or seriously consider that.
    Mr. THOMPSON. So that would be your answer to any of the 
means by which to increase revenue?
    Mr. KIENITZ. That would be my principal answer.
    Mr. THOMPSON. On the miles traveled specifically,----
    Mr. KIENITZ. Correct.
    Mr. Thompson [continuing]. is there a reason that you would 
put that in the good policy category or the bad policy 
category?
    Mr. KIENITZ. Personally, I see the attraction of it given 
the declining yield we get out from traditional gasoline taxes. 
To the degree that I have discussed with people who are more 
expert than I about what the actual implementation of this 
would be, there would be a multi-year process of taking the 
technologies that exist, that have been tested in Oregon and a 
couple of other places, figuring out how to scale them, 
creating back office systems, there is a lot of work that would 
go on in doing that. So even if we decided today full speed 
ahead, I am not sure that within the next four or 5 years, you 
are actually able to transition the system over to something 
that is so different.
    Mr. THOMPSON. Okay, thank you. Ms. Windsor, on the Vehicle 
Miles Traveled, do you have any insight as to whether or not 
you think that would be a fair way to go?
    Ms. WINDSOR. We understand that with the passenger cars, it 
is something that has been tested and has had some pilot 
programs. We know that with the alternative fuels, that 
gasoline taxes will erode through the years. Diesel, however, 
will not because there are no alternative fuels for our diesel 
trucks at this point. So without a pilot program or further 
study, we feel like that we are not supporting the vehicles 
miles tax.
    Mr. THOMPSON. Mr. Darbelnet, on your testimony, you 
outlined some principles that you thought we needed to adhere 
to, one of which it needed to be fair to all users. Do you have 
a comment on the Vehicle Miles Traveled, do you think that 
would be something that would be fair to all users?
    Mr. DARBELNET. Well, I think it is worthy of consideration, 
and we are pleased to see the pilots that have been occurring. 
There are obviously some concerns, some of them relate to 
privacy. Some of them were mentioned earlier today, and they 
relate to our ability to ensure that we are actually collecting 
everything that we should, and that we are not exposing 
ourselves to greater fraud. But as a concept, the VMT tax is 
not that far away from what we currently have. The gas tax is 
in essence a tax we pay on the basis of what you assume will be 
the number of gallons it takes to drive 100 miles.
    Mr. THOMPSON. Back to the fairness issue, do you see any 
problems with rural drivers versus suburban or urban drivers? 
People in the district where I live, they do not have, for 
instance, public transportation available to them. The miles 
that they have to drive to get to and from work, just because 
of the remoteness of the area, are far greater. There are a 
whole bunch of reasons why miles driven would calculate up a 
lot quicker than something else.
    Mr. DARBELNET. Well, it might calculate up more quickly 
than something else, but it is not that different from the gas 
tax that we currently have, and that people in rural 
environments today, with no alternative but to drive their own 
vehicle, are buying more gas than people in urban settings 
where they can decide to take transit or the bus or their bike. 
So I do not think there is a great deal of inequity between the 
VMT and the current gas tax provided we address some of the 
other issues. Where I think we would have difficulty selling 
the VMT to the motoring public would be if certain categories, 
and I understand the point made by the trucking industry 
relative to diesel and so on, but if we found ourselves in a 
situation where motorists are paying on the basis of miles 
traveled and other important segments of the users are not, 
then I think we would have difficulty explaining why it is 
fair.
    Mr. THOMPSON. I just did a real quick calculation to drive 
from one end of my district to the other. And right now under 
the current situation, I would pay a few dollars, a little over 
$4 in gasoline taxes. If we did it by miles traveled, it would 
be over $20, about a 380 percent increase.
    Mr. DARBELNET. Well, that would appear unfair, but I assume 
it is a function of what rate would be establishes for the 
miles traveled tax. And if the rate was lower, it could equate 
to what you are currently paying.
    I would like to make one other point about VMT, and it is 
that it removes, and this is not the reason not to consider it, 
but it removes one of the incentives which exist today for 
people to buy more fuel-efficient vehicles. It does not 
completely remove it but it mitigates it to some extent because 
as a taxpayer if I realize that when I am buying fuel, I am 
paying not only for the fuel but also for taxes. If those taxes 
are removed, the price of fuel hopefully would decline and the 
interest I might have in buying a more fuel-efficient and 
environmentally-friendly vehicle could be somewhat mitigated as 
a result. And we need to consider that as we consider----
    Mr. THOMPSON. Could be reduced, there is no incentive to 
purchase a more fuel-efficient vehicle.
    Mr. DARBELNET. It could reduce the incentive to do so.
    Mr. THOMPSON. Thank you. Mr. Heller.
    Mr. HELLER. Thank you, Mr. Chairman. Ms. Windsor, I am just 
looking at my notes here, and I am trying to figure out if you 
are here on behalf of the ATA or as the CEO of Hahn 
Transportation?
    Ms. WINDSOR. Actually, both. I am a trucker and, yes, I am 
representing ATA.
    Mr. HELLER. Did I understand correctly that the ATA does 
endorse a gasoline tax increase?
    Ms. WINDSOR. Yes, we do.
    Mr. HELLER. Is that a decision made by the board of 
directors or your actual members?
    Ms. WINDSOR. The executive committee has endorsed it 
because we believe it is a user fee, yes.
    Mr. HELLER. Is there a report, I do not know if it would 
come out monthly or quarter, of the amount of diesel that is 
used in this country? Someone said a report was coming out 
recently, I had not heard of diesel report or volume of diesel 
use in this country, are you aware of any report?
    Ms. WINDSOR. I am not aware, but I imagine there could be a 
report.
    Mr. HELLER. Would you anticipate that there would be an 
increased volume in diesel used in this country in the last 6 
months or a decrease?
    Ms. WINDSOR. In the past 6 months, with the new diesel that 
we have, it burns frankly much cleaner but we have lost some of 
our miles per gallon. It is very clean burning.
    Mr. HELLER. Okay, so in your capacity, in your private 
capacity as a trucker, you would say you have increased the 
actual volume----
    Ms. WINDSOR. Yes, yes.
    Mr. Heller [continuing]. because of the----
    Ms. WINDSOR. Because of the--diesel, the cleaning burning 
diesels.
    Mr. HELLER. Thank you. Mr. Kienitz, according to Mr. 
Tiberi's questioning, it is hard to get you on a gasoline tax 
where the Administration is today, where they would be if the 
economy would turn around. I am not sure where you are on VMT 
either, and I am not trying to push you out in one direction or 
another but has the Administration taken any positions on some 
of the proposals that Chairman DeFazio discussed today? He had 
three proposals, one is indexing the gas tax and using the 
money to repay new bonds, taxing barrels of crude and imported 
and refined gasoline, and imposing a tax on transactions in oil 
futures and options. Do you guys have any positions on any of 
those?
    Mr. KIENITZ. We are not supporting any new revenue for the 
trust fund from a new tax source right now. And so I guess 
those three would fall under that. We are certainly examining 
in particular the futures trading proposal because it is a 
complicated thing to try to figure out what the actual effect 
would be, but we have not endorsed any revenue.
    Mr. HELLER. Okay, one more question, Mr. Chairman. The new 
transportation bill has a new allocation process. It was at one 
time 82 percent of the current funding went to highways, 18 
percent went to transit. Under the new reauthorization, the 
proposal is 70 percent for highways, 20 percent for transit and 
10 percent for high-speed rail. Has the Administration taken a 
position on that?
    Mr. KIENITZ. I am not sure which proposal are you referring 
to that has that?
    Mr. HELLER. I am referring to the 700-page----
    Mr. KIENITZ. Oh, the committee draft?
    Mr. HELLER. Yes.
    Mr. KIENITZ. From the T&I committee. We have been having 
discussions with Mr. Oberstar and with his staff about the 
specifics of that bill, both its broad outlines and the 
specifics. We have not taken a particular position on it, 
either the pieces of it or the total thing, but obviously it is 
a major proposal, and we are hoping to work with them on it.
    Mr. HELLER. Thank you. Mr. Chairman, I yield back.
    Mr. THOMPSON. Thank you. Mr. Blumenauer.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. I was intrigued, 
Mr. Darbelnet, you talked about how when you combine the 
changes in the mileage, the efficiency, with the loss of 
purchasing power, the average motorist today is paying about 
half of what they were 20 or 30 years ago, or I guess it was 
back in 1993, when the gas tax and diesel was last adjusted. I 
am curious, Ms. Windsor, how does that balance work today for 
the trucking industry? Have you seen efficiencies in 
utilization that would make your proportionate cost be that 
much less?
    Ms. WINDSOR. Well, the price of diesel back in the 1990s 
was considerably less than gasoline, and that was the disparity 
between 18 cents and the 24 cents we pay on diesel. Now, diesel 
is more expensive than gasoline.
    Mr. BLUMENAUER. I guess the question that I would love to 
explore with both the trucking industry and AAA is the equity 
because what is clear is that, as we go forward, there will be 
less being supplied by motorists per each mile driven. I want 
to know how that works with the trucking industry. I have been 
talking to people who have been talking about super-efficient 
trucks that are on the horizon, but I want to be able to 
understand what that balance is because it appears to me that 
the efficiency for plug-in hybrids, the alternatives, are much 
greater for the motoring public, so that more and more of the 
burden is going to fall on the trucking industry unless we do 
something like Vehicle Miles Traveled. So if you would help us 
understand what that disparity is? And I would respectfully 
request that we have both the AAA and the truckers help refine 
that.
    Mr. Chairman, I appreciated your line of inquiry about 
Vehicle Miles Traveled, and I would just note for the record 
that that is entirely dependent on what the rate is. The pilot 
project in Oregon has been calculated based on just replacing 
the current miles per gallon. So that it was not designed to 
increase or reduce revenues, it was just designed to replicate 
it and test the hardware, test people's reaction to it, and I 
want to identify with what our witnesses are saying. That is 
why the legislation that I have introduced would extend the 
pilot project to every state in the union, so that people in 
rural, urban, big states, and small states can find out how it 
works and help us refine it because it is going to take--I 
agree with Mr. Kienitz, it will take four or five or 6 years to 
actually implement. Actually, the trucking industry could 
implement it much faster because so many trucks have already 
the monitoring equipment, but we could not do it system-wide. 
So I am strongly urging that we go forward with a plan to be 
able for people to test it, to calm their concerns that big 
brother is watching, although anybody with a cell phone or a 
Blackberry has that already, I find certain irony in people 
raising that while walking around with a chip that can be 
monitored, but being able to really test it and being able to 
make sure that we have a user fee in the future that helps us 
balance it.
    And I would just note for the record, one of the things 
that could happen is including an adjustment for the road 
utilization, which we cannot do today with the gas tax, and 
that there is not actually the same demand with somebody with a 
small car in rural Montana going over that road as opposed to 
somebody with a larger rig that is in an area where there is 
more congestion and more problems. So, unlike what we do now, 
where they are paying more, we would have an opportunity to 
adjust it to attune to the circumstances.
    And I will just conclude, Mr. Chairman, I know we have got 
votes coming forward, but I really have appreciated the 
testimony that has been broad-gauged, that talks about the need 
of investing in the infrastructure, people raising legitimate 
questions about balance and fairness and equity that really do 
need to be resolved, and looking at the mechanisms that we have 
got moving forward, so we do not end up penalizing rail or 
freight movement or auto motorists, as we move forward because 
the stakes are very high. And I deeply appreciate this 
opportunity and the witnesses presentation.
    I am going to apologize in advance, we have been summoned 
to the Speaker's office, and so I do not know that I will be 
able to return for the next panel, I will if it is humanly 
possible.
    Mr. THOMPSON. Because you may not be back, Mr. Blumenauer, 
let me just add I appreciate your openness to looking at the 
disparity between urban and rural. There are a lot of different 
factors, not only miles traveled but in rural districts, 
districts such as mine, there are often things you cannot do 
with a fuel-efficient automobile. It is very, very difficult to 
haul a gondola full of grapes to the winery with a Prius, and 
stock trailers and things like that, hauling logs to the mill, 
it is a tough deal. And there are some issues there that we 
would have to look closely at to make sure that everybody is 
treated equally and, as the gentleman from AAA pointed out, 
that fairness has to be an important part of whatever we do. So 
I appreciate your comments.
    I want to thank the panelists for being here. I want to 
apologize to the next panel for the wait that you are going to 
have to put up with. We have, as was mentioned, a series of 
votes, so it has been concluded that we will recess the panel 
until after the last vote, and then we will come back and 
resume our work. So, panel number three, thank you. Panel 
number four, you have got a little bit of time to make your way 
up and settle in. So thank you very much. The committee stands 
in recess.
    [Recess.]
    Chairman NEAL. Let me reconvene the subcommittee. I want to 
thank our last panel for their patience, and I want to now call 
up our really last panel. First, let me welcome Allen Biehler, 
secretary of the Pennsylvania Department of Transportation, 
testifying on behalf of the American Association of State 
Highway and Transportation Officials.
    Next, we will hear from Mr. James Whitty, manager of the 
Office of Innovative Partnerships & Alternative Funding at the 
Oregon Department of Transportation. We would like to welcome 
Janet Kavinoky, director of Transportation Infrastructure at 
the U.S. Chamber of Commerce and Executive Director of 
Americans for Transportation Mobility Coalition. Next, we will 
hear testimony from Mr. Edward Wytkind, president of the 
Transportation Trades Department at the AFL-CIO. And, finally, 
we will welcome a very patient Don Weaver, vice president of 
the Weaver-Bailey Contractors in El Paso, Arkansas and chair of 
the Associated General Contractors of America.
    Secretary Biehler, you are recognized to offer your 
statement.

    STATEMENT OF ALLEN D. BIEHLER, SECRETARY, PENNSYLVANIA 
     DEPARTMENT OF TRANSPORTATION, HARRISBURG, PENNSYLVANIA

    Mr. BIEHLER. Thank you, Mr. Chairman, and thanks for 
inviting us to give comments.
    The concerns of the state Departments of Transportation are 
pretty basic and pretty obvious, as your opening remarks 
earlier this morning, and that is two things: One is the 
immediate threat of the Highway Trust Fund insolvency, and then 
finally the need to enact a well-funded longer range service 
transportation authorization bill.
    I think it is also clear that we would agree that 
transportation is a critical engine of the American economy, 
and it sustains good-paying American jobs.
    SAFTEA-LU, when it was enacted back in 2005, we had hoped 
was going to have sufficient revenues to sustain us. We have 
talked and heard testimony this morning about how unfortunately 
that is not the case, that the revenue income is not meeting 
the expenses that are being incurred by the states. At least, 
the most recent number we had heard was that the immediate 
shortfall was in the neighborhood of $7.5 billion, and that 
that needs to be transferred into the Trust Fund simply to 
cover Fiscal 2009 commitments. If the Trust Fund becomes 
insolvent, significant problems occur for the states. The 
states will be saddled with the problem of what to do next and 
try to guess if and when the problem will be solved. And it is 
a real Russian roulette issue for us, but we would start taking 
the only responsible actions that we know how to take, which is 
frankly to start suspending ongoing construction contracts, as 
well as either delaying or simply putting off issuing new 
contracts. Ironically, it comes at a time when Congress saw fit 
to enact a stimulus bill, which has really helped all of us 
ramp up, and so far we have been successful at meeting all of 
the congressional benchmark numbers and are moving very quickly 
to bolster our construction work, and it would be right at that 
time when we would then be facing some interesting constraints 
in the program.
    If, in fact, we do not deal with 2009 and that problem 
continues into the next fiscal year, Fiscal 2010, not only will 
we need an additional $7.5 billion for 2009, but the projection 
is that we will need an additional $10 billion for 2010. If we 
do not do that, the 2010 program is projected to drop to $5.7 
billion, which is 86 percent less than projected. And so you 
can imagine the angst that it gives us.
    I can tell you that in the case of Pennsylvania, just to 
use as an example, we would have to reduce our current calendar 
2009 construction program by 70 percent. So it is a number that 
is daunting. And my colleagues around the country would face 
the same problems, we just cannot get there. Hopefully, we will 
agree that we have just got to avoid that.
    As we look forward to a tougher issue, which is the 6 year 
reauthorization bill, we note that obviously the last time user 
fees were increased was back in 1993. And despite, again, 
hoping that our revenue was going to keep pace with our 
expenses, that is not the case. And so we face what we think 
are the right issues and tough issues of looking to user fees 
again as a way to address the future 6 year needs, and coming 
to grips with that is difficult. However, we think it is 
critical. In my long written testimony, AASHTO has identified a 
very long menu of options to choose from. We certainly note, 
and I know one of the speakers, in fact to my left and to your 
right, will be addressing the issue of VMT. AASHTO has looked 
at VMT, and looks at it as one of the new methods that we think 
is very promising to deal with the tough issues of finding 
funds to basically deal with the Trust Fund.
    So let me just say in conclusion that both the federal 
highway as well as the transit programs face the long-term 
revenue shortfalls. In addition to pilot testing VMT, which 
could take years, we need to look at that mechanism, as well as 
perhaps a menu of other options. And, as we have noted, both 
national commissions, both the Policy Commission and Revenue 
Commission concluded that we really do need in fact to take a 
substantial step forward and increase revenues, and we think 
user fees are the primary source that we should look for.
    Thank you.
    [The prepared statement of Mr. Biehler follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Thank you.
    Mr. Whitty.

  STATEMENT OF JAMES M. WHITTY, MANAGER, OFFICE OF INNOVATIVE 
   PARTNERSHIPS & ALTERNATIVE FUNDING, OREGON DEPARTMENT OF 
                         TRANSPORTATION

    Mr. WHITTY. Mr. Chairman and Members of the Committee, on 
behalf of the Oregon Department of Transportation, I appreciate 
the opportunity to present our findings on the nation's first 
test of a mileage fee collection system designed to replace the 
gas tax as our nation's primary road-funding mechanism.
    Oregon's mileage fee efforts began 8 years ago with a state 
legislative directive to design a new road revenue system. On 
the 90th birthday of the gas tax, pioneered in fact by Oregon, 
this formerly reliable source of revenue now faces serious 
challenges funding our road system, primarily because of 
increasing fleet fuel efficiency. Moreover, the gas tax cannot 
remain the major source of transportation funding if national 
policy seeks to reduce oil consumption in the transportation 
sector.
    A mileage fee is based on use of the roadways and can be 
designed and collected in many ways, from the labor intensive 
paper and pencil method to hands-free electronic reporting. 
Each viable method should receive due consideration.
    The nature of the ultimate mileage fee system, however, 
will depend upon tax policy set by policymakers. In the pilot 
test, ODOT installed mileage county transponders in 300 cars of 
volunteer motorists. The transponder receives satellite signals 
to electronically-defined geographic zones for counting miles. 
A computer within the car records the total number of miles 
driven within each zone. The transponder is passive, not like a 
navigation unit, and therefore is unable to track vehicle 
movements nor store a travel history. When a motorist pulls up 
to the gasoline pump for refueling, the system reads the 
mileage data from the transponder wirelessly in a way similar 
to an electronic toll system. It then connects to a central 
computer to calculate the mileage fee. And at the pump, the 
system deducts the gas tax from the fuel price and then adds 
the mileage fee to the customer's bill. The motorist does only 
one new thing, the motorist pays the mileage fee in lieu of the 
gas tax, and the transaction occurs as quickly as a credit card 
transaction.
    The test was successful. The system was easy to administer, 
inexpensive to operate and simple for the motorist. Following 
the pilot, 91 percent of the volunteer motorists surveyed said 
they would be willing to continue to keep the mileage counting 
equipment in their car if the system were extended to every 
gasoline station statewide.
    The mileage fee seems a worthy alternative to the gas tax 
but a few questions remain. One key issue is the rate 
structure. Oregon tested a flat rate of 1.2 cents per mile that 
corresponds with our state gas tax, but the mileage fee can be 
tailored to meet policy objectives in addition to raising 
revenue. Having a higher rate for driving during periods of 
congestion is one possibility. Another is a graduated rate 
structure designed to encourage motorists to purchase more 
fuel-efficient vehicles. A third possibility would be a higher 
rate for driving in urban areas and a lower rate in rural 
areas.
    Policymakers have tremendous flexibility to create mileage 
fee rate structures. The system in Oregon used computers after 
all. The mileage fee has the potential to generate at least as 
much revenue as the gas tax and more depending upon the rate 
structure and fee level set. The mileage fee can ensure that 
revenue levels do not decline as fleet fuel efficiency 
improves.
    The mileage fee needs further development for adoption. Our 
proposal to the Transportation and Infrastructure Committee for 
developmental programs is attached to my written testimony.
    Oregon wants to undertake a new pilot project, this time 
based on an open technology platform, founded on open standards 
and protocols, like the Internet, so the motorist chooses the 
transponders' capability and desired levels of privacy 
protection and additional products and services. This may lead 
to greater public acceptance, a shorter adoption time line, 
coverage of all types of vehicles, and the ability to evolve as 
technology does.
    After years of speaking on this topic around the nation and 
engaging real citizens, I believe that appropriate policymaking 
and careful system design can resolve all perceived 
shortcomings. Technology will do what policy requires it to do. 
A mileage fee system designed to follow public policy set by 
Congress should be able to find a sweet spot of public 
acceptance.
    I thank you, Mr. Chairman, for the opportunity to present 
our findings.
    [The prepared statement of Mr. Whitty follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Thank you.
    Ms. Kavinoky.

     STATEMENT OF JANET KAVINOKY, DIRECTOR, TRANSPORTATION 
  INFRASTRUCTURE CONGRESSIONAL & PUBLIC AFFAIRS AND EXECUTIVE 
  DIRECTOR, AMERICANS FOR TRANSPORTATION MOBILITY COALITION, 
               UNITED STATES CHAMBER OF COMMERCE

    Ms. KAVINOKY. Thank you, Mr. Chairman and Mr. Ranking 
Member, for the opportunity to testify. On behalf of the U.S. 
Chamber of Commerce and our Americans for Transportation 
Mobility Coalition, I am here to ask you to develop a user fee-
based funding and financing approach that would enable SAFTEA-
LU reauthorization to move forward without delay.
    Infrastructure is unlike many problems where you can wait 
until the last minute and write a big check. Capital 
construction projects require foresight, years of careful 
planning and predictable funding.
    Two commissions and many other studies have arrived at 
identical conclusions. At today's level, the revenue sources 
for the Highway Trust Fund are insufficient to maintain federal 
programs at current services, much less to begin to address 
significant investment needs.
    Both commissions also reaffirmed that for this 
reauthorization cycle, raising enough revenue to maintain 
current services and to address needs comes down to one thing: 
increasing user fees. The user fee system has been in place 
since 1956 when Congress dedicated the excise tax on gasoline 
to pay for construction of the interstate highway system. There 
is no alternative to the federal funding needed. There is no 
free lunch and there is no creative option that is going to 
fill the gaping hole that has emerged. We will either pay for 
these investments or accept a significantly reduced federal 
program.
    Essentially, as the Chamber sees it, you have three 
options: to cut back programs to fit available funding levels 
and ship federal responsibilities to states and local 
communities; to pay for additional transportation investment 
with non-transportation-related tax increases or deficit 
spending, which discontinues the user pays basis of federal 
transportation policy; or to increase user fees to address the 
well-documented needs for today and tomorrow, which will 
support job creation in the short term and provide lasting 
investments for the long term.
    The simplest, most straightforward and effective way to 
generate enough user fee revenue for federal transportation 
programs is through increasing federal gasoline and diesel 
taxes. This fact has been substantiated and endorsed by a broad 
spectrum of organizations, including the Chamber. The Chamber 
will offer our full support of a user fee increase if Congress 
can develop legislation that realistically achieves a refined 
federal role, oriented around national interests, significant 
program reform, emphasizing performance management and 
accountability; improvement in the integrity of user fees by 
limiting earmarks and non-transportation spending; and the 
establishment of a roadmap for a sustainable revenue model.
    The House Transportation and Infrastructure Committee 
proposal is a good start towards achieving these objectives. 
However, one additional condition of the Chamber support of 
user fees is lacking in the T&I proposal: opening new 
opportunities for private investment must be part of this 
legislation.
    In addition to increasing user fees, Congress must provide 
incentives for states and local communities to exercise a full 
range of financing options to leverage federal, state and local 
resources, and to access private capital. Public/private 
partnerships are not a substitute for federal revenues, but 
they do give states and communities the option to tap the 
estimated $180 billion in private sector capital available for 
infrastructure investment. This can be done while fully 
protecting the public interest. And the Chamber would like to 
work with Congress to make the necessary changes to the T&I 
proposal that will open up these new opportunities.
    In conclusion, Chairman Neal, Ranking Member Tiberi and 
Members of the Committee, thank you for holding this hearing. I 
hope you will consider the business community's strong interest 
in repairing, rebuilding and revitalizing the nation's 
transportation infrastructure as you develop the revenue plan 
for SAFTEA-LU. America's transportation infrastructure cannot 
fall victim to the practice of doing what is easy over doing 
what is right. And it is not going to be easy to repair our 
roads, fix our bridges, and return our avenues of commerce to 
global competitiveness, but our economy cannot afford to ignore 
it any longer.
    And so what remains is a matter of political will. This 
debate, and particularly the revenue considerations it entails, 
will never be convenient. There will never be a good time to 
talk about how to pay for transportation, but the Chamber 
respectfully requests that you move swiftly to develop the 
revenue for SAFTEA-LU. Now is the time to act.
    Thank you for the opportunity to testify today, and I will 
be pleased to answer any of your questions.
    [The prepared statement of Ms. Kavinoky follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Thank you.
    Mr. Wytkind.

 STATEMENT OF EDWARD WYTKIND, PRESIDENT, TRANSPORTATION TRADES 
             DEPARTMENT, AFL-CIO, WASHINGTON, D.C.

    Mr. WYTKIND. Thank you, Mr. Chairman, for inviting the 
Transportation Trades Department, and its 32 affiliated unions, 
to present our views on the needs of our nation's surface 
transportation system.
    I am pleased to hear the comments from many analysts today 
over the course of a very long hearing. And I am pleased to be 
here with major segments of the business community making the 
case for more investment in our nation's infrastructure.
    We cannot wait another 18 months for reauthorization of 
this program, as some would have us do. Americans suffering in 
this recession cannot wait until 2011 for more good jobs. Our 
transportation system and infrastructure are plunging into a 
state of severe disrepair and cannot wait 18 months or longer 
for new investments. And our national economy, reeling from too 
many years of inaction and neglect on this important issue, 
cannot wait a year and a half, or as many argue, 2 to 3 years 
for Congress to work its will on this critical legislation.
    Why the urgency? Well, let's look at mass transit 
nationwide. The systems are hemorrhaging, from Boston to St. 
Louis, Cleveland to Portland, Oregon, Atlanta, Miami, statewide 
in California and virtually every major urban, suburban and 
rural area in the country. Service and job cuts are mounting, 
and there is no relief in sight.
    Transit is a growth industry. We are witnessing that growth 
and yet, as state and local budgets decline in this very 
difficult economy, massive budget crises are forcing reductions 
in investment in infrastructure, reductions in service, and, 
unfortunately, the layoff of many employees. It is no better in 
transportation construction nationwide, where the national 
jobless rate is approaching 20 percent, even worse in many 
states.
    History shows that transportation infrastructure bills are 
engines of job creation. The economic recovery bill, which 
dedicated $48 billion to infrastructure in transportation, was 
a great first step but was only a down payment on the massive 
investments and the job creation that is so badly needed in 
this difficult economy.
    Look at the snapshot of our infrastructure today. The 
average commuter rail passenger coach is 24 years old. Sixty-
two percent are being used beyond their replacement age. Fifty-
nine percent of transit buses need to be replaced within 6 
years. More than 20 percent of city roads did not pass the 
basic test for pavement and ride quality. And 26 percent of the 
nation's bridges are structurally deficient.
    Poor roadway conditions are a number one contributing cause 
of motor vehicle crash severity, which costs our government, 
the American taxpayer, and our healthcare system $12 billion 
annually. And if we kick this can down the road, as 
unfortunately some would have us do, that can is going to land 
in a pothole, and we are going to have a problem dealing with 
the immense needs of our nation's transportation system.
    If you look at our passenger and freight rail needs, which 
the House T&I Committee bill tries to address, they also have 
massive infrastructure needs. Both freight rail and passenger 
railroad needs are tremendous and are not going to be addressed 
without a very serious surface transportation bill.
    Some are trying to use the crisis in the Highway Trust Fund 
as a reason to delay a multi-year bill. The fact is that we 
must do both. We must pass the Highway Trust Fund before the 
August recess, and we must complete the authorization bill in 
this Congress. The nation cannot wait for action on either of 
these priorities.
    We know that these are serious times with several critical 
issues demanding leadership. Last night, we heard the President 
make the case for healthcare reform, achieving energy 
independence is also a critical issue, and of course the deep 
recession weighs on the minds of Americans. These are issues 
our members care about as well, and they understand their 
importance and they face them everyday. But the transportation 
investment gap is also a critical issue. If we do not make a 
significant commitment to transportation now, when will we be 
able to do it? Without such a commitment we will cause 
irreparable harm to our economy for years to come.
    We live in a time in Washington where there are other big 
issues that Members of Congress are debating and trying to 
solve, but if we do not act now, we are worried that the 
dilapidated state of our transportation system will continue to 
choke the U.S. economy.
    We must pay for America's massive transportation 
infrastructure needs with dollars, not fairy dust or more 
hyperbole about the need to invest in America and its 
transportation system. There are two choices: raise revenues or 
fail to meet this country's real needs. If we fail, we also 
miss the opportunity to put people to work while the economy 
continues to bleed jobs. We heard from Mr. DeFazio about taxing 
oil securities and we think this is a serious proposal that 
ought to be considered because it does two things: it goes 
after unsavory oil speculation and goes a long way to fill the 
gap in our ailing surface transportation system.
    The VMT issue is a very important one. We are going to join 
in that debate. Other than dealing with some very basic driver 
privacy issues, we think it is a very viable proposal that 
ought to be looked at, and we look forward to working with you 
on that.
    Lastly, I would just conclude, the gas user fee is really 
what we need to be looking at. The transportation labor 
movement has endorsed an increase in the user fee tax because 
we think it is the only way to deal with this huge investment 
gap, and we are hopeful that in the coming months the Congress 
will work its will and adopt such a measure.
    Thank you for having us.
    [The prepared statement of Mr. Wytkind follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman NEAL. Thank you.
    Mr. Weaver is recognized for testimony.

    STATEMENT OF DON WEAVER, VICE PRESIDENT, WEAVER-BAILEY 
  CONTRACTORS, EL PASO, ARKANSAS, AND CHAIR OF THE ASSOCIATED 
        GENERAL CONTRACTORS OF AMERICA, WASHINGTON, D.C.

    Mr. WEAVER. Yes, Mr. Chairman and ranking member, thank you 
all for letting us come today on behalf of the AGC, the 
Associated General Contractors, which is the oldest 
transportation division in the United States. We represent 
people that build highways, bridges, transit systems and 
railways. And I think it is kind of neat that the contractors 
get to come last. We are the ones out there building the things 
and putting the people to work, so we appreciate the 
opportunity.
    We believe the transportation challenges facing the United 
States are significant and must be addressed in a prompt and 
reasonable manner. Increased investment is vital and all 
options should be considered. As you heard today, our immediate 
concern is the SAFTEA-LU shortfall of $3 to $8 billion, we are 
not sure, we have heard all over the road over that. But 
failure to do that will render us having to give our employees 
possibly IOUs for paychecks. It is going to be hard for our 
folks to take those to the grocery store and buy groceries. So 
anything you all can do to help bridge that gap before the end 
of this fiscal year, we greatly appreciate and our employees 
appreciate.
    Congress must also take action to ensure program 
continuity. The construction industry makes decisions about 
investment in new equipment and retaining and training our 
workforce based on long-term goals and needs. Without the 
knowledge that a continuous and growing market is on the 
horizon, contractors will not be able to make investments 
necessary to train new people and buy new equipment. This hurts 
Caterpillar, John Deere and everybody across the row. 
Efficiency and productivity increases when we can project a 
steady workplace in the future. Enactment of a 6 year program 
ensures continuity and therefore must be a priority.
    As part of the reauthorization, as you all well know, the 
Trust Fund is ultimate paygo. Highway users pay fees that 
reflect their usage of the system. The short fall we face in 
the immediate future is only a symptom of long-term problems 
facing the Trust Fund, as you all have heard today. Revenue has 
not kept pace with funding commitments and transportation 
needs. And as the economic conditions have worsened, revenue 
has continued to plummet. Significant increases in the cost of 
fuel, more fuel-efficient vehicles and alternatively-fueled 
vehicles are all impacting the revenue that comes from the 
motor vehicles tax. In addition, construction cost inflation 
has added to the Trust Fund woes, causing the buying power of 
the federal motor fuels tax to be reduced by nearly 85 percent 
since the last increase in 1993.
    AGC believes that the traditional motor fuels tax is the 
most efficient mechanism for increasing revenue for surface 
transportation in the short term and should be adjusted 
regularly to account for inflation and growing investment 
needs. AGC recommends that Congress shore up this successful 
funding method until a better system can be found and put in 
place. We recommend raising the federal gas tax by 18 cents to 
address the effects of construction cost inflation that will 
restore the buying power to the 1993 levels. In order to keep 
pace with growing transportation costs, inflation and 
construction material prices and reduced income, regular 
increases in the cents per gallon tax will also be necessary. 
However, since increasing the motor fuels tax is not always 
politically feasible, AGC proposes establishing a Federal 
Highway User Rate Commission to determine annually the federal 
motor fuels tax rate to avoid the instability in the annual 
amount of revenue collected.
    AGC also suggests there should be a direct link between 
imported products and freight movement. Use of a Custom fee 
revenue will create this linkage. AGC recommends that 5 percent 
of current Custom port fees be addressed to the Highway Trust 
Fund to help address transportation freight infrastructure.
    Increasing the gasoline tax by 18 cents per gallon with an 
additional 5 percent of Custom fees dedicated to the Highway 
Trust Fund will generate an additional $37.7 billion per year. 
This increase will allow the U.S. to invest in our highway and 
transportation systems at a level that will significantly close 
the funding gap that AASHTO identified in their released bottom 
line report. Creation of Highway User Commission to regularly 
adjust the user rate will keep us from falling behind in 
investment needs in the future and take a lot of heat off 
Congress for increasing taxes.
    AGC believes financing methods such as bonding, public/
private partnerships and tolling should also be used, along 
with the VMT studies. The two national bipartisan commissions 
established by SAFTEA, after examining everything, still came 
back to the motor fuels user fee tax as the most viable option 
we have currently. We hope that you all would make the 
necessary tough choices to support this so that we can keep 
working and keep improving our highways and having good 
employees that are able to get out there and feed their 
families.
    Thank you.
    [The prepared statement of Mr. Weaver follows:]
    Prepared Statement of Don Weaver, Vice President, Weaver-Bailey
      Contractors, El Paso, Arkansas, and Chair of the Associated
                     General Contractors of America
    Mr. CHAIRMAN. and Members of the Committee thank you for the 
opportunity to present testimony on long term financing options for the 
Highway Trust Fund. I am Don Weaver, Weaver-Bailey Contractors, El 
Paso, Arkansas representing the Associated General Contractors of 
America. This year I am serving as the Chair of AGC's Highway and 
Transportation Division. AGC is the oldest construction association in 
the country representing contractors that build all forms of 
infrastructure, including: highways, bridges, transit systems, 
railways, airport terminals and runways, water and wastewater treatment 
facilities, underground utilities, public buildings, multi-family 
housing, office buildings, military facilities, water resource 
projects, energy production and conservation, and the many other 
structures that are the backbone of the U.S. economy and provide and 
ensure U.S. Citizens' quality of life. AGC represents more than 33,000 
firms, including 7,500 of America's leading general contractors, and 
over 12,500 specialty-contracting firms. Over 13,000 service providers 
and suppliers are associated with AGC through a nationwide network of 
chapters.
    Surface transportation in the United States is at a crossroads. 
Since the enactment of the Safe, Accountable, Flexible, and Efficient 
Transportation Equity Act A Legacy for Users (SAFETEA-LU) in August 
2005, the interstate highway system celebrated its 50th anniversary. It 
was a celebration of the world's biggest public works program 
responsible for providing unprecedented mobility and economic 
opportunities for Americans. This legacy is our duty to maintain, as it 
is also our duty to meet the mobility demands of the 21st Century to 
compete in the global marketplace and provide the best quality of life 
possible for all citizens. Our charge is crowded and crumbling; our 
country is growing and demanding. The challenges are great: resources 
are scarcer; energy costs are climbing; construction costs are 
escalating; and the public's confidence in its policy makers to address 
these issues is diminishing. This is what we confront at this 
crossroads.
    AGC believes the transportation challenges facing the United States 
are significant and must be addressed in a prompt and responsible 
manner. This includes a long term authorization, a sustainable user fee 
funded trust fund and a focus on truly national transportation 
imperatives. All levels of government, including the Federal 
Government, must renew their commitment to the nation's transportation 
system. To this end, increased investment is vital and all options 
should be considered.

Immediate Highway Trust Fund Shortfall

    The U.S. Department of Transportation (U.S. DOT) and others have 
found that the Highway Trust Fund will fall below the minimum cash 
level to make daily payments before SAFETEA-LU expires on September 30, 
2009. The Federal Highway Administration (FHWA) has already notified 
states that it will begin slowing down reimbursements to state 
Departments of Transportation by mid-August if additional revenue is 
not provided. With the financial crisis hitting the states particularly 
badly (most states, including Arkansas, are constitutionally required 
to have balanced budgets and they are thus scrambling to make cuts), 
the states are already out on a financial limb. Action is needed 
immediately to fix this problem. To do otherwise would leave the states 
with the need to float millions of dollars and incur substantial 
borrowing costs to meet their contractual obligations or slow down 
payments to contractors for work completed. The most recent government 
estimates predict a shortfall of $7-8 billion in the Highway Account in 
fiscal year 2009. AGC commends the Committee for its leadership last 
year to avoid a similar funding shortfall and urges you to act hastily 
to enact a legislative fix to avoid the payment slow down later this 
summer.

Long Term Authorization

    Because of the current state of trust fund finances, Congress must 
take steps to create certainty in program continuity. The construction 
industry makes decisions about investments in new equipment and in 
retaining and training a workforce based on its best projection about 
where the market will be over the long term. Without the knowledge that 
a continuous and growing market is on the horizon, contractors will not 
make the investments necessary to carry out this program's objectives. 
This is particularly true for small businesses, which typically have 
less operating capital to invest, thus are more risk-adverse with their 
capital. This trait is also magnified by the economic conditions, which 
make risk reduction a company's top priority. This hurts the program as 
much as it does the industry. Efficiency and productivity increases 
when contractors can project a steady future market in which to work. 
This helps lower costs, and allows for a better constructed project 
because new equipment and improved technology improves the final 
project. For these reasons, enactment of a 6-year surface 
transportation authorization bill that ensures program continuity must 
be a priority.

Recovery Act

    Continuing the momentum of the Recovery Act investment in 
infrastructure is particularly important. Construction spending was 
less than 25% of the total spending in the ARRA, but provides some of 
the best investment opportunities for job creation and economic growth. 
AGC studied the economic impact of infrastructure investment on job 
creation. AGC's analysis, in partnership with George Mason University, 
showed that investment in nonresidential construction adds 
significantly to jobs, personal income, and GDP far beyond the hiring 
that takes place in the construction industry itself. AGC found that $1 
billion in nonresidential construction spending would add about $3.4 
billion to Gross Domestic Product (GDP), about $1.1 billion to personal 
earnings and create or sustain 28,500 jobs. The Recovery Act is already 
going a long way towards creating or saving jobs. But, national 
construction unemployment is still at 17.4 percent (not seasonally 
adjusted), compared with the total private unemployment rate of 9.7 
percent. We are in a critical, vulnerable stage in economic recovery, 
maintaining program continuity is key to ``staying the course'' set by 
the Recovery Act. Shoring up the highway trust fund and ensuring a 
sustainable user fee funded trust fund long term is the best way to 
keep workers in construction careers.

Highway Trust Fund

    The Highway Trust Fund is the ultimate ``Pay-Go'' program. Highway 
users pay fees that reflect their usage of the system. These fees are 
credited to the Highway Trust Fund which is then used to support 
expansion and improvement to the federal-aid highway system. This 
mechanism was successful in providing the funds necessary to build the 
interstate highway system and to continue to expand and maintain it in 
recent years. The Highway Trust Fund has also supported the 
construction and upkeep of other transportation projects, including 
mass transit.
    However, the shortfall that we face in the immediate future is only 
the symptom of the long-range problems facing the trust fund. Revenue 
has not kept pace with funding commitments and transportation needs, 
and in the past few years, as economic conditions have worsened, 
revenue has continued to plummet as purchases of heavy trucks has 
declined and vehicle miles traveled have diminished. Significant 
increases in the cost of fuel, more fuel efficient vehicles, and 
alternatively fueled vehicles are all impacted the amount of revenue 
that comes from the motor fuels tax.
    In addition to the revenue shortfall, inflation has added to the 
Highway Trust Fund's woes causing the buying power of the federal motor 
fuels tax to be reduced by nearly eighty-five percent since the user 
fee was last increased in 1993. The chart below illustrates the change 
in Producer Price Index (PPI) for highway construction inputs compared 
to the Consumer Price Index (CPI) since October 1993 (the month in 
which the last fuel tax increase took effect). The highway construction 
PPI is a weighted average of the prices of all materials used in 
highway construction, including diesel fuel and other inputs consumed 
by contractors. Both lines are set equal to 100 in October 1993 to show 
the cumulative change in prices. The lines remained very close together 
until the beginning of 2004, when a series of extreme price increases 
began for major highway inputs: steel, diesel fuel, asphalt and even 
concrete. The cumulative change through June 2009 in the highway PPI 
was 85%, compared to 48% for the CPI. In other words, an 85% increase 
in highway trust fund taxes would have been required to maintain the 
purchasing power that those taxes represented in October 2003.

Motor Fuels Tax

    AGC believes that the time has now come for Congress to realize 
that there is no easy solution for addressing our transportation 
investment deficit. The level of investment provided by the Highway 
Trust Fund should be increased to address mounting needs. An increase 
in revenue is necessary just to keep up with inflation additional 
funding is also needed to address the backlog of transportation 
investment needs. Numerous authoritative reports have come to the 
conclusion that, for the foreseeable future, the federal motor fuels 
tax is the best method for funding transportation infrastructure 
investment and that the motor fuels tax needs to be increased. The 2006 
Transportation Research Board (TRB) study, ``The Fuel Tax and 
Alternatives for Transportation Funding,'' concluded that fuel taxes 
will continue to be the most viable source of support for the Highway 
Trust Fund ``for at least the next 15 years.''
    SAFETEA-LU established two national commissions to look at the 
future of the federal transportation programs and to make 
recommendations on paying for these needs into the future. Both 
Commissions were appointed with bi-partisan membership and included 
transportation experts and individuals representing businesses and 
other users of the system.
    The National Surface Transportation Policy and Revenue Study 
Commission called for a national vision to ``Create and sustain the 
pre-eminent transportation system in the world,'' and recommended a 
variety of reforms to improve the delivery of a transportation system 
that supports U.S. economic growth. To accomplish this, the Commission 
concluded that the United States needs to invest at least $225 billion 
annually from all sources for the next 50 years to provide a 
transportation system that ensures strong economic growth. Currently, 
all levels of government combined are spending less than 40 percent of 
that amount. To support this initiative, the Commission recommended 
that the federal motor fuel tax be increased 5 to 8 cents per gallon 
per year over the next 5 years, after which it should be indexed to 
inflation. This conclusion was reached after an exhaustive examination 
of all potential funding sources. The commission concluded that the 
motor fuels tax provides: low administrative and compliance costs; 
ability to generate substantial amounts of revenue; relative stability 
and predictability; and ease of implementation.
    SAFETEA-LU's second commission, the National Surface Transportation 
Infrastructure Financing Commission, consisted of an entirely different 
group of individuals from diverse backgrounds, including: economics, 
finance, industry, law, and public policy. The Commission came to the 
conclusion that the current federal surface transportation funding 
structure that relies primarily on taxes imposed on petroleum-derived 
vehicle fuels is not sustainable in the long term and is likely to 
erode more quickly than previously thought. However, the Commission 
also concluded that as a nation, we cannot afford to wait for a new 
revenue system to be put in place to start addressing the fundamental 
investment challenge. After reviewing a wide array of options, the 
Commission concluded that increasing and indexing existing mechanisms 
is the most effective way to raise the revenue needed to meet existing 
needs. The Commission recommended an immediate increase in the federal 
gasoline tax of 10 cents, a 15 cent increase in the federal diesel tax, 
and commensurate increases in all special fuels taxes, and indexing 
these rates to inflation.
    The federal excise on gasoline is currently 18.4 cents per gallon. 
Reflecting the political difficulty of raising taxes, it has been 
raised only five times since 1956 and it has not been raised in a 
transportation reauthorization since 1982 when President Reagan signed 
the Surface Transportation Assistance Act

AGC Recommendations

    Highway user fees in the form of motor fuel taxes have been the 
primary source of funding for construction, maintenance, and rebuilding 
of our nation's road system at the state and federal level for the past 
80 years. The Highway Trust Fund has been a model for efficient 
transportation investment that enjoys significant public support. 
Eventually the method for charging the user fee will need to be changed 
but for the successor to SAFETEA-LU the existing funding system should 
be maintained and enhanced.
    AGC recommends that Congress shore up this successful funding 
method until a better system can realistically be put in place. We also 
recommend raising the federal gasoline tax by 18 cents to address the 
effects of inflation since the fee was last increased.
    In order to keep pace with growing transportation costs, inflation 
in construction material prices and reduced income, regular increases 
in the cents per gallon tax will also be necessary. However, increasing 
the motor fuels tax is not always politically feasible. To take this 
decision out of the political arena, AGC proposes establishing a 
federal Highway User Rate Commission to determine biennially the 
federal motor fuels tax rate to avoid the instability in the annual 
amount of revenue collected. The Commission would annually index the 
motor fuels tax to inflation, preferably to the Producer Price Index 
for construction inputs. The Commission's decision would be final 
unless overturned by a ``Super'' majority of Congress.
    In the long term, Congress should consider changing the user fee 
collection model to a Vehicle Miles (VMT) tax. A VMT tax would be 
charged to all vehicles using transportation infrastructure that is 
eligible for federal funds. Mileage could be electronically recorded 
and collected at the gas pump when vehicles are fueled or through a 
monthly invoice.

Tolling/Public Private Partnerships (PPP)

    Together, tolls and private capital contribute about 4.5 percent 
annually to the total revenue pool currently available for U.S. highway 
program investments. Much of this revenue is used for debt service. 
While there is potential to expand the application of tolling in the 
U.S. and to attract even more private capital to highway investments, 
objective research suggests these methods alone cannot realistically be 
anticipated to raise the amount of revenue necessary to close 
substantially the existing highway capital investment gap. As such, 
while they should be promoted and encouraged, they should not be 
overemphasized as solutions to meeting future funding needs.
    States should be granted the option to use tolls on all existing 
and future interstate and National Highway System (NHS) routes. Should 
a state choose to toll existing or future routes built with federal 
revenue, its federal apportionment should be adjusted to reflect only 
non-tolled lane miles in the state.
    In addition, states should be granted authority to partner with the 
private sector to improve and operate interstate and NHS routes. It is 
also imperative that revenues realized by public entities through the 
sale of concessions be reinvested only in transportation infrastructure 
programs.

Bonding/National Infrastructure Bank

    A new bonding vehicle should be created to allow the Federal 
Government to borrow funds for an immediate boost in federal 
infrastructure investment, such as the ``Build America Bonds'' proposal 
put forth by Senators Ron Wyden (D-OR) and John Thune (R-SD). Build 
America Bonds were authorized in the Recovery Act and have been 
successfully received by public agencies and investors. Bonding, 
however, can only be a supplement to the motor fuels tax, excise taxes, 
and other existing pay-as-you-go funding sources. This infusion of 
additional funds from bonds will provide a revenue source to help 
states catch up with some of their huge backlog of needs that have 
resulted for past underinvestment. These funds will also be important 
in helping states build mega-projects that are vitally needed but can 
absorb all of a state's funding for many years and, therefore, 
undermine efforts to address other transportation needs. The creation 
of a National Infrastructure Bank could also serve this purpose and 
supplement infrastructure investment at all levels of government.
    However, there is a real concern that extensive borrowing of funds 
now is mortgaging our transportation future. It is important that 
bonding remain a limited portion of total transportation funding mix. 
It is also important to create a dedicated funding source to create the 
revenue stream to pay the interest on the bonds and ultimately repay 
the principle.

Customs Fees

    A portion of U.S. Customs revenue should be dedicated to paying 
bond interest or to intermodal or trade corridor routes. Since freight 
movement is an important national objective, and since the needs here 
are so great, it is important that an additional funding source 
directly related to international commerce be created. There should be 
a direct link between imported products and freight movement. Use of 
custom fee revenue will create this linkage. AGC recommends that 5 
percent of current customs port access fees be directed to the Highway 
Trust Fund.

Conclusion

    The United States has been under investing in our transportation 
systems for far too long and the impact is now being felt in every 
state and in most towns. With the interstate system beyond capacity and 
design life, this underinvestment is costing U.S. businesses and 
individual's time and money.
    Providing continued support for traditional funding mechanisms and 
finding new financing options is necessary to address this dire 
situation. Again, AGC believes the traditional motor fuels tax is the 
most efficient mechanism for increasing revenue for surface 
transportation in the short-term and should be adjusted regularly to 
account for inflation and growing investment needs. Increasing the 
gasoline tax by 18 cents per gallon with an additional 5 percent of 
customs fees dedicated to the Highway Trust Fund will generate an 
additional $37.7 billion per year in revenue. This increase in revenue 
will allow the U.S. to invest in our highway and transit systems at a 
level that will significantly close the funding gap that the American 
Association of State Highway and Transportation Officials (AASHTO) 
identify in their recently released ``Bottom Line'' report. Creation of 
a Highway User Rate Commission to regularly adjust the user rate level 
will keep us from falling behind on investment needs in the future. In 
addition, AGC believes financing methods such as bonding, Public 
Private Partnerships, and tolling should be used to supplement Highway 
Trust Fund financing.
    AGC encourages the Committee to consider all options as it looks to 
providing Congress with the background to make the tough choices that 
will be necessary.
    Thank you for allowing AGC to testify at today's hearing.

                                 

    Chairman NEAL. Thank you. Ms. Kavinoky, the Chamber has 
been an early and consistent advocate for increasing the gas 
tax, and I think that the first time that we met was at the 
Jefferson Building at the Library of Congress. I was pleased 
with the courage that you demonstrated personally and the 
Chamber's willingness to step forward. As you have heard today, 
there is some disagreement here, however, at least at this 
time. Is there strong support within your membership on 
increasing the gas tax, and have you tested that support at 
various levels of involvement for a gas tax increase?
    Ms. KAVINOKY. Yes, Mr. Chairman, the position that the 
Chamber has taken was voted on by our entire board of directors 
last November. It represents a broad array of business 
interests in different industries and both large and small 
businesses. I am sure you would find some within our ranks who 
would disagree, but that is what happens when you have an 
organization of three million.
    We have been around the country talking to Chambers of 
Commerce, everywhere, from California to Georgia, I think. 
Business recognizes that if we do not keep investing in our 
transportation systems, both highways and public transit, their 
productivity is going to suffer and their costs are going to go 
up.
    Chairman NEAL. Would you have a number that you would like 
to peg this to?
    Ms. KAVINOKY. A number in terms of the overall increase?
    Chairman NEAL. A nickel, a dime?
    Ms. KAVINOKY. From what we understand, it is going to take 
at least 10 cents just to maintain current services. And we 
know there are more resources that are needed. I think given 
the array of numbers we have heard today and differences of 
opinion between Congress and the Administration, if I could 
humbly suggest it would be an excellent question to ask the 
Congressional Budget Office, to ask exactly what it would 
take----
    Chairman NEAL. We are not on good terms these days.
    [Laughter.]
    Ms. KAVINOKY. I am sorry. All right, then we will do some 
number crunching. Tom Donahue has said publicly several times, 
we know we think about 10 cents for current services, and then 
we would phase in some additional increases.
    Chairman NEAL. Thank you. Secretary Biehler, we have heard 
some grim news today about the shortfall of revenue. Can you 
tell us how the states are preparing for this potential loss of 
support for ongoing construction projects?
    Mr. BIEHLER. Well, first, we are praying. And then after we 
do that, seriously, obviously we are waiting, we are hoping 
that the short-term problem is solved, and we are waiting to 
see if Congress takes action. If Congress does not take action, 
we will start taking a series of actions. And then very 
honestly, as I mentioned in my comments, it will become a 
guessing game for us because the guessing game is will we have 
a short-term solution, meaning one to simply deal with federal 
fiscal 2009, or will we have solution that goes farther? And we 
will then have to take action commensurate with that kind of a 
time frame.
    In the short term, a number of our states are living very 
close to hand to mouth, which means we will start having to 
curtail our construction contracts, contracts that are already 
in place, which then you get into ridiculous situations where 
you start paying penalty fees to contractors, you demobilize, 
you spend money on things that just do not lead to good 
infrastructure investment.
    If it continues into next year, the situation is 
calamitous. We will have to shut down our systems. Potentially, 
if we do not plug the hole, there will be 86 percent less 
federal money for our systems. In Pennsylvania, of all of our 
programs, of our typical base program, about 50 percent of our 
program is financed with state funds and the other 50 percent 
federal. This particular year because we ramped up for 
stimulus, as I mentioned, in Pennsylvania, we would have to 
take our program next year and reduce it by 70 percent, our 
construction program. I am not sure what the numbers will be 
statewide or nationwide. We can get that kind of information 
pretty quickly if that is useful to the committee, but the 
bottom line is we will have severe cuts throughout our whole 
industry.
    Chairman NEAL. Mr. Wytkind, you testified that public/
private partnerships are not appropriate for most 
transportation projects. Where do you believe that the best 
work and what federal guidelines would be needed for their 
success?
    Mr. WYTKIND. Thank you, Mr. Chairman, for that question. I 
grudgingly became a blogger on transportation issues recently, 
and I said in a blog about this issue that public/private 
partnerships obviously play a viable role in the transportation 
industry. The private sector has always played an important 
role in the transportation industry. The private sector employs 
many of our members. The real issue is whether public/private 
partnerships end up becoming a distraction from the underlying 
challenge we have, which is to fund a huge under investment 
problem in our surface transportation program.
    And if you are going to go forward with public/private 
partnerships, I think the most important thing would be to make 
sure that the public interest is protected, that the impacts on 
employees on the ground are adequately dealt with so that these 
kinds of initiatives do not allow basically the wholesale 
displacement of workers that are currently performing important 
functions, whether they be public sector employees or other 
types of workers. We need to do the kind of analysis to make 
sure that we are not pursuing a public/private partnership 
simply because of ideological reasons but because it actually 
will solve a transportation challenge, will hopefully make a 
lot of people gainfully employed, and will serve the people in 
those communities better than the current system that is 
currently in place. I think that is the debate that probably 
has not been adequately held in some of these local debates 
over PPPs.
    Chairman NEAL. Mr. Whitty, you have offered some pretty 
interesting alternatives for the current reliance on the gas 
tax or fuel taxes. And your suggestion of an implementation of 
a mileage fee really could be a decade away. What do you 
suggest that we do in the interim, and what is the status of 
the Oregon pilot project, and is it feasible to become 
permanent for the nation at this particular time?
    Mr. WHITTY. Mr. Chairman, the time from now until adoption 
of a viable mileage fee is really dependent largely on 
political will and process. The technology probably could be 
implemented in four or 5 years nationally. So it is a matter of 
figuring out the system you want to design, and the policies 
around it, and then starting that process.
    There are ways to implementation a little quicker than what 
we have outlined. And there is a NCHRP paper coming out, I 
think in the fall, that will outline some of those quicker 
ways. But still we are limited by political will. That is what 
really stops us from getting this done fairly quickly.
    The Oregon pilot stopped actually was only a year test. We 
wanted to prove concept, and it was not intended to go further. 
But we have a second pilot that we think will resolve some of 
the issues from first pilot, that we have designed and for 
which we are looking for funding. When I talk about an ``open 
system,'' this second pilot will test that. This open system is 
something that will have a greater capacity for expansion and 
growth with changes in technology and have a better chance for 
public acceptance. So we are going to enter phase two as soon 
as we can.
    Chairman NEAL. Mr. Tiberi is recognized to inquire.
    Mr. TIBERI. Thank you, Mr. Chairman. Thank you all for 
coming to testify. Mr. Wytkind, would your organization support 
an effort to move--oh, he is back. I am going to ask it anyway. 
Would you support a proposal, it is going to be tougher for you 
to answer now, to move bike trails, walking trails, 
beautification projects, sidewalks out of the Trust Fund and 
into the general revenue fund to free up more dollars for other 
transportation projects?
    Mr. WYTKIND. I think I would answer that question the same 
way regardless of who is in the hearing room.
    Mr. TIBERI. Okay.
    Mr. WYTKIND. My view is that the decisions that Congress 
made a very long time ago, I would have to go back into the 
previous authorizations to find out the exact date of 
inception, those kinds of initiatives are always going to be a 
part of the highway transit reauthorization. I fully expect, 
knowing the leadership of the committee on the House side, and 
the level of support that those initiatives have, that they 
will remain a viable part of this program. We would not take a 
position to try to remove them. It is not something that any of 
our member unions have ever sought or have taken a formal 
position on.
    Mr. TIBERI. Thank you. Mr. Weaver, the vehicle mileage tax, 
I think you were here when you heard that discussed, has your 
organization taken a position on that?
    Mr. WEAVER. We think it is going to be a viable future 
option. We do not know that this next 6 year bill, that there 
is any way to get it in there, but we think with the mileage 
going up on the cars, and I am in a rural state, we have to 
drive a long way to get places, the rate of it will have to 
be--I do not know if it will be balanced out between rural and 
urban.
    Mr. TIBERI. Right. How about the proposals from Mr. 
DeFazio, were you here for those?
    Mr. WEAVER. Yes.
    Mr. TIBERI. Has your organization taken a position on 
those?
    Mr. WEAVER. We do not have a position personally on the oil 
speculative trade. I can just see that going to London, in New 
York you can trade oil on multiple--personally, I think we 
would be shooting ourselves in the foot because I think it 
would just be traded overseas, and we would not get any money 
out of it.
    Mr. TIBERI. Thank you. Ms. Kavinoky, you mentioned the gas 
tax issue, and we talked about the CBO. Our staff has done a 
preliminary review of how much it would cost in terms of a gas 
tax increase if the Majority put in the Trust Fund the $50 
billion for high-speed rail and the figure comes to 33 cents, a 
33 cent increase. Would the Chamber support something that high 
or how high would you be willing to go?
    Ms. KAVINOKY. First of all, I do not believe that the 
Chamber would support putting high-speed rail in the Highway 
Trust Fund.
    Mr. TIBERI. Okay.
    Ms. KAVINOKY. I will tell you it is not something we have 
had a specific discussion about but knowing our members, I 
suspect that would be problematic.
    Mr. TIBERI. Okay.
    Ms. KAVINOKY. I would have to discuss with our chief 
economist how he saw the economy absorbing increases in 
gasoline and diesel taxes. I think we would balance all of that 
though against the danger of continuing to have the cost from 
congestion, safety and environmental costs that it might 
offset.
    Mr. TIBERI. How about the two other proposals, the DeFazio 
proposals and the Mica proposal or the Mica thought on a VMT?
    Ms. KAVINOKY. We would oppose Mr. DeFazio's oil speculation 
and tax on barrels of oil. As far as VMT is concerned, we have 
said we want to see a ground work laid for a future system. I 
think a lot of the questions about that system come from not 
knowing some of the good answers, and so we support an 
aggressive pilot program to expand or to look at that.
    Mr. TIBERI. Thank you. Mr. Whitty, on that note, on the 
VMT, have you had any experience on issues of privacy being--
concerns with privacy being expressed to you and how have you 
dealt with that?
    Mr. WHITTY. Perhaps more than anyone else, I think I have. 
Concern about privacy largely comes from a lack of 
understanding, although I do not begrudge the legitimacy of the 
issue whatsoever. For the Oregon pilot, we used a passive 
device that could pick up satellite signals. This passive 
device did not have any signal going out from it so that 
anybody could follow it around, there was no way for this 
device to allow vehicle monitoring--it was unlike a navigation 
unit in that respect. And then we eliminated the GPS map of a 
navigation unit so there is no way to identify specific 
roadways. All the device did was count miles within coordinates 
that were predefined. So the privacy issue seems to be 
something where there is a suspicion rather than actual 
complaint about the system used in the Oregon pilot. But still, 
concern about privacy should be something that if you are 
designing a new pilot program for the nation, you have got to 
take that into consideration.
    I think that if the motorists can choose the device from a 
number of options, its capability, its level of privacy 
protection, that we may be able to get public acceptance 
because choosing a device means you choose its capability. And 
we did not do that in the first pilot. We said ``You have got 
to take this device or nothing,'' and I think a choice could 
get us to public acceptance on the technology.
    Mr. TIBERI. Thank you. Mr. Chairman, can I ask one final 
question of Mr. Biehler?
    Chairman NEAL. You sure can.
    Mr. TIBERI. Mr. Biehler, I am from Ohio. I drive into 
Pennsylvania, and your roads are great, by the way, at least 
the ones I drive. You are a donor state like Ohio. Any concerns 
that we are not addressing in a T&I bill, the donor/donee state 
issue for states like ours, when we are asking our constituents 
to maybe pay more and continue to get less?
    Mr. BIEHLER. It is going to be a struggle certainly. As 
part of an organization, a nationwide organization, our members 
have that same concern. I think we need to set up a structure 
that would decide what the structure is that is going to 
properly fund whatever it is we agree to over the next 6 years. 
And then we will certainly face the donor/donee issue. I am 
hoping that when we get into things like performance measures 
and so on, that some of that discussion gets wrapped into those 
kind of questions, what do we want to do, are we going to do 
special initiatives for special corridors? Are there nationwide 
goals that we need to achieve? And then you can perhaps make 
sense out of the donor/donee issue. It is a tough issue for all 
of us, but the bottom line I would certainly advocate for 
additional money no matter whether you were a donee or donor.
    Mr. TIBERI. Thank you. Thank you, Mr. Chairman, for the 
additional time.
    Chairman NEAL. Thank you, Mr. Tiberi. Mr. Blumenauer is 
recognized to inquire.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. And I did not mean 
to come back and inhibit the cross-section from my friend from 
Ohio, but I must say that I do think Mr. Wytkind's analysis of 
the leadership of the Transportation and Infrastructure 
Committee, notwithstanding that it is very unlikely that there 
will be any change, I would be prepared to argue that it would 
be not a very good idea. We have a rather spectacular story 
that we can tell about cycling in our community that has 
actually increased dramatically the use of cycling to the point 
where it is making a demonstrable impact on some of our 
congested corridors, 8 percent mode split, and it all costs 
less than one mile of freeway. Those projects are very labor 
intensive when you are talking about things like bike paths and 
completing street networks, it will put a lot more people to 
work than just throwing down a freeway mile, and they make the 
system work better. But just dealing with the notion that the 
number one cyclist in Congress chairs the committee and his 
subcommittee chair is the only former bike mechanic in 
Congress, I suspect that that framework is probably going to 
stay there.
    I do want to explore just a moment though this notion about 
donor/donee, which hung us up to a large measure in the last 
cycle. If we do not adequately fund the program, then we will 
be fighting over table scraps. Is it not true, Mr. Biehler, 
that the ebb and flow of transportation funding in some not 
insignificant measure is a result of where there are major 
projects that may be in a community at any given time, and that 
these can change over time?
    Mr. BIEHLER. Absolutely, sure. Again, I will relate it to 
the Pennsylvania experience. But absolutely, we have gone 
through quite a change in our approach to our business. But you 
are absolutely right. We may have huge projects, then those get 
completed, and then we are back to dealing with maintaining our 
system or in our case, because of the lack of dollars, we have 
severely cut the amount of money we are spending on any kind of 
capacity improvements, from 20 percent 4 years ago to 5 percent 
today. And only because we have got such a horrible backlog of 
preservation needs, not because we do not want to make rifle 
strike investments in capacity.
    Mr. BLUMENAUER. And I do appreciate that the four of our 
witnesses that are representing major transportation 
stakeholders have all developed policy frameworks that talk 
about the big picture, that if we have a national plan that is 
right-sized, that is meeting transportation needs, then these 
over time are going to even out if we are thinking 
comprehensively and doing the job right. And it would be a 
mistake to take a snapshot for a year or even 6 years when we 
are talking about infrastructure that is going to serve our 
country for a half century.
    One of the concerns though that I have is that there are 
dramatic inequities between--and often these occur within 
states--between metropolitan areas. You talk about donor/donee, 
the much greater disparities are not so much between states as 
they are between metropolitan areas. Metropolitan Dallas, where 
Texas kind of hung us up last time, Dallas got 78 cents on the 
dollar. There are huge metropolitan areas that are generators 
of jobs and where lots of work could be done who are 
systematically short-changed. Do any of our witnesses on the 
panel have any thoughts about having some guaranteed resources 
that go back to the areas where most of the congestion, most of 
the jobs, most of the economic opportunities are?
    Mr. BIEHLER. Perhaps I can start that conversation. In 
Pennsylvania, as we update our 4 year transportation 
improvement program, we deal with all of our MPOs. Pennsylvania 
has also over time filled in all of the gaps of rural areas. We 
now have either rural planning organizations or metropolitan 
planning organizations in every one of our 67 counties. And 
what we do, what we have done, Mr. Blumenauer, is we have met 
with that group and reached a consensus on how to divide the 
pie because what we do is we throw our state capital dollars 
into the pie along with the federal dollars and basically 
distribute the whole slug of dollars. And we have sat down, we 
have said, ``All right, what are the right factors to use?'' It 
is pretty tough sledding to try to get a consensus in a group, 
but we have been successful. We have now done it, and each time 
we have to take the TAP, we go and revisit that. And so we have 
talked about what is the population of the area, what is the 
VMT in the area, what is the mileage of roads, what is the 
status of your bridge system, and on and on and on. I am not 
sure it is perfect, but for us it was a way to deal with that 
very troubling issue, are we putting the fair shares in the 
right place?
    Mr. BLUMENAUER. Mr. Chairman, I see my time has expired, 
but I would invite any of our witnesses that have some thoughts 
about making sure that in the reauthorization and the funding, 
that we guarantee that there is some intra-state equity so that 
we do not have ``hot spots'' or problems with the flow of the 
federal dollars, maybe some who have not quite done the job 
that Pennsylvania has.
    And I would, Mr. Chairman, just thank my friend, Mr. 
Whitty, for being here, for being an extraordinarily valuable 
resource as we think about how we deal with funding in the 
future and look forward to finding ways to answer the questions 
people have about an equitable, thoughtful, effective way of 
being able to provide finance as we go forward.
    Thank you, sir.
    Chairman NEAL. Thank you, Mr. Blumenauer. I want to thank 
our panelists today for their testimony. I thought it was very 
helpful on this important topic. You may receive some written 
follow-up questions from members, and I hope you will respond 
promptly so that they may be included in the record.
    If there are no further comments, then this hearing stands 
adjourned.
    [Whereupon, at 1:45 p.m., the subcommittee was adjourned.]
    [Submissions for the Record follow:]
             Statement of Kurt J. Nagle, President and CEO
    Thank you for the opportunity to submit this statement for the 
hearing record. The American Association of Port Authorities (AAPA) and 
its member seaports appreciate the time and attention that the House 
Ways And Means Subcommittee on Select Revenue Measures is giving to 
this important issue. Surface transportation authorization is a 
critical issue which cannot move forward without the due diligence of 
this committee.
    As part of AAPA's guiding principles for surface transportation 
authorization, our members believe that a combination of funding 
mechanisms will be necessary to address freight mobility needs in the 
United States. When developing our list of acceptable funding 
mechanisms for AAPA's policy position, we focused on ensuring that the 
chosen mechanisms will not disadvantage U.S. exports nor hinder ports 
in their ability to remain competitive.
    Supported funding mechanisms include:

          A share of revenue from customs duties devoted to 
        funding freight mobility infrastructure improvements
          An increase in the gas tax and a future indexing 
        mechanism as recommended by the National Surface Transportation 
        Policy and Revenue Study Commission with a percentage of the 
        new proceeds dedicated to funding freight mobility 
        infrastructure improvements
          An increase in the diesel tax, and a future indexing 
        mechanism with a majority of the new proceeds dedicated to 
        freight mobility infrastructure improvements
          A portion of any carbon tax or climate change program 
        revenues be made eligible for investments made by freight 
        transportation to reduce its carbon footprint
          Public-Private Partnerships (PPP) where each sector 
        pays in proportion to the benefits they derive from the 
        capacity generated by the infrastructure

    AAPA applauds Congressman Oberstar's proposed ``Surface 
Transportation Act of 2009'' as it addresses goods movement challenges 
in ways that will help alleviate freight congestion on America's roads, 
rails and waterways. While surface transportation authorization is 
complex and challenging, it is vital that we keep the momentum and 
focus of Capitol Hill on this important issue. Our current system falls 
woefully short in supporting current freight transportation demand, and 
delaying these long-overdue investments will put our country's goods 
movement network further in jeopardy while eroding our ability to 
optimally engage the global marketplace. Moving this process forward as 
quickly as possible is a national priority that should not be 
postponed.

The Role of Port Authorities and the Importance of Seaports

    Founded in 1912, AAPA is an alliance of the leading public ports in 
the Western Hemisphere. Our testimony today reflects the views of our 
U.S. members, which are state and local public agencies located along 
the Atlantic, Pacific, and Gulf coasts, the Great Lakes, and in Alaska, 
Hawaii, Puerto Rico, Guam, and the U.S. Virgin Islands.
    Port authorities develop, manage and promote the flow of waterborne 
commerce and also act as catalysts for economic growth in their state, 
county or city. Public ports own, develop and maintain terminal 
facilities, some of which are leased to private terminal operators. 
Ports play a crucial role in our national defense. In addition, U.S. 
ports handle 99% of this nation's overseas cargo by volume.
    America's seaports are a critical link for access to the global 
marketplace. In 2007, U.S. seaports and marine cargo operations 
generated nearly $3.2 trillion of total economic activity and $212.4 
billion of total federal, state and local taxes. U.S. seaports handle 
more than 2 billion tons of domestic, import and export cargo annually, 
including food, clothing, medicine, fuel, and building materials, as 
well as consumer electronics and toys.
    On average, each of our 50 states relies on 13 to 15 ports to 
handle its imports and exports, which total more than $1.3 billion 
worth of goods moving in and out of U.S. ports every day. The volume of 
cargo shipped by water is expected to dramatically increase by 2020 and 
the number of passengers traveling through our seaports will continue 
to grow. To meet these demands, the American Association of Port 
Authorities and its members are committed to keeping seaports 
navigable, secure and sustainable.

Surface Transportation Legislation 

    This year's surface transportation authorization legislation 
presents an unprecedented challenge and opportunity for America. Our 
transportation infrastructure investment needs are vast while the 
traditional sources for funding our system become less sustainable 
every day. Our freight goods movement system is no exception. The total 
cost of congestion to the economy, the environment, and the quality of 
life of all Americans is incalculable.
    Seaports are the gateways that facilitate American economic 
prosperity. Ports are doing their share to ensure that U.S. farmers, 
manufacturers, businesses and retailers have the transportation 
infrastructure that they need for global market connectivity and 
competitiveness by investing more than $2 billion annually in capital 
improvement projects on their terminals. Despite these massive 
investments by ports, inadequate infrastructure connecting ports to 
land-side transportation networks and water-side ocean shipping lanes 
often creates bottlenecks in and around seaports resulting in 
congestion, productivity losses, and a global economic disadvantage for 
America.
    Public port authorities are dependent on the nation's surface 
transportation infrastructure for the landside movement of goods and 
military cargo and the facilitation of cruise passengers. Faced with an 
inevitable long term projected growth in international trade, a robust 
cruise industry and the needs of the U.S. military, public port 
authorities will become increasingly dependent on the nation's surface 
transportation infrastructure and policies that help facilitate the 
movement of people and goods to and through U.S. ports and harbors.
    It is essential that Congress recognize the importance of 
addressing goods movement and port access in its deliberations 
regarding surface transportation authorization legislation. To this 
end, the American Association of Port Authorities submits the following 
principles representing the collective view of U.S. public port 
authorities. We feel that these principles reflect a prudent way 
forward toward addressing freight mobility infrastructure needs in the 
United States.
    Additionally, attached to this testimony is the joint platform of 
the Freight Stakeholders Coalition, which AAPA co-chairs, which calls 
for a national freight program and stronger federal role. The platform 
represents the joint recommendations of 17 major shippers and public 
and private transportation providers working together to support 
policies to promote freight mobility in the United States.

National Freight Program

    It is critical that Congress place an emphasis on alleviating 
freight congestion and provide a mechanism for future investments by 
implementing a national freight program as part of the surface 
transportation authorization legislation. AAPA supports the creation of 
a national freight program that includes funding for projects and 
corridors of national and regional economic significance. Project 
awards should be based on cost/benefit analysis which considers 
externalities (including environmental impact) and encompasses all 
modes. Existing identified and newly proposed corridors should be 
eligible for funding through this program.
    AAPA supports the American Association of State & Highway 
Transportation Officials (AASHTO) recommended State Freight 
Transportation Program and National Freight Corridors Investment Fund 
with the stipulation that port authorities are a key part in the 
planning process in both the federal and state level programs. Port 
Authorities should be eligible to apply directly for project funds 
through these programs.

Funding for Intermodal Freight Connectors

    Funding for intermodal freight connectors (highway, maritime, rail) 
is vital to port efficiency and cargo mobility. On the landside, the 
shortcomings of ``first mile'' connectors to the National Highway 
System (NHS) and main-line rail networks have not been adequately 
addressed in the traditional planning and funding processes of states 
and local planning organizations. Ports are areas where roads and rail 
converge, often at the same grade, causing congestion and delays as 
trucks wait for freight trains to clear intersections. Delays and 
idling trucks then exacerbate negative air quality impacts on the 
surrounding communities. Many of these roads are in disrepair, have 
inadequate turning radii, and are generally not fit for the volume of 
freight traffic they must endure. For these reasons, connector roads 
and highway access infrastructure around ports are often the weak link 
in the goods movement network and must be addressed through programs 
specifically directed at these issues. Expertise in freight planning at 
the state/metropolitan planning organization (MPO) level is the key to 
the success of these programs at the execution level. AAPA calls for 
dedicated freight offices with coordinators, programs, and funds that 
support what is devolved down from the federal level.

Investments in Freight Rail

    Investments in freight rail will make the system safer and more 
efficient, improve environmental sustainability and encourage 
competitive rail access to seaports. The federal surface transportation 
program should provide tax credit incentives for main line and short 
line railroads to invest in port access. Legislation should also 
include a grant program with a cost-share (federal/railroad) for 
projects with both public and private benefits. In addition, the 
national freight program should define freight corridors of national 
significance that are eligible for rail investment. In order to execute 
these investments effectively, an increased expertise in state 
departments of transportation and MPOs on rail access issues is 
imperative.

Development of Marine Highways

    The improvement and new development of marine highways will 
alleviate highway congestion and improve environmental sustainability. 
A number of steps will be required to effectively catalyze the 
development of a system of marine highways. Harbor Maintenance Tax 
exemptions for certain U.S. port-to-port cargo must be enacted by 
Congress. Federal funding support for establishing short sea shipping 
services and incentives for shippers using ``greener'' modes of 
transportation would serve as public and private sector economic 
incentives to help jump-start marine highways. Establishing a new 
program similar to the ferry boat discretionary program and encouraging 
more utilization of current federal programs such as Congestion 
Mitigation and the Air Quality (CMAQ) Improvement Program'' to fund 
projects for short sea shipping services, would also have a catalyzing 
effect. Marine highway development could also benefit from a 
reassessment of federal shipbuilding programs with a focus on how they 
could support marine highway development.  An understanding and 
expertise at the state/MPO level on marine highway alternatives and 
benefits is a necessary component in effectively executing programs and 
projects in this area.

Program Reform

    With regard to program reform, AAPA supports a performance-based 
approach which consolidates the existing 108 surface transportation 
programs into 10 programs (one of which should focus on freight 
transportation) as recommended by the National Surface Transportation 
Policy and Revenue Study Commission and AASHTO. AAPA also supports 
establishment of a multi-modal freight office that reports to the 
Office of the Secretary at the United States Department of 
Transportation.
    AAPA supports improving project delivery by addressing environment 
review inefficiencies and National Environmental Policy (NEPA) 
redundancies that cause project delays and cost overruns, including 
delegating NEPA responsibilities to appropriate state agencies.

Freight Trust Fund

    AAPA believes that if a freight trust fund is created under this 
surface transportation authorization, it should be fully spent on 
freight transportation and not used for deficit reduction. Appropriate 
projects that are freight-related should still be eligible to compete 
for other federal funding sources.
    While AAPA does not endorse a port cargo fee for freight movement, 
if Congress decides to adopt such a fee to pay for freight projects, it 
must be levied equitably over all types of cargo including imports and 
exports and should be structured as noted below. AAPA is strongly 
opposed to a fee based solely on containerized cargo, because it is 
inherently inequitable. Containers are only one type of conveyance that 
utilize transportation infrastructure. Containerized cargo only 
represents a small segment of transportation infrastructure users, even 
in the freight realm. By singling out this conveyance for a tax, a 
disproportionate burden is placed on certain commodity types and 
shippers. Non-containerized cargoes, many of which cause more wear and 
tear on infrastructure due to heavier weights and larger wheelbases, 
would not be required to pay their fair share under this scenario. For 
these reasons, AAPA believes that a tax solely based on containerized 
cargo is not equitable.
    If a broader port cargo fee is adopted by Congress, the structure 
of the fee should reflect the following recommendations:

          for port authority cargo, all revenues collected 
        should be returned to the port authority where the fee was 
        collected to be used for projects directly benefiting freight 
        mobility;
          be levied equitably over all types of cargo, 
        including both imports and exports;
          assessed at all international ports of entry (air, 
        land and sea);
          provide ports the discretion to ``opt-out'' from the 
        fee program, and
          The fee should not negatively affect the nation's 
        bulk or break bulk export products (e.g., grain, coal, paper 
        products), making these commodities uncompetitive in 
        international markets.

Conclusion

    Ensuring congestion-free port access and adequate capacity is 
critical to maintaining America's status as a luminary in the global 
economy. AAPA applauds the work of this committee towards finding the 
right mix of mechanisms to fund and finance the surface transportation 
programs in this authorization bill. Seaports have many immediate needs 
that can be addressed through a timely passage of surface 
transportation authorization. In addition to the obvious long-term 
global competitiveness benefits, funded projects will create jobs and 
have a positive economic effect in the immediate term as America 
navigates its way back to prosperity. Thank you for the opportunity to 
include this testimony as part of the written record of this hearing.

FREIGHT STAKEHOLDERS COALITION

2009 Surface Transportation Reauthorization Platform

    The Freight Stakeholders Coalition represents shippers and public 
and private transportation providers working together to support 
policies to promote freight mobility in the United States. The 
Coalition believes that the next surface transportation authorization 
bill must maintain a strong federal role and provide for the creation 
of a national freight program.
    We are unified in our conviction that substantial investment in the 
nation's freight transportation system must be given a high priority in 
the next authorization. Without such investment, the performance of all 
modes of goods movement will continue to deteriorate and our country 
will pay a high price in terms of domestic prosperity and international 
competitiveness.
    The Federal Government must continue to play a strong and focused 
role in shaping the future of our nation's surface transportation 
policy. The Federal Government should lead in furthering America's 
competitive advantage by developing projects of regional and national 
significance which reduce congestion, enhance goods movement, improve 
the environment, and create and maintain jobs. In addition, freight 
mobility should be a key factor in any performance standards 
established by Congress or the Department of Transportation.
    We are committed to working together, with the Congress, the 
Administration and other important interests, to develop the public-
private consensus necessary to develop a freight transportation policy 
and program that will meet the needs of the nation. The Freight 
Stakeholders Coalition has agreed to the following principles for the 
upcoming surface transportation authorization legislation:

    1. Mandate the development of a National Multimodal Freight 
Strategic Plan. The next surface transportation authorization should 
mandate the development of a National Multimodal Freight Strategic 
Plan. The development of this plan should be led by the U.S. Department 
of Transportation, in partnership with state DOTs, cities, counties, 
MPOS and regional planning organizations, ports, freight shippers, 
freight carriers, and other stakeholders.
    2. Provide dedicated funds for freight mobility/goods movement. The 
legislation should provide dedicated funds for freight mobility/goods 
movement. Dedicated funds should be provided to support capital 
investment in critical freight transportation infrastructure to produce 
major public benefits including higher productivity, enhanced global 
competitiveness and a higher standard of living for our nation. High 
priority should be given to investment in efficient goods movement on 
the most significant freight corridors, including investment in 
intermodal connectors into freight terminals and projects that support 
national and regional connectivity.
    3. Authorize a state-administered freight transportation program. 
Congress should authorize a state-administered freight transportation 
program as a new core element of the federal highway program 
apportioned to states.
    4. If a new freight trust fund is created, it should be firewalled, 
with the funds fully spent on projects that facilitate freight 
transportation and not used for any other purpose. Priority should be 
given to nationally and regionally significant infrastructure, with 
funds distributed through a competitive grant process using objective, 
merit-based criteria. Appropriate projects that are freight-related 
should still be eligible to compete for other federal funding sources.
    5. Establish a multi-modal freight office within the Office of the 
Secretary. Freight mobility should be a key priority within USDOT. The 
Secretary's office should have staff with freight expertise who can 
focus on nationally and regionally significant infrastructure.
    6. Form a national freight industry advisory group pursuant to the 
Federal Advisory Committee Act to provide industry input to USDOT, 
working in conjunction with the new multi-modal freight office. The 
advisory group should be funded and staffed, and it should consist of 
freight transportation providers from all modes as well as shippers and 
state and local planning organizations. Despite the best efforts of the 
agency to function as ``One DOT,'' there is still not enough of a 
focused voice for freight. An Advisory Group would meet the need for 
regular and professional interaction between USDOT and the diverse 
freight industry, and could help identify critical freight chokepoints 
in the national freight transportation system.
    7. Fund multi-state freight corridor planning organizations. Given 
that goods often move across state lines and involve multiple modes of 
transportation, Congress should fund multi-state, multi-modal planning 
organizations that will make it possible to plan and invest in projects 
where costs are concentrated in a single state but benefits are 
distributed among multiple states.
    8. Build on the success of existing freight programs. There are 
numerous existing transportation programs that facilitate freight 
mobility and are demonstrably valuable. A new national freight policy 
should continue and strengthen these core programs or build on their 
principles and successes to guide freight program development if DOT is 
restructured and/or program areas are consolidated. Examples of these 
successful core freight programs are the Projects of Regional and 
National Significance, National Corridor Infrastructure Improvement 
Program; Freight Planning Capacity Building Program; Transportation 
Infrastructure Finance and Innovation Act, National Cooperative Freight 
Transportation Research Program; Coordinated Border Infrastructure 
Program; Private Activity Bonds for Intermodal Facilities; Capital 
Grants for Rail Line Relocation Projects; Rail Rehabilitation and 
Improvement Financing (RRIF); Congestion Mitigation and Air Quality 
Program, Truck Parking Pilot Program, and Rail-Highway Crossings. 
Funding for discretionary programs should be awarded through a 
competitive grant process.
    9. Expand freight planning expertise at the state and local levels. 
Given the importance of freight mobility to the national economy, 
States and MPOs should be provided additional funds for expert staff 
positions dedicated to freight issues (commensurate to the volumes of 
freight moving in and through their areas). All states should have a 
freight plan as a tool for planning investments and for linking to the 
national freight system.
    10. Foster operational and environmental efficiencies in goods 
movement. As in other aspects of transportation, improvements designed 
to achieve long term sustainability in goods movement are desirable to 
meet both commercial objectives--economy and efficiency--and public 
objectives--energy security and reduced environmental impact. Federal 
policy should employ positive approaches to enhance freight system 
efficiency and throughput with the goal of reducing energy consumption 
and green house gas emissions.

American Association of Port Authorities
    Susan Monteverde
American Association of State Highway and Transportation Officials
    Leo Penne
American Trucking Associations
    Darrin Roth
Association of American Railroads
    Jennifer Macdonald
Coalition for America's Gateways and Trade Corridors
    Leslie Blakey
Council of Supply Chain Management Professionals
    Rick Blasgen
Inland Rivers Ports and Terminals Inc.
    Deidre McGowan
Intermodal Association of North America
    Joni Casey
National Association of Manufacturers
    Robyn Boerstling
National Association of Regional Councils
    Fred Abousleman
National Association of Waterfront Employers
    Paul Bea
National Industrial Transportation League
    Bruce Carlton
National Retail Federation
    Jonathan Gold
Retail Industry Leaders Association
    Kelly Kolb
U.S. Chamber of Commerce
    Janet F. Kavinoky
Waterfront Coalition
    Robin Lanier
World Shipping Council
    Anne Kappel

                                 
                     Statement of Leif Wathne, P.E.
    Honorable Committee Members,
    The American Concrete Pavement Association, founded in 1964, 
represents more than 450 member companies involved in the construction 
and maintenance of our highway infrastructure--including paving 
contractors, cement companies, ready-mixed concrete producers, and 
suppliers of capital equipment, machines, materials, value-added 
products, and services that are used in the construction of concrete 
pavement. On behalf of this vital American industry, we encourage you 
to act swiftly to develop a funding source for the multi-year 
authorization of the surface transportation programs. Such an effort 
represents a bipartisan opportunity to improve transportation 
infrastructure, increase productivity, and create jobs throughout our 
economy without adding to our national debt.
    Our industry recognizes the importance the surface transportation 
system has played (and continues to play) in making America the great 
nation it is today--our highway infrastructure is the backbone of our 
economy and our way of life. It is absolutely critical that we reinvest 
robustly in this transportation system to deliver a 21st Century 
transportation solution that not only strengthens the U.S. economy, 
provides stable and well-paying jobs and enhances the quality of life 
for all Americans, but also protects our natural environment.
    Furthermore, it is essential to recognize that a failure to 
authorize a multi-year reauthorization bill with robust highway 
transportation investment at this time, will compromise and possibly 
negate the significant gains made in job-creation and economic stimulus 
by the recently enacted ARRA of 2009.
    Finally, it is important to acknowledge that we already know the 
answer to the most pressing funding questions. Numerous commissions, 
committees and expert panels charged with exploring this issue have all 
concluded the same thing: The only equitable way to generate adequate 
funding in the short-to-medium term is to increase and index the 
federal motor fuel user-fee! While no one enjoys the thought of 
increasing fuel user-fees, properly adjusted and administered fuel user 
fees represent a responsible solution that the driving public 
understands. It has integrity. Further, we plainly cannot afford to 
endure the pervasive traffic congestion, the rampant loss of life on 
our highways and the reduced competitiveness of American business in 
the global marketplace! Our future quite simply depends on it.
    We encourage the Committee to embrace this opportunity to deliver a 
responsible revenue source for America's next transportation program!

                                 
                    Statement of Andrew Maybee, P.E.
    Honorable Committee Members,
    As a State Association executive who is affiliated with national 
organizational members of the Transportation Construction Coalition, I 
wanted to take this opportunity to encourage you to act quickly to 
develop much-needed funding sources for surface transportation. Our 
nation's states are in need of infrastructure funding for roads and 
bridges, and moving forward with a new funding bill, in lieu of an 
extension of current funding levels, will meet our nation's needs, 
provide job growth, and serve the citizens of the United States.
    As funding solutions will be the topic of discussion for some time, 
it is clear that the only way to raise adequate funding will be to 
assess user-based fees and increase the federal motor fuel tax. While 
no citizen enjoys the thought of higher gas taxes, our industry 
understands that in these difficult economic times, job growth is 
critical. It has been debated, but proven time and time again that 
funding of infrastructure and road-building projects puts Americans to 
work!
    Providing critical infrastructure construction and maintenance 
services for our state and national highway system is the key business 
for our supplier and contractor membership. Without federal funding, it 
is a certainty that highway construction and maintenance in Tennessee 
and many other states would grind to a halt. This would have a negative 
impact by resulting in additional job loss, negating any positive 
impact in the highway sector from the ARRA funding. It would 
additionally put our nation further behind in our long stretch of 
underfunding our nation's highways.
    The Concrete Paving Association of TN is made up of cement and 
concrete industry, concrete highway paving contractors, and industry 
suppliers. The cement and concrete industry provide nearly 60,000 jobs 
and over $580M in revenue for the State of Tennessee. In our state, our 
industry contributes over $100M in annual payroll across multiple 
sectors of the highway construction industry. Thank you for your 
interest in this issue on infrastructure investment. Our nation's roads 
and bridges are critically important to the future economic growth and 
success of our country. Our industry, our nation and our citizens are 
depending on your action.
    For information on how concrete pavements can meet our nation's 
road-building needs please visit www.pavements4life.org.

                                 
         Statement of Gigi B. Sohn, President, Public Knowledge
    Chairman Levin, Ranking member Brady and Members of the 
Subcommittee, thank you for giving me the opportunity to submit this 
statement into the record in this hearing on behalf of Public Knowledge 
and the Electronic Frontier Foundation (EFF). Public Knowledge is an 
advocacy organization that seeks to ensure that copyright and 
communications policies promote citizens' access to and participation 
in culture and knowledge. Electronic Frontier Foundation (EFF) is a 
member based digital rights organization that focuses on defending free 
speech, privacy, innovation, and consumer rights. To achieve these 
goals, the public's voice should be present in the formulation of 
intellectual property laws and policies both domestically and 
internationally. We limit this testimony to the intellectual property 
aspects of trade agreements and the process by which they are 
negotiated.

Introduction

    Increasingly, international obligations are influencing U.S. 
intellectual property (IP) law and policies. IP chapters of many 
international trade agreements adopt unsettled interpretations of U.S. 
law to the benefit of rights owners and ignore the policy decisions 
made in our domestic laws, which promote learning and culture by 
striking a balance between rights of owners and citizens generally. 
While U.S. IP industries such as the pharmaceutical industry, the 
motion picture industry, and the recording industry have considerable 
influence in the formulation of these agreements, the American public 
has very little input in the process. In order to correct this 
imbalance and ensure that IP aspects of trade agreements reflect the 
interests of all Americans, Congress should facilitate greater public 
interest input into the process by which trade agreements are 
formulated. To this end, Congress should:

        1.  Clarify that the ``fair balance'' requirement of the 
        Federal Administrative Committees Act (FACA) requires that ITAC 
        15 \1\, or any future IP-related ITACs, represent the interests 
        of everyone affected by the IP aspects of trade agreements, 
        including non-business interests.
---------------------------------------------------------------------------
    \1\ ITAC 15 is the tier 3 Industry Trade Advisory Committee that 
deals with IP issues.
---------------------------------------------------------------------------
        2.  Amend the Trade Act to ensure that the USTR's power to 
        close meetings and documents to the public does not result in 
        all such meetings and documents relating to intellectual 
        property negotiations being closed by default.

    These changes would ensure that trade agreements will represent not 
only the interests of intellectual property owners but also American 
citizens generally.

    1. Congress should clarify that the ``fair balance'' requirement of 
the FACA means that tier 3 industry trade advisory committees should 
represent interests of all affected, including non-business interests.

    The USTR and executive agencies charged with administering industry 
trade advisory committees (ITACs) currently follow the policy of 
excluding non-business interests from representation on tier 3 
committees.\2\ As a result, ITAC 15, which deals with intellectual 
property issues, overwhelmingly represents the interests of IP 
owners.\3\
---------------------------------------------------------------------------
    \2\ GAO, International Trade: Advisory System Should be Updated to 
Better Serve U.S. Policy Needs, GAO-02-876, p. 63 (Washington, D.C.: 
September 24, 2002),(``GAO Report, 2002''); ITA International Trade 
Administration, Dept. of Commerce, Become a Trade Advisor, http://
www.ita.doc.gov/itac//become_an_advisor/becomeanadvisor.asp.
    \3\ With the exception of one public health representative, all of 
the members of ITAC 15 represent IP holders.
---------------------------------------------------------------------------
    Perhaps because of this, intellectual property chapters of many 
U.S. trade agreements have tended to ignore the interests of the public 
and assume international obligations that are harmful to them. For 
example, the U.S.-Australia Free Trade Agreement (FTA) requires the 
U.S. and Australia to grant to copyright owners the exclusive right 
``to authorize or prohibit all reproductions, in any manner or form, 
permanent or temporary (including temporary storage in material form) . 
. . .''.\4\ The U.S. Copyright Act does not extend protection to 
temporary instances of a work that are of a transitory nature, and U.S. 
courts are divided as to how non-transitory reproductions must be to 
implicate the rights of copyright owners.\5\ If temporary or transitory 
reproduction were considered a right granted to copyright owners, 
Internet Service Providers (ISPs), internet based services such as 
webcasters and online music stores, and consumers would all be exposed 
to liability for copyright infringement during the course of routine 
activities.
---------------------------------------------------------------------------
    \4\ U.S. ``Australia Free Trade Agreement,'' Article 17.4, January 
1, 2005, available at: http://www.ustr.gov/trade-agreements/free-trade-
agreements/australian-fta/final-text.
    \5\ Compare MAI Systems Corp. v. Peak Computer Inc., 991 F.2d 511 
(9th Cir. 1993); and Advanced Computer Services of Michigan, Inc. v. 
MAI Systems Corp., 845 F.Supp. 356, 362-364 (E.D. Va. 1994) with 
Cartoon Network LP. v. CSC Holdings, 536 F.3d 121, 127-131 (2d. Cir, 
2008); CoStar Group Inc. v. Loopnet, Inc. 373 F. 3d 544, 551 (4th Cir. 
2004).
---------------------------------------------------------------------------
    Like the U.S.-Australia FTA, the proposed Anti-Counterfeiting Trade 
Agreement (ACTA) raises the specter of eroding consumer rights and 
subjecting ISPs to unjustified burdens in order to prevent copyright 
infringement. The USTR has announced its intention to negotiate, as 
part of ACTA, provisions to counter Internet-based infringements of 
copyrights. In public comments filed with the USTR, content industry 
groups such as the Motion Picture Association of America (MPAA) and the 
Recording Industry Association of America (RIAA) have called for ACTA 
to contain measures that would require ISPs to reveal information of 
customers accused of copyright infringement, suspend Internet accounts 
of customers accused of repeat infringement, and require ISPs to filter 
their networks for infringement.\6\ These measures rely on ISPs and 
copyright owners making infringement determinations without judicial 
intervention and thus threaten consumers' privacy and due process 
rights. While representatives of the MPAA and the RIAA, as members of 
ITAC 15, have the ability to influence the design of these provisions, 
consumers do not.
---------------------------------------------------------------------------
    \6\ Greg Frazier, Motion Picture Association of America, Re: 
Request For Public Comment on The Anti-Counterfeiting Trade Agreement 
(ACTA), March 20, 2008, available at: http://www.publicknowledge.org/
pdf/acta/mpaa-20080320.pdf; Neil Turkewitz, Recording Indsutry 
Association of America, Anti-Counterfeiting Trade Agreement: Request 
for Public Comment, March 17, 2008, available at: http://
www.publicknowledge.org/pdf/acta/riaa-20080317.pdf.
---------------------------------------------------------------------------
    In order to ensure balance in the views expressed by ITAC 15, 
consumer and public interest advocates should be included in its 
makeup. The law does not explicitly exclude public interest 
perspectives from the committee, and the legislative history of the 
Trade Act and the FACA, both of which govern ITAC 15, actually support 
their inclusion. In enacting FACA, which applies its ``fair balance'' 
requirement to trade advisory committees,\7\ Congress intended to end 
industry domination of advisory committees.\8\ Similarly, in enacting 
certain amendments to the Trade Act in 1979, Congress expressed its 
intention to broaden the interests represented on tier 2 and tier 3 
committees to include, among others, public interest representation.\9\
---------------------------------------------------------------------------
    \7\ Federal Advisory Committee Act (5 U.S.C. App. Sec. 5(b)(2)) 
(1994).
    \8\ Northwest Ecosystem Alliance v. Office of the United States 
Trade Representative, 1999 U.S. Dist. Lexis 21689, 20 (W.D.Wash.1999).
    \9\ GAO Report, 2002, supra note 2, at 60.
---------------------------------------------------------------------------
    Although Congressional intent is clear, the language of the Trade 
Act does not provide sufficient guidance about how the ``fair balance'' 
requirement should be applied. Consequently, as the GAO report 
noted,\10\ judicial decisions on this issue do not establish 
conclusively that FACA's ``fair balance'' requirement applies to tier 3 
trade advisory committees.\11\
---------------------------------------------------------------------------
    \10\ GAO Report 2002, supra note 2, at 3.
    \11\ Compare Northwest Ecosystem, supra note 8 (finding that the 
``fair balance'' applied to a tier 3 committee and ordering appointment 
of members representing non-business interests) with Center for Policy 
Analysis on Trade and Health v. Office of the United States Trade 
Representative, 540 F. 3d 940 (9th Cir. 2008)(holding that the ``fair 
balance'' requirement is not justiciable because it is not clearly 
defined).
---------------------------------------------------------------------------
    In the absence of clear direction in the Trade Act, the USTR \12\ 
and the Department of Commerce, which are responsible for administering 
certain ITACs, contend that tier 3 committees ``are not generally open 
to non-business interests.'' \13\ In order to give effect to its 
intention and to promote public interest, Congress should clarify that 
FACA's ``fair balance'' requirement extends to all tier 3 advisory 
committees. Such clarification would facilitate appointment of public 
interest representatives on the tier 3 ITAC that deals with 
intellectual property issues a€'' ITAC 15.
---------------------------------------------------------------------------
    \12\ ITA International Trade Administration, Dept. of Commerce, 
Become a Trade Advisor, http://www.ita.doc.gov/itac//become_an_advisor/
becomeanadvisor.asp.
    \13\ 2002 GAO Report, supra note 2, at. 63.
---------------------------------------------------------------------------
    Public interest representation at the tier 3 level is essential in 
addition to public interest representation on the tier 1 and tier 2 
committees. As the 2002 GAO report noted, the tier 1 committee may not 
have any influence on the tier 2 and tier 3 committees.\14\ 
Furthermore, tier 2 committees have been less active than tier 3 
committees.\15\ Also, tier 1 and tier 2 committees are general policy 
committees that will not be able to provide focused public interest 
perspective on specialized areas such as intellectual property. 
Therefore, a significant public interest presence on ITAC 15 is 
essential to ensure that the USTR promotes IP policy that is beneficial 
to all Americans.
---------------------------------------------------------------------------
    \14\ GAO report, 2002, supra note 2, at. 7 (noting that the trade 
act does not establish any formal relationship among tier 1, tier 2 and 
tier 3 committees and does not authorize the first tier to exercise any 
control over the other two); Id, at. 25 (noting that although the Trade 
Act and FACA do not forbid it, the USTR and the Dept. of Commerce do 
not routinely consult a cross-section of committees concerned with a 
particular issue.)
    \15\ GAO, International Trade: An Analysis of Free Trade Agreements 
and Congressional and Private Sector Consultations under Trade 
Promotion Authority, GAO-08-59, p. 55 (Washington, D.C.: November 7, 
2007)(``GAO Report, 2007'').
---------------------------------------------------------------------------
    In order to be effective, public interest representatives should 
not be relegated to a small minority whose views are ignored by the 
committee.\16\ While the USTR cannot be expected to adopt the views of 
public interest representatives and has discretion in appointing 
members of tier 3 committees, Congress should seek to avoid extreme 
imbalances in committee composition by providing adequate direction to 
the USTR. Further, there would be greater accountability within ITAC-15 
discussions if the USTR adopted the practice of responding to all 
written suggestions, as well as requiring that more written 
consultations occur within the consultation process.\17\
---------------------------------------------------------------------------
    \16\ GAO Report, 2002, supra note 2, at 41.
    \17\ Id. at 28, (noting that many advisory committee chairs 
complain that written suggestions from their committees do not elicit a 
response. Also noting that predominance of oral advice causes problems 
in tracking and distributing committee advice).
---------------------------------------------------------------------------
    Public interest participation would not cause many of the harms 
that detractors claim it would. For instance, many industry 
representatives on tier 3 committees claim that non-business 
representation would prevent Members of the Committees from providing 
candid advice for fear that non-business representatives would release 
sensitive information to the public.\18\ This argument either overlooks 
the fact that all members of tier 3 committees are bound to keep 
committee information secret, or suggests that the advisory committee 
process should be based on an assumption that non-business 
representatives are somehow less trustworthy than their commercial 
counterparts. Industry representatives also claim that too many 
differences of opinions within a committee would prevent the committee 
from providing clear advice to the USTR.\19\ While clarity is 
essential, it is not necessarily compromised by presentation of nuanced 
views that account for interests of all concerned, including the 
public.
---------------------------------------------------------------------------
    \18\ GAO Report, 2002, supra note 2, at. 43; Hearing on the Trade 
Advisory Committee System, Before the Subcommittee on Trade of the 
House Committee on Ways and Means, 111th Congress, (June 21, 2009) 
(Testimony of Brian T. Petty, Chairman, ITAC 2).
    \19\ Hearing on the Trade Advisory Committee System, Before the 
Subcommittee on Trade of the House Committee on Ways and Means, 111th 
Congress, (June 21, 2009) (Testimony of Timothy Hoelter, Vice 
President, Government Affairs, Harley-Davidson Motor Company).

    2. The Trade Act should clarify that the USTR's discretion to close 
---------------------------------------------------------------------------
documents to the public should not result in a default rule of secrecy.

    IP aspects of some trade agreements, including the ongoing ACTA 
negotiations, are shrouded in excessive secrecy. Members of the public 
have no access to information concerning the need for the agreement, 
how it would benefit or harm them, and the specific proposals that are 
under negotiation. Although the USTR has made available to the public a 
summary of the ACTA negotiations, this summary does not shed any light 
on the actual nature of the agreement. Furthermore, it undermines the 
credibility of USTR's stated intention to seek greater public input.
    The USTR has offered several justifications for this excessive 
secrecy. First, the agency claims that secrecy is an accepted policy in 
trade agreements. Second, it claims that secrecy allows exchange of 
views in confidence and facilitates the negotiation and compromise that 
is necessary to reach agreement on complex issues. Neither of these 
reasons justify excluding the public from discussion of issues that 
could have harmful consequences for them.
    That secrecy is accepted policy does not, in itself, mean that it 
is also in the public interest. Further, it is not the policy in many 
multilateral intellectual property negotiations. For instance, the U.S. 
negotiated the WIPO Copyright Treaty and WIPO Performances and 
Phonograms Treaty in the open. While secrecy may permit ease of 
negotiation, it does not necessarily facilitate the best outcome. While 
revealing certain information, such as U.S. negotiating positions 
before they are tabled before the negotiating partner, may in certain 
situations be counterproductive, the same concern does not extend to 
all information.
    Intellectual property issues do not fit neatly within trade 
agreements. Yet chapters on intellectual property have been part of 
trade agreements since the GATT negotiations. The justifications for 
secrecy that may apply to traditional trade aspects such as tariffs do 
not apply to intellectual property issues. Opacity in formulating IP 
aspects of trade agreements can only harm the interests of consumers.
    The USTR should release information such as meeting dates, times 
and agendas; industry studies or other presentations made available to 
the USTR urging adoption of certain provisions in agreements; and draft 
negotiating texts after they are tabled before negotiating partners. 
These examples are not exhaustive and merely suggest certain steps 
towards greater transparency. Release of such information would allow 
the USTR to benefit from the expertise of members of the public. 
Further, it would be in accordance with provisions of the Trade Act 
that require the USTR to seek input from members of the public.\20\ 
Ultimately it would lead to adoption of negotiating positions that 
reflect the interests of all Americans.
---------------------------------------------------------------------------
    \20\ See 19 U.S.C.A. Sec. 2155 (2006).
---------------------------------------------------------------------------
    Lifting the veil of secrecy over IP aspects of trade agreements 
will become increasingly important if, as the parties to this testimony 
expect, the IP industries abandon multilateral IP forums like WIPO for 
agreements such as ACTA. While we believe that the proper forum for an 
agreement like ACTA is WIPO or a similar multilateral forum, if ACTA is 
to proceed as a trade agreement, it should be subject to the kind of 
transparency and public input that would attach to a multilateral IP 
treaty.

Conclusion

    We urge Congress to implement the recommendations made above.
    Thank you for giving Public Knowledge an opportunity to submit this 
testimony. We remain at your disposal to answer any questions.

SUPPLEMENTAL SHEET

Contact information of witnesses:

    Gigi B. Sohn, President, Public Knowledge
    Gwen Hinze, International Policy Director, Electronic Frontier 
Foundation

                                 
     Statement of the National Transportation Policy Project (NTPP)
    Mr. CHAIRMAN. and Members of the Subcommittee,
    We are pleased to have the opportunity to submit this statement of 
the Bipartisan Policy Center's National Transportation Policy Project 
(NTPP). As the co-chairs of NTPP, we recently completed a 2-year effort 
with a wide range of business, academic and civic leaders, calling for 
U.S. transportation policy to be more performance driven, more directly 
linked to a set of clearly articulated goals, and more accountable for 
results. Our principle message to this committee is that achieving 
critical national goals will require not only a comprehensive 
consolidation and restructuring of current programs based on clear 
performance metrics, but also a fundamental new approach to funding. 
Our report -Performance Driven: A New Vision for U.S. Transportation 
Policy concludes that revenue issues in the upcoming legislation to 
extend and reform the nation's surface transportation system will 
involve more than just identifying revenue sources to fund programs. 
Financing mechanisms play a central role in the performance and 
outcomes of our nation's transportation system. The NTPP report calls 
for the adoption of better national user-based financing mechanisms, 
echoing the conclusions and recommendations of a number of reports, 
studies, and Commissions. The evidence is clear that the extent to 
which system costs are transparent to system users has direct effects 
on both performance of the system and the level of investment required.
    This statement highlights two important elements of our NTPP report 
germane to you as the revenue raising committee:

        (1)  Recommended funding principles
        (2)  Immediate actions on funding mechanisms

    A recurring theme of both elements is that revenue needs to be 
linked to system performance, and thus solutions should favor direct, 
user-based fees. While we did not make recommendations for specific 
revenue measures, we identified a number of areas where immediate 
action is needed'' largely by the revenue-raising committees of 
Congress. These include moving towards user-pay financing mechanisms, 
as well as research and planning to enable a smooth transition of our 
nation's present transportation financing system to one that is 
supported by national user-pay funding mechanisms.

BACKGROUND:

    For many years the motor vehicle fuel tax provided a stable and 
growing source of funding for federal transportation investments. This 
federal tax, however, has not kept up with growth in road use, 
construction costs, and system needs. As a result, resources available 
in the Highway Trust Fund are increasingly falling short, which in turn 
has triggered transfers from the general fund. This situation is 
clearly unsustainable. Overall gasoline consumption is down due first 
to high oil prices earlier this decade and now because of the economic 
recession. A combination of increased vehicle fuel-economy standards, 
the introduction of electric and plug-in hybrid vehicles, and mandated 
expansion of biofuels can be expected continually to reduce oil demand. 
This is obviously beneficial for many reasons, but it also leads to 
declining receipts from fuel taxes, assuming the level of those taxes 
is unchanged. All of these developments combined expose flaws not only 
in the stability of the gas motor vehicle fuel tax as a funding source, 
but also in its long-term sustainability.
    The current fuel tax is also inadequate in the sense that it does 
not charge users anything close to the full costs associated with their 
use of the transportation system. It does not accurately reflect the 
full environmental, health, energy, security, and congestion costs of 
individual transportation choices. If such costs were accurately priced 
they would affect users' decisions about a range of relevant issues, 
from where to live, when to commute, and what type of vehicle to drive. 
The failure to send accurate price signals leads to inefficient levels 
of consumption if prices are too low, the result will be excess 
demand.\1\ For example, diesel and heavy vehicle tax levels that fail 
to approximate the relative damage and costs imposed by heavy 
commercial vehicles will contribute to deteriorating road conditions by 
under pricing the full costs of their use and thus prompting more truck 
travel. Oregon's pilot mileage-based pricing program demonstrated that 
as drivers became more aware of the true costs of using the roads they 
reduced their travel even when incurring no additional costs.\2\
---------------------------------------------------------------------------
    \1\ Sorenson, Paul, et al. ``Moving Los Angeles'' Short Term 
Options for Improving Transportation.'' RAND Corporation. 2008.
    \2\ Oregon Department of Transportation. ``Oregon's Mileage Fee 
Concept and Road User Fee Pilot Program Final Report.'' 2007.
---------------------------------------------------------------------------
    Another problem with current funding mechanisms is that they impede 
the distribution of funds on a mode-neutral basis because most of the 
revenue is generated from road vehicles via fuel taxes and other 
vehicle fees. This is a problem for metropolitan programs because, 
despite some funding flexibility, projects are forced into either 
``highway'' or ``transit'' categories even though highway and transit 
systems work best in concert. This is an even more severe constraint 
for freight projects, which are unlikely to be funded absent an 
unbiased assessment that considers all mode choices and gives the 
ability to partner across modes.
    Present financing mechanisms to support the nation's highway and 
transit programs are unsustainable and in need of significant reform. 
The problem is not just a growing funding shortfall resulting from the 
fact that the current fuel tax and other taxes that support the highway 
and transit trust funds have not been increased or pegged to inflation. 
Rather, the central flaw of existing financing mechanisms is that they 
provide a poor signal to users about the costs they impose on the 
system (and the benefits they receive). In other words, how we raise 
money for transportation is itself an extremely important policy 
decision quite distinct from the decision about how much money needs to 
be raised. Thus, reform of current financing mechanisms should be 
central to any effort aimed at making effective U.S. transportation 
policy that is more performance-based.
RECOMMENDED FUNDING PRINCIPLES
    The question of how to raise revenue was not the primary focus of 
NTPP's efforts. We were primarily concerned with spending it 
effectively. However, we recognized the critical importance of the 
funding issue because how revenue is raised relates directly to system 
performance. NTPP recommends that future efforts to address the need 
for new transportation revenue-raising mechanisms be guided by the 
following core principles: \3\
---------------------------------------------------------------------------
    \3\ We note that our recommendations in this regard align closely 
with conclusions reached by both the National Transportation Policy and 
Revenue Study Commission and the National Surface Transportation 
Infrastructure Financing Commission.

          Revenue currently collected is insufficient to 
        maintain, much less improve, system performance
          Public revenue collection can enhance the performance 
        of the system when users understand and more directly bear the 
        full costs of the infrastructure they use

    Allow us to amplify these central principles:

Revenue is Insufficient to Maintain or Improve Performance

    Adequate and sustainable funding is an essential dimension of 
putting in place a true performance-based transportation system. 
Obscuring the true costs of maintaining, operating and updating our 
transportation network is not in the national interest.\4\ As a new 
national program is defined, the primary roles and responsibilities of 
different levels of government in maintaining, operating and improving 
the performance of our infrastructure must become more transparent. 
This will solidify the federal role in funding programs that further 
specific national interests.
---------------------------------------------------------------------------
    \4\ ``Using Pricing to Reduce Congestion'', 2009, http://cbo.gov/
doc.cfm?index=9750.
---------------------------------------------------------------------------
    Proposals to increase revenues are frequently opposed as ``double 
taxation'' or resisted with complaints that users have ``already 
paid''. Bold political leadership is needed to bring the reality to 
light in this area. Federal highway spending (and taxation) per mile 
travelled has actually fallen by nearly 50 percent since the Highway 
Trust Fund was established in the late 1950s. Moreover, because the 
fuel tax is not indexed to inflation, its purchasing power has declined 
by 33 percent since it was last increased in 1993. As population has 
grown and trade has expanded, basic infrastructure has deteriorated. At 
the same time, the lack of transparent user-based financing perpetuates 
individual and commercial decisions that do not take into account the 
full public costs imposed by each transportation choice.
    A wide variety of circumstances have combined continually to weaken 
the link between transportation funding (primarily via the gas tax) and 
the costs imposed and benefits received by system users. The failure to 
``price'' economic, environmental, and social externalities of travel 
has contributed to unsustainable development patterns and a lack of 
awareness of, or concern for, energy consumption, emissions, and 
congestion impacts.

Favor Direct, User-Based Fees

    Taxes and fees are currently the two primary means used to raise 
revenue for federal transportation infrastructure. While the motor 
vehicle fuel tax generates significant revenues at low administrative 
cost, its reliability as a proxy for transportation-system use has 
decreased dramatically. In an age of increasing fuel efficiency, 
growing numbers of hybrid-electric vehicles, and increased use of 
alternative fuels, payment of that tax bears a diminishing relationship 
to actual use of the system. In contrast, where users pay directly for 
their infrastructure use, they receive more timely and accurate signals 
about the full range of costs they impose and the benefits they 
receive. Ideally, user fees should capture diverse elements of use 
including miles traveled, time and place of travel, vehicle weight or 
number of axles, vehicle fuel efficiency, contribution to congestion, 
and emissions.\5\
---------------------------------------------------------------------------
    \5\ Transportation Research Board. ``Fuel Tax and Alternatives, 
Special Report 285. 2006. www.TRB.org/publ/sr/sr285.pdf.
---------------------------------------------------------------------------
    Raising federal transportation revenue from a more complete and 
accurate national system of user fees can advance a range of national 
interests and benefits including:

          enhancing equity across all users;
          promoting consistency with energy and environmental 
        goals by ensuring that transportation users bear the true cost 
        of energy and environmental impacts;
          reducing congestion and increasing the reliability of 
        travel times;
          promoting more accurate user-based signals with 
        respect to investment priorities; and
          reducing capital needs as users internalize cost 
        impacts and rationalize their use of the system.

    A robust user-pay system would free up alternative resources to 
allow state or metropolitan programs investment in modes or specific 
user groups for which 100 percent direct user-pay funding is not 
feasible and to advance specified social and environmental goals. The 
user-pay principle should be at the core of any short-term increases in 
existing taxes and/or fees, as well as in the development and structure 
of any new revenue sources and mechanisms put in place for the long 
term.

RECOMMENDATION FOR IMMEDIATE ACTION ON FUNDING MECHANISMS

    While we recognized that our call for a comprehensive restructuring 
of all federal programs will take years to achieve, several critical 
revenue-related principles could and should be applied in the near 
term. These include the following:

Set a high bar for any use of general funds for transportation 
        infrastructure

    The first and most obvious reason to set a high bar for any use of 
general funds for transportation infrastructure is that every dollar of 
additional spending out of general funds at this time represents 
additional borrowing and thus exacerbates the already extreme deficit 
problems and fiscal challenges the nation is now and will continue to 
confront in coming years. Second, even before it is feasible to 
transition fully to a user-pay system, numerous opportunities exist to 
raise revenue for near-term transportation needs in ways that make 
system costs more transparent, send more accurate price signals to 
users, and thus promote more efficient use of the system. Examples are 
system fees and road tolls. Relying on general funds obscures the true 
cost of the transportation system to users and does nothing to either 
promote efficient use of the system or to advance critical societal 
objectives.

Minimize departures from user financing

    Until new and long-term sustainable revenue mechanisms in the form 
of user-based fees can be implemented, short-term revenue-enhancing 
measures are likely to be put forward to cover the costs of increased 
federal support for transportation even to maintain levels set in 
SAFETEA-LU.
    NTPP recommends that any action by Congress to generate additional 
revenue for transportation:

          advance the user-pay principle
          be targeted toward rewarding performance on system 
        preservation and expansion projects

Be transparent in establishing new financing mechanisms

    Issuing new federal bonds or establishing a national infrastructure 
bank both need to be recognized as forms of borrowing. The use of 
general taxpayer funds should be limited to programs which demonstrably 
generate nationally significant and broadly based public benefits. The 
operations of any new financing entity need to be clear, specific, and 
transparent regarding actual revenue sources and beneficiaries. Such an 
entity should also apply rigorous quantitative performance metrics 
covering the range of national interests that need to be balanced, and 
strive to align funding sources with the beneficiaries of federal 
investments. Finally, establishing a new financing entity must not be 
seen as a substitute for moving aggressively toward transportation 
infrastructure supported to the maximum extent possible by well-
designed user-based fees.

Implement a mode-neutral freight fee

    A well-targeted program to address critical freight bottlenecks and 
improve transport efficiency along critical freight corridors, 
networks, and connectors is vital. The soundest basis for 
infrastructure investments that improve the performance of the entirely 
private existing freight system is a user-based freight fee. The fee 
structure should reflect the range of the freightnetwork and the burden 
each mode imposes on public infrastructure, as well as the relative 
fuel efficiency and/or greenhouse gas emissions of different modes of 
freight transport. Revenues from the fee should be applied to projects 
that have clear benefits for freight transport, including transport on 
the privately owned system.

Charge transportation users the costs of their carbon emissions and 
        recycle those funds into transportation investments

    Effective pricing of transportation-related carbon emissions is 
needed to complement other transportation-related policies on energy 
and the environment, such as fuel efficiency standards and alternative 
fuel programs. Further analysis is needed to ensure that the right 
incentives are in place to motivate users to reduce carbon emissions 
from transportation. This is particularly urgent given evidence that 
the transportation sector has been one of the fastest growing 
contributors to overall carbon emissions. While a petroleum based tax 
may not be an adequate proxy for road use, it is an appropriate proxy 
for pricing the externalities associated with carbon emissions and 
energy security.
    Just as transportation needs to bear an appropriate share of the 
cost of controlling and reducing greenhouse gas emissions at a national 
level, an appropriateshare of revenues generated through a carbon 
pricing should go toward transportation infrastructure investment and 
operations that produce carbon reduction benefits.

Help states and local governments develop sustainable funding sources

    While NTPP supports a well defined federal focus on nationally 
significant infrastructure, there is also a national interest in 
supporting and incentivizing state and local governments to develop 
sustainable funding sources for locally significant infrastructure 
investments. It is clear that achieving national performance goals for 
the transportation system will require states and local governments to 
have the ability substantially to increase revenues needed for 
infrastructure investments.
    Accordingly, the Federal Government should help ensure state and 
local capacity to develop sustainable, equitable, and performance-
enhancing revenue streams. States and localities have a wide range of 
transportation investment and revenue-raising options at their 
disposal. While the Federal Government should not be in the business of 
prescribing specific state and local strategies,\6\ it can remove 
impediments and support efforts to use creative financing tools at 
state and local levels.\7\ Three concrete steps the Federal Government 
can take in this regard are:
---------------------------------------------------------------------------
    \6\ Government Accountability Office. ``Highway Public-Private 
Partnerships: More Rigorous Up-Front Analysis Could Better Secure 
Potential Benefits and Protect the Public Interest.'' Sep. 2008. GAO-
08-1149R.
    \7\ Government Accountability Office. ``Highway Finance: States' 
Expanding Use of Tolling Illustrates Diverse Challenges and 
Strategies.'' June 2006. GAO-06-554.
---------------------------------------------------------------------------
    Reduce restrictions on road pricing. Performance and environmental 
goals are likely to be most cost-effectively achieved with greater use 
of variable pricing on congested roadways. The Federal Government 
should removerestrictions to instituting such policies on the nation's 
roadways, with appropriate limitations.
    Support efforts by states to implement direct user charges. Direct 
user-fees, such as a mileage-based charge, can improve system 
performance and represents a critical tool for states and metropolitan 
areas to supplement or eventually replace traditional revenue sources. 
Support should be provided to states or groups of states piloting new 
comprehensive user-based fees.
    Expand TIFIA credit support. With the removal of restrictions on 
pricing, the TIFIA program should be expanded to allow for loans that 
are paid back with variable pricing tolls on national highways. TIFIA 
should adopt performance metrics proposed in the NTPP report to aid in 
the assessment of projects.

Lay the Groundwork for a Sustainable Funding Source 

    Transitioning to a performance-based surface transportation system 
that is equipped to address 21st century challenges requires a timely 
and evidence-based transition to a user-pay funding mechanisms. This 
means research must begin methodically to test, evaluate and resolve 
various issues that are likely to arise in the course of such a 
transition.\8\ Concepts must be considered and encouraged that would 
establish a system, which at the earliest possible date, can become the 
backbone of national revenue collection.
---------------------------------------------------------------------------
    \8\ National Surface Transportation Policy Study and Revenue 
Commission. ``Transportation for Tomorrow.'' 2007. Back up and 
technical papers: http://transportationfortomorrow.org/final_report/
technical_issue_papers.aspx; See in particular papers 5A-06 re 
container charge; 5A-15 re PPPs; 5B-03 re financing options for freight 
and intermodal facilities; 5B-05 re phasing in new fees.
---------------------------------------------------------------------------
    For instance a funding system that uses in-vehicle, on-board GPS 
units could charge differentially for mileage in high congestion zones 
or for travel during more congested times of day. The system could also 
apply different fees based on vehicle fuel economy and emissions. Such 
a tailored alignment of fees to distinct costs will send proper price 
signals to users, thereby reducing congestion, emissions, and fuel 
consumption. This is important because, while there is a growing 
support for a ``mileage-based'' system or VMT fee such a fee will only 
provide accurate cost signals if it is adjusted for vehicle fuel 
economy. Similarly, a mileage-based fee would have to account for the 
fact that not all miles are equal. Mileage-based fees that vary based 
on congestion provide incentives for drivers to shift to off-peak 
periods, consolidate trips, use less congested routes, use alternative 
modes, or telecommute. They also can be tailored to avoid penalizing 
rural drivers who travel long distances on relatively empty roads. A 
corollary benefit of increasing the transparency of costs is that 
capital investment decisions will be guided by quantitative signals of 
increased demand for physical capacity.
    Over a longer time horizon, a vehicle-based revenue system may 
offer additional efficiencies and dramatic new safety benefits if it is 
integrated with developing proposals for integrating ``smart road-smart 
car'' technologies. The platform of on-board GPS technology is already 
being applied to advanced innovations with automatic crash prevention. 
Other applications are being adapted to provide diverse consumer 
services including routing, vehicle optimization, and payment of a 
range of services such as parking, registration and weight, or 
emissions-related fees.
    Because a vehicle-based fee would likely be collected from 
individual drivers, however, the implementation of such a system 
presents numerous transition and operational challenges. For example, 
efficiently linking a nation-wide user fee system with state and local 
revenue collection, publicly tolled facilities, and private operators, 
will require that a host of issues be addressed. The most commonly 
cited concern is the privacy protection of users. These specific 
challenges will require time to work through, which is why the NTPP 
calls for immediate action to begin laying groundwork for a future 
system.

Concluding Remarks

    This is a period of extraordinary opportunity for revitalizing 
America's surface transportation system. Existing systems are dated, in 
many cases strained to or beyond capacity, and increasingly fall short 
of delivering transportation services at the level of quality, 
performance, and efficiency the American public demands. Current 
funding mechanisms and revenue sources are not sufficient to maintain 
existing infrastructure, let alone provide the investments needed to 
expand and modernize our transportation systems. Available resources 
are typically distributed without any sense of national priorities. 
Bold federal leadership and immediate action is needed to develop, 
test, and implement new, more direct and more complete ways of linking 
revenue collection to system use and impacts.
    As the NTPP report outlines and as we have discussed in this 
testimony, transportation investments should not be funded using 
general funds, assistance must be offered to states and local 
governments to enable them to establish sustainable funding sources for 
transportation projects, and our nation's transportation system should 
be funded by user-based fees that are sustainable and tied to system 
use. The way in which transportation revenue is raised and the extent 
to which system costs are transparent have direct effects on both the 
performance of the system and the level of total investment needed.
    Thank you for considering this statement. We welcome future 
opportunities to support the work of House Ways and Means Select 
Revenue Measures Subcommittee, and ask that you draw upon the work of 
the National Transportation Policy Project as you develop legislation 
that ensures adequate funding of our nation's transportation 
infrastructure.

                                 
