[Senate Hearing 111-1230]
[From the U.S. Government Publishing Office]







                                                       S. Hrg. 111-1230

                 FEDERAL, STATE AND LOCAL PARTNERSHIPS 
                 TO ACCELERATE TRANSPORTATION BENEFITS

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 11, 2010

                               __________

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





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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                     ONE HUNDRED ELEVENTH CONGRESS
                             SECOND SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming
BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
AMY KLOBUCHAR, Minnesota             CHRISTOPHER S. BOND, Missouri
SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico
JEFF MERKLEY, Oregon
KIRSTEN GILLIBRAND, New York
ARLEN SPECTER, Pennsylvania

                    Bettina Poirier, Staff Director
                 Ruth Van Mark, Minority Staff Director
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                            C O N T E N T S

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                             MARCH 11, 2010
                           OPENING STATEMENTS

Boxer, Hon. Barbara, U.S. Senator from the State of California...     1
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...     2
Lautenberg, Hon. Frank R., U.S. Senator from the State of New 
  Jersey.........................................................    27
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...    28

                               WITNESSES

Kienitz, Hon. Roy, Under Secretary for Policy, U.S. Department of 
  Transportation.................................................     4
    Prepared statement...........................................     7
    Responses to additional questions from:
        Senator Boxer............................................    13
        Senator Sanders..........................................    15
        Senator Inhofe...........................................    16
        Senator Voinovich........................................    23
        Senator Vitter...........................................    26
Villaraigosa, Hon. Antonio R., Mayor, City of Los Angeles, 
  California.....................................................    38
    Prepared statement...........................................    42
    Responses to additional questions from:
        Senator Boxer............................................   107
        Senator Inhofe...........................................   109
        Senator Voinovich........................................   111
        Senator Vitter...........................................   112
Inman, Max, Senior Advisor, Project Finance and Program 
  Management Initiatives, Mercator Advisors......................   116
    Prepared statement...........................................   118
    Responses to additional questions from:
        Senator Sanders..........................................   122
        Senator Inhofe...........................................   123
Clary, Lowell R., Managing Partner, Clary Consulting, LLC........   127
    Prepared statement...........................................   129
    Responses to additional questions from:
        Senator Sanders..........................................   139
        Senator Inhofe...........................................   142
Hecker, JayEtta Z., Director, Transportation Advocacy, Bipartisan 
  Policy Center..................................................   146
    Prepared statement...........................................   148
    Responses to additional questions from:
        Senator Sanders..........................................   161
        Senator Inhofe...........................................   163
        Senator Voinovich........................................   169
 
  FEDERAL, STATE AND LOCAL PARTNERSHIPS TO ACCELERATE TRANSPORTATION 
                                BENEFITS

                              ----------                              


                        THURSDAY, MARCH 11, 2010

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 a.m. in 
room 406, Dirksen Senate Office Building, Hon. Barbara Boxer 
(Chairman of the Committee) presiding.
    Present: Senators Boxer, Inhofe, Carper, Lautenberg, 
Whitehouse, and Voinovich.

           OPENING STATEMENT OF HON. BARBARA BOXER, 
           U.S. SENATOR FROM THE STATE OF CALIFORNIA

    Senator Boxer. Welcome.
    Is Mr. Kienitz here? Why don't you take your seat. Thank 
you.
    Welcome, everybody. Last month, Secretary LaHood came to 
Los Angeles as part of his Surface Transportation 
Reauthorization Outreach Tour. Together we held a town hall 
meeting in L.A., where we heard from city, county and local 
officials and other interested parties from throughout 
California about issues we should consider as we work on the 
next surface transportation authorization bill, MAP-21. That 
stands for Moving Ahead for Progress in the 21st Century.
    Today's hearing focuses on one of the ideas that was raised 
at that town hall: finding ways the Federal Government can 
build upon and encourage transportation investments made at the 
State and local level across the country and ways in which the 
benefits of those investments can be accelerated.
    For example, in 2008 the citizens of Los Angeles County--
was it county or city, Mayor? County. The citizens of Los 
Angeles County approved a half-cent sales tax dedicated to 
transportation investments. This measure will generate an 
estimated $40 billion over the next 30 years.
    Mayor Villaraigosa, who I am so pleased has joined us 
today, suggested to me and to others that if the Federal 
Government could help Los Angeles complete a portion of the 
transportation improvements approved by the voters over 10 
years rather than 30 years, then our constituents could enjoy 
the benefit of their transportation investments sooner, and 
many more jobs would be created in the short term.
    I am a strong supporter of investments in transit as a 
crucial part of a transformational transportation policy. I 
want to thank Mayor Villaraigosa for bringing the Los Angeles 
30/10 initiative to my attention.
    I support the 30/10 initiative. I look forward to working 
with the mayor, my colleagues here in the Senate, and the U.S. 
Department of Transportation to find ways to help not only Los 
Angeles but also communities across this Nation.
    I think, Senators, if we can get this done, it is going to 
send a very strong signal to the citizens that if they step up 
and are willing to pay even a small amount over time, that that 
investment will pay off in the early years. It is a simple 
idea, it is a crucial idea, and I am all for it.
    I want to thank Roy Kienitz, Under Secretary for Policy at 
the U.S. Department of Transportation, for being here today, as 
well as all of the witnesses on our second panel.
    Today's witnesses will discuss the Federal programs 
currently available to assist States and local governments with 
transportation investments as well as examples of how some 
States are partnering with private investors to provide 
additional investment.
    I look forward to hearing suggestions as we develop this 
idea and as we develop MAP-21. I am hopeful we will hear today 
that there are some programs already in effect that could step 
in and begin this 30/10 project, because it would be very 
helpful for us to just get started.
    With that, I want to call on my colleague and friend, who 
has been such a supporter of transportation programs in this 
country, Senator Voinovich.

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

    Senator Voinovich. Thank you, Madam Chairman. I would like 
to thank the witnesses for being there today and for your hard 
work and leadership on highlighting the need for increased 
investment in our aging transportation infrastructure.
    Having served as a mayor, county commissioner, a member of 
the metropolitan planning organization in Cleveland, NOWACA, 
Governor, now Senator, I understand the different needs, 
concerns, and responsibilities that each level of government 
brings to bear on the challenges we face as communities and a 
Nation, and I really appreciate each of you being here today to 
discuss your vision and needs for the next reauthorization 
bill.
    With the next bill we have an opportunity to not only 
improve and repair our crumbling highways and bridges but to 
spur our economy at the same time, and that is why I encourage 
the big five--the National League of Cities, Conference of 
Mayors, NGA--to come together and reach consensus on what they 
want to see in this reauthorization bill. And Mayor, it would 
be very important that you work with them to make sure that 
they come back with the recommendations that would respond to 
the kinds of things you are going to be talking to us about 
today.
    It is no secret that the Nation's transportation needs 
greatly exceed the investment at all levels. We authorize two 
commissions in SAFETEA-LU, and they came back--the National 
Surface Transportation Policy and Revenue Study Commission--and 
they called for investments of at least $225 billion annually, 
and right now, when you take the Federal money and the State 
money and the local money, we are doing about 40 percent of 
that.
    I believe the next reauthorization bill will provide 
fundamental and needed reforms to our system, projects of 
regional and national significance, consolidate programs, 
streamline project delivery, important. And I am happy to see a 
witness from the Bipartisan Policy Center. I spoke before your 
group a couple weeks ago, and I am pleased to hear that you are 
advocating for our national transportation system.
    Jobs. I think that we all know that the unemployment in the 
construction industry and transportation is about twice as bad 
as it is in the rest of the economy. In my State, we have had 
35,000 people who are not working that are in the construction 
industry.
    We also, I think, know that we are going to get a bigger 
bang for our buck if we move on this quickly because of the 
fact that people are hungry today, and our bids in Ohio are 
coming in at about 10 to 12 percent less than they did a couple 
years ago. So it means we are going to get more for the money 
that we invest. And the other thing is that we are going to pay 
for it.
    Mr. Kienitz, I am very interested in your thoughts on that; 
and the mayor, I am very interested in your thoughts. I read 
your paper, and it is very impressive. There ought to be some 
way that we can encourage people to take on more 
responsibility. So I think that is something that we need to 
fold into this.
    Environment, I think, again, you know, I don't know if we 
have weighed the measure of reducing greenhouse gases from some 
of the proposals that are there. It is fantastic. So it is 
another benefit.
    And last but not least, bipartisan--something that maybe 
the Republicans and Democrats can do this year that would be 
well received by the American people. And I think certainty. I 
think really what we are concerned about today is there is a 
lot of uncertainty out there. People aren't sure where we are 
going, and they are holding back because they are not sure 
whether they are going to get a job or they are going to keep 
their job.
    And if we were able to move forward with this 
reauthorization and fund it robustly I think we would take a 
large segment of the economy of the United States and give it 
certainty, and I think that would then start to flow into other 
areas where we have uncertainty.
    So I am looking forward to the presentations today.
    Is it Mr. Kienitz, is it?
    Mr. Kienitz. Kienitz, sir.
    Senator Voinovich. I wish that the day you came here and 
testified that we were recording what you had to say, because 
it was--some of the people behind you I thought got a little 
uncomfortable. But you did a fantastic job of outlining why it 
was that we needed a multi-year reauthorization of this bill to 
provide the certainty that is needed throughout this country, 
particularly for State governments that are right now holding 
their breath and trying to figure out where we are going.
    Thank you, Madam Chairman.
    Senator Boxer. Thank you so much.
    Under Secretary, please proceed.

        STATEMENT OF HON. ROY KIENITZ, UNDER SECRETARY 
         FOR POLICY, U.S. DEPARTMENT OF TRANSPORTATION

    Mr. Kienitz. Thank you. Sir, I will try not to scare the 
people behind me quite so much today and yet still be helpful.
    Obviously, thank you, Chairman Boxer, for having us here, 
and Senator Voinovich, good to see you.
    I guess what I would like to do is talk about, first of 
all, some of the tools that DOT currently has that might be 
able to help very large transportation projects with loans or 
other types of credit assistance, but also about some tools 
that we don't yet have that might be best suited to what we 
think is probably an emerging area of need here.
    Before I go into that, though, I would like to talk a 
little bit about Los Angeles. As you know, Madam Chairman, I 
was out there a couple weeks ago with Secretary LaHood, at your 
invitation, to hear about the needs of that region, and we met 
with the mayor in some depth, discussing his ideas for the 30/
10 plan, and I think both the Secretary and I viewed that as a 
very valuable trip, and once again, thank you for hosting us.
    I know the mayor will describe the political forces that 
came together to create this long-term revenue stream in that 
region by a vote of the people, but the central issue here is 
really as the cash flow goes out over a great number of years, 
and I think the mayor has correctly identified a situation that 
will allow the projects to all be built, but not at the time in 
which they are needed. Everyone who has ever driven in L.A. 
knows that I think more and better transit in that region is a 
must, and the sooner it is in place the better.
    But I also think Los Angeles is probably not the only place 
that is pursuing a whole program of projects of this kind, 
rather than just individual spot investments. Just off the top 
of my head, I know that Denver, Salt Lake City, and Seattle are 
also in a similar situation where they have a network proposal 
that they have made; it is broken into individual pieces for 
the purpose of implementation, but their goal is really to 
create an entire network. And even with dedicated taxes it is 
decades until the program can be fully built out, and that 
means it is decades that the people have to wait to get the 
benefits of the program.
    So we have some tools to help in these cases, and they are 
useful, but they are designed to work on a project by project 
basis. The first of these is the TIFIA program, which this 
Committee had a major role in creating a dozen years ago, and 
it provides loans up to one-third of the cost of a major 
transportation infrastructure project.
    Its first utilization really was in the world of toll 
roads, and it has done well at that, but it is increasingly 
being looked at also as a major capital source for transit 
projects. I can tell you that in this Administration one of our 
goals is to make sure that that program is truly multi-modal in 
practice as well as in theory. It has always been multi-modal 
in theory, but we are trying to also make it multi-modal in 
practice.
    And I will say, as an example, TIFIA recently provided a 
$171 million loan to the Transbay Transit Center project in San 
Francisco, which is a major hub that is going to connect the 
city and the peninsula with the rest of the State.
    Denver Union Station is a project of a similar kind where 
TIFIA might also be useful.
    But unfortunately the TIFIA office is currently evaluating 
proposed loans and loans that are expected to close in the near 
term that will consume a large portion of its available funding 
sources. Even if that were not true, TIFIA is just not sized to 
deal with something of the magnitude of what is being proposed 
in Los Angeles. It could be adapted to help with that, or it 
could offer a first step in a multi-step process, but right now 
that is probably all it could do.
    Another option is the TIGER program, which I know the 
Senators are familiar with. It can offer grants but also 
support for TIFIA loans to, once again, a wide variety of 
projects--highways, transit, and others. As such, added 
increments of TIGER funding are one way, for example, to add 
more money to the supply available to TIFIA without going over 
and above the current appropriated level. So that could 
potentially be a tool for making funds available to this 
purpose.
    The competitive nature of the TIGER program has led a lot 
of project sponsors to get creative, and in particular bring a 
much higher level of local resources to the projects being 
proposed so that they can compete better than you tend to see 
under the formula program, and that could make it in some ways 
a good fit for the Los Angeles experience where there are so 
many local resources.
    But once again, magnitude may be an issue. Although we were 
able to fund many valuable projects in the first round of TIGER 
funding, the average grant size was $30 million, and $30 
million sounds like a lot of money, but in Los Angeles you know 
they are talking about $40 billion, and that amount of money, I 
am not sure it really moves the needle in what they are trying 
to do.
    Third, of course, I would refer you to the President's 2011 
budget, which proposes $4 billion for what we are calling a 
National Infrastructure Innovation and Finance Fund, and this 
can be viewed as a new iteration of the original infrastructure 
bank proposal. And once again, this would create funds to 
invest as grants or loans in projects of regional or national 
significance.
    These three programs--TIFIA, TIGER, and the proposed new 
Infrastructure Fund--could be used to help Los Angeles get 
started, but once again, even these are all project based 
programs. As such, to get started, to take that first step, we 
will need to work with the mayor and the MTA in Los Angeles to 
identify which projects potentially could be accelerated first, 
their state of readiness, and the other routine information 
that DOT needs to have whether we are advancing something 
through a grant or a loan.
    We have obviously begun initial discussions on this; we 
have received some materials from them, and then this is going 
to need to continue so that we can try to discern if there is a 
pathway to move forward here. We have become, I think, much 
more familiar--certainly Secretary LaHood has--about the 
various proposals, be they the Regional Connector or the 
Crenshaw Line or Subway to the Sea, so now we are going to need 
to get down into the details to figure out where the best 
pathway might be.
    That said, it is not clear that any of these programs, 
either existing or as currently proposed, can fully support the 
vision that has been articulated. This is both due to the 
structure of what is proposed and its sheer size. Full Federal 
support for an effort of this size may need to be directly 
addressed in the reauthorization of surface transportation 
programs, and obviously we pledge to work with you, Chairman 
Boxer, and the entire Committee on that to see how we can as a 
group best support not just Los Angeles but regions all over 
the country that are trying to take big steps forward in 
transportation.
    Once again, thank you for the opportunity. I am happy to 
stay for questions.
    [The prepared statement of Mr. Kienitz follows:]
    
    
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       Senator Boxer. Well, I just want to thank you for that, 
because you are such a positive person, and you are giving us 
some hope here that we can get started as we work on this 
longer-term project of the reauthorization.
    I know Senator Lautenberg would like to make an opening 
statement. It would be appropriate now if you would like to do 
that.

        OPENING STATEMENT OF HON. FRANK R. LAUTENBERG, 
           U.S. SENATOR FROM THE STATE OF NEW JERSEY

    Senator Lautenberg. Thank you. I appreciate it, Madam 
Chairman. And my Republican colleague, who will be missed when 
he leaves here, I am glad to share the hearing with him.
    Forgive me for a moment, Madam Chairman. This is kind of 
momentous for me because I had kind of a health siege, and 
things worked out very, very well, and just as an indication of 
support from my team, David Gardner and two other members of my 
staff shaved their heads as I lose my hair. So it is solidarity 
all the way, and I thank you for the opportunity to get 
personal for a minute, personal and up front, by the way.
    Madam Chairman, my home State of New Jersey is situated at 
the crossroads of some of the most traveled paths for moving 
people and goods in the country--the New Jersey Turnpike, the 
Garden State Parkway, the northeast rail corridor, plus a major 
seaport and airport--and there is no doubt that transportation 
is the life blood of my State and our country.
    Our transit system is the largest statewide transit system 
in the country, our workers are the third highest users of 
public transportation in the country, and the George Washington 
Bridge, which connects our State to New York, is the busiest 
crossing in the world. I think there is a poll that exists that 
says how long will you have to wait to cross this incredible 
bridge. It is just an indication of what it is that we need to 
do with our transportation system.
    This hearing is critical because of the focus on the 
essentiality of Federal, regional, and State partnerships 
joining together. And if we really want to do more than fill 
potholes and fix traffic lights and actually tackle the 
enormous transportation challenges we face, we have no choice. 
We have to work together.
    Right now the construction of a brand new tunnel under the 
Hudson River is moving forward in New Jersey. It is the largest 
transit project in the country, and it came to life because the 
Port Authority of New York and New Jersey, and local, State, 
and national leaders joined forces and created a plan to cut 
traffic, reduce pollution, and put people to work. When the 
tunnel is finished, it will take 22,000 cars a day off the 
roads. What is more, when completed this tunnel will create 
44,000 new jobs--permanent jobs. In the meantime work on the 
tunnel will generate 6,000 construction jobs a year. We are 
ready to go to work.
    The Hudson River tunnel is a terrific example of what can 
be accomplished when we all work together, and it should be a 
model for future transportation investments.
    But as important as these partnerships are, they are not a 
substitute for a national transportation policy, and that is 
why Senator Rockefeller and I have introduced the bill that 
moves us into a new direction. Our bill establishes clear, 
measurable goals for our national transportation system. This 
national policy will pave the way so that we can ease traffic, 
save lives, break our dependence on foreign oil, help clean the 
environment, repair our crumbling infrastructure, and build the 
cutting edge transportation systems of the future. That is a 
win-win-win-win.
    The truth is we have to get beyond the status quo. Simply 
building more highways--while critical--will not solve our 
Nation's transportation problems. It will not make us more 
competitive, and it will not prepare us for the economy of the 
future. We have to make substantial investments in mass 
transit, passenger rail and high speed rail. At the same time, 
we also must modernize and expand our freight rail service.
    I want to thank the witnesses, Madam Chairman, for coming 
today. I look forward to hearing their views, and we listen 
with interest to Mr. Kienitz on how we can work together to 
rebuild our country, expand our economy, and create jobs, and I 
thank you very much.
    Senator Boxer. Thank you so much, Senator Lautenberg. We 
are so glad to see you.
    Senator Inhofe.

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

    Senator Inhofe. Thank you, Madam Chairman.
    The members of the Committee know this, but some in the 
room may not, there is a conspiracy going on, actually. It is 
between the Armed Services Committee and this Committee. 
Because every time we have a hearing I find I have to be down 
there, and I am second ranking on that. So I apologize for that 
because this is so significant.
    I believe our Federal infrastructure spending is one of our 
very primary concerns, second only to defending America. That 
is just my personal feeling. Given our enormous needs, however, 
it is just difficult to imagine that the next highway bill 
could ever meet all of them if we follow the traditional way.
    I remember how successful we were, Madam Chairman, back in 
2005, and yet what we passed didn't really even maintain what 
we had already.
    SAFETEA was a 38 percent increase over TEA-21 and was one 
of the largest non-defense spending measures ever passed. But 
as I have often said, it wasn't enough money to even maintain 
the existing roads and bridges, let alone improve them. We 
can't expect to spend our way out of this crisis with Federal 
dollars alone; we need a true public-private partnership if we 
are going to accomplish something, and that is the reason that 
we are having this hearing today.
    One of the most frequently discussed ways to leverage non-
Federal investment is through public-private partnerships and 
with the State and local governments entering into an agreement 
to transfer risks to the private sector and raise private 
capital. This is a way to unleash an enormous amount of private 
money, especially from pension funds. Investors are attracted 
to private-public partnerships because they offer stability 
over long periods of time, often 75 or 95 years.
    I must point out that although these long-term concession 
agreements can work, as evidenced by the Indiana toll road, 
there are many different applications of these partnerships 
that we are just beginning to understand. We can no longer 
overlook this financing source to help address our problem.
    So, in addition to the private sector playing an active 
role in a project, there are always Federal Government ways 
that we can lower borrowing costs. These include capitalizing 
State infrastructure banks, increasing opportunities for 
bonding, and Federal loan programs.
    So we have tried some things that have worked to varying 
degrees in States like Indiana and Virginia and Texas, and I 
think we need to. We recognized this problem back in 2005 when 
we did our reauthorization bill, so we had a commission that 
was formed to explore all these other opportunities. I wasn't 
satisfied with the product that came out of it, but perhaps 
from this point forward we can find something better. We are 
going to have to do something about our crumbling 
infrastructure in America, and particularly in Oklahoma.
    [The prepared statement of Senator Inhofe follows:]

                  Statement of Hon. James M. Inhofe, 
                U.S. Senator from the State of Oklahoma

    I believe in Federal infrastructure spending and see it as 
one of the primary purposes of Government. Given our enormous 
needs, however, it is difficult to imagine that the next 
highway bill could ever meet all of them if we follow the 
traditional way of paying for transportation. According to the 
Administration, our backlog of deferred road and bridge 
maintenance is $600 billion and growing. Clearly, we need to 
think about how we can do things differently. Not only do we 
need to get the most for our Federal highway dollar, but we 
also need to encourage State and local governments and the 
private sector to invest as much as possible in roads and 
bridges.
    SAFETEA was a 38 percent increase over TEA-21 and was one 
of the largest non-defense spending measures ever passed. But 
as I've often said, it wasn't enough money to even maintain our 
existing roads and bridges--let alone improve them. We can't 
expect to spend our way out of this crisis with Federal dollars 
alone; we need a true public-private partnership if we are 
going to accomplish what needs to be done.
    One of the most frequently discussed ways to leverage non-
Federal investment is through public-private partnerships, or 
PPPs. With PPPs, State or local governments enter into an 
agreement to transfer risks to the private sector and raise 
private capital. This is a way to unleash an enormous amount of 
private money, especially from pension funds. Investors are 
attracted to PPPs because they offer stability over long 
periods--often 75 or 95 years. I must point out that although 
these long-term concession agreements can work, as evidenced by 
the Indiana Toll road, there are many different applications 
for PPPs that we are just beginning to understand. We can no 
longer overlook this financing source to help address our 
infrastructure funding shortfall.
    In addition to the private sector playing an active role in 
a project, there are ways the Federal Government can lower 
borrowing costs. These include capitalizing State 
infrastructure banks, increasing opportunities for bonding, and 
Federal loan programs, such as those made possible by the 
Transportation Infrastructure Finance and Innovation Act 
(``TIFIA'') program. To date, all of these have been initiated 
at the State or local level.
    I am interested in hearing from our witnesses today on how 
changing the structure of the Federal program can encourage 
more transportation investment at the State and local level.
    I look forward to the testimony.

    Senator Boxer. Senator, you know, as we often say, this is 
one area where we really see eye to eye, and that bodes well 
for the country, and I think we can all unite around this 
notion that a great country needs a great infrastructure.
    Now, Mr. Under Secretary, again, I appreciate your 
testimony very much, it is a can-do type of testimony; it is 
not we can't do this and we mustn't do that. So I really 
appreciate your laying out the programs that exist today that 
could leverage the funds. As Senator Inhofe said, that is 
crucial here.
    Now, here we have a confluence of interesting issues. We 
have Los Angeles County, whose people voted to tax themselves, 
and it is a 30-year program, 30-year program of $40 billion. So 
that is done, and those funds will come in. And as the mayor 
will so eloquently testify, these projects are needed much 
sooner than 30 years from now. So how do we work together, 
given that that source of funding is real? As we say, we can 
take it to the bank, to the infrastructure bank because it is 
real.
    Then the other issues are, as Senator Voinovich said, we 
are at a time now where the costs have gone way down due to the 
recession and for bad reasons. You know, the construction 
industry is hurting, so the costs are coming in--how much did 
you say, Senator Voinovich, how much lower are some of the 
costs coming in?
    Senator Voinovich. Ten to 12 percent.
    Senator Boxer. Ten to 12 percent. So it would be foolish 
that we have this opportunity now to save these funds, that we 
just didn't speed up this whole idea.
    And by the way Los Angeles is now what we are talking 
about, but I think this is an issue for Oklahoma and everywhere 
else. Where the locals or the private sector are willing to 
come up to the plate we ought to have a way to accelerate it; 
Federal Government gets paid back.
    I wanted to just probe on the current programs, because you 
said that TIFIA will lend a third of the cost of the project 
and that the problem with it is that it is not funded at a high 
enough level. What is the funding of TIFIA?
    Mr. Kienitz. I believe the annual appropriation has been in 
the $100 million to $200 million range. Now, what that covers 
is the subsidy cost, as we call it, so you figure you can offer 
assistance that is 8, 10, 12 times that amount.
    Senator Boxer. Good. In other words, it scores at $100 
million to $200 million, but in essence it is much more than 
that.
    Mr. Kienitz. A billion, billion and a half, depending on 
the quality of the repayments that are pledged.
    Senator Boxer. OK. So that is a program that essentially 
allows for a billion to a billion and a half loans for specific 
projects, which, by the way, I think is fine. I mean, they know 
what they want to do, and they have specific projects. We are 
not going to give money for some non-specific project.
    Mr. Kienitz. Right.
    Senator Boxer. I don't think I could go home and support 
that. So that is a program where--let me just ask you this. If 
we were to simply just--I don't know what it is authorized at.
    Do you know, Bettina, what it is authorized at, TIFIA?
    If we were able to authorize it at a higher level and fund 
it at a higher level, theoretically, would we be able to take 
care of Los Angeles? Let's just say we are able to fund it way 
up.
    Mr. Kienitz. Right. I would say, as a matter of theory, 
yes. What has happened is that the tightening of credit markets 
in the last 2 years has led to a huge spike in demand for TIFIA 
resources. TIFIA used to be a program where they would provide 
$100 million or $200 million a year in authority, and we were 
lucky if, any given year, that was actually used, and there 
were lots of carryover funds. Now that the municipal bond 
market and other private markets are tight, we have recently 
sent out a solicitation for possible interest for TIFIA loans 
in 2010, and a huge number of people have responded to that.
    Senator Boxer. Right. But that is why I am saying if we 
were able to dramatically increases the funding----
    Mr. Kienitz. Yes.
    Senator Boxer [continuing]. Given the situation, or to say 
if a local government, a State government came to us with a 
plan for private sector involvement, local government 
involvement, State government involvement--I mean, I am a 
person who doesn't like to have to write new laws if we have 
laws on the books. So I am just pressing you. Assuming that we 
were able to fund TIFIA at an appropriate level, which we will 
leave what that is later, would that law give Los Angeles what 
it needed, assuming we could make these loans a third of the 
cost of the project? Would that go a long way to solving the 
problem?
    Mr. Kienitz. The answer is yes, with some asterisks. The 
asterisks are it is only legally allowable up to a third of the 
cost, so if they have a $3 billion project, we could loan them 
$1 billion; where the other two billion comes from is an issue. 
The second is that the process by which you determine the 
interest rate on a TIFIA loan is a well described process. I 
don't know that it could get the number down to low enough for 
what you are looking at or not, but there are a lot of market 
conditions that go into that.
    Senator Boxer. Is the loan rate a market rate from the 
Federal Government, or is it lower than a market?
    Mr. Kienitz. It is based on a Treasury rate, so it is 
generally almost always much better than you can get in the 
private market.
    Senator Boxer. Right now the Treasury coupon is what?
    Mr. Kienitz. I don't know.
    Senator Boxer. It is low.
    Mr. Kienitz. Low. Two. Under two, I think.
    Senator Boxer. Which is another interesting issue.
    Well, I am going to come back for a second round and ask 
you about the TIGER grant program that you mentioned and the 
National Infrastructure Fund, but my time has run out, so I 
will turn to Senator Inhofe.
    Senator Inhofe. Thank you, Madam Chairman.
    Again, I apologize for not being here when you gave your 
statement; however, we have read it.
    Well, we know the problem. We talked about the fact there 
is about $600 billion out there, and it is growing every day in 
terms of just maintenance backlog that we have, and we have to 
do something about it. Some things are not much fun to talk 
about, but in looking at some of the options, some have 
proposed changing the formula, maybe lowering the Federal--did 
you talk about that in your opening statement? Is that 
something you want to talk about, changing the formula, in 
order to accomplish more of these projects?
    Mr. Kienitz. This is the match rate for Federal----
    Senator Inhofe. Yes.
    Mr. Kienitz. It is not something I have certainly 
discussed. I know it has been much discussed over many years 
here. Many States already provide much more local funding than 
the requirement is, so California and New York, Illinois, big 
States like that, are already probably doing their highway 
programs at 50/50. An individual project might legally be at 
80/20, but they have way more State funds that they are using.
    The issue there becomes the States without a lot of their 
own resources, and I know just from my time here that Montana, 
Wyoming, Idaho, South Dakota, States like that are the ones 
that tend to particularly resist that because they have much 
less in the way of local revenue to make that higher match.
    Senator Inhofe. Yes. Well, you know, we talk--when the 
Senator from Minnesota is here, she talks about the horrible 
thing that happened, the bridge up there.
    I would suggest, Madam Chairman, that--and I am reading now 
from 2004--a football size piece of concrete fell from a bridge 
and crashed through Yvonne Osborne's windshield. This was in 
Oklahoma City, I-35. A mother of two, and she died. I mean, 
this is not just a matter of convenience; it is a matter of 
life and death. And I am not very proud that we have a record, 
from indications that I have seen, in my State of Oklahoma we 
are dead last in the condition of our bridges, and yet we have 
I think one of the most quality secretaries of transportation 
of any of the States. We talk on almost a daily basis over 
doing something about this.
    I understand that--and I don't know much about it, but very 
broadly speaking I heard Secretary LaHood, who is one of my 
best friends I have served with in the House, talked about that 
you plan to release the principals in the next 90 days. Now, I 
don't know what we are talking about here. Can you enlighten me 
as to what principals will be released in the next 90 days?
    Mr. Kienitz. I don't think I can. That is something that we 
are actively discussing internally to try to make sure we are 
on the timetable that you all are on, to the degree that we can 
be. So, unfortunately I don't really have anything to offer.
    Senator Inhofe. These principals, are these principals 
going to relate to funding mechanisms like the subject of this 
hearing?
    Mr. Kienitz. I am not sure that has been finally 
determined.
    Senator Inhofe. OK, it has been 16 years since the Federal 
aid program authorized the use of State infrastructure banks, 
which enables the States to use Federal funds to capitalize 
revolving loan funds and so forth. Now, since then only a 
handful of States have taken advantage of this program, and I 
really wonder why. Why do you think that is the case, that so 
few have--the program hasn't caught on. Why not?
    Mr. Kienitz. I actually have some experience with this 
program when I worked in State government in Pennsylvania. 
Pennsylvania was one of the States that did establish this 
program. During my time there, usage of that program was based 
entirely on demand, and what we offered essentially was advance 
payments to local governments or counties or other communities 
who had transportation projects they wanted to do quickly; they 
had revenue sources coming in slowly over time, so they would 
agree to get the money up front and then take their revenue and 
turn it back over to the State infrastructure bank to 
eventually repay the amount.
    The real issue was that the amount of ongoing funding 
available to those project sponsors was so constrained it was a 
very difficult thing for them to pledge future year money, 
because they needed that future year money to take care of 
urgent needs ongoing or underway. So our program was a few tens 
of millions of dollars. In the course of a year we never turned 
anyone away, but when you have to pay it back----
    Senator Inhofe. That is my point. This has been available 
to everyone, and you haven't turned them away. I think you have 
answered it very well.
    You deal probably more than we do with a lot of the private 
sector initiatives. We hear a lot of the problems with it; we 
hear a lot of the misunderstandings by people, particularly in 
Texas--that is where I zero in on--that don't really understand 
it, and they don't think it will work. Of all the different 
programs that you have heard, are there any that you have 
established in your mind that are better types of partnership 
programs than any other that you could share with us?
    Mr. Kienitz. Well, I think what has happened is actually 
there has been an evolution over time. When this started out I 
think the State of Indiana was probably the first one that did 
one of these arrangements with the private sector, and since 
then the deals that have been proposed in Pennsylvania--we 
proposed a lease of the Pennsylvania Turnpike, which I worked 
on extensively--Texas, other States, the contract between the 
government agency and the private sector has grown a little bit 
more. Some lessons have been learned. For example some of the 
original agreements included what is called a non-compete 
clause. The government would be prohibited contractually from 
going out and building a roadway within a certain distance of 
the new privately leased roadway, and I think in subsequent 
iterations people have said it is not appropriate to tie the 
hands of government about what is or isn't in the public 
interest; government has a responsibility to undertake things 
in the public interest, and if that means building another 
road, then so be it.
    So there have been some other things like that that were 
controversial in the early proposals that have been less so 
recently. I would say the underlying issue of ``are you turning 
over what appears to be a public asset to private management'' 
is still controversial. We were able to be very comfortable 
with it in the administration side in Pennsylvania; our 
legislature was not comfortable with it and they did not 
approve that lease. But the amount of money that deal could 
have yielded, for example, was really quite large and could 
have done a huge amount of road repair, bridge repair, and 
transit investment in the State.
    Senator Inhofe. All right, thank you very much.
    Sorry about that.
    Senator Boxer. No, that is fine, Senator.
    Senator Lautenberg.
    Senator Lautenberg. Mr. Kienitz, thank you for your 
testimony. I want to get squarely to a question that we are 
looking for answers on and that is the President's budget 
includes $200 million for the mass transit tunnel in New 
Jersey. The President also prioritized the project for a full 
funding grant agreement. Does this budget signify that the 
President and the Administration are fully committed to 
building a new rail tunnel under the Hudson River?
    Mr. Kienitz. As you know, Senator, from extensive 
conversations between yourself and Secretary LaHood, we have 
been, since many months ago, and continue to be committed to 
keeping that project moving forward as fast as possible. The 
amount of resources that were committed earlier in the year and 
in the President's budget are designed precisely to make sure 
that it stays on track, because as you know the usage of that 
facility, when eventually completed, is going to be so terribly 
high it really competes very well under any criteria.
    The constraint we are under, is that the way that the New 
Starts program works is you don't put 100 percent funding, or 
even 100 percent of the Federal share up front. We try to enter 
into a plan whereby slowly, over time, the Federal share of the 
project gets paid, but it is year by year, and that can be 
quite a drawn out process.
    We have had many project sponsors in transit who get their 
full agreement to go out to private banks and borrow to cash-
flow the project because the Federal funds come in so slowly, 
and that is precisely because there are $20 billion and people 
wanting to transit New Start funds for every $2 billion of 
funds we have. So that leads of a very long line out the door 
and a very slow payout. Hopefully, that is something that can 
be addressed in the reauthorization process.
    Senator Lautenberg. Well, I am sure you are fully aware of 
the fact that somewhere over 60 percent of the funding is 
already committed for by the State and the Port Authority, so 
we are putting our dollars where the pick and shovel should be. 
So reassurance that we can continue, get what the Federal 
Government is committed to, and the full funding agreement is 
critical in this moment. There are lots of people armed with 
picks and shovels and spirit and ready to go, and we have to 
give them the [unclear] to say, OK, here you go.
    Without funding for the transportation needs we provided in 
the Recovery Act, unemployment rates would even be higher. As 
the Senate debates the series of jobs bills, what might be the 
significant contribution that additional investment in 
transportation infrastructure beyond just extending existing 
programs, what influence might that have on the job market?
    Mr. Kienitz. A very positive one, we hope. We have a lot of 
experience in the Recovery Act funding of getting that funding 
out the door really as quickly as we could, more quickly than 
we did in the underlying programs, and creating jobs. I think 
inevitably transportation investment, if you are doing big 
projects, occurs over a couple of construction seasons, and 
that is what we are seeing with the Recovery Act.
    That said, this recovery is going to be a long one--that is 
what all the experts say--so having something that lasts for 
two construction seasons is probably what the country needs. 
The Administration I know is in dialogue with the House and 
Senate leadership about potential future jobs bills and has 
certainly been a supporter of additional infrastructure 
funding----
    Senator Lautenberg. It is hard to imagine a more ready 
environment than investments in transportation for jobs. I want 
to ask you this. Funding for high speed rail in the Recovery 
Act, good start, but our investment in high speed rail still 
lags way behind other countries. In 2009 China invested $80 
billion in high speed rail, and we have seen huge investments 
by Germany and other countries across the world in high speed 
rail. Last summer China announced it plans to build 42 high 
speed rail lines by 2012.
    Now, if we are going to compete with countries like China 
in the international marketplace, shouldn't the development of 
high speed rail receive dedicated Federal funding just like our 
interstate highway system does?
    Mr. Kienitz. Obviously, as you know, Senator, this 
Administration is very interested in high speed rail, and the 
President has made it a personal priority of his. That 
unfortunately has not led us to solve the underlying resource 
limitation for high speed rail any more than it has for the 
highway program or the transit program. That is unfortunately a 
problem that spreads across the breadth of all transportation 
investments.
    So I think while we would agree entirely with your stated 
goal, it is going to have to be a group effort to find the 
politically difficult but necessary method of closing the gap 
so that all of the programs can be on a stable----
    Senator Lautenberg. Well, I think that this hearing 
suggests ways of getting things done, including not only 
regional organizations, but the private sector as well.
    Thanks very much, Madam Chairman.
    Mr. Kienitz. Thank you, sir.
    Senator Boxer. Thank you, Senator.
    Senator Voinovich.
    Senator Voinovich. The Administration originally took the 
position that they did not want to see the reauthorization of 
the Surface Transportation Act done this year and were very 
strong to say we should extend it for 18 months. I hope it is 
clear to the Administration that we indeed are going to get the 
job done now, this year.
    And I think it is real important that you folks get to the 
table. We are starting out with looking at the work that Jim 
Oberstar has done to try to figure out where there is 
agreement, and then from there we are going to get into the 
nitty-gritty on things. But we are going to really need your 
participation; you have to be at the table.
    I want to underscore--and I had a chance to speak to the 
President about it--if you really want to do something about 
making an impact in this country in terms of jobs, the 
reauthorization of this bill, robustly funded, is going to have 
an enormous impact on jobs in this country. And as I mentioned 
in my opening statement it give us this kind of 5-year 
continuity or confidence that something is going to happen.
    One of the big challenges of course is this issue of 
financing, and you touched on some of the tools that are 
available in Ohio. We were the first State to use the State 
infrastructure bank to get Port Washington done down in the 
Cincinnati area, but I really would like, for my benefit and 
for the members of this Committee, a very good memorandum on 
the programs that are currently available, how they work, some 
detail.
    Now, you have scratched the surface; you couldn't go into 
all the detail, but I particularly would be interested in that. 
I may even come over and talk to some of your folks. Then you 
mentioned in your words that there were other tools that you 
would like to see, and I would be very interested in those 
other tools.
    Senator Inhofe mentioned some other things. There is 
tolling that is going on. We had some people in from Texas that 
are using pension funds, and they are borrowing from the 
pension funds, and they do a toll, and then they repay the 
money to the pension. There is a whole variety of things that 
are out there that we should be looking at.
    But I think that you have to recognize that all of these 
things we are talking about are not going to be adequate and 
that we do definitely need to have an increase in the gas tax. 
And the fact of the matter is just about every group that I 
have talked to in the last 8 months have basically said we will 
support an increase in the gas tax.
    Now, there is some concern about when that would happen, 
but I would suggest that you go back--in fact, I will send you 
a memorandum on it--and look at what Drew Lewis did in 1982. At 
that time I was mayor of Cleveland and going through the chairs 
with the National League of Cities, and they really worked hard 
to get all of the details worked out. They looked at the 
various financing and then President Reagan supported a 5 cent 
increase in that gas tax. I have to tell you something. If they 
hadn't done that and come up with an emergency jobs bill, we 
would have had a very, very bad situation in this country.
    So I think we have to look at all of this, but I think that 
you and others have to recognize that all these other things 
that we have, we are going to have to come up with the money. 
That is a reality, and the sooner I think it sets in the 
better. And I think the other thing I wanted to mention to you 
is that you have a chance here to do something bipartisan, and 
I have to tell you something.
    Think about this a little bit. We may not have anything 
else we can do this year on a bipartisan basis; the health 
thing is blown. God only knows where that is going. We have the 
climate change; I am trying to work on that. That may blow up. 
But this is something that we could do all together.
    The other thing that I think all of us need is to find out 
about this infrastructure bank you are talking about. What part 
of the infrastructure bank anticipates things like the mayor 
might want to do in terms of loans and how does that all work, 
or is it just across the board in terms of loans to a bunch of 
things over in the Department of Energy and so on? But somebody 
has to look at the whole big picture here and see what has to 
be done.
    Now, Senator Lautenberg talked about high speed rail. Well, 
we got $400 million. There is a big controversy in Ohio right 
now about whether we can use that $400 million. Can the State 
really use that money? Couldn't we use that money for something 
else that would make more of a difference? What are our 
priorities? Is it more important to deal with what the mayor 
wants and our cities, and come up with a better transportation 
system?
    Is it better for us to build that tunnel under the Hudson 
River than it is to, say, take on high speed rail, which many 
of us know is going to be a ton of money down the road? There 
has to be some prioritization here. You can't do it all; there 
are only so many assets.
    So I really would urge you to start to think about some of 
these big picture things and get back to this Committee about 
what your thoughts are and how this can be done. It is really 
important. It is very important to the future of our country 
right now. We are in a very, very fragile position. If we can 
get started with some of these things, people have confidence 
in the future, we have a chance of maybe turning this thing 
around and going in another direction.
    And I am sorry I didn't ask you questions, but I really 
would like you to respond to some of the things that I have 
talked about.
    Mr. Kienitz. Yes, certainly, Senator. I take your point 
entirely about the long-term value to the country and to all of 
the needs that we have discussed here today of getting a long-
term bill, and I saw with interest your statement that you 
issued after the passage of the recent jobs bill here in the 
Senate on cloture, and also Senator Boxer has been very strong 
in her statements about trying to proceed down a similar path 
this year. We are very aware of that, as is the Secretary, and 
we hope to find a way to engage with you that meets your 
objectives.
    The Secretary has been fairly clear that during a period of 
deep recession it was his view that it was not the right time 
to raise the gas tax, but obviously we will have to work with 
everyone here going forward to see what the choices are.
    Senator Boxer. Well, let me just say Senator Voinovich has 
been an extraordinary partner as we--because he was not 
thrilled with the long-term extension; he wanted us to write 
the long bill this year. I mean earlier, way earlier. And we 
are going to do it this year. We are going to get it done 
before the end of the year.
    And what we are going to do--Senator Inhofe is very strong 
on this as well--is we are going to look at all the funding 
recommendations. It is up to Senator Baucus and Senator Carper, 
who serves on Finance; they are going to find the way to do the 
long-term funding. We are going to look at it all and forward 
every good idea. But we are going to write a bill here, because 
Senator Voinovich is right; it is going to lift people's 
spirits up.
    In my State--and I am sure it is true in other States--the 
construction industry is flat on its back because of the 
housing crisis, which has hit most of our States if not all. 
And construction jobs--these are important good paying jobs; 
they can't be exported. When you build a road in Ohio or 
Delaware or California, when you run a transportation system, 
it is in America. So we have to get this going.
    What I am going to do now, instead of asking you more 
questions, because we want to get to the mayor--and I know 
Senator Carper said he has questions for the next panel; he 
will be back--is just say I would like to get your word. You 
have already said yes to this, and Secretary LaHood is one of 
my favorite ever transportation secretaries. I just want to get 
it on the record that you will work with us----
    And Mayor, I think this is important for you to hear.
    I want to get it on the record that you will work with us 
and with the Secretary and with our staff to examine all the 
laws that now you have IDed, which can be potentially helpful 
to Los Angeles and other places where they have made a 
commitment either through the ballot box or through the private 
sector. And from your testimony it looks like it is TIFIA, it 
is the National Infrastructure Fund, and it is the TIGER grant 
program. Can they make loans through TIGER?
    Mr. Kienitz. Yes. One of the great features of TIGER is 
that it can do either really in any amount.
    Senator Boxer. Good.
    Mr. Kienitz. So even if we are unsuccessful in increasing 
appropriations for the TIFIA program, for example, the TIGER 
grants recently announced actually were a $50 million increase 
in TIFIA because those projects ended up being high priority. 
So TIFIA immediately grew outside of the normal budget process. 
So that is one other window.
    Senator Boxer. OK. So I have your word that you will work 
with us to help Los Angeles? Because I think if we could get a 
project that is ready to go and build the confidence there and 
get it started, I think it would send a really great signal. So 
you will work with us on this?
    Mr. Kienitz. Absolutely. You have my commitment and our 
commitment.
    Senator Boxer. Thank you. Thank you, Under Secretary. We 
very much appreciate your testimony.
    Mr. Kienitz. Thank you. My pleasure.
    Senator Boxer. And we are pleased now to call up our second 
panel, Hon. Antonio Villaraigosa, Mayor, city of Los Angeles; 
Lowell Clary, Managing Partner, Clary Consulting, LLC; Mr. Max 
Inman, Senior Advisor for Project Finance and Program 
Management Initiatives, Mercator Advisors; and Ms. JayEtta 
Hecker, Director of Transportation Advocacy, Bipartisan Policy 
Center.
    And we are going to begin with the mayor, and we are going 
to go right down the row. And Mayor, we welcome you here. You 
have been an ardent advocate for your city and for the same 
constituents I represent, and I really appreciate it. And I am 
really happy you are here today because I think your message to 
us is a good message, so please proceed.

 STATEMENT OF HON. ANTONIO R. VILLARAIGOSA, MAYOR, CITY OF LOS 
                      ANGELES, CALIFORNIA

    Mr. Villaraigosa. Thank you, Madam Chair, for that 
introduction. But let me say how fortunate we are in the city 
and the county of Los Angeles and the State of California to 
have you as an advocate not just on the issue of 
transportation, the environment, the many jobs related issues 
which are so important in these times, and I want to thank you 
for inviting me here today.
    Senator Voinovich, thank you for your remarks. Maybe it is 
because you are a former mayor, but clearly you know and 
understand just how important this issue of infrastructure, 
particularly in our cities and our metropolitan areas, is, not 
just to those areas, but to the Nation. Your comments regarding 
the need for public-private partnerships and innovative 
financing mechanisms are music to my ears, so I want to thank 
you for your comments.
    And Senator Carper, it is good to see you as well. I know 
that Senator Inhofe and Senator Lautenberg had to go back to 
committee. As a former member of the California legislature and 
speaker of the assembly, I can tell you I understand having to 
be in two places at the same time.
    I want to thank you for the opportunity to address you 
today. Your leadership, support, and interest in transportation 
infrastructure are crucial to the future of the city. In 
hearing each of you speak, all of you talked about this 
important issue of infrastructure, what it means for the 
economic vitality of America, its future, and I can tell you 
that for me those words couldn't be any truer. Your focus on 
leveraging Federal investment comes at just the right time.
    As American cities continue to grow, we are struggling with 
traffic congestion and air pollution. It makes life harder and 
more expensive for people. Congestion burdens our economy, 
increases the cost of goods movement, and affects the mental 
and physical health of our communities. So that you understand, 
we are the congestion capital of the United States of America, 
and we move more goods than any area in the United States of 
America. We move 44 percent of all the seaborne goods that 
enter the United States through our ports.
    When you look at those ports, they generate jobs in every 
single congressional district in the United States of America. 
At the same time we are facing a staggering unemployment rate. 
In Los Angeles the unemployment rate is at 14 percent, as high 
as 35 percent in the construction trades. We believe there is a 
way to address both issues head-on through an innovative, 
Federal-local partnership.
    I already mentioned that we are famous for being the car 
capital of the world. This also makes us the most congested 
city, with some of the worst air quality in the country. But we 
are doing something about that: we are investing in car pool 
lanes, in congestion pricing, synchronizing our traffic 
signals, and most importantly investing in public 
transportation. Our current transit program includes 
construction of 12 major new lines over the next 30 years. We 
will double the rail system in Los Angeles County. And although 
I am the mayor of the city, I come here representing the entire 
county, 10.5 million people.
    These projects include an extension of our subway, the 
subway to the sea that some have referred to; light rail lines 
in the Crenshaw District, the San Gabriel Valley, and to Los 
Angeles International Airport, the No. 1 destination airport 
and the fifth busiest airport in the world. Our overall goal is 
to connect the communities where we live with the major job 
centers in the region. As an example, this subway to the sea 
would connect the two largest job centers in the State of 
California, downtown and the west side. We need to get people 
where they need to go sustainably and efficiently.
    Building these 12 projects will create 166,000 high quality 
construction jobs in a 10-year period; will create at least 
2800 permanent operating and maintenance jobs. I want to point 
out that these are career jobs, jobs that can support a family. 
These projects also will take 570,000 pounds of pollutants out 
of the air each year, make our communities more sustainable and 
livable, and secure our energy future by reducing our 
dependence on foreign oil.
    Now, we can pursue such an aggressive and far reaching 
transit program because of Measure R. Measure R was approved 
overwhelmingly by 68 percent of the voters in Los Angeles 
County in November 2008. We did that in the midst of an 
economic recession. It is a 30-year half-cent transportation 
sales tax. It is also the third transportation sales tax 
approved by our voters. Measure R alone will generate $40 
billion in new revenue and together with our other three local 
sales taxes generate almost $2 billion a year for the region, 
money that we are investing in transportation infrastructure 
and the future of our region.
    But the reason why we are here is we have a unique 
opportunity to build our transit projects sooner; create the 
jobs and capture the environmental benefits in the near future. 
We want to build our transit projects in 10 years instead of 
30. We call our accelerated plan the 30/10 Initiative. It is 
100 percent consistent with the Consensus Transit program 
adopted locally and approved by our voters. It would accelerate 
our transit program; will save billions of dollars, reducing 
the cost from $18.3 billion to $14.7 billion. Now, we also 
believe that we can cut costs even further by taking advantage 
of market conditions, public-private partnerships for design 
and construction.
    Now, right now we are working to identify a funding 
strategy to build these projects sooner. We think we can meet 
most of our funding needs by financing the project costs up 
front using tax exempt bonds and by tapping, as was mentioned a 
few minutes ago, Federal programs such as Build America bonds 
and TIFIA. These two programs as well as the potential in 
National Infrastructure Bank are all very good starting 
frameworks.
    We are looking to expand our partnership with the Federal 
Government, a more aggressive Federal program of interest rate 
subsidies, loan guarantees, direct loans, and/or innovative 
repayment terms. This would help us build our program in 10 
years and jump start our region's economic recovery.
    I mentioned that I used to be speaker, and the reason why 
we came up with this issue is because when I was speaker of the 
California State Assembly localities would always come to the 
legislature and ask us for money, and I would always ask them, 
what are you doing to invest in your infrastructure? It is nice 
to ask us for money, but we don't have unlimited pots of money.
    Well, the same is true in the Federal Government. At a time 
when the Senate just passed--and the House has approved--the 
$15 billion jobs bill, we all know while that was a good 
starting point it is a long way from what we need to do right 
now to get people back to work to make investments in our 
infrastructure program that is so important.
    This is not just L.A. coming with an empty hand; this is 
Los Angeles coming with money in hand, approximately $40 
billion, and an offer for a Federal partnership with the other 
hand. And importantly--and I was very heartened to see all of 
the Senators make comments--importantly, it is a template for 
what we ought to be doing across the country.
    I am Vice President of the U.S. Conference of Mayors, and 
one of the things I am arguing with my colleagues, or 
advocating for, I am saying, look, at a time of very limited 
resources at the Federal level, with the deficit and the debt 
as high as it is today, we need to think about innovative 
public-private partnerships and opportunities for us to partner 
to leverage what localities are doing. It will incentivize 
localities across the country to pass their own bonds and/or 
funding efforts in the way that New Jersey has done, where they 
are spending, I think Senator Lautenberg said, about 60 percent 
of the money for that tunnel locally, and it will allow all of 
us to accelerate the generation of jobs and the infrastructure 
that we need.
    So as we get closer to finalizing our funding strategy we 
look forward to working with you to forge a new Federal-local 
partnership that will create quality jobs, increase 
sustainability, and build livable communities.
    I want to thank you again, Madam Chair, for allowing me to 
be here today. I took the red eye as I usually do when I come 
here. I will be leaving in a couple hours back to Los Angeles. 
And if you saw both the Washington Post article, the L.A. Times 
opinion article in the opinion section, and the Wall Street 
Journal article, everybody is talking about what we are trying 
to do here. It is a template for what we need to do in times 
when there is a limited amount of Federal funds, an opportunity 
for us to partner in an innovative way.
    Thank you very much.
    [The prepared statement of Mr. Villaraigosa follows:]
    
    
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    Senator Boxer. Thank you so much, Mayor.
    Our next speaker we are going to call on is Max Inman, 
Senior Advisor for Project Finance and Program Management 
Initiatives at Mercator Advisors.
    Could you tell us a little bit about the company and where 
it is located?

  STATEMENT OF MAX INMAN, SENIOR ADVISOR, PROJECT FINANCE AND 
       PROGRAM MANAGEMENT INITIATIVES, MERCATOR ADVISORS

    Mr. Inman. Yes. Mercator Advisors is headquartered in 
Philadelphia. It is a very small firm that provides 
transportation finance consulting, primarily with public 
agencies, State and local governments primarily, and also with 
the U.S. Department of Transportation.
    Prior to joining Mercator, I was the Chief of the Federal 
Aid Financial Management Division at the Federal Highway 
Administration; I spent 33 years at Federal Highway. And I 
would like to thank the Chairman and members of the Committee 
for the opportunity to testify.
    In the mid-1990s, FHWA, under the leadership of Deputy 
Administrator Jane Garvey, began to explore innovative finance 
techniques that would help State and local governments advance 
transportation projects. With the assistance of this Committee 
many of these techniques were included and authorized in 
legislation, helping to accelerate projects through more 
efficient use of Federal funds. At FHWA during that time, I saw 
firsthand the value of Federal, State, and local agencies, 
along with Congress, working together to find solutions to 
financing transportation projects.
    Many project sponsors have taken advantage of initiatives 
such as the State infrastructure banks, the GARVEE bonds, the 
TIFIA loans, the enhanced advance construction procedures and 
more flexible State matching share provisions. We have made 
great progress in the last decade by providing a much wider 
array of financial tools than the standard 80 percent grant 
program that was the mainstay of the Federal highway program 
until just a few years ago. But we need to continue developing 
other financial techniques and looking for ways to improve the 
current techniques, so I would like to direct my comments this 
morning to some of the existing Federal transportation 
programs.
    First, the State infrastructure banks. Since their 
inception in 1995 only eight States have exceeded $100 million 
in executed loan agreements. However, these States have shown 
how successful the banks can be, especially in providing 
assistance to local governments, often resulting in local 
projects being completed well ahead of the projected date and 
at overall lower cost compared to using a pay as you go 
strategy. I think Congress should provide incentive grants to 
encourage States to create or expand State infrastructure banks 
and also provide States with more flexibility in using the bank 
funds for any eligible transportation project.
    The Grant Anticipation Revenue Vehicles, known as GARVEE 
bonds, have been very successful in allowing States to advance 
large projects without seriously impacting their current 
program of projects. Allowing States to use Federal funds to 
pay debt service payments conforms to the standard business 
practice of paying for capital improvements over the life of 
the asset.
    It is important, though, to recognize that GARVEE bonds 
depend on the prospect of a long-term and reliable source of 
Federal funds. Recurring short-term authorizations or temporary 
disruptions to Federal payments because of shortages in the 
Highway Trust Fund could raise the risk of a default on a bond 
payment and therefore may impact the State's ability to issue 
GARVEE bonds on favorable returns.
    The TIFIA program that was authorized in 1998 provides 
credit assistance to major transportation projects. The 
flexibility of the program that allows subordinate claims on 
pledged revenues and loan payments to be deferred until 5 years 
after the project is completed is tailor made for long-term 
transportation projects. Unfortunately, the program, as you 
have heard, is now unable to meet the demand for credit 
assistance due to program funding constraints.
    Because of its ability to help advance projects of national 
or regional significance, as well as its favorable budget 
scoring, the TIFIA program is a prime example for increased 
funding to help leverage Federal resources. I believe the 
program would benefit from some technical changes, such as 
increasing the loan size to 50 percent of the project cost or 
perhaps eliminating the so-called springing lien provision.
    Just to mention a few other Federal policies that might 
contribute to assisting in this effort, I would like to suggest 
perhaps a reduction in the number of Federal programs, 
currently over 100; increase the flexibility of States to use 
those programs for their highest priorities; consider providing 
States with greater flexibility and matching funds on a program 
basis, as opposed to a project level basis; reducing streamline 
that Federal restrictions on tolling interstate highways; and 
allow States to privatize interstate highway rest areas.
    In conclusion, the legislation initiated by this Committee 
has significantly enhanced the financing options available to 
State and local governments, allowing for the acceleration of 
projects and more opportunities for participation by the 
private sector. This results in reduced construction costs and 
expedited benefits to the users of the transportation systems. 
But the effectiveness of any of these finance techniques 
depends on the establishment of a reliable and substantial 
source of funding. I am confident that the Committee will meet 
this challenge.
    Thank you for the opportunity to testify.
    [The prepared statement of Mr. Inman follows:]
    
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    Senator Boxer. Thank you for those good ideas.
    Now we are going to hear from Lowell Clary, Managing 
Partner, Clary Consulting.
    And if you would tell us about that firm, where it is, and 
what you do.

     STATEMENT OF LOWELL R. CLARY, MANAGING PARTNER, CLARY 
                        CONSULTING, LLC

    Mr. Clary. Thank you, Madam Chair.
    I am Lowell Clary. Clary Consulting is an advisory firm 
based in Tallahassee, Florida, and I am also a founding member 
of P3 Development Company, which is based in Tallahassee, 
Miami, and Denver, around the country.
    I have been I the private sector about 2 years, and since 
that point in time we have been developing projects and 
advising on projects. I bring that experience, as well as prior 
to that I was chief financial officer for Florida Department of 
Transportation and developed many of these projects. I am going 
to briefly talk about some specific projects that were 
developed in Florida that have used many of these tools to 
accelerate projects.
    The Miami Intermodal Center is a major intermodal center, 
about $1.5 billion in Miami; involves all modes of 
transportation. It was a major partnership among multiple 
Federal agencies, State and local agencies; at times a bit like 
herding cats to get it done. It used the first TIFIA loan that 
was ever implemented by USDOT and also has a second TIFIA loan 
in it as well as multiple private, State, local, and Federal 
funding sources.
    The second project is a design-build-finance. I-75 in 
southwest Florida has been highly congested. The Florida DOT 
had many projects scheduled over about a 10-year period, with 
construction going longer than that. They moved an ability to 
advance those projects up with the private sector providing the 
funding up front, and then the Department is paying them back 
over time in a term called design-build-finance. It advanced 
that project by about 6 years in total. Florida DOT has put out 
a number of projects totaling over $2 billion with the use of 
this tool that has advanced a number of projects forward.
    95 Express is a project in Miami, and that was copied after 
a State Road 91 in California as a HOT lane. It basically 
created a new lane in each direction out of the existing 
footprint of I-95 in Miami-Dade County, and they added that to 
the HOV lane and have created two high occupancy toll lanes. It 
was hotly debated for several years. The Urban Partnership 
Program with Florida DOT brought that forward, and it is now in 
operation and getting rave reviews.
    Availability payment structure was used on the Port of 
Miami Tunnel and I-595. The Port of Miami Tunnel was about a $1 
billion project; I-595 is about $1.3 billion. And availability 
payment structure essentially is where the private sector 
provides the funding up front and the government pays it over 
time from multiple funding sources. Both of those projects have 
toll revenues in them. Excuse me, in the case of the Port 
Tunnel, have user fees; and they also have State and Federal 
and local funds in those. The Port Tunnel moved from probably 
never happening to a real project through this concept. I-595 
moved forward and advanced about 15 to 20 years in that.
    Sunrail is a commuter rail project in central Florida. And 
while, Chairman, I know this is not a purview of your 
Committee, this project will eliminate the need for a lane in 
each direction on I-4, which certainly is a reduction in the 
need to fund highway improvements and comes in at a cost less 
than that and is moving forward.
    Some programs that may be under consideration, Florida 
created the Strategic Intermodal System, which brings all modes 
together in a strategic fashion and focused funding on those 
collectively, and I would encourage you to take a look at that 
as you are developing your bill.
    In addition, Florida has high speed rail essentially ready 
to go. It is the only system in the country that is a closed 
system, which would allow the system to operate with true high 
speed rail. The initial phase is a fairly modest investment and 
would allow a lot of testing and ability to move this forward 
at a modest investment to test out high speed rail without 
expending significant State and Federal dollars into it.
    Florida has tolling in the State. About $1.2 billion a year 
is generated; about 10.5 cents equivalent of State gas tax. And 
they are moving forward with 100 percent free flow traffic on 
those. They have 70 percent penetration of electronic tolling 
today and will eliminate cash pay toll booths in a few years.
    State infrastructure bank in Florida has been very 
successful. Twenty-nine projects under the Federal SIB, about 
$1 billion total with $300 million in loans; 36 projects from a 
State-created SIB, about $7.2 billion in total projects with 
$761 million in loans. That State SIB was the first SIB in the 
country that was bonded with the repayment stream from the loan 
portfolio of the SIB loan supporting that bond and allowed it 
to grow in its overall structure and allow a lot more loans. It 
also revolves loans back into it, which keeps it active.
    Florida also has an efficient environmental process which 
allows projects to move forward more timely.
    Chairman, in some recommendations, I would encourage 
flexibility in both the funding structure and also in the 
ability for States and local governments to raise fees in 
multiple methods, similar to sales tax, as well as tolling. I 
do believe that public-private partnerships can be a tool for 
the future, and I would encourage that that be not limited in 
Federal law, that it can be allowed to move forward. I also 
encourage you to continue with the TIFIA program, but you might 
consider making it multi-modal so that it can accommodate 
seaports, airports, and other modes, as well as just highways 
and transit.
    Thank you very much.
    [The prepared statement of Mr. Clary follows:]
    
    
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    Senator Boxer. Thank you very much, Mr. Clary.
    And last but not least, Ms. JayEtta Hecker, Director of 
Transportation Advocacy, Bipartisan Policy Center.
    Welcome.

   STATEMENT OF JAYETTA Z. HECKER, DIRECTOR, TRANSPORTATION 
               ADVOCACY, BIPARTISAN POLICY CENTER

    Ms. Hecker. Thank you very much, Madam Chair. Very pleased 
to be here. Senator Voinovich. I am speaking on behalf of the 
National Transportation Policy Project, which is a major effort 
of the Bipartisan Policy Center.
    The BPC was actually developed just a few years ago to 
develop pragmatic, bold, but doable ways for moving forward 
that are politically viable and that are pragmatic to solve the 
Nation's problems. And in line with that our transportation 
project was put together to bring fresh thinking, new views 
with business leaders, academics, civic leaders; kind of not 
all just the usual system owners and managers but the real 
users of the system and the parts of the economy that are so 
affected by it.
    So this group worked for 2 years. We had comprehensive 
research supporting our work; deliberations of this very mixed 
and different group, and reached a consensus report that we 
issued in June.
    Our principal message actually aligns so well with the 
hearing today because the core of our observation was that 
resources will always be scarce and that achieving national 
goals will require a fundamentally new performance based 
partnership between the Federal Government and its State, 
local, regional, and private partners.
    To share a little bit more detail, I have organized my 
remarks around three points. The first is that the Federal 
Government needs to be restructured to assure accountability 
for wise transportation investments that are scarce and that 
achieve specific and optimized results. The second is that we 
need to provide direct incentives to non-Federal partners for 
developing sustainable funding strategies. And finally, we have 
a caution about the new financing mechanisms and the need for 
very new real revenue.
    The first topic, that assuring Federal dollars are invested 
wisely, stems from what is a very widespread observation that 
the Federal program has lost its direction since the completion 
of the interstate. We have no overarching or consensus based 
national goals and that the program essentially functions as a 
block grant mechanism with very little accountability. We have 
no national plan today; we have no national priorities, and 
this lack of direction results in a fundamental failure of the 
$40 billion--minimum--that we spend each year to leverage non-
Federal funds.
    Accordingly, our group recommends that transportation be 
clearly focused on outcomes, national outcomes, not 
transportation outcomes, and they are not really controversial: 
promoting economic growth; providing for national connectivity; 
assuring the mobility in our metropolitan regions; integrating 
energy and environment into our transportation decisions; and 
of course improving the safety of our system.
    But moving to such a performance driven approach actually 
is more than just setting these goals. We have had similar 
goals, lofty goals, in almost every transportation legislation, 
but they are precatory language. They don't govern the 
programs; they don't guide where the money goes. Our main 
recommendation is that Congress needs to begin an aggressive 
transition to a performance based system with comprehensive 
testing and refining of outcome oriented national metrics. And 
I can discuss that more in the Q&As.
    The second broad topic, our policies need to directly 
incentivize investment. I start with something that may sound a 
little off topic, but we actually think it is extremely 
germane, and that is incentivizing investments begins with 
assuring that the Federal dollar does not displace or 
substitute State or local funds and that it is indeed focused 
on true national interests.
    So our recommendation is that the Congress--this is a very 
sensitive issue; it needs to broaden the definition of the 
national system to include critical freight corridors and rail 
corridors, which are so vital to our Nation, obviously needing 
partnerships with private parties, but it has to narrow the 
definition on highways which is too inclusive and muddies the 
water of who is really responsible for what.
    So we need a redefinition of the national system to focus 
what will always be scarce Federal dollars on the national 
interest and then clarify and motivate and incentivize State 
and local areas to be very clear what their direct inherent 
responsibilities are.
    Now, more directly to the topic of incentivizing non-
Federal investment, I won't repeat because you have heard 
excellent comments here about the importance----
    Senator Boxer. I have to tell you your time is out, so if 
you want to just quickly tick them off, because your time has 
run out, and we have to ask questions.
    Ms. Hecker. New efforts to support State efforts to 
implement direct user charges with incentive grants; capital 
cost funding; remove restrictions on road pricing; expand and 
increase the flexibility of TIFIA; and directly facilitate 
private investment.
    So I will leave it there.
    [The prepared statement of Ms. Hecker follows:]
    
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    Senator Boxer. Thank you very much. I appreciate your 
summing up.
    I will start with the questions. You know, I was taken by 
what you said, Ms. Hecker, about don't displace local funds. 
Well, doesn't this example of Los Angeles taking the lead, 
going there, passing a bond issue, voters saying this is it, we 
are going to bond ourselves for the next 30 years to the tune 
of $40 billion through the sales tax, isn't that an example of 
action that ought to be incentivized in the new bill?
    Ms. Hecker. Precisely. That whole point of incentivizing 
sustainable local funding, which they took the initiative to. I 
am talking about a program that would more generally 
incentivize regions to take those tough decisions in advance.
    Senator Boxer. Exactly. That is what I think so fits in. In 
other words, they have done now what you are talking about more 
communities doing.
    Ms. Hecker. Right.
    Senator Boxer. And I think to incentivize this is 
important. And I think on both sides of the aisle we understand 
very well how urgent it is to build an infrastructure that 
works in this country, and we also understand very well we have 
to leverage, leverage, leverage funds. That is key. Local, 
State, regional, private, everything. I mean, that is what we 
have to do in this bill in order to reach for the numbers that 
we need to build the kind of infrastructure and transportation 
systems of the future.
    So, Mayor Villaraigosa, I guess I want to thank you very 
much because when I heard this proposal, as you know, I was 
very taken with it, and it made a lot of sense to me. And it 
really in many ways exemplifies what we try to do in America; 
we get a basic source of funding, and we figure out how can we 
help either the homeowner or how can we help the businessman or 
woman carry out that dream if we believe that we will get paid 
back for it, and what you have is the proof.
    So I guess what I need to ask you is I think this notion of 
moving quickly, we have already established that it makes sense 
just because of the confluence of issues hitting us--the 
recession, the need for more jobs, the lower costs that are 
coming in on these projects--have you calculated in any way 
some of the savings and some of the increases in jobs if we 
were to be able to help you to do in 10 years what you would 
otherwise do in 30?
    Mr. Villaraigosa. Yes, we have, Madam Chair. And by the way 
Senator Voinovich talked about reduction currently in costs 
about 10 to 12 percent. Over the last 18 months, CalTrans, 
which is our State Highway California Transportation 
Department, the bids have been 18 percent lower. In the city of 
Los Angeles, our public works bids have been--I am sorry, that 
was 18 percent.
    Our public works bids are down 16 percent lower. So we 
think we can generate almost $4 billion in savings in a 10-year 
period of time due to the soft market, the fact that the 
unemployment rate, in the construction industry particularly, 
is as high as it is. So that is the number.
    Senator Boxer. Well, thank you for that. That is really--$4 
billion less, that is huge savings.
    Mr. Villaraigosa. And by the way these aren't my estimates; 
these are estimates that I think that we provided in our 
testimony. These are expert analysis of what we could save.
    Senator Boxer. Well, that is why this is so timely. Now, in 
addition, as we all know you were eloquent about the quality of 
the air and the fact that we need to clean up the environment. 
It seems to me that is another cost that I don't know whether 
you have quantified it, but we know what asthma does to kids. 
We know what living near congested areas, the impact of that; 
it is hardening of the arteries way earlier. That has been 
proven by health experts. So have you looked at the benefits of 
the environment of moving forward with these projects which 
will alleviate some of the terrible congestion?
    Mr. Villaraigosa. Yes. As I said, just moving from 30 to 10 
years will reduce about 500,000 tons of carbon emissions from 
the region. I don't have--and I know that the American Lung 
Association is supporting this effort, as is virtually every 
environmental organization. The Chamber of Commerce will be 
here next week advocating for 30/10----
    Senator Boxer. Good.
    Mr. Villaraigosa [continuing]. Because of its job creation, 
as I said, 165,000 jobs. I can quantify this. At the port 
alone--not the whole region, just the port--we know there are 
about 2400 premature deaths that are caused, a million lost 
school days that are caused just with the diesel emissions and 
pollution at the port. So take that across the region. 
Remember, this is the most congested area in the United States 
of America, and its air quality is always in the top three or--
well, in the bottom three or four. It is one of the----
    Senator Boxer. Worst.
    Mr. Villaraigosa. I guess one of the worst in the United 
States of America, yes.
    Senator Boxer. Mayor, thank you very much. I am very 
anxious to move forward very quickly. I have one last question 
for you.
    Mr. Villaraigosa. Yes.
    Senator Boxer. In terms of the legislation we have that 
could be helpful that many of our experts here on this panel 
and our under secretary cited, TIFIA and some others, it is 
necessary to be able to show us one or two projects that are 
already pretty much laid out. So I guess my last question to 
you is do you have on your list of projects a couple of 
projects that you feel will be ready to go in terms of all the 
planning and the environmental work on them and all the rest in 
the next 12 months or so, or is it a longer period?
    Mr. Villaraigosa. Yes, we do. There are a number of 
projects. The foothill extension, the exposition line phase 2 
are two of them. I think 8 of the 12 projects have substantial 
environmental review work. All of the projects, according to 
the experts that we have talked to, construction managers and 
the like, can be done within the 10-year period of time.
    Senator Boxer. Excellent. But I am asking you shovel ready.
    Mr. Villaraigosa. Yes, two.
    Senator Boxer. And you are saying there are two?
    Mr. Villaraigosa. There are two.
    Senator Boxer. There are two shovel ready. And do you know 
the cost of those off the top or not?
    Mr. Villaraigosa. Off the top of my head, the cost of----
    Senator Boxer. Just within a range. It doesn't matter.
    Mr. Villaraigosa. About $2.5 billion for the two of them.
    Senator Boxer. OK. Well, this has been extremely helpful. 
And if I don't get to see you, have a safe and good trip back, 
and I will see you soon. And thanks to the rest of the panel, 
too.
    Mr. Villaraigosa. Thank you very much. Again, Madam Chair, 
thank you. And Senator Voinovich, thank you as well. I really 
enjoyed hearing the bipartisan support for innovative ways to 
address this tremendous infrastructure need that the Nation 
has. Thank you very much.
    Senator Boxer. Absolutely.
    Senator Voinovich, questions.
    Senator Voinovich. Does the city run the transit system?
    Mr. Villaraigosa. We do have a DASH system, a local 
circulator, if you will, in the city, but no, we are part of a 
regional system, the Metropolitan Transit Authority. I sit on 
that board as either the chair, the first vice chair or second 
vice chair of it. There is a consensus around----
    Senator Voinovich. Forgive me for interrupting, but is the 
county also an MPO, you know, metropolitan planning agency?
    Mr. Villaraigosa. No, I think SCAG, the Southern California 
Association of Governments, is the MPO, but the Metropolitan 
Transit Authority is the organization whose responsibility it 
is to address the regional transportation needs.
    Senator Voinovich. So what happened in order to put your 
plan together, you got everybody at the table and you worked it 
out, and----
    Mr. Villaraigosa. Yes.
    Senator Voinovich [continuing]. Dotted the Is and crossed 
the Ts. It is terrific. That is great. And I am sure that that 
has----
    Mr. Villaraigosa. Unanimously, by the way.
    Senator Voinovich. I am sure that is has had an impact on 
the people who supported the increase in the tax. One of the 
things that we are trying to do on the national level is to 
talk about these projects of regional significance dealing with 
congestion, freight areas, which you have there, and just 
trying to build the need for this. So that is one thing.
    The problem we have here is that this country is so 
different, and Mr. Secretary, you are talking about having a 
performance based responsive program, and in some States the 
major issue in terms of their Federal funding would be--I know 
one, for example, they have the worst bridges in the United 
States, and they would like to have some flexibility in terms 
of how they spend their money.
    And one of the things that I am concerned about is to have 
some bureaucracy in Washington created to kind of oversee what 
is going on and having people having to come here and touch 
base. It would seem to me that if an MPO or a regional transit 
system or whatever it is came together like you did, that that 
would be enough to indicate that this is something that makes 
sense, and by the way, they are willing to pay for it. This 
leveraging thing I think you should be rewarded for this kind 
of thing. So I am interested in that point of view.
    The other thing that I am interested in is Congressman 
Oberstar has done a great deal of work and spent 2 and a half 
years on it, on his work, and we are trying to get people's 
opinion about what they think of that legislation. We are 
trying to get a consensus. I talked with Don Borut of the 
National League of Cities, and I was talking to the U.S. 
Conference of Mayors to come to us and kind of come together 
and say, this is what we think is good and what we don't think 
is good.
    And Mayor, I would really be interested in--you put so much 
work in this, I am sure you have a tremendous amount of staff 
work, people there that are backing you up. I would be real 
interested in getting your input on that.
    All I do is talk. What is your opinion about what would be 
the most effective thing to help you right now in terms of your 
situation?
    Mr. Villaraigosa. Well, we are heartened to know that by 
the end of the year we are going to get a surface 
transportation bill out that I think all of us are looking 
forward to that. But even in that bill, the fact is there is 
not unlimited money, and the reason why we have come forward 
with offering some innovative ways to stretch those Federal 
dollars is because we think that ultimately this is the best 
route to add value and create leverage between localities, 
States, and the Federal Government.
    Senator Voinovich. The real issue is what is the vehicle on 
the Federal level that your folks have looked at as being the 
most effective way to get the job done? I asked Mr. Kienitz 
about----
    Mr. Villaraigosa. Yes.
    Senator Voinovich [continuing]. The state that the national 
infrastructure bank, and I don't know, what are they going to 
use that for? Is three-quarters going to be for transportation 
and transit, or are they going to spread it out all over the 
country?
    Mr. Villaraigosa. Well, there are a number of vehicles that 
are currently configured. There could be others. But as I 
mentioned, or as was mentioned, TIFIA, Build America bonds, a 
demonstration project for an infrastructure bank, loan 
guarantees, loan subsidies. There are a number of mechanisms to 
make something like this work and/or to really incentivize 
localities to put up some of the investment that we are asking 
the Federal Government to do.
    Senator Voinovich. One of the things that I have been 
advocating since last year is that in spite of the fact that 
there are some creative financing mechanisms out there--and I 
am not as familiar with them as I should be.
    I know in Florida you have done--I am really impressed with 
what you have done in Florida, and congratulations, Mr. Clary, 
for your role in it. If you weren't there it wouldn't have 
happened. I hope you feel good about that.
    We had some folks in from Texas that have talked about 
tolling and borrowing money from their pension funds, et 
cetera. So I think we need to understand all of these 
opportunities that are there. But the real question is many of 
us feel that we do not have enough money coming in the till, 
and I have advocated at least a 10 cent increase in the gas 
tax, with indexing, to create a backdrop for all of this.
    You are a politician. What would the folks in Los Angeles 
have to say if your representatives voted for increasing the 
gas tax but making sure that the way it is done is that the 
program fits in with what you are trying to do? Or would they 
say, hey, we have done enough and----
    Mr. Villaraigosa. I think the region--remember, we have 
taxed ourselves three different times, a penny and a half. 
Measure R, this last penny----
    Senator Voinovich. By the way we have done that in Cuyahoga 
County.
    Mr. Villaraigosa. I believe they would support it is the 
answer, Senator Voinovich.
    Senator Voinovich. Mr. Inman, what do you think?
    Mr. Inman. My view is that a gas tax increase would be 
generally supported. I think what we have seen is if you offer 
improvements to the system, as the mayor is doing--he is going 
to offer improvements in the short term--these are valuable 
assets to the American public.
    Senator Voinovich. Mr. Clary. You have been there.
    Mr. Clary. I have been there, and I will offer an 
observation. And the mayor certainly knows his constituents 
much better than I do, but I was at a meeting last week in 
California where a group sponsored--there were State and local 
officials there, and there was a gentleman there that polls for 
tax initiatives all over California, and he said in his surveys 
he had done over the past 2 years the level of support for a 
gas tax had been steadily dropping and was in the single digit 
range.
    And what surprised him is user fees. I think the disconnect 
that has happened is the public doesn't see that as a user fee 
as much anymore. The user fees that they looked at was a 
pricing model of a tolling, and he said what surprised him was 
that was getting much higher and was approaching 50 percent.
    Senator Voinovich. If you have that, send it to me.
    Mr. Clary. I will get that, yes, sir.
    Senator Voinovich. Ms. Hecker.
    Ms. Hecker. I would concur with all of the research that 
has been done. The only way to get the revenue to really beef 
up the program to begin to address the Nation's needs is to in 
the short term raise the gas tax. But it is only a short term. 
And longer term we need to be looking at more sustainable 
approaches that are actually more equitable and more user based 
than the gas tax really is these days.
    The other thing I would observe is that the public has lost 
the trust that the Trust Fund has been spent well, and I think 
that is part of the reason we are so focused on getting some 
performance focus and accountability. I think that will be a 
key part of the communication to the public that this is 
needed, but we have clear focus, just like it has been at the 
local level. Local measures that are very clear about what the 
outcome is pass, and when they are vague they don't pass.
    Senator Voinovich. Thank you.
    Senator Carper. Those were very good questions.
    If I may ask a question of Ms. Hecker there. There was once 
a woman who worked at GAO for a number of years; she was one of 
the top people there. And she left maybe a year or so ago, and 
I think her name was also JayEtta, and I think her middle 
initial was Z. Was that you?
    Ms. Hecker. Yes.
    Senator Carper. I remember the first time I ever saw your 
name when you were at GAO, I thought it was like the name of a 
rapper, JayEtta Z.
    [Laughter.]
    Senator Carper. And you really are cool. You have the 
neatest name, and every time I see your name I think of that 
first thought, how could a rapper end up with a senior position 
at GAO? And here you are now being one of the leaders on the 
bipartisan front. So good for you. Thanks for the work that you 
did there, and thanks for what you are doing today.
    Welcome all of our panelists. Mayor, it is great to see 
you, especially. But each of you, thank you for coming and 
sharing your thoughts and ideas and advice with us.
    Question, if I could, for Ms. Hecker. For maybe there-
quarters of a century the gas tax has been used, as you know, 
as really the primary funding mechanism--not the only funding 
mechanism, but the primary funding mechanism for Federal 
transportation projects. I believe that continued reliance on 
the gas tax is really not sustainable because, and at least one 
of you made this point already, good news, cars are becoming 
more efficient; bad news, because they have become more 
efficient we will have less gasoline tax to derive from their 
operation unless we just drive more and more miles and continue 
to see vehicle miles traveled that escalate.
    About a month or two ago we had a chance to drive a 
Chevrolet Volt down here. It goes about the first 40, 50 miles 
on battery, then after that it has an auxiliary engine to help 
charge the battery to run the car. But we are going to be 
building in Delaware--Automotive is going to launch in about 18 
months a vehicle that gets about 100 miles per gallon, another 
flex fuel plug-in hybrid car--not flex fuel, but a plug-in 
hybrid car, and a beautiful car. So we see just around the 
horizon the prospect of vehicles that not just meet the CAFE 
standard, 36.36 miles per gallon by 2016, but go way, way 
beyond that, and that is wonderful news, but it is going to 
undermine our ability to raise taxes over time from the gas 
tax.
    There are a lot of, I guess, political and technical 
questions which need to be answered before a new system can be 
adopted to begin to replace the fuel tax, and the transition is 
obviously going to occur over not just 1 year but over a number 
of years. Having said that, this is something that we can't 
ignore here in Washington.
    I would just ask what steps you might recommend that we 
here in the Congress take in our next transportation bill to 
recognize this truth and also to prepare for it.
    Ms. Hecker. Well, first, let me agree with all you have 
said. It is not a sustainable strategy, and in many ways I 
think the Congress would really be irresponsible not to begin 
planning now for a post-gas tax environment. It is losing its 
credibility; it is losing its utility as a proxy for use; and 
while in the short term it is our only way to really get the 
kind of revenue to support a bill, we have to start now.
    And the tools, interestingly, that we have talked about 
today, are all about financing; they are not new money in many 
ways; they are borrowed money. I mean the new money is a sales 
tax, or a new money is an actual source of revenue. But these 
tools to loan and have funds funded by the General Fund, those 
aren't the new money. The new money needs real revenue. We have 
to begin a national process of rigorous and comprehensive 
planning as soon as possible.
    Frankly, I think it should begin before you pass a bill if 
it passes in December. This is urgent enough; it can be well 
defined. The tests we have underway are very small, they are 
not scalable, they haven't cut across States, and there are 
fundamental questions. And connecting back to the hearing 
today, it would provide a fundamentally new and efficient 
platform for States to also transition to a more efficient user 
based fee.
    So all of the reasons are go ahead, structure the tests. We 
have specific recommendations of the kinds of robust testing 
that is needed and would be happy to share that with you, the 
Finance Committee, but it is also a policy issue. How you raise 
the money affects performance. So this Committee has an 
interest as well in the sustainability of a user pay system 
which, frankly, is deteriorating.
    Senator Carper. All right. Thank you very much. Thanks for 
your comments. Thanks for your willingness to share some 
further insights with us as we prepare to face this challenge.
    If I could, Mayor Villaraigosa, your experience--it is 
great to always have somebody before us who actually does 
things in the public sector and is responsible for getting 
things done and achieving results, and as a recovering Governor 
it brings back some wonderful, wonderful memories, and 
challenges, too. But your experience in L.A. demonstrates the 
challenges that we face in our metropolitan areas, and although 
I am told only about 60 percent of Americans actually live in 
large urban areas, those areas represent maybe 90 percent of 
traffic congestion, maybe 90 percent of transit riderships, and 
I am told about 90 percent of population that is exposed to 
auto related air pollution.
    Let me just ask this. Do you believe that the Federal 
transportation policy is well suited to address metropolitan 
transportation needs? And if not, what recommendations do you 
have for improvement? You have already made some, but feel free 
to reinforce those again.
    Mr. Villaraigosa. Well, there is, as I had mentioned 
earlier, I am also the vice president of the U.S. Conference of 
Mayors, and I can tell you that last year----
    Senator Carper. Let me ask you a question. In the National 
Governors Association you become vice chair and then become 
chairman.
    Mr. Villaraigosa. Yes. Next year.
    Senator Carper. OK. It is like having another job, you 
know.
    Mr. Villaraigosa. Right. One of the issues that was a great 
deal of concern to us last year was, if you recall, 
historically with respect to what they called the STIP funds, 
metropolitan areas receive about two-thirds of the money--and 
by the way the numbers I have from the U.S. Conference of 
Mayors is that in metropolitan areas, about 82 percent of the 
population lives in the metropolitan areas of the United 
States. That is the number we have been given over the years.
    So, historically the metropolitan areas receive two-thirds 
of the funding and the State one-third. Last year they changed 
that formula with the ARRA funding, and the States got two-
thirds and the metropolitan areas got one-third.
    The problem with that--I mentioned I used to be speaker of 
the Assembly, so I went to the legislature and the Governor and 
convinced them that in California we should turn it back to the 
way it used to be. So the metropolitan areas did get two-thirds 
in California, but not everybody was able to do that.
    The problem with that is, what I mentioned back then at the 
White House, was that while you are still going to build a 
road, it is a road--when you do it that way it is a road that 
is going to connect the ducks to the geese, and in the case of 
an area like mine connect the two largest ports in the United 
States of America. There is a difference in terms of 
infrastructure, the impact of that infrastructure.
    So I would say, from my vantage point both as mayor of the 
city of L.A. and representing a large metropolitan area, that 
making sure that metropolitan areas get the majority of the 
money, if you will, makes a lot of sense, and it is the way the 
STIP funds have historically been distributed but weren't last 
year.
    Senator Carper. Thanks very much.
    We have been joined by Sheldon Whitehouse, a senior Senator 
from Rhode Island, and he is going to proceed and grill each of 
you until it is time to go to lunch.
    Senator Whitehouse. The junior Senator from Rhode Island.
    Nice to see you, Mayor, and welcome to the other witnesses.
    Mayor, I wanted to explore an idea with you. We have 
considerable infrastructure in this country that is decrepit, 
that is in urgent need of repair and replacement; highways, 
bridges, water systems, wastewater systems. There is a great 
deal of it. And we have an urgent need for jobs, and we have 
legitimate serious concerns about the deficit that got run up 
in the last Administration in particular.
    It strikes me that there is a real convergence around the 
decrepit infrastructure. If it can be put into the category of 
infrastructure that is going to have to be replaced anyway, 
then to get onto that job now, first of all, puts jobs into the 
economy now, while they are desperately needed. And as anybody 
who has been involved in maintenance and repair understands, 
ordinarily the quicker you get after maintenance and repair the 
less expensive the job ultimately is.
    So it is sort of a double whammy on the deficit argument. 
First of all, you are going to have to spend it sooner or later 
anyway, so it doesn't really add to the deficit if you move the 
repair or maintenance forward; and second, you are probably 
actually saving hard dollars against that future liability by 
getting to the repair or the maintenance or replacement sooner. 
So I see that as sort of a frame for our infrastructure and 
jobs argument.
    Against that I see our efforts in order to avoid anything 
resembling an earmark with the stimulus funds, which everybody 
hates when they are called stimulus funds, but everybody loves 
as soon as they hit a particular project. I think that there 
has been a great number of Governors and Members of Congress 
who have campaigned against the stimulus and gone to every 
ribbon cutting they can find because they love the projects; 
they just hate the ideology of it. But the projects work.
    But what I have seen is that it has been slow going getting 
the funding out. It has to go through the Federal bureaucracy 
first; then in very significant measure, by and large it goes 
through a State bureaucracy, and then only then, finally gets 
to the project itself and to putting boots on the ground and 
jobs in the field.
    I would love to hear your thoughts on whether the mayors 
might be in a position to try to build an accelerated process 
so that you could come to Congress and say, look, if you really 
want these jobs out there, I can prove to you, one, that our 
process will be transparent and honest and fair, and two, that 
we will hit those projects that are clearly going to need to be 
done sooner or later anyway.
    It is a bridge under an existing weight restriction; it is 
a viaduct that has been declined further maintenance because it 
is in such terrible shape; it is a wastewater treatment 
facility that is spewing sewage into our waters. These are 
things we are not going to tolerate for long. We are not going 
to let those bridges fall down. We have to get on it.
    But I don't see a mechanism in our governmental apparatus 
for directing funding through to jobs that allows that to 
happen in any kind of immediate and transparent way, and 
clearly the existing bureaucracy isn't the way to do it. Can 
the mayors come up with a truly transparent local mechanism for 
saying, look, these are the real projects we need so that you 
can get around the sort of concern that this is earmarking, 
this is special dealing, this is whatever, but also get around 
the bureaucracy, and that we could, with confidence in that 
program, find ways to direct funding directly to mayors 
directly for projects that meet those standards and that are 
transparent?
    Mr. Villaraigosa. I think we can. First of all, Ms. Hecker 
mentioned performance based funding. I am all for it. Earlier 
in my testimony we talked about the fact that in our county--
the most congested county in the United States, the car capital 
of the world--that we have put together a half-penny sales tax 
that generates $40 billion over a 30-year period of time.
    We have come up with a plan to accelerate the 30-year $40 
billion investment in a 10-year period of time, and what we 
have said is there are a number of creative financing 
opportunities, public-private partnerships, cost savings that 
come with the fact that the construction industry currently has 
an unemployment rate in our county of about 35 percent; to be 
able to generate the wherewithal to create about 165,000 jobs, 
reduce about 500,000 tons of carbon emissions in that 10-year 
period of time.
    My hope is that this could be not just something for L.A., 
an ``earmark,'' but a template for what we all need to be 
doing. I mentioned earlier that I was the speaker of the 
California State Assembly, and I always had people come up with 
their hand out and ask for State funding, and I would always 
say to them, what are you doing to match that, to demonstrate 
the community resolve that this is a priority?
    So in an era of limited funds, with a debt that is the 
largest in our history and a deficit that is going to be a 
priority beginning next year to address, I think it is very 
important to come up with these kinds of innovative ways to 
say, look, we are putting up our own money; we would like the 
Federal Government to partner through a guarantee, through a 
loan subsidy, through an infrastructure bank these efforts; and 
say this isn't just for L.A., this is a template that could 
work for Rhode Island, that could work for New Jersey, that 
could work for Oklahoma, and Ohio and some of the other States 
that are represented by the members here.
    I believe that that is a way for us, in a time of limited 
funds, to leverage these investments and to accelerate, as you 
said, these jobs, which are so critical in these times.
    Senator Whitehouse. My point is also about the transparency 
of the selection process. I think in Rhode Island, for 
instance, we have a number of bridges that are in urgent need 
of repair. Highway 95 goes right through the middle of Rhode 
Island; it is the most traveled east coast artery; it goes 
through the city of Pawtucket over the river.
    The Pawtucket River Bridge is now under a weight 
restriction so that trucks have to go around it onto another 
access highway, but is much longer than the Route 95. And I 
think if people were able to see that this bridge in my 
community that I know needs to be replaced is on the list, and 
I know how it got there, and I know that it was transparent and 
clear and public, everybody had a chance to have their say, I 
think there would be a lot of confidence that the kind of 
infrastructure spending that we need to do is the right thing 
to do, and deficit concerns can be allayed because in fact we 
have an infrastructure deficit. And if we really accounted for 
this stuff properly we would count that as a liability, and by 
fixing it you would reduce the liability and the books would 
still balance.
    So I just encourage you, through the mayors, to try to look 
at a way to create a sufficiently transparent process at the 
mayoral level that everybody can have confidence in it, that we 
could have enough confidence to fund it directly and get you 
out of the loop of being at the tail end of the funding running 
through first the Federal bureaucracy, then the State 
bureaucracy, then finally you get the pickings of what is left 
or the leavings of what is left.
    And I know that Mayor Cicilline from my capital in Rhode 
Island is interested in this as well and has been working on 
these issues trying to find ways to put the mayors more 
directly into the infrastructure equation.
    But it strikes me that that is sort of a sweet spot. If it 
is really transparent, if people really get that that is truly 
decrepit infrastructure, and if that is attached to, wait a 
minute, this is OK to do even when there is a deficit because 
it is going to cost more later anyway, then I think there is a 
lot of room to move, and clearly we have an infrastructure gap 
that needs closing in a big, big way.
    Mr. Villaraigosa. Well, I think you hit the nail on the 
head. Remember, the half-penny sales tax that we passed, we did 
it in November 2008, in the beginning of the recession. We did 
it with a 68 percent vote because we were transparent. We 
identified all 12 public transit projects, all the highway 
projects. We addressed the entire region. Using standards 
developed by the Metropolitan Transit Authority, which is our 
regional transportation authority, we identified them based on 
congestion and air quality and the number of people that they 
would move and the entire needs of the region.
    I think you are absolutely right, and you hit it on the 
head. What we have seen is, at the State level there is much 
less support for State bonds than there are for local, because 
people see more of a direct connection between their tax 
dollars and those investments.
    Senator Whitehouse. Well, I would urge you to take that 
template, try to expand it as widely among the mayors as you 
can, and attach it to the appeals you make to the Federal 
Government and not just to your local constituents for bond 
support.
    Mr. Villaraigosa. I will heed that advice and certainly 
make those arguments. Thank you very much, Senator.
    Senator Whitehouse. Let me ask one more question, then I 
will let everybody go. I know it is noon, and I apologize.
    I was interested, Mr. Inman, I your thoughts on the grant 
anticipation revenue vehicles as a sort of de facto 
capitalization of infrastructure investment, and I would be 
interested in your thoughts on exploring other ways in which 
Federal transportation policy can support treating these 
capital investments as the capital investments that they are 
rather than effectively expensing them every year. Front 
loading against future borrowing is the way the GARVEE notes do 
it, but I would be interested in your thoughts on capital 
budgeting more generally and in national infrastructure bank in 
particular.
    Mr. Inman. I think the tools that we put into place when I 
was at the Federal Highway Administration--as I mentioned 
earlier, I was the Chief of Financial Management at Federal 
Highway before joining Mercator. Certainly our objective, as 
the mayor has indicated, is to try to move projects forward, 
particularly in this environment. This is such an opportune 
time to move projects up. As you indicated, they have to be 
built anyway. If you build them now you build them cheaper. The 
public has use of the facilities many years in advance. It can 
increase your economic recovery from economic benefits that 
occur. It is just many, many issues, and GARVEE bonds have been 
very successful in that. Now, there may be some advantage to a 
capital budget, for example, because you are not looking at--
you are really looking at providing a basis for the economic 
strength of the country.
    As far as the infrastructure bank, my personal view--and 
this is my personal view--I am not exactly sure how that is a 
big advantage over an existing TIFIA program. The TIFIA program 
is very suited to transportation type improvements based on the 
flexibility of the program; whereas, the infrastructure bank, I 
am not sure how that might be administered. Would it be outside 
the Department? There are so many issues that would have to be 
resolved.
    I managed the TIFIA program for some time when I was at 
Federal Highway, and one of the advantages we had was the 
support of the USDOT as well as the field offices because we 
have to monitor those projects. We need people, we need 
engineers, we need other folks monitoring those projects that 
are being funded through TIFIA, and that was such a good, I 
think, fit for the TIFIA program, is you had that other 
resources already available within the Department to help you 
provide that support. And with the infrastructure bank I am not 
sure where all that would come from.
    Senator Whitehouse. Gotcha.
    Mr. Inman. Thank you.
    Senator Whitehouse. Well, I won't hold anybody longer. I 
will recess the hearing.
    Mr. Clary and Ms. Hecker, if you would like to provide a 
written response on the capital budgeting or national 
infrastructure bank question, I would be delighted to hear from 
you, but I don't want to keep the mayor and all of you any 
longer.
    The record of the hearing will remain open for another week 
if anybody wishes to add anything to it. I thank you all for 
your testimony.
    Without further ado, the hearing is adjourned.
    [Whereupon, at 2:35 p.m. the Committee was adjourned.]

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