[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
NATIONAL INFRASTRUCTURE BANK:
MORE BUREAUCRACY AND MORE RED TAPE
=======================================================================
(112-55)
HEARING
BEFORE THE
SUBCOMMITTEE ON
HIGHWAYS AND TRANSIT
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
OCTOBER 12, 2011
__________
Printed for the use of the
Committee on Transportation and Infrastructure
Available online at: http://www.gpo.gov/fdsys/browse/
committee.action?chamber=house&committee=transportation
----------
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
JOHN L. MICA, Florida, Chairman
DON YOUNG, Alaska NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee ELEANOR HOLMES NORTON, District of
FRANK A. LoBIONDO, New Jersey Columbia
GARY G. MILLER, California JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois CORRINE BROWN, Florida
SAM GRAVES, Missouri BOB FILNER, California
BILL SHUSTER, Pennsylvania EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California RICK LARSEN, Washington
ANDY HARRIS, Maryland MICHAEL E. CAPUANO, Massachusetts
ERIC A. ``RICK'' CRAWFORD, Arkansas TIMOTHY H. BISHOP, New York
JAIME HERRERA BEUTLER, Washington MICHAEL H. MICHAUD, Maine
FRANK C. GUINTA, New Hampshire RUSS CARNAHAN, Missouri
RANDY HULTGREN, Illinois GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
CHIP CRAVAACK, Minnesota MAZIE K. HIRONO, Hawaii
BLAKE FARENTHOLD, Texas JASON ALTMIRE, Pennsylvania
LARRY BUCSHON, Indiana TIMOTHY J. WALZ, Minnesota
BILLY LONG, Missouri HEATH SHULER, North Carolina
BOB GIBBS, Ohio STEVE COHEN, Tennessee
PATRICK MEEHAN, Pennsylvania LAURA RICHARDSON, California
RICHARD L. HANNA, New York ALBIO SIRES, New Jersey
JEFFREY M. LANDRY, Louisiana DONNA F. EDWARDS, Maryland
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma
REID J. RIBBLE, Wisconsin
CHARLES J. ``CHUCK'' FLEISCHMANN,
Tennessee
(ii)
Subcommittee on Highways and Transit
JOHN J. DUNCAN, Jr., Tennessee, Chairman
DON YOUNG, Alaska PETER A. DeFAZIO, Oregon
THOMAS E. PETRI, Wisconsin JERROLD NADLER, New York
HOWARD COBLE, North Carolina BOB FILNER, California
FRANK A. LoBIONDO, New Jersey LEONARD L. BOSWELL, Iowa
GARY G. MILLER, California TIM HOLDEN, Pennsylvania
TIMOTHY V. JOHNSON, Illinois MICHAEL E. CAPUANO, Massachusetts
SAM GRAVES, Missouri MICHAEL H. MICHAUD, Maine
BILL SHUSTER, Pennsylvania GRACE F. NAPOLITANO, California
SHELLEY MOORE CAPITO, West Virginia MAZIE K. HIRONO, Hawaii
JEAN SCHMIDT, Ohio JASON ALTMIRE, Pennsylvania
CANDICE S. MILLER, Michigan TIMOTHY J. WALZ, Minnesota
ANDY HARRIS, Maryland HEATH SHULER, North Carolina
ERIC A. ``RICK'' CRAWFORD, Arkansas STEVE COHEN, Tennessee
JAIME HERRERA BEUTLER, Washington LAURA RICHARDSON, California
FRANK C. GUINTA, New Hampshire ALBIO SIRES, New Jersey
LOU BARLETTA, Pennsylvania DONNA F. EDWARDS, Maryland
BLAKE FARENTHOLD, Texas EDDIE BERNICE JOHNSON, Texas
LARRY BUCSHON, Indiana ELIJAH E. CUMMINGS, Maryland
BILLY LONG, Missouri NICK J. RAHALL II, West Virginia
BOB GIBBS, Ohio (Ex Officio)
RICHARD L. HANNA, New York, Vice
Chair
STEVE SOUTHERLAND II, Florida
JOHN L. MICA, Florida (Ex Officio)
(iii)
CONTENTS
Page
Summary of Subject Matter........................................ vi
TESTIMONY
Ridley, Hon. Gary, Secretary of Transportation, Oklahoma
Department of Transportation................................... 11
Roth, Gabriel, Civil Engineer and Transport Economist, The
Independent Institute.......................................... 11
Thomasson, Scott, Economic and Domestic Policy Director,
Progressive Policy Institute................................... 11
Utt, Ronald D., Ph.D., Herbert and Joyce Morgan Senior Research
Fellow, The Heritage Foundation................................ 11
Yarema, Geoffrey S., Chair, Infrastructure Practice Group,
Nossaman LLP................................................... 11
PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
Johnson, Hon. Eddie Bernice, of Texas............................ 47
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Ridley, Hon. Gary................................................ 50
Roth, Gabriel.................................................... 59
Thomasson, Scott................................................. 67
Utt, Ronald D., Ph.D............................................. 79
Yarema, Geoffrey S............................................... 90
SUBMISSIONS FOR THE RECORD
Ridley, Hon. Gary, Secretary of Transportation, Oklahoma
Department of Transportation responses to questions from Hon.
John J. Duncan, Jr., a Representative in Congress from the
State of Tennessee, and Hon. Mazie K. Hirono, a Representative
in Congress from the State of Hawaii........................... 55
Roth, Gabriel, Civil Engineer and Transport Economist, The
Independent Institute:
Supplementary remarks submitted for the record...........38, 41
Responses to questions from Hon. John J. Duncan, Jr., a
Representative in Congress from the State of Tennessee,
and Hon. Mazie K. Hirono, a Representative in Congress
from the State of Hawaii............................... 65
Utt, Ronald D., Ph.D., Herbert and Joyce Morgan Senior Research
Fellow, The Heritage Foundation, responses to questions from
Hon. John J. Duncan, Jr., a Representative in Congress from the
State of Tennessee, and Hon. Mazie K. Hirono, a Representative
in Congress from the State of Hawaii........................... 87
Yarema, Geoffrey S., Chair, Infrastructure Practice Group,
Nossaman LLP:
Supplementary remarks submitted for the record........... 39
Responses to questions from Hon. Mazie K. Hirono, a
Representative in Congress from the State of Hawaii,
and Hon. Laura Richardson, a Representative in Congress
from the State of California........................... 97
ADDITIONS TO THE RECORD
American Society of Civil Engineers, written statement........... 100
Hutchison, Hon. Kay Bailey, a U.S. Senator from the State of
Texas, letter to Hon. John L. Mica, a Representative in
Congress from the State of Florida, October 12, 2011........... 105
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
NATIONAL INFRASTRUCTURE BANK: MORE
BUREAUCRACY AND MORE RED TAPE
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WEDNESDAY, OCTOBER 12, 2011
House of Representatives,
Subcommittee on Highways and Transit,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:00 a.m. in
Room 2167, Rayburn House Office Building, Hon. John J. Duncan,
Jr. (Chairman of the subcommittee) presiding.
Mr. Duncan. The subcommittee will come to order. I ask
unanimous consent that members of the Committee on
Transportation and Infrastructure who are not on the
Subcommittee on Highways and Transit be permitted to sit with
the subcommittee at today's hearing, offer statements, and ask
questions. And without objection, that will be so ordered.
Today the subcommittee is convening to receive testimony
from transportation financing experts on the administration's
proposal to create a national infrastructure bank as part of
the American Jobs Act of 2011. The national infrastructure bank
proposal would create a new Federal bureaucracy that would
distribute loans and loan guarantees to eligible entities for
transportation, water, and energy projects. Capitalized with
$10 billion, the projects would be selected by a board of
directors that are appointed by the President.
Many people are skeptical that bureaucrats in Washington
would have any idea of which transportation projects are the
most worthy of receiving a Federal loan. We are going through
many hearings and so forth about the Solyndra right at this
time. This skepticism is why Congress already has established
the State infrastructure bank program in SAFETEA-LU. A State
infrastructure bank allows the States to use their Federal aid
funding to capitalize the State infrastructure bank, and to
provide loans and loan guarantees to appropriate transportation
projects that the State deems most important. It is not a one-
size-fits-all; it would vary from State to State.
The Transportation Infrastructure Finance and Innovation
Act program, or TIFIA, was established in 1998 to provide loans
and loan guarantees to surface transportation projects. In
fact, the TIFIA program is so popular, that it has received 14
times the amount of project funding requests in fiscal year
2011 than the program has available to distribute. Why not give
these established programs more funding, in order for them to
reach their full potential?
Also, there is no guarantee that transportation projects
would be favored over the water and energy projects that the
President's national bank proposal would set up. This proposal
seems to many simply just another distraction as Congress
pushes for a long-term surface transportation reauthorization
bill. The administration should be focused on helping Congress
to pass this much-overdue legislation, and give the States some
long-term funding certainty that a national infrastructure bank
would most certainly not accomplish.
We believe that we will soon be passing a major
transportation bill, and we believe we've got a good proposal
that we are working with right now, and one that expands
funding for State infrastructure banks, along with an expansion
of the TIFIA program.
I want to thank our witnesses for being here today, and I
look forward to hearing your testimony.
Now we will proceed to Mr. Coble, our--now we will go to
the gentleman from North Carolina, Mr. Coble.
Mr. Coble. Thank you, Mr. Chairman. I appreciate that. I
want to thank you for convening the hearing, and thank you for
the work you are doing to help create a jobs through long-term
and accessible highway infrastructure planning. I also want to
welcome the panel of witnesses, and look forward to hearing
their testimony on a very timely subject, which, of course, is
jobs.
I don't want to be a naysayer, Mr. Chairman. I try to avoid
being a naysayer most of the time. But once again we are
reminded of the fundamental problem with the current philosophy
of the White House. To quote an old adage, why build one when
you can build two at twice the price? The White House plan
duplicates the efforts already found in the Transportation
Infrastructure Finance and Innovation Act. It makes no sense,
it seems to me, to create a completely new bureaucracy costing
upwards of $270 million, when the Transportation Infrastructure
Finance and Innovation Act already accomplishes that goal.
Mr. Chairman, I look forward to learning more today about
the President's plans for an infrastructure bank, and hope our
panel can help provide us with pertinent information to make an
informed decision. Again, I thank you for having called the
hearing, and yield back the balance of my time.
Mr. Duncan. Thank you very much. We will now recognize the
Ranking Member DeFazio.
Mr. DeFazio. Thank you, Mr. Chairman. Sorry I wasn't here
promptly on time. My iPhone is on West Coast time; it didn't
wake me up properly. The hazards of transcontinental commuting.
Thank you for holding this hearing.
You know, for a number of years many have touted an
infrastructure bank as the solution to our massive
infrastructure deficit in this country. It isn't. However, it
can be a useful adjunct.
Before Wall Street destroyed the economy, I had said, I
really don't see why we need an infrastructure bank. Most of
the States have good credit, and they can go out and borrow on
their own at very good rates. But that isn't the case any more.
The States need guarantees. They need help. Many are against
their borrowing limits. And most of the banks who were
generously bailed out by Congress--not by me; I didn't vote for
it--aren't lending. So--and the credit bond markets are tight.
So, an infrastructure bank could be more useful for the
States in that sort of a circumstance. The question is the form
of the infrastructure bank and the mission. Remember, again,
for those who think it solves all problems, an infrastructure
bank is a bank. That means it expects to be repaid; that means
there are interest and principal payments due.
If you look at the TIFIA program, we can do forbearance on
repayment during construction and even after construction under
extraordinary circumstances. Well, that is a pretty good model.
Maybe we should be using TIFIA and enhance the funding there.
On the other hand, an infrastructure bank could be
particularly useful for projects which do have a revenue
stream. Those could be PPPs in the case of transportation. They
could be tolled projects for those States or entities that
choose to build a tolled individual project. However, we are
not going to toll the existing interstate, so it is not going
to deal with the 150,000 bridges that need repair and
replacement now. We are not going to toll the existing
interstate, so it is not going to take care of the 40 percent
of the pavement that needs restoration.
You know, transit systems lose money. This isn't going to
help address the $70 billion backlog of capital improvements
necessary just to bring transit systems up to current operating
state of good repair, let alone new investments, because
transit systems don't make money anywhere in the world, except,
I'm told, one subway in Hong Kong.
Not going to pay for rail. You know, most of the rail
problems we are talking about don't make money.
Could be particularly good to help with sewer, water,
electrical transmission, other things like that, that are
legitimate infrastructure needs.
So we should keep this discussion in context today. That
is, an infrastructure bank could be useful to help this country
deal with a massive infrastructure deficit that isn't just in
transportation, it is in many other areas. But an
infrastructure bank has its limits, and I would hope that the
testimony will address the problem in that way.
What are the limits? What could it be good for? And what
other programs do we have that could help us with the
transportation deficit?
Thank you, Mr. Chairman.
Mr. Duncan. Thank you very much. We are always honored to
have the chairman of the full committee here with us, and I
would like to call on Chairman Mica for any statement he wishes
to make at this time.
Mr. Mica. Well, thank you, Chairman Duncan and Ranking
Member DeFazio, for holding this subcommittee hearing on a very
important topic. And I think the administration's proposal for
a national infrastructure bank deserves our review and
consideration. I have been a strong proponent of creative and
innovative financing methods, especially in a time when we have
limited Federal resources, and States are scrambling to provide
adequate financing for infrastructure projects, that we take
and use every mechanism possible to move projects forward and
expand our financing capability. Financing is an important key.
Process is also important. And I hope to talk about those
briefly.
I have looked at the Kerry-Hutchison proposal from the
Senate, basically the administration proposal. I think it
mirrors the House proposal by Ms. DeLauro and some others. And
I have given a great deal of thought to creating a new national
infrastructure bank. I wish the administration had spent a
little bit more time consulting with Members of Congress,
myself and others, before moving forward with this. And as much
as--consideration I have given it, unfortunately I am afraid
that a national infrastructure bank, as proposed either by this
legislation or the administration, is dead on arrival in the
House of Representatives. The reason is--there are several
reasons.
First of all, if you review the existing legislation, it
creates more bureaucracy. If you don't think we have enough
bureaucracy, we have got a chart somewhere that shows the
existing bureaucracy of the Department of Transportation, and
it is over 100 agencies' activities. And I guess this is
supposed to be quasi-independent, it would be out to one side.
But if you just look at the chart of existing Federal agencies
and activities, we have tons of them.
And you can use this chart now. We have 33 States that have
existing infrastructure banks. And Mr. DeFazio, in his opening
remarks, said they are up against the wall. Most of them, like
the Federal Government, don't have the monies to finance these
infrastructure banks. This chart shows what we already have in
place. The problem is they don't have the funds. So, rather
than create a national new bureaucracy, another agency, I think
we can utilize the existing infrastructure banks.
You will hear from the Oklahoma secretary of transportation
shortly, and he will tell you they have the bank, they don't
have the money. So we have existing capability.
The other thing, too, is what is all this about? This is
about trying to get people to work immediately. To create this
new infrastructure, Federal infrastructure bank, it is
estimated a minimum of a year. This requires setting up a
bureaucracy, staffing it--there is over 100 positions--a cost
of $270 billion. Now, if we could leverage that out, it is
worth probably $1.5 billion, even in a State that doesn't do
very good leveraging.
So, at the cost of $270 billion, when I already have in
place infrastructure banks that can make immediate decisions--
what they need is the financial backing--so these are some of
the reasons I think a Federal infrastructure bank is dead on
arrival at this time, if we want to get people working.
Now, if you want a recipe not to get people to work, adopt
that current proposal. If you want a recipe to put off job
creation, adopt that national infrastructure bank proposal. And
we can do just the opposite. We can get people working right
away.
Let me just talk about what we have got, as far as existing
financing structure. These are existing programs. And I thought
we had a pretty good agreement, both with the House and Senate,
TIFIA, transportation infrastructure financing. We have a loan
program, and we have a guarantee program. And I think we have
agreed on the 33 percent Federal participation can be
increased. I will go to 49, I will consider others. So we can
finance with existing structures if we modify it. We have a
successful example that needs some improvement, and it does
also have a loan guarantee program.
The RRIF program--I checked yesterday--railroad
infrastructure financing--has $34 billion in capacity. It
doesn't work. The joke at Federal Railroad Administration that
administers this program, the joke is that they have had more
FRA administrators than they have had RRIF loans granted. That
is one of the problems.
So, we can make this work. It exists. We don't have to
create a new infrastructure bank. We have private activity
bonds. And again, I think they need backing. GARVEE,
Government-advanced revenue, where you can dedicate a stream of
Federal dollars to projects, we can increase the amount of
money that is available for commitments to States, and they can
go ahead and get people working and do projects.
Harbor Maintenance Trust Fund--and that had a balance as of
yesterday of $6 billion-plus--existing program.
So those are some things, as far as existing finance
programs. Let me go to grants, because again, the Kerry-
Hutchison bill calls for loans, loan guarantees, and grants.
Well, the last time I checked, folks, none of my banks have
been willing to give me a grant. I don't know any banks that
are giving free money out right now, or grants. But the Federal
Government has all of these agencies now giving grants. So we
have a grant mechanism. What do I need to create another one?
They are also specialized. Most of them do a pretty good
job, too. The Federal Aviation Administration people are
critical of agencies getting their money out. They are the
exception. They have actually got just about all of their money
out through AIP money. Most of it is funded through a trust
fund. And there are examples of getting grant money out. We
have got plenty of agencies that can do that.
So, we have TIFIA that works--we can make it work better--
RRIF that works. Sometimes it can work a lot better. Harbor
Maintenance Trust Fund, we have got a good example of a grant
program with AIP.
Finally, we have got a situation where we can get money, we
can be creative, we don't have to create huge bureaucracy. But
what we do need is some reform in the process of getting money
out. We still have--and even if I create another--even if I put
more money in these infrastructure banks at the State level, or
we created a Federal new infrastructure bank, we created the
stimulus program with $63 billion for infrastructure out of
$787 billion. As of September 1, there was $22 billion still in
Washington, DC, after 2\1/2\ years. You can't get the money
out.
In the past bills that we have done authorization from this
committee, I have asked the staff to total up how much money is
still sitting there--TEA-21, TEA-LU, ISTEA--there is $8.5
billion. So there is $30.5 billion sitting there that we can't
spend that we have. So we can do a better job in getting money
out that we already have.
Yesterday the administration announced they are freeing up
14 projects for expedited process. Shovel-ready, as you know,
has become an national joke, because we don't have projects
that are shovel-ready. Now, while they advocated and allowed 14
projects to move forward, they left thousands of projects
behind. So we have got to revise the process and truly make
projects shovel-ready, or you can have all the money in the
world--and we have money here, sitting in Federal accounts that
can't be spent, because projects aren't shovel-ready. So, we
have got to address the twofold issue of financing and being
creative and leveraging, and secondly, process.
So with that, I look forward to working with folks, and I
think we can find a bipartisan bicameral solution to get money
out, projects moving, and people working in this country. And I
yield back the balance of my time.
Mr. Duncan. Thank you very much, Mr. Chairman. And next on
the Democratic side is Ms. Hirono.
Ms. Hirono. Chairman Duncan and Ranking Member DeFazio,
thank you for scheduling this hearing. I would also like to
thank our witnesses for being here today. The proposal we are
examining today was laid out by President Obama in his American
Jobs Act. And that bill would provide $10 billion to establish
an American Infrastructure Finance Authority, AIFA, also known
as a national infrastructure bank.
Right now, our country can borrow at historically low
interest rates. And if we take advantage of this situation, we
could fund this bank and it could be self-sustaining.
His proposal is modeled on bipartisan legislation
introduced by Senators Kerry and Hutchison. And I would like to
note that the President's proposal provides for loans or loan
guarantees, not grants, as contained in the Senate bill.
Increasing our national capacity to invest in
infrastructure is what our country needs right now. Over 14
million of our neighbors are unemployed, nearly 40,000 in
Hawaii. The American Society of Civil Engineers estimates that
we need $2.2 trillion in infrastructure investments to remain
competitive. In Hawaii alone, we are facing an infrastructure
funding shortfall of $14.3 billion. And since 2005, the U.S.
has dropped from number 1 to number 15 in the World Economic
Forum's rankings of national infrastructures.
So, bipartisan proposals that will put people to work,
meeting the vital needs of our Nation are proposals we should
be fighting hard to see enacted. I have been a supporter of
establishing this type of bank for some time. This proposal has
bipartisan support in Congress and among various industry and
labor groups. In fact, establishing an infrastructure bank is
one of the few matters that both the AFL-CIO and the Chamber of
Commerce agree on. So I am sorry to hear that this idea, which
has promise, is dead on arrival in the House.
Establishing the AIFA will add a powerful tool for
financing large-scale, multiyear infrastructure projects, the
type of game-changing investments that will increase our
Nation's competitiveness in the 21st century.
Of course this one proposal won't solve all of our
infrastructure challenges. We shouldn't pretend that it will. I
know that some will argue that providing additional funds to
State infrastructure banks, or expanding the budget of TIFIA
will do the trick. They are both worthy proposals, and I
support them, as well. But they won't do the trick on their
own, either.
What we need is a balanced approach to meeting our
infrastructure needs. We need Federal, State, and private
sector coordination. Contrary to what some may claim, none of
these entities can finance the upgrades we need by themselves.
Given its focus on regional, national, and rural projects, the
AIFA will supplement State infrastructure banks. As envisioned,
it will have a broader project scope, including transportation,
energy, and water projects that will help support TIFIA's focus
on transportation.
So, together, these three programs could help support the
kind of large-scale investment in our economic future without
being subject to the congressional appropriation process, or
taking funds allocated under our multiyear surface
transportation bills. These are investments we need at a time
when we need them badly. We need to put our people to work.
I look forward to working with all of you, and I am sorry
to say that I have a scheduling conflict, so I will be
submitting questions to the panel in writing. Thank you.
Mr. Duncan. Thank you very much. Next we will call on Mr.
LoBiondo.
Mr. LoBiondo. No statement, Mr. Chairman.
Mr. Duncan. All right. Next, Mr. Sires.
Mr. Sires. Thank you, Chairman Duncan. I will be very
brief. You know, this creative proposal I have certain
questions, and I am hoping that, as the committee moves
forward, that I can get some answers.
For example, municipalities are allowed to go to this bank.
Municipalities already have the bonding capacity to do any
infrastructure project. Could a municipality circumvent their
bonding capacity by going to this bank and getting themself
into more debt?
So, you know, these are just questions that I hope that,
you, be answered as the committee moves forward. Thank you very
much.
Mr. Duncan. Thank you. Mrs. Capito.
Mrs. Capito. Thank you, Mr. Chairman. I don't have an
opening statement. I look forward to the witnesses.
Mr. Duncan. Mr. Capuano. No statement? Mr. Harris?
Dr. Harris. No statement, Mr. Chairman.
Mr. Duncan. All right. Mr. Nadler is next.
Mr. Nadler. Thank you, Mr. Chairman. Mr. Chairman, I am
going to be very brief. As is mentioned, the American Society
of Civil Engineers says we have--estimates we have a $2.2
trillion backlog of infrastructure that we have to make. We are
investing about 1.5 percent of GDP and infrastructure annually.
China is something like 6 or 7 percent. Our infrastructure, as
we all know, is falling behind our international competitors.
It makes our economy less competitive, as well as making daily
life more stressful and more expensive. We have got to start
investing a lot more.
The country has fiscal stringencies. The chairman's mark
for the service transportation bill would be a 35-percent cut
in funding. That is exactly the wrong direction to be going in.
How could we make up for this?
We have to leverage private funds. I am not saying this is
a substitute for public funds. It is not. I certainly do not
support the chairman's mark of that low level of funding. We
should have a much higher level of Federal funding. But we also
have to leverage private funds as much as we can, and the I-
Bank, the infrastructure bank, could be a very useful tool for
this. TIFIA should be expanded, but the I-Bank is a very useful
tool.
At the same time, it is not a panacea. We are going to have
a fight on our hands to preserve the transportation funds that
we do have. And we have to make sure that they are spent as
wisely as possible.
I have a number of questions about the I-Bank. And I think
some of the claims made for it are somewhat questionable. But
on balance, I think it is a very good idea.
For example, I support this in addition to but not instead
of a section in the infrastructure--in the reauthorization bill
on projects of national and regional significance. I do not
want all decisions taken away from Congress and given to people
in the Department of Transportation or in the new
infrastructure bank bureaucracy that you might set up.
We have to be careful about falling prey to lofty rhetoric
about somehow finding a magic formula, a magic non-political
formula for project selection. Every decision carries with it a
value judgment. How do you determine, for example, whether a
transit project that moves millions of commuters is more
deserving than a port access project that moves millions of
freight containers? Well, the commuters vote, the containers
don't, but that is not the valid criteria.
Or, NextGen, that improves safety and efficiency in the
aviation system. How do you calculate the cost and benefits? Do
we fund only projects that have a revenue source and can repay
a loan? That is one of the weaknesses of this I-Bank proposal,
in that it does loans only, or loan guarantees only, and
therefore can only help where you have a revenue stream.
But what if you don't have an adequate revenue stream on a
project that is necessary to finance? How do we ensure that
important projects with significant public benefits but maybe
not the direct economic return as defined by an official in the
I-Bank or in TIFIA also get funded?
I am sure that many others in this room have at some point
questioned the decisionmaking of agencies. No matter who is
making the decisions, there is always a political component.
And putting a lot of money that is critical to the economy in
the hands of unelected bureaucrats is not always the best idea.
Many of the things I have supported in the past came to my
attention because there was a specific need that was not being
met by Albany or by Washington for any number of reasons. As
long as the process is open and transparent, there should still
be a role for Congress and elected officials to direct funding
for worthwhile projects and programs.
Whatever we do, we must do it soon, and we must not lose
sight of the necessity to pass a long-term transportation bill
that will repair and sustain and improve our Nation's
infrastructure systems, and provide a crucial boost in job
creation and economic development.
With these caveats, that it must not be the only
decisionmaking agency, that it must be supplemental to, not
instead of normal project financing and congressional
decisions, I think an infrastructure bank such as the President
has proposed could make an excellent addition to our armory of
tools to address our infrastructure needs. I thank you, and I
yield back.
Mr. Duncan. Thank you very much, Mr. Nadler. Mr. Petri. Oh,
he is not--all right. We have got--I don't believe anybody else
on our side. So Ms. Johnson?
Ms. Johnson of Texas. Thank you very much, Mr. Chairman and
Ranking Member DeFazio. I am glad to see that the Highway and
Transit Subcommittee addressing such an important subject as
the proposal for the national infrastructure bank. And I want
to thank you for its consideration.
However, I am greatly disappointed to see that the current
majority of this subcommittee seems to have already reached a
conclusion on this topic by entitling the hearing, ``National
Infrastructure Bank: More Bureaucracy and More Red Tape.'' This
is certainly a prematurely formed opinion on this matter, and I
hope that the majority will keep an open mind on the proposal
of a national infrastructure development bank, moving ahead.
The creation of the national infrastructure development
bank to leverage private and public capital to finance
nationally and regionally significant infrastructure projects
is a proposal that I have been highly supportive of for many
years, and I have cosponsored legislation that would achieve
exactly this. And I have been a vocal supporter of the
President's American Jobs Act that includes this proposal.
So, the creation of a national infrastructure development
bank is an idea that enjoys bipartisan support. The President's
proposal, as a part of the American Jobs Act, is based on
legislation introduced by Democratic Senators Kerry and
Rockefeller, with the support of Senators Graham and Republican
Senators Hutchison and Lautenberg.
The House legislation for this Congress, H.R. 402, has been
introduced by Congresswoman Rosa DeLauro, and currently has 70
cosponsors, including myself.
The President's national infrastructure development bank
proposal would create American infrastructure financing
authority to provide direct loans and loan guarantees to
expedite regionally or nationally significant projects, in
partnership with the existing Transportation Infrastructure
Finance and Innovation Act program. While the TIFIA program
focuses on helping fund traditional surface transportation
projects with Federal credit assistance, the AIFA would expand
eligibility, eligible infrastructure projects, to include not
only highways and bridges, but also transit projects: airports,
inland waterways, and rail systems, and water infrastructures,
dams and levees, as well as energy infrastructure and others.
These national programs would work with State
infrastructure banks to enhance our country's aging
infrastructure system. They are regional proposals to improve
the financing expensive infrastructure projects and enjoy the
support of Democrats, Republicans, and Independents.
So, I look forward to hearing the witnesses today, and I
thank you very much for the hearing, again. I yield back.
Mr. Duncan. Well, thank you very much, Ms. Johnson. I will
tell you that I was not the one who came up with the title for
this hearing, but there may be better ways to fund these
projects.
I did not overlook Mr. Lankford, though. We are saving him
to the last, so he can introduce our first witness.
I will say that we have a very distinguished panel here
today, and I will introduce the other witnesses. We have Mr.
Ron Utt, who is the senior research fellow at the Heritage
Foundation, Mr. Geoffrey Yarema, who is a partner at Nossaman
LLP, Mr. Gabriel Roth, who is a civil engineer and
transportation economist with the Independent Institute, and
Mr. Scott Thomasson, who is director of public policy for the
Progressive Policy Institute.
And now, I call on Mr. Lankford for any opening statement
he wishes to make, and then request that--Mr. Lankford, that
you introduce our first witness at the conclusion of your
opening statement.
Mr. Lankford. Well, thank you, Mr. Chairman. I am glad to
be a guest of this committee today. I am on the full Committee
for Transportation, but a guest of this subcommittee, since we
have the finest secretary of transportation in the Nation, Mr.
Gary Ridley, that is here from Oklahoma, who absolutely does
set the standard for planning and long-term research, and
looking out on the horizon to see what is coming up on things.
I am glad that we are taking the time to discuss the issue
of the national infrastructure bank, as well, before we get in
a hurry to do something, and end up creating another labyrinth
of red tape and another Federal program to solve the previous
labyrinth of red tape and the previous old Federal program. In
the past, Government high-risk loans were used for activities
like nuclear power plants, but had such a high cost and high
regulation that lenders were slow to put capital at risk,
because of the uncertain political environment.
Now, apparently, the regulation and political risk is high
on asphalt pavement. What have we become, as a Nation, when we
have driven the cost of construction up so high, increased the
construction time through regulations so long, and burdened the
State budget so much that we need a Federal loan program to
offset the risks of lending for a bridge? This is a prime case
of the Federal Government creating the problem, and then
running in with a solution that will really just create more
problems.
It is my concern that this loan program is designed to bail
out States that cannot get credit because of bad budgeting
decisions in the past, so they are at high risk. Or it is
another way to shuttle additional money to States that already
receive a high proportion of transportation dollars.
There is a legitimate role for the Federal Government in
transportation and facilitating interstate commerce. But
creating a new infrastructure bank with the start-up cost of
$270 million and 100 new employees to do what normal
transportation funding, TIFIA, and many State infrastructure
banks already do, I do not believe is one of them.
States do not need yet another way to increase their debt
from the Federal Government. They need answers to the problem.
They also don't need a group from Washington determining which
projects get funding, based on the decisions of another yet-to-
be-named group from the administration. The last thing we need
is another Government enterprise like Fannie Mae and Freddie
Mac, or another loan program like the Department of Energy's
loan to Solyndra.
The Federal infrastructure bank is also not shovel-ready.
It would take a significant amount of time to select directors,
get established, do the studies, hire the large staff, then
start giving taxpayer-backed loans. In the meantime, what is
really needed is a long-term reauthorization bill, a funded
TIFIA program, and a streamlined construction process so they
can get started.
I do look forward to the testimony today, Mr. Chairman, and
I thank you for allowing me to be able to be here, and to be
able to introduce Mr. Ridley of Oklahoma, a great secretary of
transportation. I look forward to his testimony, and the
testimony of the others.
Mr. Duncan. Thank you. Thank you very much, Mr. Lankford.
And I would like to welcome all of our witnesses and thank them
for being here today, and ask unanimous consent that our
witnesses' full statements be included in the record. And
unless there is objection, that will be so ordered.
Since your written testimony has been made a part of the
record, the committee requests that you limit your opening
statements, the summary of your opening statements, to the 5
minutes. And Mr. Ridley, we will begin with you.
Secretary Ridley.
TESTIMONY OF THE HONORABLE GARY RIDLEY, SECRETARY OF
TRANSPORTATION, OKLAHOMA DEPARTMENT OF TRANSPORTATION; RONALD
D. UTT, PH.D., HERBERT AND JOYCE MORGAN SENIOR RESEARCH FELLOW,
THE HERITAGE FOUNDATION; GEOFFREY S. YAREMA, CHAIR,
INFRASTRUCTURE PRACTICE GROUP, NOSSAMAN LLP; GABRIEL ROTH,
CIVIL ENGINEER AND TRANSPORT ECONOMIST, THE INDEPENDENT
INSTITUTE; AND SCOTT THOMASSON, ECONOMIC AND DOMESTIC POLICY
DIRECTOR, PROGRESSIVE POLICY INSTITUTE
Mr. Ridley. Mr. Chairman, members of the committee, my name
is Gary Ridley. I am the secretary of transportation in
Oklahoma. I am here today to testify on behalf of the Oklahoma
Department of Transportation.
First, we want to thank you, Mr. Chairman, for your efforts
to ensure that transportation infrastructure is a priority of
the Nation. We appreciate you, Congressman Lankford, other
members of the committee, to recognize the important
contribution of the transportation system in improving the
Nation's economy, viability, and sustaining our quality of
life.
Dedicated public funding, innovative financing, and
opportunistic partnerships have important roles in the
development and management of modern world-class transportation
system. Depending on the condition, each method can be equally
effective in delivering infrastructure improvements, and each
has both positive aspects and drawbacks.
Considering the Nation's transportation system, it is
imperative that we recognize the success of dedicated funding
initiatives, financing methodologies and partnerships. All are
dependent on the identification and stability of long-term
supporting revenue streams. Therefore, as we turn our attention
to the work of identifying ways to modernize, expand, maintain
our aging and deteriorated infrastructure, we must remain
mindful that dedicated, long-term, and consistent
transportation funding is critically important.
Today a variety of financing methodologies can be brought
to bear in order to help successfully deliver significant
transportation improvements that are out of reach of the
immediate availability of transportation funding sources. In
recent times, the utilization of grant-anticipated revenue
vehicle bonds, referred to as GARVEE, transportation
infrastructure finance and improvement financing, referred to
as TIFIA, public-private partnerships, Build America bonds,
State infrastructure banks, and other such methodologies have
proven effective in financing certain well-defined
transportation system needs.
Focusing specifically on the successes of TIFIA, the
structure and organization of the program seems to hold
particular promise for assisting with financing of
transportation improvements. Recognizing extension acts and
continuing resolutions, TIFIA currently receives $122 million
each year, and can support an estimated $1 billion in average
annual credit assistance.
In recent years, more widely accepted and mature--in recent
years, a more widely and mature TIFIA program has received a
considerable level of interest, and has participated in many
important transportation improvement projects. Most recently,
in 2011, the program received $14 billion in letters of
interest for participation in projects with an estimated value
of more than $48 billion.
Based on the summary information currently available, both
the House and Senate reauthorization bills include a plan to
build upon and improve a TIFIA loan program. It is very
appropriate to utilize the existing and successful program and
format to deliver an enhanced financing opportunity, along with
a more robust set of eligibility criteria.
Providing additional funding for TIFIA will help meet the
demand for credit assistance for transportation projects, and
enable an increased leveraging of Highway Trust Fund dollars
with State, local, and private sector funding.
Conversely, the concept of a new Government corporation and
Federal authority will somehow enhance the ability to finance
infrastructure seems untimely and entirely unnecessary.
Especially when considering that many of the ideas encompassed
by the proposed authority already appear to be closely
paralleled provisions of other existing Federal financing
programs.
In addition, recognizing the apparent Federal duplication
and administrative control of the proposed national
infrastructure bank, most States already have and can easily
obtain the expertise necessary to facilitate infrastructure
banks and other innovative transportation financing
methodologies. States can choose to work with existing Federal
bureaucracies, or seek assistance of private financial
institutions, knowledgeable investors, or even experience of
other States.
In Oklahoma, we have been effectively and efficiently
arranging financing for transportation improvement projects
within our borders for more than 50 years. Again, it is
important to acknowledge the difference between identifying new
sources of transportation revenue and creating new ways to
incur debt without providing for new revenue streams capable of
retiring that debt. None of the referenced financing
opportunities specifically provides for any new additional
funding. Bonds still must be repaid with interest. Government-
guaranteed loans are still loans. And the associated long-term
repayment plan reduces the availability of future resources.
Capitalizing an infrastructure bank duplicates other
financing methodologies, and does not generate new revenue. For
financing transportation projects, States only require clear
Federal guidance in the law and continued and enhanced
utilization of existing financing opportunities. A bold new
vision will be necessary to meet the increasing transportation
challenges ahead, and it is unlikely that such a vision will be
defined by an easy payment plan.
It is much more likely that efficiencies can be gained
through regulatory reforms and red tape reductions, rather than
through the creation of a new Government corporation and
additional bureaucracy.
Mr. Chairman, thank you for the opportunity to provide
testimony. I would be happy to answer any questions that the
committee may have.
Mr. Duncan. Thank you very much, Mr. Secretary.
Mr. Utt, you wrote a real fine column on this issue that I
read in the Washington Times. And thank you for being here with
us today. You may begin your testimony.
Mr. Utt. Well, thank you for having me. Chairman Duncan,
Ranking Member DeFazio, and members of the subcommittee, thank
you for inviting me to express my views on the various
proposals to create a national infrastructure bank. My name is
Ronald Utt. I am a Herbert and Joyce Morgan senior research
fellow at The Heritage Foundation. The views I express in this
testimony are my own, and should not be construed as
representing any official position of The Heritage Foundation.
Until recently, Federal interest in infrastructure banks
has been limited to the creation of funding of State
infrastructure banks, several of which were created in the
1990s, and are still in operation. Congressional focus has
since shifted to a Federal infrastructure bank. Several bills
have recently been introduced in Congress to create such an
entity. Added to this are the several plans President Barack
Obama has proposed since taking office.
What these Federal-level proposals all have in common is
the goal of attempting to muster a greater volume of financial
resources for various types of infrastructure. But beyond that,
they all differ significantly in how they would operate, who
would run them, the volume and source of funds, what they can
invest in, and what types of infrastructure would be eligible
for support.
I have reviewed these proposals and believe that there is
little added value from them beyond what could be achieved by
modest alterations in existing transportation programs. Reasons
for my skepticism are as follows.
First, the Federal Government has created a number of
credit entities over time, and most have been challenged by
serious financial failure involving taxpayer bailouts. Fannie
Mae and Freddie Mac are the most recent and perhaps the most
catastrophic of all, with bailout costs totaling about $150
billion so far. Would an infrastructure bank be immune from
these risks?
In this regard, what is noteworthy about the typical
infrastructure bank proposal is that all will begin with risks
and deficiencies that could exceed those confronting the
Federal finance entity cited above. Fannie Mae, for example,
was supposed to be investing only in conforming mortgages,
thought by most to be safe, conservative investment, providing
a steady stream of revenue.
With the exception of some well-established toll roads,
bridges, and tunnels, most transportation infrastructure earns
no revenue, and must be supported through taxes or related user
fees. Most roads are still free to users, and will likely
remain so, while fares earned on even the best run transit
systems recover none of their debt service, and only about half
of their operating costs.
As such, the inevitable source of revenues to an
infrastructure bank seem likely to be taxes. And, of course,
this would be the case with any grants by banks, as some
proposals would allow.
Senator Inhofe, ranking member of the EPW committee noted
that ``banks don't give out grants, they give out loans. There
is currently a mechanism for giving out Federal transportation
grants. It is called the Federal highway program.''
My second concern reflects the Senator's, and that is to
wonder what the value added would be of creating another
Federal transportation program when you already have one that
has a half-a-century of experience and has served the Nation
reasonably well. If credit availability is the issue, then a
quick review of existing Federal transportation infrastructure
credit programs reveals that there are several programs in
existence, including the TIFIA program, GARVEE bonds, tax-
exempt private activity bonds, tax-exempt State municipal
revenue bonds, or tax-exempt general obligation bonds. If
current levels of credit availability for existing programs are
deemed insufficient, why not propose that these existing
channels be improved or expanded?
Third, I am perplexed by how such a bank would aid in the
economic recovery. For some advocates, these banks are seen as
a mechanism to propel the economy forward out of the lingering
recessions and into an era of greater prosperity and more jobs.
Sadly, all evidence indicates that this isn't so. In large
part, such programs have been a disappointment because of time
delays in getting underway, projects identified, projects
approved, and money spent.
Supporters of the American Recovery and Reinvestment Act
claim that it would focus on shovel-ready projects, but USDOT
recently reported to this committee that, as of July 2011, 2\1/
2\ years after the enactment of the legislation, just 61
percent of authorized transportation funds had been spent. Yet
the stimulus funds were spent through existing Federal, State,
and local channels by departments, managers, and employees with
many years of experience in the project approval business.
In the case of the proposed infrastructure banks, no such
administrative infrastructure exists. And one will have to be
created from scratch, once the enabling legislation is
ultimately enacted. As a result, delays would be even longer in
getting projects underway.
That concludes my oral remarks, and I would be pleased to
discuss them further during questions and answers. Again, thank
you, Mr. Chairman, for the invitation.
Mr. Duncan. Thank you very much, Mr. Utt.
Mr. Yarema.
Mr. Yarema. Thank you, Mr. Chairman, Ranking Member
DeFazio, and members of the subcommittee. It's an honor to be
here today. I appreciate the invitation.
I am a partner in a law firm that has the privilege of
representing State and local transportation agencies around the
country. They are all struggling with the same basic problem:
how do they deliver our largest and most important new
infrastructure projects, while minimizing the use of Federal
gas tax dollars?
We have been fortunate to have been successful in helping
them deliver signature projects doing just that. In addition, I
had the privilege to serve on the National Surface
Transportation Infrastructure Financing Commission, appointed
by the U.S. Secretary of Transportation Mary Peters, of which I
was proud to be a part. Our unanimous and bipartisan report to
Congress and the administration was completed 2 years ago. So
my testimony today reflects my firm's experience on the ground,
representing public transportation agencies in your districts,
as well as the work I did with the Commission.
As the subcommittee is well aware, the role of the Federal
Government in delivering our largest transportation
infrastructure projects is changing. Historically, the function
of the Federal Government has been to provide funding to the
States and then regulate how they use it. As those Federal
resources have declined in very real dollars, States and
localities have been faced with deferring those large projects
for decades or filling the ever-growing gap with their own
resources instead.
Thus, the Federal role is evolving away from a traditional
apportionment-based funding paradigm and toward a credit
assistance and incentive-based model that leverages as few
Federal dollars as possible into the maximum State, local, and
private contributions to projects of regional and national
significance. In other words, the Federal role is getting the
States themselves to do now what the Federal Government used to
do much more itself.
This shift in thinking is evidenced best by the policy
underlying one of the key components of the President's
proposed Jobs Act, the national infrastructure bank. The
President is certainly right--we can create hundreds of
thousands of badly needed jobs and build critically important
infrastructure with a federally supported bank. What is ironic,
however, is that we already have a national infrastructure bank
for transportation. And as you have heard today, it is called
TIFIA. And Congressman Johnson has been one of the longest
standing supporters of TIFIA, and we can't thank you enough for
your steadfast commitment.
This program has been operating successfully for 12 years.
Every $100 million of TIFIA credit subsidy creates
approximately $1 billion in the face amount of loans, which
States, localities, and private entities use to create about $3
billion in project finance plans. Thus, the Federal Government
gets a 30 to 40 times multiplier for every TIFIA dollar that it
provides.
The problem today is that TIFIA is terribly underresourced.
Currently, the program has a backlog of applications for over
$30 billion in projects of regional and national significance
in districts all over the country. Instead of going to the
cost, the delay, and the bureaucratic struggles to create a new
institution, why not just add to TIFIA, size it to meet the
demand that we project, and clear out the backlog now? At the
same time, we can simply take the opportunity to fine-tune the
program based on the successful 12 years of experience we have
had with it, and modernize its mechanics.
For related reasons, it is hard to listen to the
President's statements supporting an infrastructure bank
concept without some degree of consternation. The U.S.
Department of Transportation actually has had the opportunity
to expand the TIFIA resources that it has available today with
shares of its TIGER funds, but has simply chosen not to do so.
Under TIGER I it could have added $250 million in credit
subsidy to TIFIA, which would have produced $2.5 billion more
in TIFIA loans, or $7.5 billion in project value, than the base
TIFIA program had resources for. But it elected to award less
than a quarter of that.
Under TIGER II the U.S. DOT could have added up to $150
million or $1.5 billion in loans to the program, but again,
despite excellent applications, awarded less than 15 percent of
that.
Now, under TIGER III, Secretary LaHood has the discretion
today to award up to $150 million, or $1.5 billion in loans for
projects totaling over $4.5 billion in project costs. These
projects, which will otherwise be delayed or canceled, will
produce literally hundreds of thousands of jobs, not for modest
repaving jobs, but for projects of regional and national
significance, making a material contribution to our critical
mobility needs and economic growth. The letters of intent for
that TIGER III program go in on October 31st. If the President
really believes in the national infrastructure bank concept, he
should tell the Secretary to fully fund TIFIA out of the TIGER
III program. Whether the Secretary does that or not really
should be a litmus test for whether the President really
supports a national infrastructure bank concept, and wants to
maximize job creation.
Thank you for the opportunity. I am happy to answer
questions.
Mr. Duncan. Thank you very much, Mr. Yarema.
Mr. Roth.
Mr. Roth. Good morning. I would like to start by thanking
you, sir, and Ranking Member Peter DeFazio, for inviting me to
testify before this subcommittee. I would also like to thank
the other witnesses for their informative and helpful
testimony. Having heard the case against the new infrastructure
bank, I am looking forward to hearing the case in support.
But, as for myself, I am also against the President's
proposed American infrastructure financing authority. This is
not because of any objection to an infrastructure bank. My
disagreement is with the idea that the Federal Government
should finance such a bank. My disagreement is for four
principal reasons.
First, the Federal Government, having run out of money,
should not finance facilities that can be financed by others.
Second, because U.S. transportation systems have a long
user-pays tradition, having been financed over long periods by
private investors and by user-funded, dedicated road funds. As
you all know, the Federal Highway Trust Fund was set up in 1956
with great care to avoid subsidies from general revenues. And
this seems to me to be a precedent worth following.
Third, Government involvement can actually delay projects,
and even politicize them, so that the most urgently needed
projects do not get funded. This point is pertinent, because
the executive branch seems to have a problem in identifying
viable projects on which to spend taxpayers' money. Job
creation does not justify all projects. And the private sector
actually tends to be good at finding those with benefits that
exceed costs.
In my testimony I suggest that priority be given to
relieving urban traffic congestion by providing express toll
lanes, the tolls being collected electronically and varied to
ensure free flow on the lanes at all times.
Finally, Federal involvement raises costs, for example,
because of numerous regulations, including those arising from
the Davis-Bacon and ``Buy American'' acts. Therefore, for
projects that cannot be financed by private investment, it
seems to me that financing by individual States seems
preferable to Federal financing.
This subcommittee has important responsibilities. I am sure
that all of us testifying today wish its members all success in
encouraging the provision of urgently needed transportation
projects at the highest possible speeds and the lowest possible
costs. Thank you.
Mr. Duncan. Thank you very much, Mr. Roth.
Mr. Thomasson.
Mr. Thomasson. Thank you. I thank the subcommittee,
especially Chairman Duncan and Ranking Member DeFazio, for
holding this hearing today. I hope the committee members find
today's discussion helpful to fully understanding this
important proposal to enhance our national strategy for
infrastructure spending and investment.
There is no better symbol of the recent dysfunction of our
political system than the partisan divide on funding
infrastructure. Infrastructure has long been a shared
bipartisan priority, but Congress now finds itself unable to
pass critical transportation funding bills that expired years
ago. Swift rejections from Republicans to the proposals
President Obama offers for infrastructure render many good
ideas ``dead on arrival,'' simply because the President was the
one to suggest them.
The latest target of this rush to judgment is the
President's proposal in the American Jobs Act for a national
infrastructure bank. Although leaders throughout the U.S. and
around the world support infrastructure banks as a smart
investment tool, the idea is still new and unfamiliar to many
here in Washington. The infrastructure bank proposal has
generated a lot of confusion and misinformation, with opponents
often painting a misleading picture of what this type of bank
would look like. Many of the criticisms now lobbed against the
President's proposal are arguments about older infrastructure
bank legislation, and they have little to do with the current
version in the jobs bill.
So, let's set the record straight on what the President's
bank proposal is and is not. When he introduced the jobs bill,
President Obama explained that the bill included a bipartisan
Senate proposal to create a national infrastructure bank. That
bipartisan approach is taken directly from the BUILD Act, which
was introduced by John Kerry, Kay Bailey Hutchison, Lindsey
Graham, and Mark Warner.
The bipartisan infrastructure bank represents a new
approach to the idea of creating a bank. Its funding and
operations are kept to a fiscally responsible scale, while
preserving the best principles of political independence and
merit-based decisionmaking to make the bank worth doing in the
first place. And the bipartisan proposal is also limited to
loans and loan guarantees, and would not issue grants, as full
committee Chairman Mica said in his statement today. That is
just not accurate for the version in the jobs bill.
The bipartisan infrastructure bank will not be a sprawling
Federal bureaucracy that entangles States and regulations in
red tape. It will be an optional financing tool that is
available to empower States and local governments to invest in
transportation, energy, and water projects, and it will be
staffed by financial professionals, not bureaucrats.
The bipartisan infrastructure bank will also not be a
policy-driven subsidy program designed to pick winners or
dictate planning decisions to States. It will invest in pouring
concrete, not propping up companies. It will do so independent
of political pressure and influence, evaluating projects based
on their economic merits, using the same bottom-up approach as
DOT's successful TIFIA program, which we have heard so much
about today.
The bipartisan infrastructure bank will not be another
Freddie and Fannie type entity that runs the risk of a
taxpayer-funded bailout. It would be a Government-owned
corporation, similar to the U.S. Export-Import Bank. It would
draw on a familiar Treasury-based lending mechanism, and it
would not borrow its own money to leverage its lending. This
structure ensures that the bank bears no resemblance whatsoever
to shareholder-owned GSEs like Fannie and Freddie.
The approach of the bipartisan infrastructure bank is new
and innovative. But there is nothing new about broad support
for infrastructure banks. The infrastructure bank is an idea
that has already been widely adopted in countries around the
world, and by many States here in the U.S. There is strong
support for a national bank here in America that includes broad
coalition of top corporate CEOs, Wall Street investors,
organized labor, and local government leaders. Just this week,
the President's Jobs Council, an all-star team of CEOs and top
leaders from the U.S. economy, recommended we create a national
infrastructure bank that can ``invest aggressively and
efficiently in cutting-edge infrastructure.''
Even the U.S. Chamber of Commerce wants a national
infrastructure bank. Chamber president Tom Donohue has said
that the bank would be an invaluable part of the solution to
how we pay for maintenance and improvements that we can't
afford to ignore, but it can only work if it is added to a
strong foundation of spending in the transportation
reauthorization bills.
Now more than ever, Congress needs to consider the full
range of options we have to increase U.S. infrastructure
investment. And the new national infrastructure bank proposal
in the President's jobs bill deserves to be part of any
discussion about the solutions on the table for solving our
enormous investment challenges.
I thank the committee for the chance to testify today, and
I look forward to answering your questions about this important
bipartisan proposal.
Mr. Duncan. Thank you very much, Mr. Thomasson. I am going
to yield my time at this point to Vice Chairman Hanna for any
questions or comments that he might wish to have.
Mr. Hanna. Thank you, Mr. Chairman. Mr. Thomasson, thank
you for being here. What separates this from a subsidy, in your
mind? I mean why is it the case that if something could happen
in the natural marketplace, and the Government has to step in
with what amounts to lower interest loans, which, in my mind,
is a subsidy, why should we permit that to happen if, as you
say, they are self-supporting?
Mr. Thomasson. Well, first of all, there is no direct
subsidy in these loans. Most of the loans under the bipartisan
proposal are ``self-pay,'' similar to the 1703 proposal program
in DOE, as opposed to the subsidized 1705 proposal.
But to address your question about the market being able to
handle these projects, there are certain market failures, if we
could call them that, for large projects of national and
regional significance that some States can't handle on their
own, that many banks and investment funds can't handle because
they have diversification requirements that just can't stretch
as far as some of these projects need.
And, obviously, there are coalitions that can do that. You
have seen many States and governments at every level around the
world partnering with private sector, partnering with different
Government agencies to fund these large-scale projects, and
that is part of the role that this national infrastructure bank
would play.
As Congressman Nadler said--I couldn't say it better--it
would be an excellent addition to our armory of tools. And
State infrastructure banks want this--the ones I have talked
to--as an additional tool. They understand that it doesn't
solve all their problems, but there is a need for it that
markets aren't currently addressing.
Mr. Hanna. You say that there are multinationals and
national companies that are perfectly capable of handling this
magnitude of project. So your reason for this is because they
are just too big for the general marketplace. Doesn't that
suggest, then, that the risk is too big, also?
Mr. Thomasson. In part. And also, for some of these large
projects, in part because of the risk, and in part because the
local financing costs for local governments are higher than the
Federal Government's, and also the higher cost of private
capital--private capital expects higher returns than,
typically, the bond market does, and those higher costs make
some of the economics of these projects not work out so well.
And when you introduce lower cost Federal lending as part
of this equation, it really, on the margins, allows certain
projects to become economically rational, to pass that market
test, and----
Mr. Hanna. Obviously, that is the premise. And I would
agree with you, that as long as the Government wants to
subsidize a lower rate of interest, based on the full faith and
credit of the country--that, incidentally, has a multitrillion-
dollar debt in its own right--that they wouldn't work without
that. That is what you are saying.
Mr. Thomasson. Well, I think you have seen the demand for
this, with the TIFIA program. I mean TIFIA is over-subscribed,
has a backlog of applications. If the private sector can handle
this without the economics of the Federal Government working,
then the TIFIA program would not have the demand----
Mr. Hanna. And therefore, the Federal Government assumes
that marginal risk.
Mr. Thomasson. Well, the Treasury is made whole for that
risk under the Federal Credit Reform Act, which this proposal
would be subject to. And through the loan repayments, the
subsidy fee under the Federal Credit Reform Act would be repaid
into the Treasury, and taxpayers would be made whole for that
default risk that they take on.
Mr. Hanna. Mr. Utt, are there any circumstances under which
you would feel good about this type of loan guarantee?
Mr. Utt. No, but we already have loans and loan guarantee
programs run by the Federal Government. And some of them are
quite large, and particularly the railroad one. And I have
argued that they should be either--particularly the railroad
one--cut back or substantially reduced from the current level,
which is $35 billion.
I think that there is an enormous amount of money in the
private sector that would be available for a well-conceived
project in a State with accommodating legislation for public-
private partnerships. The case in point is the State of
Virginia, which has very early experience on this, and has
enacted accommodative legislation, has tweaked that
legislation, and has established the expertise in the Virginia
Department of Transportation, slowly but surely, to do these
deals.
Right now, not too far away from us, a $2 billion project
on the beltway is coming to an end and it received $400 million
worth of private funding to supplement TIFIA money, private
activity bonds, and input from the State. They are also
involved in a huge tunnel in the Hampton Roads area, which was
another public-private partnership, and may soon be getting
underway HOT lanes on I-95, 395, which is another multibillion-
dollar project.
So, it can be done. But it has got to be the right project.
Not every project lends itself to that kind of self-financing
or revenue stream that will pay off the debt.
Mr. Hanna. Thank you, sir. I yield back.
Mr. Duncan. Thank you very much. Mr. DeFazio.
Mr. DeFazio. Thanks, Mr. Chairman. This isn't the direct
subject, but I just want to address one issue here, because it
rankles me.
I voted against the stimulus, ARRA, in part because it was
deficient in real investment in infrastructure, building
things, putting people back to work, and very heavy on tax
cuts: 13 times more in tax cuts than infrastructure investment.
Yet I keep seeing these mythical sort of ``It is not working.''
That was the one part of the thing that worked.
And here in Mr. Utt's testimony, we have this rather
disingenuous statement, and I would just like to correct it.
And it implies that somehow the money hasn't been committed,
couldn't be spent on the highways and transit. Actually, 100
percent has been committed. Yes, project sponsors do not get
reimbursed by the Federal Government until the project is
finished. And that information in Mr. Utt's statement was from
July, which was the beginning of the construction season. So
the number would be quite a bit higher now.
And so, Mr. Utt, I just wish that you and others would stop
parroting that, and pretending that that part didn't work. It
did. One hundred percent commitment of the money. Projects, 100
percent underway or completed.
And then you go on to say that this is not a good way to
put people back to work. In his testimony, Mr. Yarema does not
agree. Mr. Yarema, I would be interested in your response. Mr.
Utt, citing a 1983 GAO report, says that infrastructure
investment is an inefficient way to create jobs and recover
from a recession, doesn't employ unemployed people, et cetera.
You say that it will--that TIFIA investment could create jobs,
and quickly. Could you respond? Is infrastructure a really poor
way to create jobs?
Mr. Yarema. No, infrastructure is a great way of creating
jobs. It is one of the best ways of creating jobs. TIFIA is a
valuable tool to attract non-Federal investment, but it is not
intended to be a substitute for Federal apportionments. We do
need Federal apportionments, and the States are doing more than
their share to fill the gap left over.
What TIFIA does is recognize the fact that current levels
of Federal apportionments, combined with State and local
resources, still leave us a huge gap, as the national
Commission really focused on.
And so, how do you incentivize States, localities, and
private entities to come in and help fill that gap? What TIFIA
does, as I mentioned, is create significant leverage and
incentives for the States and localities to do exactly that.
Estimates of how many jobs are created for every billion
dollars invested in infrastructure vary. But AASHTO numbers say
it is about 28,000 or 29,000 jobs per billion dollars of
expenditure.
If you just take the $30 billion in TIFIA backlog, and
right-size TIFIA to make it equivalent to demand, you multiply
28,000 times 30 billion--you get almost a million jobs. What is
so important about the TIFIA program sitting here today is that
the $30 billion backlog represents projects that are almost all
ready to go. I don't use the word ``shovel-ready,'' but this
backlog of projects of regional and national significance are
almost all environmentally cleared; the State, local, and
private monies that will be needed to repay the TIFIA loans are
almost all assembled; and the procurements are all either in
process, soon to be in process, or final negotiations in
process.
So, we are talking about a very unique moment in our
history, when we have many billion-dollar-plus jobs that are
ready to go if we can right-size TIFIA. With consensus on that,
we can proceed to refine how TIFIA works. There has been some
mention today of the discretionary decisionmaking that takes
place under TIFIA and would be enhanced with the national
infrastructure bank. If we size TIFIA to meet demand, we can
make it a first-come-first-served, rolling application program.
You make your application, check the boxes. Does it qualify? If
so, you do your financial analysis. Is it feasible? If so, then
get in line for money. If loan capacity is available, it goes
out the door. One hundred twenty days from initial application
should be sufficient for fully qualified and financially sound
projects, given without waiting for a one-time-a-year window to
open and shut.
So, really, that kind of a program, which is the way almost
all the rest of the credit programs work in the United States,
would have a dramatic impact on employment, mobility, and
economic growth.
Mr. DeFazio. And when the loan was made--since what Mr. Utt
and others are using is the spend-out rate versus the
obligation of money--would those loans be immediately all
spent, and would we measure the projects by that, or would some
of them take a couple of years, because they are big projects?
Mr. Yarema. You are absolutely right. The spend-out would
be over the construction period.
Mr. DeFazio. Thank you. But you do raise one issue I have a
concern about, which is springing liens. Because you know the
way the Federal Government scores things is risk.
Mr. Yarema. Right.
Mr. DeFazio. And I would assume--you are an attorney, I am
not--that the Government would be assuming more risk if that
springing lien provision did not exist, which means that the
trolls down at OMB would score these things differently, which
means we would get less efficiency for the money that we put
into TIFIA.
Mr. Yarema. That is correct. The scoring that the Treasury
does and OMB does on these loans varies, based upon the overall
risk of the loan. There are many risk factors that go into that
calculation, of course, the source of repayment of the loan
being the principal one.
So, for example, a TIFIA loan backed by local option sales
tax revenues, would be scored lower than a loan backed by toll
revenues, like may happen with the planned Columbia River
Crossing between Portland and Vancouver.
The springing lien would create slightly more risk. But I
really don't think it is going to be material. With a 12-year
history TIFIA is not a new program. The success rate that those
TIFIA loans have had will, I think, be a significant mitigating
factor in any incremental increase in scoring created by a move
away from the springing lien balance.
Consequently, I really advocate removing the springing lien
requirement. Not only will it have only a modest impact on loan
scoring, I think it will have a huge impact on attracting
senior debt into the projects, which is exactly what TIFIA
seeks to accomplish. With the springing lien removed, I think
we will have a net gain.
Mr. DeFazio. OK, thank you. My time has expired, Mr.
Chairman.
Mr. Duncan. Yes, thank you very much. Mr. Coble.
Mr. Coble. Thank you, Mr. Chairman. Good to have you
gentlemen with us this morning.
Mr. Ridley, has Oklahoma utilized its SIB as a tool for
innovative financing?
Mr. Ridley. We have not. We have used general obligation
bonds, revenue bonds, GARVEE. We have not used TIFIA, simply
because we have not had a project that really lent itself. We
do think that the TIFIA program is a viable program that we may
use in the future. Certainly if it was better capitalized and
maybe modernized a little bit, so that it made it easier for
accessibility, we think it certainly has some pluses. But we
have not.
Mr. Coble. Thank you, sir. Mr. Utt, do you see any benefit
in creating another Federal bureaucracy, when it appears we
have one in place now that would essentially serve the same
purpose?
Mr. Utt. Exactly. I agree with you there. We have a program
that is ready to go with experienced people running it, a huge
batch of knowledge out there by potential users on how it
works. And you lose all that, or you ignore all that if you
then spend as much as a year creating a new entity with new
rules, new procedures, which will then go out and solicit the
projects, and then people have to come in with the projects,
and according to their rules. You are talking about more than a
year before the first dollar or first commitment goes out.
Just to add to that, even some of the current programs are
not working as efficiently as possible. The rail part of the
ARRA took about a year before the first awards were made. It
took them that long to get up and running because it was a
relatively new program, even with a bureaucracy--even within a
Government department of experienced people in the area of
making judgments about railroads and their viability.
Mr. Coble. I thank you, sir. Mr. Yarema, could a national
infrastructure bank be successful in combination with TIFIA?
Mr. Yarema. If there were a bill passed that really created
adequate Federal apportionments and if TIFIA were funded to
meet anticipated demand, I think that would be sufficient for
transportation. There may be other kinds of infrastructure,
however, that can't avail themselves of the TIFIA program that
a national infrastructure bank would facilitate, without
transportation competing for loans with other kinds of
infrastructure, like dams, levees, and ports.
So, my strong preference would be to achieve the same goals
of the national infrastructure bank concept by fully funding
TIFIA to meet demand, maximizing the incentive for States and
localities and private entities to bring new sources of revenue
to the table, and converting TIFIA into a first-come-first-
served program. And I think that will be sufficient for
transportation.
Mr. Coble. Thank you, sir. Mr. Thomasson, before my time
expires, let me extend what Mr. Utt said. In your estimation,
how long do you think it would take for the national
infrastructure bank to actually begin issuing loans?
Mr. Thomasson. It's hard to say. It would take time, and I
think those who proposed the bank acknowledge that it is not an
immediate solution. It sends a good long-term signal to the
private markets that helps trigger investment. But it would
take a year or two, probably, before the loans were issued.
I think the faster process could be hiring the financial
professionals that TIFIA lacks, that RRIF lacks. The DOE loan
program has some that were hired after Solyndra. But I think
those financial professionals could play an important and
valuable consulting role to existing Federal credit programs
that could prevent the need for additional bureaucracy
increases in DOT for TIFIA if you are super-sizing its loan
capacity.
So, I think there are certain functions that could be more
immediate. I think it could help expedite some of the backlog
on TIFIA if we have this kind of expertise in the Government.
But I fully acknowledge that some of the loan process would
take time. You want it to take time, because this is a
different approach that needs to be clear and transparent, and
you do have to set up a process for it. It shouldn't be a
rushed program in the name of short-term stimulus.
Mr. Coble. Very quickly. Mr. Roth, do you want to weigh in
on that? Do you want to add anything to that, Mr. Roth?
Mr. Roth. I would not like to add anything to that point,
but I would like to add something to the point made
previously----
Mr. Coble. Well, my time is expired. Mr. Chairman, may he
do that?
Mr. Duncan. Yes. Go ahead, Mr. Roth.
Mr. Roth. I beg to dispute the suggestion that roads cannot
be financed without Government support. In the last century,
the Interstate Highway System was financed by road users,
without any Government money coming into it from general
revenues. And in the century before, tens of thousands of miles
of roads were financed privately, under incredibly difficult
conditions. As a proportion of GDP, more money was spent on
roads in the 19th century than in the 20th.
Mr. Coble. Thank you, sir. Thank you, Mr. Chairman. I yield
back.
Mr. Duncan. Thank you, Mr. Coble. Mr. Nadler.
Mr. Nadler. Thank you. I just have to comment before I
start asking questions. Of course the private sector can
finance certain roads and big projects. But clearly, as Henry
Clay realized, and Abraham Lincoln, and President Eisenhower,
and a lot of others, it can't finance all the roads and
projects that we need. Some projects just don't pay for
themselves, even though they may well pay off for the economy.
But we will leave that debate to Henry Clay.
Mr. Thomasson, could you succinctly tell us why an
infrastructure bank would be superior--or not superior, why we
would need that in addition to an adequately funded TIFIA
program for transportation, not for other projects?
Mr. Thomasson. Sure. One thing I would say first about the
TIFIA program and this committee's proposals to expand the loan
capacity of the TIFIA program is that it is currently
understaffed, as Mr. Yarema said. The resource is very low. It
outsources all its----
Mr. Nadler. No, but let's assume we adequately staffed and
adequately funded it.
Mr. Thomasson. Well, first of all, it funds projects beyond
transportation: energy, water----
Mr. Nadler. The infrastructure bank, not TIFIA.
Mr. Thomasson. The national infrastructure bank. So that is
critical--I know that is not within the jurisdiction of the
committee, but it is a critical point.
Mr. Nadler. Of course.
Mr. Thomasson. And we have serious needs in the country for
those kind of projects.
Also, as you said earlier, there are certain projects that
go beyond the scale of TIFIA that would require more
independent analysis and professionalism within the national
infrastructure bank. I think you get a different approach under
that than you do under----
Mr. Nadler. When you say beyond the scale of TIFIA, what
limits TIFIA?
Mr. Thomasson. Well, TIFIA's loan authority, and its
allocations from this committee under the Highway Trust Fund.
But----
Mr. Nadler. So you are saying that some projects are simply
too big for TIFIA?
Mr. Thomasson. There are. And I think if you have a more
adequately staffed and professionally run national
infrastructure bank with project finance experience on those
big types of projects, we as a country will be better able to
handle them. We are not very good at those large projects,
currently.
You also see the national infrastructure bank as a platform
for credit expertise and--for the Federal Government--could
also play this consulting role for other loan programs in the
Government--DOE, RRIF, which----
Mr. Nadler. OK. Now, the proposal--or, well, there are
different proposals for a national infrastructure bank, but I
believe the administration proposal and Senator Kerry's
proposal limits the national infrastructure bank to things
like--to loans, loan guarantees, not to grants, although I
think Congresswoman DeLauro's proposal has grants, too.
Mr. Thomasson. That is correct.
Mr. Nadler. How would you finance--I mean there are clearly
projects that are vital to the economy, both transportation and
non-transportation, that don't have enough of a revenue stream,
or cannot generate enough of a revenue stream to generate
enough revenue to pay back bonds and so forth? So if you don't
allow for grants, how do you finance those?
Mr. Thomasson. I think there are two answers to your
question. One is that the bipartisan infrastructure bank
proposal does have that restriction. It is more limited than
Congresswoman DeLauro's proposal. And Congresswoman DeLauro
would tell you that we need to be more bold to be able to fund
every type of project like that.
So, it is true that the bipartisan proposal would not be
able to fund every type of project that is out there. I think
it is a tool in the armory, as you said. There are other
sources for grants available that----
Mr. Nadler. OK.
Mr. Thomasson [continuing]. Infrastructure bank projects
might be able to seek as----
Mr. Nadler. You might use infrastructure bank financing,
plus something else.
Let me ask you the last question, because my time is
running out; I have got 45 seconds, plus whatever leeway is
granted.
Chairman Mica has estimated the cost of establishing a
national infrastructure bank would be about $270 million. Could
any of the witnesses explain where this figure comes from, and
whether it seems to be accurate? And does anybody have a
different estimate of the cost that would be associated with
establishing such an entity?
Mr. Thomasson. I have not seen this number before. I am not
sure where it comes from.
Mr. Nadler. Mr. Utt?
Mr. Thomasson. You know, I----
Mr. Nadler. Thank you.
Mr. Utt. Yes. I think I put it in my testimony, and it
comes----
Mr. Nadler. Could you talk louder, please?
Mr. Utt. I think I put it in my written testimony, and I
also think I footnoted it. It goes back to the President's
February 2001 transportation budget plan, which was also his
transportation reauthorization plan. There was a page----
Mr. Nadler. 2001?
Mr. Utt. 2011, I am sorry. In this age of austerity, I have
less numbers.
The President's budget proposal includes a page devoted
with some detail to a transportation infrastructure bank, as
opposed to the current infrastructure bank proposal, which
covers a wide range of infrastructure. And it lays out in some
detail what the funding would be. And it talks about a total of
$270 million to get it up and running, consulting fees,
different kinds of studies, and paying a staff of, I think they
estimate, 100 people. And so that would be the start-up cost
for that.
And again, we are pulling it right out of the President's
proposal.
Mr. Nadler. And would that figure differ greatly if it were
simply to expand TIFIA to the similar size?
Mr. Utt. I can't imagine that it would. In fact, I find the
$270 million figure that was in the President's budget a little
bit on the high side for starting up a public entity. But
nonetheless----
Mr. Nadler. That was his estimate?
Mr. Utt. Those were the numbers that were there.
Mr. Nadler. Thank you. I see my time has expired.
Mr. Duncan. Thank you very much, Mr. Nadler. Dr. Harris?
Dr. Harris. Thank you very much. And thank you very much,
Mr. Chairman, for holding the meeting. It is an important day,
because I guess the news today is that we probably are going to
have to break up the American Jobs Act and do what we probably
should have done from the beginning, handle things piece by
piece.
Let me just ask Mr. Thomasson. I am going to--and I will
ask the same question for all five of the panelists here. You
know, the President said in his speech--and I quote--``The
American Jobs Act answers the urgent need to create jobs right
away.'' The testimony I am hearing is that none of you think
that this is a--establishing the American infrastructure bank
in a hurry, which is what we are talking about, we are talking
about a major new program, rushing through the process of a
major new program--I assume that none of you believe that this
will create--and I quote--``jobs right away.'' Well, except for
the people we hire into the bureaucracy.
But starting with Mr. Thomasson, do you agree that that is
true?
Mr. Thomasson. Well, I think my first answer to your
question is his statement was about the American Jobs Act
broadly. He has two different infrastructure sections in the
jobs act. One is immediate infrastructure investment and the
second is this long-term----
Dr. Harris. Right. But you agree this long-term one is not
short-term. It is not immediate in any way, shape, or form. It
will take a long time, comparatively. I mean we have a 9.1
percent unemployment rate. CBO says it is not scheduled to go
down before the next election. Would you agree that we really
won't see concrete evidence of this working--no pun intended--
before the next election?
Mr. Thomasson. I would, as an administrative point. But I
would----
Dr. Harris. Thank you. Can we just go--I only have 5
minutes.
Mr. Thomasson. OK.
Dr. Harris. I can't have--I have another question. Mr.
Roth?
Mr. Roth. It seems to me that the obstacle to creating jobs
in transport infrastructure is more regulation than lack of
money.
Dr. Harris. And this really doesn't do anything to address
the regulatory side.
Mr. Roth. I think that the Honorable Gary Ridley could tell
us more about this from his experience in Oklahoma.
Dr. Harris. Sure.
I am working my way down there. Thank you, Mr. Roth. Mr.
Yarema.
Mr. Yarema. Early in my career, I was a lawyer for the U.S.
Synthetic Fuels Corporation, which was formed under the Energy
Security Act of 1980. It was a Government corporation intended
to provide loans, loan guarantees, and other instruments for
alternate energy projects. And it worked fairly well. But it
took a long time to get the program started. I think a year is
a very unlikely period of time to get this program off the
ground. The rulemaking alone will take time.
If TIFIA is managed and staffed properly, it can make
significant loans quickly. In 2003 the TIFIA program issued a
$917 million loan to the Texas Department of Transportation for
the $3.6 billion Central Texas Turnpike Program. That loan was
made when needed--the projects are all built and it is
completely performing. There was no problem in getting that
loan made. And there are very few projects in the United States
that would be larger than that.
Dr. Harris. And what TIFIA can do. Thank you. Mr. Utt.
Mr. Utt. I mean I agree that any of these programs are
going to be hard to get underway very quickly. So they should
be viewed as infrastructure investment programs, which is a
long-term issue. And there is a backlog that is necessary, or
that exists, that needs to be remedied.
But that is much different than a stimulus program. And I
think all of these--ARRA and the current jobs act are being
sold as something, or promoted as something, that we need right
now. And yet I think there is widespread agreement on this
panel, and also within the experience, that you are not going
to get jobs right now.
Dr. Harris. Well, except in the bureaucracy. Thank you.
Secretary Ridley?
Mr. Ridley. Congressman, without adding a permanent revenue
stream, adding another credit card to the Government will not
create jobs in the short term nor the long term. It will not.
We have the abilities to be able to finance projects today.
States need to ensure that they have the revenue streams in
order to repay the debt as accumulated. So, having another way
to do that is not necessary, in our belief.
Dr. Harris. Thank you. And working the way down, just kind
of a very brief answer, so what I am hearing is that basically
we could take the currently existing program, TIFIA, and with
some modification--Mr. Thomasson mentioned maybe putting some
other areas of expertise on it--we could basically deal with
virtually any size project that comes along. General agreement?
All kind of nodding.
Mr. Yarema. Absolutely correct.
Mr. Thomasson. Except I don't think you get too much more
of a time advantage beefing up TIFIA than you do creating an
infrastructure bank. I think that takes time, also.
Dr. Harris. OK, thank you. Yield back.
Mr. Duncan. Thank you very much. Mr. Boswell.
Mr. Boswell. I pass.
Mr. Duncan. Mr. Altmire.
Mr. Altmire. Thank you, Mr. Chairman. Secretary Ridley, you
just said--and I think I heard you correctly--that we have the
ability, as a country--presumably the States and others--to
fund projects already. Is that correct?
Mr. Ridley. Congressman, if I said that, I said it in
error. We have the ability to finance projects. The funding
capability is where the draw is, where it is difficult. We
have, again, all different ways of being able to finance a
project and receive financing. It is funding the projects and
funding the repayment of the financing that becomes difficult.
Mr. Altmire. Right, OK. I appreciate the clarification. I
come from a region of the country where we have over 1,000
structurally deficient bridges--Western Pennsylvania--and we
are obviously having trouble finding that funding, and finding
the way to repair and do the maintenance on those bridges. And
to that point, I wanted to talk to Mr. Thomasson for a moment.
And, you know, I am a fiscal conservative. I have
accumulated a voting record on a lot of these things. And I
share the same concerns that a lot of us do about the spending
decisions that had been made in the past in Congress, and some
of the same concerns have been expressed by the other members
of the panel. And I wanted to ask you: why is the
infrastructure bank the fiscally responsible thing to do now,
and what role does private capital investment play in getting
more out of what we would spend under the infrastructure bank?
Mr. Thomasson. Sure, thank you. First of all, as most on
this committee probably recognize, infrastructure spending
isn't the kind of thing that you save money by cutting. There
is nothing fiscally responsible about deferred maintenance.
When you are looking at a required repair cost, it doesn't get
any cheaper by putting it off.
But with regard to the bank specifically, there is no
better time for the infrastructure bank than now, with loans
and loan guarantees as a credit approach. We have heard time
and time again today that TIFIA is an effective way of
leveraging the Government's money and the Government's loan
authority.
And as Mr. Yarema could probably testify to this better
than I can, the Government's loans, whether through the bank or
through TIFIA, only cover a portion of the total project cost--
for TIFIA 33 percent, for the bipartisan bank 50 percent--that
leaves at least 50 percent, and in most cases more than that,
of the total cost to be picked up by private-sector investors
and by State and local governments. That alone leverages it.
But the loans themselves are also typically scored at about 10
percent of their total cost.
So, in terms of ``bang for the buck'' for taxpayers and
smart, efficient approaches to investing, both TIFIA and the
infrastructure bank really provide advantages that we should
look at.
Mr. Altmire. You referred, Mr. Thomasson, in your opening
statement, about the Chamber of Commerce and some opinions that
have been expressed by other organizations publicly. And there
has been a lot of talk about how more infrastructure
investment, including the bank, would make the U.S. more
globally competitive. At least that has been the opinion
expressed by supporters of the bank.
Have you heard directly from companies or investors who
agree with that claim?
Mr. Thomasson. Actually, we heard directly last week. My
group, the Progressive Policy Institute, held a forum here on
the Hill with top CEOs from the U.S.: the CEO of Nucor, the
biggest steelmaker in the country; and the CEO of Siemens
Industry, a multinational that invests heavily in the U.S. We
heard from CEO after CEO that we need this kind of strong
signal to the international business community that the U.S. is
a place worth investing in.
The Siemens CEO told this short story about starting a new
manufacturing plant in Charlotte, North Carolina, to build gas
turbines. And to do that, part of their costs were building
their own rail line up to the Port of Norfolk, because they are
exporting these turbines. And he said, ``You know, Siemens is a
160-year-old company. We look at the long term. We are happy to
include those costs in our decisions of bringing our own
infrastructure to the U.S. But how many companies are going to
do that?'' How many global investors, when they look at the
U.S. and they see that they have to bring their own
infrastructure, are going to do that?
And we heard the infrastructure bank would send a clear
signal that the U.S. is improving its decisionmaking ability to
invest in infrastructure and attract private capital from
abroad and multinational corporations to invest here at home.
Mr. Altmire. And Mr. Utt, very quickly, Mr. Thomasson makes
the point that deferred maintenance is not a fiscally
responsible decision, that if you allow things to fall into
disrepair the costs are more later than they are today. Is that
a statement that you agree with?
Mr. Utt. Sure, yes, absolutely.
Mr. Altmire. OK. My time is up. I would like to follow up,
but my time has expired. Thank you.
Mr. Duncan. All right. Thank you very much, Mr. Altmire. I
have to leave in just a few minutes for another meeting, but I
do want to ask some questions before I go.
Secretary Ridley, you have had long experience in this
field. And we have heard your skepticism about the national
infrastructure bank proposal. You do know, I am sure, that in
our base bill we tried to expand TIFIA, we tried to expand the
State--get more incentives for State infrastructure banks.
What ways--what are the two or three most important things
that we could do, here at the Federal level, to make your job
easier or to help a State DOT operate more economically and
more efficiently? Would it be--it is a little bit beyond the
scope of this, but it ties in, I guess, directly and
indirectly, both. Would it be environmental streamlining? What
two or three things would you suggest to us?
Mr. Ridley. Mr. Chairman, it would be regulation reform. I
think that we can accelerate projects. We heard comment today
about the administration targeting 14 projects across the
country for accelerated delivery. I can tell you from our own
experience in Oklahoma we had an interstate bridge go down, a
525-foot long bridge, four-lane facility, about 25,000, 30,000
vehicles a day on it. We were able to completely rebuild that
bridge in 64 days. And we did not break any laws or skirt
around any regulations. But the Government was focused on the
task at hand, and the regulatory agencies that we deal with
were focused on that at hand.
If you really want to accelerate project delivery, if we
really want to put the construction industry back to work, and
making the assumption that you would be able to fund things at
the historic levels over the last few years, if you can remove
the brick that is around everyone's neck that holds us back
from being able to do our job--and that would be in the
regulatory effort--it is my belief if the administration would
declare an economic emergency, and therefore these regulatory
agencies knew they had to respond quickly and timely with every
project, not just with 14, that I think that you can see a lot
of things happen rather quickly.
Mr. Duncan. Let me ask you this. The two most recent
studies by the Federal Highway Administration have said that--
one said it took 13 years, one said it took 15 years for the
average highway project, from conception to completion. And
these are not transcontintental roads, these are relatively
short, mileage-wise, projects.
If we did what you want us to do, and when--these projects
on an emergency basis, how much do you think we could speed
those projects up? Could we cut that time in half? Would that
be just totally unrealistic? Or what would you say about that?
Mr. Ridley. Oh, I think that--I think maybe even better
than that. As--all of us remember the bridge that went down in
Minnesota, and how fast they were able to rebuild that
structure.
Mr. Duncan. Right.
Mr. Ridley. The earthquakes in California, and how fast
Caltrans was able to put those back together, the bridge and
causeway that went down in Texas, and how fast TxDOT was able
to put that back together, and it is simply because the focus
of the agencies are on the same project, or the same goal, if
you will.
Right now, it isn't the same goal. Regulatory agencies do
not have the same goal as DOTs or local units of governments.
It--their goal is somewhat different. But if you put a focus
and a microscope on what actually has to be done and what you
are trying to build--we build the whole--not the whole, I won't
say the whole--90 percent of the interstate in this country was
built in about 17 years. Think about that a minute. Now, the
only reason I know, because I was there. But in about 17 years,
90 percent of our whole interstate system was built.
Mr. Duncan. Yes.
Mr. Ridley. And today, as you pointed out, it takes many,
many years from conception until we get project completion,
just on a single portion of that.
Mr. Duncan. I remember one of the main contractors on the
California earthquake highway project was given an incentive
bonus of $100,000 a month. And that really speeded up things
out there. It is amazing how early they came in, in comparison
to the original estimates.
I need to move on. Mr. Utt, my friend Mr. DeFazio seemed to
imply that you were sort of misleading people in your--some of
your writings that you have done. Would you like to respond?
Mr. Utt. Well, I didn't mean to, if that was the
perception. I agree with several of the other statements, that
jobs will occur as a consequence of spending on infrastructure.
But the issue that we are discussing today is being presented
as a desperately needed effort to get the unemployment rate
down as quick as possible. And if that is the case, then this
is not the proper tool to do that.
And likewise, on ARRA, is that this was also presented as
something urgent, a national emergency. We were in the midst of
a recession, we have a stagnant economy, we were losing jobs.
And again, what we see is that, despite the urgency of enacting
it, you cannot make a program like that work very quickly. And
this is not a deficiency on the part of people being involved,
it is just that infrastructure is a slow, deliberative process.
For example, one of the biggest delays in ARRA was getting
acceptably presented projects in from all the State DOTs. And
you can't do anything until you do that. And then you have to
evaluate them. And this involves a long time before any money
is spent.
So, if you want jobs next week, or jobs tomorrow, or even
jobs within a couple of months, this is just not the way to go.
Mr. Duncan. All right----
Mr. Nadler. Would the gentleman yield?
Mr. Duncan. Well, I am in kind of a hurry, Mr. Nadler, so I
am going to move on.
Mr. Nadler. At the conclusion of your remarks?
Mr. Duncan. Yes, you can----
Mr. Nadler. Thank you.
Mr. Duncan. Mr. Yarema, everybody has said glowing comments
about TIFIA--has had glowing comments about TIFIA here today,
and especially you. And it is a program that I support, as
well. But I am just curious. You have great expertise in this
area. Is this the--is TIFIA the first perfect Federal program,
or would you tell us what problems there are with it, or what
changes you would make?
And I am particularly interested--do you know of a TIFIA
project that has gone bad? And what was the reason for that?
Mr. Yarema. TIFIA is not perfect, but what we have is 12
years' experience with it. I was around when it was enacted in
1998. We have worked on about two-thirds of the applications
that have gone in. And it needs to be modernized in that 12
years.
And there is no question we can improve it. If it is, in
fact, right-sized, we would need new staff, nowhere near the
100 employees the national infrastructure bank proposal calls
for, only a small fraction of that, and you would need
additional leadership in the TIFIA program.
But the most important thing to move away from is the
discretionary decisionmaking process that has the potential--
and some would say the reality--of being politicized--toward a
first-come-first-served program where applicants put together
their projects, they meet all their criteria or they don't,
they are either feasible or they don't, and then they stand in
line to get their money. If we use that kind of approach, TIFIA
loans could be going out 120 days after the applications come
in. It would be a very simple process to use.
In my memory, over the 12-year history of TIFIA, there has
only been one default. That is the SR-125 toll road in eastern
San Diego County which opened right at the beginning of the
recession. As a result, the traffic isn't there. So, the TIFIA
program has a default on its record.
But if you look at it as you should, which is a program
where Congress effectively pays insurance premiums into the
Treasury every year under the Credit Reform Act, the Treasury
has actually made money off the TIFIA program. So that, I
think, gives it strong credibility, going forward.
Mr. Duncan. All right, thank you. Mr. Roth, you mention or
cite the Solyndra project in your testimony, and that has
raised a red flag with some of us, because this national
infrastructure bank proposal from the President would include
energy-type projects such as that. And we would have some
concern about that.
But as a proponent of more private investment and less
Government involvement in these types of things, do you believe
that private investment alone will be able to cover our
infrastructure revenue shortfalls?
Mr. Roth. It would be difficult, until the way that road
use is charged for is changed. When people pay for using roads
by means of a fuel tax, it is not easy to reimburse private
road providers. That is why I think that the Government should
be interested in helping States to switch to new ways of paying
for roads, based on vehicle miles traveled, as recommended in
2009 by witness Geoffrey Yarema and his colleagues on the
National Surface Transportation Infrastructure Financing
Commission.
But, even under the present methods of payment, it is
possible to bring in the private sector. And I gave in my
testimony an example of how this was done in Britain 20 years
ago.
Mr. Duncan. All right. Well, I am running way late. Mr.
Nadler, if you could be very brief----
Mr. Nadler. Yes, I will be very brief.
Mr. Duncan [continuing]. Your side.
Mr. Nadler. I thank you. I just wanted to make a comment,
because it has come up twice now, and that is the jobs aspect
of the bank and the timing.
It is clear, obviously, that it will take some time to get
an infrastructure bank up and running, and it is not--and
forgetting its aspect of infrastructure finance, just looking
at its employment aspects--it is not the solution to an
immediate jobs crisis. But anyone who thinks that our jobs
crisis is going to be over in a year or two, no matter who the
President is or what we do or how successful other things are,
I think is not realistic.
The problem we have now is a long-term as well as a short-
term job crisis. And an infrastructure bank, if it worked
properly, could be invaluable in dealing with the jobs crisis
that is an ongoing crisis. That is all I wanted to say. So you
have to evaluate it. Not only--from a jobs perspective, not
only will it help the problem within a year, but will it help
the problem over a period of time. Thank you.
Mr. Hanna. [presiding.] Ms. Edwards. Donna?
Ms. Edwards. Thank you, my good friend, Mr. Hanna. Good to
see you in the chair.
I want to thank you all for your testimony. I am just
curious about something. I think all of us acknowledge--or most
of us do--that whether it is hearing from the U.S. Chamber,
from the AFL, from the various construction trade associations,
that we have about a $2 trillion infrastructure deficit. That
is money that we really need to spend on infrastructure, our
roads, bridges, you know, all of our infrastructure that just
is crumbling, to get us to where we need to be in the 21st
century.
And I think, Mr. Yarema, even if I agree with you, which I
do, about what you describe as sort of right-sizing TIFIA and,
you know, dealing with the $30 billion backlog that could
create a million jobs, that that still leaves a rather
significant shortfall, in terms of what we really need to be
spending on infrastructure. And so, maybe we could argue that
it is about $200 billion or $250 billion a year that we need to
be spending.
And so let's say we do the $30 billion backlog. That other
balance we really do need to invest in infrastructure. And if
it can't be through TIFIA--and we have had arguments in this
committee about whether--and with the administration and
others--about whether we can do it through a fuel tax or
measuring--looking at miles consumed, used in that sense--we
have to put together some combination of things to meet our
infrastructure needs.
And so, isn't--and I direct this to Mr. Thomasson and Mr.
Yarema--isn't an infrastructure bank at least one of the legs
of the stool that could be used to, you know, to provide the
balance that we need for infrastructure, recognizing that we
still might have to deal with the $30 billion need that we
have, the backlog in TIFIA? And I wonder if you could address
that.
Mr. Yarema. I would be pleased to. The National Surface
Transportation Infrastructure Financing Commission, on which I
was honored to serve, absolutely underlines what you are
saying--that the shortfall in Federal transportation revenues
will not be made up for by project revenues alone. So we do
need a level of Federal apportionment that does its best to
meet as much of the Federal role as possible. The Commission
recommends a vehicle miles traveled fee that would be imposed
by the year 2020.
I think the only point I was making about TIFIA in
distinguishing from the national infrastructure bank is that if
we right-size TIFIA, I believe that all the projects where
there will be sufficient revenues to be able to repay a loan.
TIFIA can handle that.
The national infrastructure bank, as a tool, will be
redundant for the transportation program if TIFIA is right-
sized. It will not be redundant for other kinds of
infrastructure that don't have TIFIA. Energy projects, ports,
levees, and dams don't have the benefit of TIFIA. So there may
very well be a role there for a national infrastructure bank.
All I was saying is that the national infrastructure bank
probably will not be able to provide an instrument that
requires repayment any better or different than TIFIA's.
If you compare TIFIA to the other multilateral banks in the
world, like the European Development Bank and the Asian
Development Bank, that provide Government-supported finance for
projects, those applicants would all kill for the terms that
TIFIA provides. So we do have a great program.
Ms. Edwards. Thank you. And, Mr. Thomasson, if you could
also address this, you know, this burning question that I have
kind of had that--I mean, look. We have a fuel tax we haven't
actually raised in a gazillion--not since I was in college, or
something like that. And in Maryland, we actually are now, you
know, considering that, because we have a whole bunch of State
and local projects that don't really qualify to be used out of
our Federal funding, and we have still got to do that stuff,
too.
So if you could address those questions, I would appreciate
it.
Mr. Thomasson. I think that is absolutely right. It has
been, what, 17 years, I think, since we have raised the fuel
tax. And that leaves States in a bind. We have States who are
not only facing tough fiscal situations, but who are there on
the ground, trying to make these investments in infrastructure
because the Federal role is limited.
And part of the idea of the infrastructure bank is to offer
an optional tool to the States, another tool, because we need
as many as we can to meet this infrastructure deficit that we
are facing. As you said, it is in the trillions, and the
magnitude is just awesome. And we need every tool we can have
available.
We can talk about the duplication with TIFIA, but this
funds other kinds of projects. The need for water projects is
enormous at the State level, and there is no good financing
mechanism for that. It is worth doing, just for the water
programs, if nothing else.
But I think you are exactly right. This is a long-term
project, whether it is the President's new jobs bill, or the
recommendations from his jobs council just this week, where
there are a dozen recommendations about infrastructure. This is
not a silver bullet. This is one part of a broad-based strategy
that we need for this overwhelming challenge that we are facing
on infrastructure.
Ms. Edwards. Thank you. And I just would conclude by just
reminding us that with this $2 trillion deficit and the need
that we have to spend, I would say, a couple of hundred to
perhaps $300 billion a year in infrastructure, there is no
shortage of multiple ways that we are going to need to finance
this stuff. We have to bring the United States into a 21st-
century infrastructure if we want to be competitive, globally.
And we cannot wait to do that, arguing over whether it is this
or that. It is not this or that. It is all of these things.
And so, I would urge us to do that and get on with it.
Instead of talking about the 1 million jobs that we would
create with a right-sized TIFIA, we could be talking about 7 or
8 million jobs that we would fund with a long-term
infrastructure plan for this country that would really put
people back over the course of time, and allow States to do the
kind of planning that they need for the big projects, and not
just for routine maintenance.
And so, with that, I would yield. Thank you.
Mr. Hanna. Mr. Capuano.
Mr. Capuano. Thank you, Mr. Chairman. And gentlemen, I
apologize. I heard all your testimony, but I had to leave
during the first question. So if I am redundant, welcome to
Congress.
Gentlemen, especially Secretary Ridley, you made some
comments in your statement--and also in your written
statement--that I found very interesting. First and foremost,
``Recognize that the success of dedicated funding, financing
methodologies, and partnerships are all dependent on the
identification and stability of long-term supporting revenue
streams.'' That is 1 million percent right.
Is there anybody on the panel that disagrees with the
statement that we need to put more money into our national
infrastructure needs? Is there anybody who disagrees with that?
[No response.]
Mr. Capuano. OK. Is there anybody who disagrees with the
statement--do you disagree, Mr. Roth?
Mr. Roth. I disagree with the statement the way that it is
put.
First, I am very suspicious about this $2 trillion figure.
I suspect that----
Mr. Capuano. Well, you disagree with it. So you think that
we are fine with the amount of money we put into our
infrastructure now. And that is fine. You are welcome to that
opinion.
Mr. Roth. What I want to say is that the money has to be
put into the right place, and we have to have a way of
prioritizing----
Mr. Capuano. Well, I understand that.
Mr. Roth [continuing]. And putting money----
Mr. Capuano. That is a judgmental call, and I respect that.
We may have differences of opinion on where it should go. And I
understand that. But you are telling me that you are fine with
the amount of money that we put into the infrastructure system.
You don't agree--I didn't mention $2 trillion; some people have
different numbers.
I happen to think that, no matter what the number is, I
think our infrastructure system is crumbling, and we are
turning into a Third World country over time. And if you
disagree with that, you are welcome to that opinion. That is
all I asked. Do you disagree with that?
[No response.]
Mr. Capuano. I will take that silence as a disagreement.
Mr. Roth. I do not think there is any rational way of
knowing whether we should be spending 2 or 3 or 4 billion
dollars on infrastructure----
Mr. Capuano. Well, unfortunately, we have to make that
decision, and I respect that.
Mr. Roth, I presume, then, you would then disagree that you
think the Highway Trust Fund is probably perfectly well funded.
Mr. Roth. I believe that the people who are running the
Highway Trust Fund should raise the fuel tax to get more money
into----
Mr. Capuano. So you think we need more money for the
Highway Trust Fund.
Mr. Roth. Yes, certainly.
Mr. Capuano. Does everybody else agree that we need more
money into the Highway Trust Fund?
Mr. Roth. The fuel tax, at the moment, is not----
Mr. Capuano. Mr. Roth, I understand this, but there are
many ways----
Mr. Roth [continuing]. Does not even cover the maintenance
costs----
Mr. Capuano. I am trying to avoid the discussion of how to
get that money, because that sets everybody off here. I am
simply asking a simple question.
Do people on this panel think that we need more money into
the Highway Trust Fund? If you do, fine. If you don't, that is
fine. I am not an argumentative question. It is argumentative
when you start saying how we get it in there. And I am trying
to avoid that. I am trying to be nice. I don't want to upset my
colleagues here.
Mr. Roth. We do need more money in the Highway Trust Fund.
Mr. Capuano. That is--so we all agree on that. So, as
this--as we sit here today, we are all struggling with a way to
get more money into infrastructure. That is really what this is
all about, and how to get it done.
Now, for me, whenever you introduce private sector into
anything, does the private sector do anything, or should they--
I don't think they should--do they do anything for free? No. It
costs money to get the private sector in. And in this case, it
costs interest payments, which I am not arguing is good, bad,
or indifferent, but it takes money away from infrastructure to
pay private enterprise.
And, Mr. Ridley, when you were involved with the creation
of the Interstate Highway System, did we do that?
Mr. Ridley. Most of the monies that was paid for the
interstate system was pay-as-you-go, although there was some--
--
Mr. Capuano. A little bit.
Mr. Ridley [continuing]. Roads that were toll roads.
Oklahoma has a few that were----
Mr. Capuano. But a toll road is pay-as-you-go, too, if you
are a toll payer.
Mr. Ridley. That is correct.
Mr. Capuano. Either way, every penny, or virtually every
penny to create the Interstate Highway System was out of the
taxpayers' pockets.
Mr. Roth. No.
Mr. Capuano. My concern--well, on the Federal side it was.
The State side it wasn't. On the Federal side it was.
Mr. Roth. It was paid by road users. It did not come out of
Federal general revenues.
Mr. Capuano. Well, Mr. Roth, now we are getting into a
substantive discussion. Whenever the Government reaches into my
pocket--and I am a liberal, by the way, I don't mind this--that
is a tax. You can call it a fee, you can call it a toll. But
when the Government reaches into my pocket, that is Government
action. It is a tax.
When I go--when I drive down the Mass Pike, I don't really
care why they are collecting my dollar-and-a-half; I know that
they are doing it.
So, I guess the question for me is, why are we arguing, in
any capacity, adding a middle man to this? Bottom line is we
are here today to discuss an option because we haven't got the
courage or the fortitude to do what we have to do, which is to
increase revenues, increase funds going into our
infrastructure. And we are all struggling for 1,000 different
ways to do this.
And the truth is, it is all going to cost taxpayers or toll
payers, which are the same people, by the way, more money over
the long run. If we just did it straight up, either through a
gas tax or a vehicle mile, or the 10 other proposals that are
on the table, the long-term benefit to the Commonwealth of
Massachusetts, to the taxpayers of Massachusetts, to the people
of this country, is that they get a bigger bang for their buck
when it comes to infrastructure.
And I guess I just want to argue. Does anybody here think
that it is good to simply deny our obligations, to say, ``We
don't really need this,'' or, ``We don't have the courage to
pay for it now, we will let somebody else pay for it later''?
How is that a strong-minded, intelligent, long-term process
when the day will come--maybe not for you, Mr. Ridley, but for
me or my kids or your kids--when they are going to have less
money to fix their roads and bridges because we burned them
with interest payments that were unnecessary, because we don't
have the courage to do what we need to do today?
I would like to know. My time is up, but I had fun doing
it. If you have any time, I would like to know if any of you
disagree with that.
[No response.]
Mr. Hanna. Ms. Richardson.
Ms. Richardson. Yes, thank you, Mr. Chairman. I have a few
questions. First of all, Mr. Roth, in your testimony you
reference the California State 91 Freeway, which--I happen to
live in California, and I go along that freeway often. Are you
aware of some of the problems regarding your suggestion of why
tolling and all that is a great scenario? Have you studied the
problems, as well? You didn't reference the issues with that.
Mr. Roth. I know that there was a problem in connection
with the State building new roads parallel to that, and that
that problem was overcome by the toll road being sold to Orange
County. But I don't know of other problems. The road has been
working well since 1995. The system has been replicated in
other parts of California, in Colorado, in Minnesota, and of
course, is coming to Washington, DC.
The beauty about that arrangement is that paying the toll
is voluntary. People who use that corridor if they need to get
to somewhere in a hurry. If they are late for picking up their
child, then they can pay the money and use the toll road. If
not, they stay in the untolled lanes, and it seems----
Ms. Richardson. OK, excuse me, sir----
Mr. Roth [continuing]. To me that these arrangements can be
replicated----
Ms. Richardson. Excuse me. We have only got 5 minutes.
Reclaiming my time, I would like it to be noted for the record,
because I think it is important, if we are going to have people
come and testify, that we are testifying accurately and
providing information, especially to this committee.
Sir, in your testimony you note, as you just started to
explain, that payments are collected electronically from
customers from prepaid accounts. So I would like to ask you. If
it is from a prepaid account, and if someone--suddenly an
emergency and needs to get there, or someone is driving through
that area and would like to utilize it, they don't have the
ability to use that road, because it is only collected through
prepaid accounts, which is called Fast Track.
So, essentially, what it is doing is it is eliminating
people, such as myself. I don't drive--go down the 91 Freeway
every single day into Orange County. I may do it once a month.
So if I would like to reduce congestion and have the ability to
do it, I currently don't, because of the Fast Track system.
So, I would only say if you are going to reference as a
positive of toll roads in communities, especially across the
United States, you need to make sure to reflect all of the
information and some of the problems, and not just the limited
area in the way that you did. Because it is a well-known fact
and an issue in California.
Mr. Roth. It----
[Following are supplementary remarks regarding California's
State Route 91 HOT lanes submitted for the record by Gabriel
Roth:]
A subcommittee member queried the omission from my
testimony of the fact that road users have to open
accounts before using California's State Route 91 HOT
lanes.
I spoke to a staffer at the Orange County
Transportation Authority and was advised that road
users can enter the HOT lanes even without having an
account. Those who do so receive an invitation to open
an account, and are charged a $25 fee for using the
lanes without one. However, if they then open a HOT
lanes account the $25 fee is credited to it.
Ms. Richardson. My next questions are for Mr. Yarema. You
mentioned about TIFIA--and we were pretty involved with TIFIA
legislation last year, both myself and some others, in terms of
extending that program--and on page five of your testimony you
talk about a first-come-first-served program. And you are
proposing that we would eliminate discretionary competitive
programs, and somehow that this would help us with regional and
national significance.
I don't quite agree. So let me let you take a stab at
explaining why you think that is right.
Mr. Yarema. Sure. As long as you have more applicants than
you have resources, then you have to have a discretionary
program. And hopefully that discretionary program will be based
upon objective criteria that Congress has laid down.
TIFIA was, for many years, undersubscribed. So until
recently it was essentially first-come-first-served, because
the resources that Congress made available to it were greater
than the demand.
That curve started to change in the last couple years. And
as it has changed, it has become oversubscribed. So those
discretionary decisions have become, for the first time, real.
Ms. Richardson. Let me----
Mr. Yarema [continuing]. If we right-size the program----
Ms. Richardson. If you could, wrap it up in 5 seconds.
Mr. Yarema [continuing]. We can go back to the way it was.
Ms. Richardson. If we what?
Mr. Yarema. If we right-size the program, we put the
resources in it to meet demand, then we don't need to have a
discretionary program, because it is not a limited resource; it
will be sized to meet the demand that the States and localities
are asking for.
Ms. Richardson. OK. Reclaiming my time, the problem is we
live in the United States of America. And the fact that we are
going to be able to resize it to the point that we can meet
every single road and highway, I don't know that I would
probably say that that is realistic.
So, in light of that, I just want to say for the record
that I would have a great concern with us eliminating the
discretionary and competitive program, because I think it would
do the very thing that your statement actually suggests. I
think it would be contrary to that. By doing a first-come-
first-serve, to me, that eliminates establishing whether the
projects are, in fact, of regional or national significance. It
just means whatever project happens to come up is going to get
funded. And I don't think the----
Mr. Yarema. No, I would say that the objective----
[Following are supplementary remarks submitted for the
record by Geoffrey S. Yarema:]
A first-come-first-served program can and should still
impose strict eligibility requirements, including
qualification as a project of regional or national
significance, among others.
Ms. Richardson. Excuse me, I have reclaimed my time. You
already got to testify. We only get 5 minutes, and we are in
the middle of a Homeland Security markup.
I am just saying, from reading your testimony--and I am
happy to have an offline conversation with you about it--but my
concern is, listed in your testimony of suggesting going to a
first-come-first-served, I believe--I don't see, realistically,
that we are going to have all the money we could possibly need.
And so I think it is important for the record--because we are
going to be working on a transportation bill--that we seriously
understand the problems with this. Because I don't believe that
then the projects of national significance and regional
significance would be adequately met.
So I just wanted, for the record, to clarify that part in
your testimony. Thank you.
Mr. Hanna. Thank you----
Ms. Richardson. I yield back the balance of my time.
Mr. Hanna. Mr. DeFazio.
Mr. DeFazio. Thank you, Mr. Chairman. Mr. Ridley, some of
those who object to the national infrastructure bank--and I
made clear my position on it at the beginning, that it was
appropriate for certain things, not for others, I don't know
that we need it for transportation--are offering saying,
``Well, we should just encourage State infrastructure banks.''
I notice apparently your State doesn't have one, a State
infrastructure bank.
Mr. Ridley. We do have an infrastructure bank. It is not
capitalized. It was established in the late 1990s. We haven't
had a use for it, but it is established. It is in statute. We
promulgated the rules, and we do have a bank.
Mr. DeFazio. So you have one, but you haven't found a need
to utilize it.
Mr. Ridley. That is correct.
Mr. DeFazio. OK. And what would bring you to utilize it? I
mean what----
Mr. Ridley. Certainly I think we would have to understand
that when we capitalize the bank, then that takes money out of
the revenue stream that we would have. So capitalization of it
would be the start.
The second thing is that you would have to assume that you
could get lower interest loans through the State infrastructure
bank than you can get currently now, just in the market. Our
rating in Oklahoma is very good. The turnpike authority rating
is very good. So whether it is revenue bonds or others, we have
a good enough rating that we get very good interest rates on
our money today. And that is not the issue.
Mr. DeFazio. OK. I would like to see if I can turn this
into a question. It is back to Mr. Capuano's comment regarding
the levels of investment.
I guess first I will ask, are any of you or all of you
familiar with the new and different report from the American
Society of Civil Engineers? They regularly rate the state of
our infrastructure, which is, as Mr. Capuano said, headed
toward Third World status, and it gets poor ratings. But they
came out with a different report this year--first one they have
ever done of this kind which looks at the cost of not investing
in our transportation infrastructure.
I don't know who on the panel is familiar with it. My
reading is they are saying that our lack of investment in
transportation infrastructure--and I believe Mr. Thomasson sort
of referenced this when he talked about foreign firms looking
at making capital investments in the U.S. having to build their
own infrastructure, something you would have to do in Siberia
or the interior of Africa, but you wouldn't think you would
have to do it in the United States of America--is a detriment
to investment, both by foreign capital and by U.S. capital in
plants and equipment here. They estimated about a $30 billion-
per-year loss because of the lack of investment.
Does anybody have any issues with the report? Mr.
Thomasson, you were nodding your head.
Mr. Thomasson. I am familiar with it, not enough to quote
it, but that was some of the background behind sort of the
deferred maintenance and the competitive concerns.
I think you also see domestic costs. The Nucor CEO that we
had last week who said, ``What is good for America is good for
Nucor, and I would love to be putting out more steel for
investments here in this country. I am having to ship some
abroad because there is so much foreign investment. But also, I
am under capacity and would love to have more economic growth
from that investment.''
So I think there are both costs, in terms of attracting
capital from abroad, getting businesses to invest here, but
also businesses we already have would love to see more
infrastructure investment, because they benefit directly from
the economy, as a whole, growing.
Mr. DeFazio. OK. Mr. Roth?
Mr. Roth. I suspect that the nice civil engineers who make
those reports are being a bit self-serving, and they are
looking----
Mr. DeFazio. Well, sir, have you read the report?
Mr. Roth. No, I have not.
Mr. DeFazio. OK. Well then I really don't want to hear from
you on that.
Mr. Roth. May I make----
Mr. DeFazio. No, sir. I am reclaiming my time. If you
haven't read the report, you haven't seen that it was done by
economists, not by civil engineers, you have nothing to
contribute here. Anybody who has read the report who would like
to comment or contest the conclusions?
[No response.]
[Following are supplementary remarks submitted for the
record by Gabriel Roth:]
A subcommittee member asked the witnesses whether we
accepted the estimate made by the American Society of
Civil Engineers that the ``infrastructure needs'' of
the U.S. total $2.2 trillion. I have doubts about this
estimate because it is associated with requests for
Federal money and, as such, may be exaggerated. I could
name projects that make no sense to a transport
economist but which are probably included as somebody's
``need.''
Furthermore, the concept of ``needs,'' with no prices
attached, is dubious. I may ``need'' to travel in
Washington, DC, at a speed of 20 miles per hour but
that ``need'' is likely to vanish if I were required to
pay my share of the costs of providing it.
Mr. DeFazio. OK. So I think they make a good case. I mean I
will just give a slight example. We had a failure of a major
interstate bridge in Oregon on I-5. And what it meant was a
truck route detour which went over the Cascade Mountain range,
down the other side of the mountains, and then back down the
Cascade Mountain range. I think some companies find that
inconvenient. And UPS has documented what a delay means to
them, and other companies have, too.
So, I think what--we hopefully have a common goal here,
which is to enhance our investments, deal with the decrepit
state of repair. Whether a national infrastructure bank, you
know, would be a major contributor, or is necessary for
transportation--I have my doubts--it would be necessary, I
believe, for other forms of infrastructure, or potentially
necessary, because we don't have a TIFIA program for water and
sewer, and States are limited these days, in entering into the
markets.
Anybody have any comments on how important that potential
could be for other infrastructure investments, which are also
important to our economy and our citizenry?
Mr. Thomasson. Well, I think that is absolutely right. We
have heard in the bipartisan proposal in the Senate there is
just an enormous outpouring of concern about water
infrastructure projects that can't get financed--that States
are having trouble financing them.
Our energy transmission grid is a generation older than it
needs to be. We have massive modernization challenges that
could be expedited, if we lower the financing costs for those
projects. I think this is critical for our overall investment
deficit.
And I think TIFIA is a great program. We learn from the
lessons and success of TIFIA. We can scale that to other areas
of infrastructure, focus on the kind of projects that we need
as a country to make the economy more efficient, to keep from
being the kind of Third World country that we are headed toward
being, and that kind of national strategy is essential if we
are going to have a long-term strategy for growth and
prosperity.
Mr. DeFazio. Thank you. Just back to the topic I raised
earlier, which Mr. Utt was given the opportunity to comment on,
that ARRA was defective, very defective. I voted against the
bill. A lack of investment in infrastructure was a big part of
it. Seven percent for infrastructure, over 40 percent for tax
cuts.
Can anyone on the panel tell me of a major infrastructure
project which has been initiated by tax cuts?
[No response.]
Mr. DeFazio. No, I didn't think so. Tax cuts don't seem to
build infrastructure. They don't seem to put people back to
work, either.
And I would also observe, in terms of how quickly the money
can be spent, it varies by program, Mr. Utt. If you look at the
backlog in our transit infrastructure, which is about $70
billion for a state of good repair--they are killing people in
Washington, DC, because of a lack of state of good repair, a
little embarrassing and kind of tragic for the families, the
Nation's Capital is running obsolete equipment that actually
kills people.
In Chicago--and I use this example because of my
differences with the President over this--Chicago Transit
Authority was able to commit its total ARRA allocation of $270
million in less than 30 days, which immediately initiated
orders, which immediately put people to work, and there are
Made In America requirements, and they were all Americans. That
did initiate employment.
So, if you choose where to target the money--if you want
quick employment you probably would put more money into areas
where there are on-the-shelf investments ready to go, orders
waiting. I talked to the people who make buses. They are
waiting. They have orders for thousands of buses, but can't
move forward because they lack the funds.
So, they are ready to go. They are ready to hire. So it
depends on where you choose to invest the funds. If you put it
into a new, major road project that requires environmental
review, that is going to take a long time. If you put it into
bridges, quite a bit quicker--150,000 bridges on the Federal
system need replacement or repair. I have a bridge company out
in my State, American Bridge, they have two branches. They are
kind of underemployed at the moment. They would love to be
building more bridges made in America.
We have the strictest Made in America requirements for
transportation investment. We have the least leakage, unlike
tax cuts, which go into savings, or junk made in China.
So, I have got to say that those who fault the idea that we
could both get long-term and short-term growth, and increased
foreign investment, out of investing in infrastructure just
couldn't be more wrong. Is an infrastructure bank a magic wand,
no. And I never said that. Perhaps there are some who have. But
we need more investment from all sources. And that is the
bottom line here.
I do note with appreciation that the Republican side has
now dropped their proposal to cut infrastructure investment by
35 percent, and they are now talking about current levels of
funding extended in the future. Not what we need. We need more
investment. But that is a good start. Now they are searching
for a revenue source, and I will do anything I can to help them
in that effort.
So, thank you, Mr. Chairman. I appreciate the opportunity.
Mr. Hanna. Thank you, Mr. DeFazio. I have one last
question.
It has been widely written by economists that
infrastructure banks--whether you agree with the premise that
the Government should be the source of last resort or not--are
similar to Fannie Mae and Freddie Mac, especially as we come
reeling off of the whole housing crisis, with public risk and
private profit.
How does anyone feel about that? Do you think that is an
accurate comparison? Sir? Mr. Ridley?
Mr. Ridley. In the description of the infrastructure bank,
it is described as a Government corporation. I know of very few
Government corporations, and I don't know that I can--I
certainly cannot speak on behalf of the two lending
institutions, and whether those are considered Government
corporations, but certainly you--have been established by the
Government.
U.S. Postal Service and Amtrak would be others, I would
think, that would have been started by well-meaning people and
created, in some cases, unintended consequences, a debt on the
Government or a debt on the State. So----
Mr. Hanna. Thank you. Mr. Utt?
Mr. Ridley [continuing]. But I do not have the answer for
that question, sir.
Mr. Hanna. Mr. Utt?
Mr. Utt. Do I believe it is a risk? Yes, absolutely. I mean
there are a lot of infrastructure projects that were originally
projected to do quite well, based on ridership estimates and
cost to do it, and everything worked out, and the bonds were
issued, and lo and behold, the customers didn't show up, who
need to pay the toll.
The classic case is the Nevada monorail system, which would
have allegedly--based upon projections done by a highly
reputable consulting firm in transportation--would have made it
the second transit system in the world to earn a profit, or at
least cover its costs and its capital. And, as a consequence,
it moved forward.
Now, if this was 10 years ago, this would have been--they
would have come to the infrastructure bank, possibly, for this.
But let's talk about what happened. It turns out that the
ridership projects were dead wrong. Instead of the 50,000
people per day, they got about 21,000 per day. The consequence
was that revenues were very short of what was needed for debt
service, let alone operating costs. The consequence is that
$600 million of private activity bonds are now worth zero.
Now, that could have been held by the infrastructure bank.
And there are other programs like that. Even Fannie Mae didn't
have assets that went to zero, OK?
Mr. Hanna. Right.
Mr. Utt. So there are risks out there. It is not to say it
is not worth doing, but it is just not a slam dunk. Just
because somebody is charging tolls and you have got some
private activity bonds there, and you have got private
partners, doesn't necessarily mean it is going to work. It is
like any other business.
Mr. Hanna. Yes. Mr. Yarema?
Mr. Yarema. Let me just offer some comments about the Las
Vegas Monorail.
First of all, there were no private activity bonds in that
project. The private activity bond program wasn't authorized
until 2005, and the Las Vegas Monorail closed its financing in
September of 2000.
Secondly, yes, there is a shortfall in revenues. But it
didn't cost the Government a single dollar. That was private
money taking private risk. The hallmark of a public-private
partnership program is for the Government to shift risk to the
private sector that it normally assumes in a conventionally
delivered and conventionally financed project.
Yes, people think these projects print money, and the
private sector just gets rich off them. Actually, in the way
most public-private partnerships are structured, there is a cap
on the amount of profit they can make and there is no floor on
how much money they can lose. In fact, in the Las Vegas
Monorail, private investors did lose money. But that project
would have otherwise been developed by the Regional
Transportation Commission, the transit agency for Clark County,
Nevada. And Clark County didn't put a dime into that project,
either at the time of the financing or subsequently.
So, from the public sector's perspective, protecting the
public interest, it was protected. That system operates today
without a single dollar of Government money.
Mr. Hanna. Mr. Roth?
Mr. Roth. I think it is more helpful to focus on individual
projects, rather than looking at infrastructure as a whole.
An interesting example is the Channel Tunnel, which was, in
fact, privately financed. A lot of people, private people, lost
a lot of money on it. And the tunnel was produced. But no
Government money was lost on its construction.
I think we have to remember, when we talk about the
references to this country becoming a Third World country, that
it is the policy of this administration to reduce the miles
traveled per person. And it is the policy to take monies--35
percent, according to Chairman Mica's letter of July 15, 2011,
to the Chamber of Commerce--from road users and spend them on
bike paths and beautification, and things like that. And I
believe there is a wish to take money from road users to spend
it on rail, 19th-century technology used in Third World
countries.
So, I think we have to be very careful when we design
methods of routing Government money to infrastructure.
Mr. Hanna. Thank you. Mr. Thomasson?
Mr. Thomasson. Well, to get back to your question,
Congressman, about Fannie Mae and Freddie Mac, it is an
important question, because the bipartisan infrastructure bank
bill that the President has adopted started with the intent of
avoiding the kind of structure that the GSEs had that has
gotten them into trouble.
The biggest distinction in that structuring is that Fannie
Mae and Freddie Mac are Government-chartered corporations, but
they are owned by private shareholders. You have this
divergence of interest, a conflict of interest, between the
private shareholders that want to chase high returns and have
Fannie Mae and Freddie Mac holding higher risk portfolios to
generate those returns, and the public interest that is
supposed to be served by those GSEs.
The bipartisan infrastructure bank that Senator Kerry and
Senator Hutchison have introduced maintains ownership of the
corporation by the Federal Government, so you don't have that
conflict of interest with the public interest. It also doesn't
issue its own bonds like Congresswoman DeLauro's bill would do,
so it is not able to leverage or gear its own capitalization by
issuing debt, which Fannie and Freddie also did to abandon.
I mean look at the numbers--Fannie Mae in 2008 had debt
that was 18 times its equity; Freddie Mac's was over 60 times
its equity. This is designed intentionally to avoid that. The
bank would have to hold an investment-grade portfolio. It is a
lower--much lower--risk profile that we are talking about. And
it uses the same sort of risk approach as TIFIA and the Export-
Import Bank, which is a much better analogy, a much better
comparison, that is financially self-sufficient and returns
money to the Treasury every year.
Mr. Hanna. Thank you. Thank you all. I guess I am the only
one here, so there is no further questions. I want to thank you
for your contributions and your insights today, and
particularly your time.
I ask unanimous consent that the record of today's hearings
be left open until such time as our witnesses have provided
answers to any questions that may be submitted to them in
writing, and unanimous consent during such time as the record
remains open.
Additional comments offered by individuals or groups may be
included in the record of today's hearing. Without objection?
[No response.]
Mr. Hanna. So ordered. I would like to thank our witnesses
once again for coming.
If there are--no other Members have anything to say,
obviously. This hearing is adjourned. Thank you so much.
[Whereupon, at 12:29 p.m., the subcommittee was adjourned.]