[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 ---------- U.S. GOVERNMENT PRINTING OFFICE 70-681 PDF WASHINGTON : 2012 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 COMMITTEE ON 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 ---------- 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.]