[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
            OVERVIEW OF PUBLIC-PRIVATE PARTNERSHIPS IN HIGHWAY 
                           AND TRANSIT PROJECTS

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

                                (113-57)


                                HEARING

                               BEFORE THE

                  PANEL ON PUBLIC-PRIVATE PARTNERSHIPS

                                 OF THE

                              COMMITTEE ON

                   TRANSPORTATION AND INFRASTRUCTURE

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 5, 2014

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure


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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                  BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska                    NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         ELEANOR HOLMES NORTON, District of 
JOHN J. DUNCAN, Jr., Tennessee,          Columbia
  Vice Chair                         JERROLD NADLER, New York
JOHN L. MICA, Florida                CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey        EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California           ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri                 RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan          TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California            MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas  GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas              TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana               STEVE COHEN, Tennessee
BOB GIBBS, Ohio                      ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania         DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York           JOHN GARAMENDI, California
DANIEL WEBSTER, Florida              ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida       JANICE HAHN, California
JEFF DENHAM, California              RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin            ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky              DINA TITUS, Nevada
STEVE DAINES, Montana                SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina             ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma           LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas                CHERI BUSTOS, Illinois
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
MARK SANFORD, South Carolina
VACANCY
                                ------                                7

                  Panel on Public-Private Partnerships

                JOHN J. DUNCAN, Jr., Tennessee, Chairman
CANDICE S. MILLER, Michigan          MICHAEL E. CAPUANO, Massachusetts
LOU BARLETTA, Pennsylvania           PETER A. DeFAZIO, Oregon
TOM RICE, South Carolina             ELEANOR HOLMES NORTON, District of 
MARK MEADOWS, North Carolina             Columbia
SCOTT PERRY, Pennsylvania            RICK LARSEN, Washington
                                     SEAN PATRICK MALONEY, New York
                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    iv

                               TESTIMONY

Joseph Kile, assistant director for microeconomic studies, 
  Congressional Budget Office....................................     3
James M. Bass, interim executive director and chief financial 
  officer, Texas Department of Transportation....................     3
Phillip A. Washington, general manager and chief executive 
  officer, Regional Transportation District of Denver, Colorado..     3
Richard A. Fierce, senior vice president, Fluor Enterprises, 
  Inc., on behalf of The Associated General Contractors of 
  America........................................................     3

 PREPARED STATEMENTS AND ANSWERS TO QUESTIONS FOR THE RECORD SUBMITTED 
                              BY WITNESSES

Joseph Kile, prepared statement..................................    35
James M. Bass:

    Prepared statement...........................................    46
    Answers to questions for the record from Hon. John J. Duncan, 
      Jr., a Representative in Congress from the State of 
      Tennessee..................................................    60
Phillip A. Washington:

    Prepared statement...........................................    73
    Answers to questions for the record from Hon. John J. Duncan, 
      Jr., a Representative in Congress from the State of 
      Tennessee..................................................    90
Richard A. Fierce:

    Prepared statement...........................................    98
    Answers to questions for the record from Hon. John J. Duncan, 
      Jr., a Representative in Congress from the State of 
      Tennessee..................................................   105


[GRAPHIC] [TIFF OMITTED] 


OVERVIEW OF PUBLIC-PRIVATE PARTNERSHIPS IN HIGHWAY AND TRANSIT PROJECTS

                              ----------                              


                        WEDNESDAY, MARCH 5, 2014

                  House of Representatives,
              Panel on Public-Private Partnerships,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The panel met, pursuant to notice, at 9:59 a.m. in Room 
2167, Rayburn House Office Building, Hon. John J. Duncan, Jr. 
(Chairman of the panel) presiding.
    Mr. Duncan. The panel will come to order. First, let me 
thank our distinguished panel of witnesses for being with us 
today to testify. And this is the second event and first 
hearing of the Panel on Public-Private Partnerships, or P3s, as 
they are commonly called. We had a very successful, very well-
attended roundtable a couple of weeks ago, and now this is our 
first hearing.
    We are investigating how P3s can accelerate the delivery of 
projects across all modes of infrastructure. I think almost 
everybody in the Congress, both Democrats and Republicans, 
agree that we have very great infrastructure needs in this 
Nation. The big question is how do we pay for them. And so, 
there are various suggestions or ideas or proposals, but 
certainly many States and several State and local governments 
have decided that public-private partnerships are one of the 
solutions to the problem that we all face.
    Our roads and transit systems play a critical role in the 
movement of goods and people, and in the success of our 
economy. States are increasingly utilizing P3s to help them 
address their highway needs and other needs. We are happy to 
have one of the leaders in this effort today, a representative 
from the Texas Department of Transportation, with us.
    Americans are also using transit systems to--more than 
ever, to get them where they need to go. But, as we all know, 
building new transit lines can be a complex and costly effort. 
The Denver region decided to pursue a public-private 
partnership in order to significantly expand its transit system 
far more quickly and cheaply than would have been possible with 
traditional project delivery approaches. We look forward to 
hearing from a representative of Denver's regional 
transportation district this morning.
    In this hearing we also want to explore how the public 
sector can ensure that public-private partnerships deliver 
public benefits, and how those benefits are protected over 
time. That is a very important question. We also recognize that 
the private sector will only engage in projects that make 
economic sense for their business models. So it is important to 
understand what the private sector looks for when selecting 
projects to participate in. One critical issue we will discuss 
is how the public and private sectors can share in the risk of 
a project, especially in arrangements that can last for 30 
years or even longer.
    Finally, while public-private partnerships are, first and 
foremost, driven at the State and local level, the Federal 
Government has a very important role to play in these 
arrangements. Everything that this committee deals with, there 
is a very important Federal role, because people in Ohio 
sometimes use the highways in Tennessee, and vice versa. People 
in California sometimes use the airports in Texas, and vice 
versa. People in New York sometimes use the water systems in 
Florida, and vice versa, and so forth. And the same is true 
with our ports and railroads and every other topic that this 
committee deals with.
    The last surface transportation bill, MAP-21, significantly 
increased the size of the TIFIA program, which provides credit 
assistance to eligible surface transportation projects. We have 
heard from many stakeholders that the TIFIA program is a 
critical component of public-private partnerships in this 
country. We want to explore how the TIFIA program is working, 
and what changes we may need to make in the next authorization 
bill, which we hopefully can complete later this year.
    Private activity bonds are also important in the P3 
arrangements, and I am sure we will hear about their role 
today, as well.
    Again, I want to thank the witnesses for being here today, 
and I now recognize the ranking member, Mr. Capuano from 
Massachusetts, for 5 minutes to make any opening statement he 
may have.
    Mr. Capuano. Thanks for being here, guys. I look forward to 
the discussion.
    [Laughter.]
    Mr. Duncan. Well, that is the quickest opening statement I 
think I have ever heard. Well, thank you. Thank you very much.
    We have now been joined by our chairman, Mr. Shuster, and 
it is always an honor and privilege to have him here with us, 
and so I would like to call on him for any comments he has at 
this time.
    Mr. Shuster. I just want to echo Mr. Capuano's words.
    [Laughter.]
    Mr. Duncan. All right. And Mr. Meadows?
    Mr. Meadows. Ditto.
    Mr. Duncan. Well, well, this is a first, I can tell you. Of 
all the committee hearings I have chaired over the years, that 
is a first.
    Mr. Shuster. Mr. Chairman?
    Mr. Duncan. Yes?
    Mr. Shuster. Just a reminder, we are not in the Senate, 
so----
    [Laughter.]
    Mr. Duncan. All right. Well, I previously welcomed all the 
witnesses. Our panel today is a very distinguished one. We will 
start with Mr. Joseph Kile, who is assistant director for 
microeconomic studies at the Congressional Budget Office, and 
then, following his testimony, Mr. James Bass, the interim 
executive director and chief financial officer of the Texas 
Department of Transportation. Next is Mr. Phillip Washington, 
general manager and chief executive officer of the Regional 
Transportation District of Denver, Colorado. And finally, Mr. 
Richard Fierce, a senior vice president of Fluor Enterprises. 
And he is here on behalf of The Associated General Contractors 
of America.
    I ask unanimous consent that our witnesses' full statements 
be included in the record.
    [No response.]
    Mr. Duncan. And hearing no objection, that will be so 
ordered.
    Since your written testimony has been made a part of the 
record, the subcommittee would request that you limit your oral 
testimony to around 5 minutes.
    And, Mr. Kile, we will begin with you.

TESTIMONY OF JOSEPH KILE, ASSISTANT DIRECTOR FOR MICROECONOMIC 
 STUDIES, CONGRESSIONAL BUDGET OFFICE; JAMES M. BASS, INTERIM 
     EXECUTIVE DIRECTOR AND CHIEF FINANCIAL OFFICER, TEXAS 
 DEPARTMENT OF TRANSPORTATION; PHILLIP A. WASHINGTON, GENERAL 
 MANAGER AND CHIEF EXECUTIVE OFFICER, REGIONAL TRANSPORTATION 
  DISTRICT OF DENVER, COLORADO; AND RICHARD A. FIERCE, SENIOR 
   VICE PRESIDENT, FLUOR ENTERPRISES, INC., ON BEHALF OF THE 
           ASSOCIATED GENERAL CONTRACTORS OF AMERICA

    Mr. Kile. Thank you. Good morning, Congressman Duncan, 
Chairman Shuster, Congressman Capuano----
    Mr. Duncan. Pull the microphone a little bit closer to you, 
if possible.
    Mr. Kile. Sure thing. Is that better?
    Mr. Duncan. Yes.
    Mr. Kile. Good. Good morning, again, and thank you for 
having me here today to talk about public-private partnerships 
before this panel.
    The United States has about 4 million miles of public 
roads. In 1960 the number of miles of--since 1960 the number of 
miles of roads has grown slowly, but the demands on them have 
grown substantially. In particular, the number of vehicle miles 
traveled roughly quadrupled, rising from about 700 billion in 
1960 to roughly 3 trillion in 2012.
    To pay for those roads, the Federal Government and State 
and local governments spent about $155 billion in 2012. 
Traditionally, a State or local government assumes most of the 
responsibility for carrying out a highway project, and bears 
most of its risk. Such risks include the possibility of cost 
overruns, delays in the construction schedule, and shortfalls 
and toll revenues for such roads. Alternatively, some analysts 
assert that public-private partnerships can increase the amount 
of money available for highway projects, and can complete the 
work more quickly, or at lower cost than is possible with the 
traditional approach.
    Over the past 25 years, governments at all levels have 
created about 100 public-private partnerships for highway 
projects that exceeded $50 million. Adjusted for inflation, the 
total value of those projects was about $60 billion. That is 
about 1.5 percent of the total amount spent by all governments 
for highways during that period. But roughly half of that total 
has been committed during the past 5 years.
    My testimony today is going to address the role of the 
public-private sector in financing and providing--that is, 
designing, building, operating, and maintaining a highway 
project--and I want to make three broad points.
    First is that private financing can provide capital 
necessary to build a new road, but such financing comes with 
the expectation of a future return for private lenders and 
private investors. Private financing only increases the 
available funds for highway construction when States or 
localities have chosen to restrict spending by imposing legal 
or budgetary constraints on themselves. Even so, regardless of 
the financing mechanism chosen, the ultimate source of money 
for highways is toll revenues paid by drivers and funds from 
taxpayers.
    Second, the cost of privately financing a highway project 
is roughly equal to the cost of financing it publicly after 
factoring in certain costs to taxpayers. Those costs include 
the risk of losses from the projects that are borne by the 
Federal Government, and the financial transfer made by the 
Federal Government to States and localities. CBO examined 29 
highway projects that were undertaken since 1989 that cost more 
than $50 million and involve private financing. The amount of 
risk that was transferred to the private partner varied 
substantially from project to project. In some cases, the 
financial risk was borne primarily by taxpayers, who were 
responsible for repaying the debt incurred by the private 
partner. But in other cases, the private partner bore much more 
of the risk of the investment, in particular the risk that it 
might lose the money if the project did not receive the 
revenues that were expected.
    Of the projects that have been completed, some of those 
that were financed through tolls have failed financially 
because the private partners over-estimated the revenues that 
the project would generate. And, as a result, they were unable 
to fully repay the project's debt. Perhaps in response to that 
history, projects that are still under construction tend to 
rely less on tolls for revenues. More commonly now, private 
partners are compensated through a State's general revenues, 
which reduces the risks of not being repaid. In addition, 
financing provided by TIFIA and tax-exempt private activity 
bonds have become an increasingly important source of funds for 
highway projects.
    Third, and finally, CBO assessed the limited evidence on 
cost savings that might occur from bundling together other 
elements of providing highways--in particular, designing, 
building, operating, and maintaining them.
    On the basis of the evidence, it appears that public-
private partnerships have built highways slightly less 
expensively and slightly more quickly than when compared with 
the traditional approach. Contracts that bundled two or more 
elements of the work may give greater control to the private 
partner, and a stronger incentive to reduce costs and meet 
established schedules.
    But contracts that achieve those goals can be challenging 
to formulate, especially in light of the lengthy period of time 
over which many contracts extend. The relative scarcity of data 
and the uncertainty surrounding the results from the available 
studies make it difficult to apply the conclusions definitively 
to other such projects.
    Thank you very much. That concludes my statement. I would 
be pleased to answer any questions you might have.
    Mr. Duncan. Well, thank you very much, Mr. Kile.
    Mr. Bass?
    Mr. Bass. Good morning. My name is James Bass, and I am the 
interim executive director and chief financial officer at the 
Texas Department of Transportation. I would like to thank 
Chairman Duncan and Ranking Member Capuano for holding this 
hearing today. I will discuss the State's perspective using 
public-private partnerships--or P3s, for short.
    As the panel is well aware, States are struggling with the 
lack of predictable funding for our transportation projects. 
The surface transportation program, until very recently, was 
one of the most reliable of all Federal undertakings. Now there 
are recisions, earmark claw-backs, short-term extensions, and a 
trust fund that can no longer fully replenish itself. These are 
obviously not ideal circumstances in which to deliver projects, 
because they disrupt the planning process for agencies, local 
communities, and our private-sector partners, both on the 
construction and the engineering side.
    In recent years, Texas has looked to the private sector 
more frequently to help us not only pay for, but to construct 
large-scale projects that otherwise would be years away from 
construction. These P3s are enabling the State to leverage our 
resources and deliver projects to our citizens much more 
efficiently and expeditiously than with the standard pay-as-
you-go methods of the past.
    In Texas, P3s for transportation projects are entered into 
using a procurement process that allows TxDOT to select the 
proposal that provides the best value to the State. These 
agreements provide for the design and construction, 
rehabilitation, expansion, or improvement of a transportation 
project, and may also provide for the financing, maintenance, 
and operation of such a project.
    Through the use of P3s, TxDOT has been able to narrow the 
gap between our transportation needs and our transportation 
assets, and has helped citizens to realize our transportation 
goals of improved traffic flow and improved air quality. 
Without the option of these P3s, several projects would not be 
developed for a number of years, including State Highway 130 
segments 5 and 6 in central Texas, and a number of long-awaited 
projects in the Dallas-Fort Worth region.
    There are different ways to structure a P3 agreement, and 
the terms of these agreements vary, based on the level of 
private sector participation. In Texas, a concession agreement 
gives the developer responsibility to perform some or all of 
the development, financing, operation, and maintenance of a 
facility for up to 52 years. In exchange, the developer is 
provided a right to the revenue generated by the project, and 
these projects also can potentially provide for revenue sharing 
with TxDOT over the life of the contract and, in some cases, 
include an upfront, lump sum payment.
    Other potential advantages include the developer assuming 
the risk for cost, schedule, traffic and revenue, financing, 
and meeting State and Federal standards over time. It also 
removes the financial burden of operating and maintaining the 
project from TxDOT. And it also reduces and, in some cases, 
eliminates the amount of public funds needed to construct the 
project.
    One of the benefits of building projects under a P3 is that 
elements of risk are transferred from the public sector to the 
private developer. However, there are some risks that are 
better managed by TxDOT than by the developer. And one of our 
core principles is to allocate risk in such a way that we 
maximize the benefits of the P3 to the public. These risks are 
identified and allocated on a project-by-project basis.
    Private activity bonds and TIFIA are very important tools 
that have helped several Texas projects be more feasible. A 
point that is generally missed in the descriptions of MAP-21 is 
that it--the reinvigorated TIFIA program had the practical 
effect of adding at least an extra year of project delivery to 
the 2-year bill.
    MAP-21 also solved key challenges that have historically 
held back the TIFIA program. We are very encouraged by the 
substantial increase in funding for the program, the increased 
share of project costs that TIFIA can finance, and the 
congressional desire to make the TIFIA program more efficient.
    To date in Texas we have received over $4.2 billion in 
TIFIA assistance. And when that's been combined with local, 
private funding, has yielded over $13 billion in total 
projects. These projects have been critical to relieving 
congestion and contributing to efficient movement of people and 
goods in the heavily populated areas of our State.
    Prior to MAP-21, USDOT was allowed discretion to evaluate 
and choose eligible projects under specific criteria. Over 
time, USDOT continued to add criteria such as livability to its 
list of selection criteria. These criteria, while seen by some 
as beneficial to help narrow down projects for funding, went 
beyond what was laid out in the law. MAP-21 eliminates 
discretionary selection criteria, and establishes a limited set 
of objective criteria that require a yes-or-no determination of 
satisfaction, and TxDOT welcome this change.
    MAP-21 provides critical changes and increased funding, but 
changes can be made to further enhance the program: reinforce 
that 49 percent of eligible project costs are allowed under 
MAP-21; streamline the letter-of-interest phase and enforce 
strict deadlines for the review of LOIs; incorporate the TIFIA 
application process with project procurement, in order to 
maximize competition.
    Again, I appreciate the opportunity testify today on the 
success of partnering with the private sector to deliver 
transportation projects in Texas. P3s in Texas have and will 
continue to play a vital role in how we deliver critical 
transportation projects.
    And I look forward to answering any questions.
    Mr. Duncan. Well, thank you very much, Mr. Bass. I had the 
privilege of chairing the Highways and Transit Subcommittee 
when we wrote MAP-21, so I appreciate some of your favorable 
comments there.
    Mr. Washington?
    Mr. Washington. Chairman Duncan, Ranking Member Capuano, 
Mr. Shuster, members of the Panel on Public-Private 
Partnerships, I want to thank you for the opportunity to 
present our testimony and our story in Denver on P3s.
    Various P3s have been very crucial in the success of our 
program called the FasTracks Program, which I believe is still 
the single largest voter-approved transit expansion program in 
this country.
    We encourage Congress to increase the focus on P3s to spur 
faster development of transit assets. We believe the new 
transportation reauthorization bill is a great vehicle to 
assist in that. We also strongly urge Congress to preserve and 
expand the financing tools that make P3s possible, those being 
TIFIA and private activity bonds.
    What I would like to focus on today is some of the 
innovative public-private partnerships approaches that we have 
employed in Denver. One is the Eagle P3 project. This is a 
design, build, finance, operate, maintain, or DBFOM P3 buildout 
over 36 miles of commuter rail that will connect downtown 
Denver to the Denver International Airport. The second one is 
our Denver Union Station project. This will be the new 
intermodal hub of our system. And what's very unique there is 
the enhanced real estate value of the land adjacent to the 
transit assets is being used to pay off the transit 
development.
    And while not discussed extensively here today, we are in 
partnership with the Colorado Department of Transportation on a 
P3 to deliver a high-occupancy toll lanes project, or BRT 
system, bus rapid transit system, between Denver and Boulder.
    RTD Denver, in that FasTracks program, this is 122 miles of 
additional light rail and commuter rail, 18 miles of bus rapid 
transit, and 57 new stations, which brings into-- brings the 
opportunity of transit-oriented communities, as well.
    The RTD's Eagle program, which is a line to the airport, or 
two-and-a-half lines, we pursued this as a public-private 
partnership because of the efficiencies that we believe could 
be attained through the P3 approach. This Eagle project is 
being procured through a concession agreement between RTD and 
the Denver transit partners to design, build, finance, operate, 
and maintain these components for a 34-year period. The agency 
will retain all assets--ownership of all assets at all times, 
set the fares, fare policy, keep all the project revenues. We 
will make payments through what is called availability payments 
to the concessioner, based on established performance metrics. 
That project is about 60 percent complete. And funding consists 
of Federal dollars, a full funding grant agreement, TIFIA, 
private activity bonds, and, of course, private sector equity.
    The Denver Union Station project, which is the hub of our 
system, is a huge engine for transit-oriented communities and 
downtown Denver, significant expansion of mixed-use 
neighborhoods surrounding that station. It has been the 
catalyst in attracting some $1 billion in development around 
that station, which, as I mentioned earlier, is helping to pay 
off the transit elements and the loans.
    The TIFIA loan program, along with the railroad 
rehabilitation improvement fund, or RIF program loans--the 
TIFIA loan is for $145 million, RIF is $152 million. Those are 
the backbones of financing of this project, and they constitute 
about 64 percent of this $500 million program, which is the hub 
of our system.
    Finally, let me say that with the P3 delivery method and 
other financing mechanisms previously mentioned, we are moving 
forward with plans for the construction of these projects that 
I mentioned. However, we don't see them as a substitute, of 
course, for the strong support for the general transportation 
investment, or the new transportation reauthorization bill.
    I will say that the jobs that have been created, the 
transit-oriented communities that have been created around 
these projects, is extraordinary. I invite the panel to come 
out on May the 9th for the opening of this Denver Union Station 
hub to see firsthand a public--successful public-private 
partnership that will open on May the 9th.
    I look forward to your questions.
    Mr. Duncan. Well, thank you very much. And from all 
reports, your project has been very successful, so we will look 
forward to hearing your answers to some of our questions.
    Mr. Fierce?
    Mr. Fierce. Chairman Duncan, Ranking Member Capuano, and 
members of the Panel on Public-Private Partnerships, I am 
Richard Fierce. I am a senior vice president at Fluor 
Corporation, speaking here today on behalf of Associated 
General Contractors. Fluor has been a proud member of AGC for 
many years. AGC represents over 26,000 firms in our industry.
    I also serve presently as the president of the Association 
for the Improvement of American Infrastructure, AIAI, an 
organization that was formed a little over a year ago, a 
nonprofit advocacy group promoting the use of P3s in the United 
States.
    A couple of introductory comments about Fluor and Fluor's 
history in P3s. We are a 100-year-old company with about $27 
billion in revenues last year, and 41,000 employees on 6 
continents. We have been involved in P3 delivery for over 20 
years now, and have been involved with a number of firsts in 
the United States: the Conway Bypass in South Carolina; E-470 
in Denver; the 895 project in Virginia, now known as Pocahontas 
Parkway; and segments 1 through 4 of SH 130 in Texas.
    We are also proud to be presently delivering the Eagle P3 
for Mr. Washington, and we recently completed the Capital 
Beltway HOT Lanes, here in the District of Columbia. We are 
also currently delivering the Tappan Zee Bridge in New York.
    My comments about P3 are fairly simple. I don't want to 
oversell P3s, they are not a magic bullet that somehow convert 
projects that aren't feasible into showpieces. But they are an 
important tool in project delivery, we think an important tool 
that should be in every procurement agency's toolkit. And it is 
a tool that can help close financing gaps by delivering private 
sector debt and equity. But I don't like to focus on the 
finance gap; there is others eminently more qualified to speak 
to that than I am.
    But I like to speak to a feature of P3 that I don't think 
as many people appreciate, and that is we truly believe that 
public-private partnerships deliver more project for the 
dollar. And you might say, ``How does that happen?'' It happens 
because of increased collaboration between the public and 
private sectors.
    The private sector gets involved earlier in project 
definition, and is involved later through delivery of the 
project in operations and maintenance. That early involvement 
enables construction and design and the public sector to 
communicate and help shape the project while you can still 
shape the project. It allows life-cycle costing to be taken 
into account while the design is underway. And then, that long-
term involvement through operations and maintenance is, in 
part, the private sector's skin in the game.
    So, how do we deliver innovation? We deliver innovation 
frequently through a process they refer to as alternative 
technical concepts. During the procurement process, the private 
sector comes up with ideas, ways to try to deliver a better 
project, a more economical project, a more efficient project. 
You might think that that collaboration could happen with any 
project delivery. But the fact of the matter is, when the 
private sector has skin in the game in the form of equity, when 
it has skin in the game in the form of a long-term operations 
and maintenance contract, we think the public sector is a 
little bit more receptive to our innovative ideas, because they 
know that we have to live with them for 30 years.
    In addition to the harder issues of project scope, we also 
like to point to some of the soft issues. We believe public-
private partnerships better deliver small, disadvantaged, and 
minority business content. We are very proud of the content we 
delivered on the Capital Beltway, over $540 million of DBE SWaM 
content on a project that started out at $1.4 billion. So we 
think that we deliver more project for the dollar, and better 
ability to deliver some of the soft items, as well.
    Thank you, and I look forward to your questions.
    Mr. Duncan. Well, thank you very much. You have been a very 
helpful and informative panel. And to have an expert here from 
the Congressional Budget Office, and a highway expert, and a 
transit expert, and an expert from the private sector added to 
the three witnesses we had at our first meeting a couple weeks 
ago, we have gotten off to, I think, a great start here.
    We are doing this panel at the request of Chairman Shuster, 
who has been a great leader for this committee. And I would 
like to call on the chairman at this time for any comments or 
questions that he might have.
    Mr. Shuster. Well, thank you very much. I appreciate that, 
and appreciate all the witnesses being here today. Just a 
couple of questions.
    On the design-build--I think I ask this question every time 
I get in front of folks. And were you able to quantify the 
savings by design-build? Any of you that operate on them have 
an answer?
    Mr. Kile, you want to start?
    Mr. Kile. I am sorry, I don't have an immediate number in 
front of me, Mr. Chairman. But in the report we wrote in 2012, 
and in doing some research updating that for today, we did look 
at some of the design-build and the operate and maintain 
experience, and learned that they are somewhat cheaper to 
build, and come to fruition somewhat more quickly than under 
the traditional approach. And I think it is a matter of the 
communication that can go on between designers and builders and 
those who operate and maintain, and some additional reference 
to life-cycle costs of projects.
    And I guess the only cautionary note I would throw on that 
is that the experience with these types of public-private 
partnerships is relatively limited, and so it is difficult to 
apply the general lesson to any specific example.
    Mr. Shuster. So there is a savings, but you just can't 
quantify, you can't say 10 percent, 20 percent?
    Mr. Kile. I think that that is hard to say, and I think 
that that would depend on the specifics of the project at hand.
    Mr. Shuster. Right, right. Mr. Bass, why don't you go, 
because you talked pretty extensively. And then I will go to 
Mr. Washington.
    Mr. Bass. I would say, like Mr. Kile just stated, we don't 
have any objective figures to show. One of the things--we have 
comparisons to what we were--we would have estimated the cost 
to be under a design-bid-build, but since we didn't go that 
route and went with the design-build, it is really just 
speculation, compared to what our estimates were. But we have 
certainly seen by--under the design-build, allowing the overlap 
of design and construction to go on at the same time, rather 
than the historic sequential process, the project is being 
delivered sooner to the public than the traditional methods.
    We also think coming with that is some cost savings, as 
well.
    Mr. Shuster. Mr. Washington?
    Mr. Washington. Yes, sir. I would comment on our design, 
build, finance, operate, and maintain Eagle project, where that 
project came in $305 million below our internal estimates. This 
was very interesting to us. Mr. Fierce mentioned alternative 
technical concepts, or ATCs. We began to see the ATCs that were 
submitted during the procurement phase, and we knew that we had 
tremendous savings there. So the ATCs really, really helped. 
The 305, no one anticipated that amount of savings from the 
internal estimate that we had on the books.
    So, I would say, in that respect, tremendous, tremendous 
savings. And I would also add that us concentrating on the 
performance metrics, not so much being prescriptive with regard 
to the technical pieces--let the private sector figure out the 
technical pieces--I just want the train to get from downtown to 
the airport in 30 minutes. And so that helped us.
    Mr. Shuster. Right. Mr. Fierce?
    Mr. Fierce. Yes, just offer a bit of anecdotal evidence 
here, a quote from the chairman of the New York State Thruway 
Authority Board, Chairman Milstein, describing our Tappan Zee 
design-build proposal, ``produced a savings of at least $1.7 
billion, compared with the original State and Federal cost 
estimates.'' So we do think that design-build, done properly, 
can really unleash value.
    Mr. Shuster. What is your total on that bridge, the Tappan 
Zee Bridge?
    Mr. Fierce. Our contract value was $3.14 billion.
    Mr. Shuster. And they were saying it is going to be closer 
to $5 billion.
    Mr. Fierce. That may include work on either--may include 
work outside of our contract.
    Mr. Shuster. Right, right. And, Mr. Washington, you said 
the land that is being developed around your project, is that 
because of land values going up, tax base? Or is that because 
you own the land and you are selling it? How is that money 
coming into you?
    Mr. Washington. That is tax-increment financing. So the 
development going on around by other parties are paying that 
TIF revenue into the project. This is a partnership between the 
transit agency, the city, and the DOT, as well.
    Mr. Shuster. So it is land value increase, you are taxing--
--
    Mr. Washington. Yes.
    Mr. Shuster [continuing]. Getting property tax to fund it? 
OK.
    Mr. Washington. Yes, sir.
    Mr. Shuster. Thank you very much. I yield back.
    Mr. Duncan. Well, thank you very much. And certainly you 
get a lot of attention when you talk about savings hundreds of 
millions, or even $1.7 billion on projects. So that is great 
for everyone concerned.
    Mr. Capuano?
    Mr. Capuano. Thank you, Mr. Chairman. I want to thank the 
panelists. I tell you, I love these panels. I am having fun 
with this, and I really want to have more of a conversation 
than anything else, because I have a lot to learn.
    But when I first started this, when I was asked to chair 
this, honestly, I wouldn't have put design-build in as a P3. I 
mean I guess it is, but that is not my definition of one. I 
accept it as one. So I kind of look at design-build as almost 
its own separate entity. I look at--when I think of P3, I think 
of more the financing, the operating, and the maintenance 
aspect of it. So, to a certain extent, I distinguish that.
    But I also want to remind people why design-build wasn't 
adopted--well, how we got to the system we have, the design-
bid-build. We did it because a lot of people across this 
country stole money. And we, little by little over the years, 
separated it out so that the same guy who was designing it 
wasn't building it and stealing money.
    Now, I am not saying--it was inefficiency intended to avoid 
malfeasance. Now, I am not saying it doesn't need to be 
tightened up, I actually think it is a good idea. But let's not 
forget how we got where we are, and what the potential 
downfalls are if we go too far down the road too quickly. It 
doesn't mean I oppose it, I actually like the idea, but I am 
conscious of not opening up the barn door and forgetting how we 
got where we are.
    So, I want to take, for me, design-build and kind of put it 
to the side. I know it is, but in my mind it is not really the 
P3 that I am most interested in. And I want to chase something, 
particularly with you, Mr. Kile.
    A couple of weeks ago we had some people from Indiana in, 
and I asked a simple question. The Indiana toll road was sold--
and I am not sure I got my numbers exactly right--something 
like $3.8 billion for a 75-year lease, which works out to 
approximately $50 million a year that the State would be 
getting. And I asked a very simple question. How much do you 
get in tolls off the Indiana toll road? How much did you get 
before? How much do you get now? Because if you are getting $50 
million a year, and the State is collecting $60 million, why 
would you sell it? Or, if you are getting $50 billion and you 
are only making $40 million, why would anybody buy it?
    So, for me, honestly, the statement that you made--or the 
report made that you repeated--I want to quote directly from 
the very first page of the CBO report--``The cost of financing 
a highway project privately is roughly equal to the cost of 
financing it publicly after factoring in the costs associated 
with the risk of losses from the project, which taxpayers 
ultimately bear, and the financial transfers made by the 
Federal Government to States and localities.'' Now, you 
repeated that, and I am starting to see that more and more on 
some of these projects, not all of them.
    Are there--did you--when you made this statement, were you 
able to get detailed financial reports on many projects, number 
one. And, number two, did you come up with a conclusion as to 
which projects might make more sense than others? We all know 
there has been some bankruptcies. We all know that we are still 
struggling of which--what projects are most subject or most 
open to a P3. Did you make any conclusions like, for the sake 
of discussion, tunnels are more--are better than bridges, or 
express lanes are better than tunnels, or anything like that? 
Were there any of those conclusions made?
    Mr. Kile. So, in assessing the projects that we looked at, 
which are primarily laid out in tables three and four of the 
testimony and of the report, we looked at--there were a wide 
variety of projects with different amounts of both public and 
private financing involved with them. The private firms that 
are putting up money are presumably doing so with the 
expectation of returns on their investment. And those returns 
would ultimately come from either the government--a government, 
not necessarily the Federal Government, but a government--in 
terms of an availability payment, or through tolls imposed on 
users.
    And so, from the investors' perspective, I would think that 
they would be most interested in making an investment, or they 
would be able to feel pretty----
    Mr. Capuano. Are you able to distinguish which projects 
maybe make more financial sense than others?
    Mr. Kile. So we did not look at, specifically, whether 
roads or tunnels or other kinds of--one type or another----
    Mr. Capuano. Because for me that is--Mr. Bass, Mr. 
Washington, Mr. Fierce, have you been able to look at which 
projects--I mean you have had more experience with them than I 
have--which projects make more sense?
    I guess my problem with always asking State or local 
officials is your job is to build things. Your job is not 
necessarily to worry about the long-term financial aspects of 
these things. And I understand that, and I don't think that is 
a bad thing. You have a different role than I do. So, to a 
certain extent, I understand why you want to build things right 
now and get the money any way you can. Don't blame you. But 
from my perspective, I got to be worried about the next 
generation of people building things, and whether they are 
going to have the money, or whether we are going to spend it 
all--which I know some of my friends on this panel are always 
worried about other things, but I am worried about everything, 
including transportation.
    Look, I like spending money as much as the next guy, but I 
have kids. And hopefully some day I will have grandchildren. I 
want them to have decent roads, too. And I don't want to waste 
it all--not waste it all--I don't want to use it all for my 
benefit and have nothing left. And I am just wondering. Have 
you had any experience of which projects might work better than 
others?
    Mr. Bass. Well, one of the things, on the revenue sharing 
in Texas, unlike Indiana--my understanding is they took all of 
that future revenue stream in a single, upfront payment. What 
we have elected to do in Texas is, in some cases, take an 
upfront payment. But on all of our projects we also have 
revenue sharing. And if the project performance is greater than 
anticipated, over time the share of revenues that come to the 
State of Texas increases as well.
    Mr. Capuano. Would you agree with CBO's conclusion that, 
over time, that the actual cost of doing most of these is 
approximately equal to the taxpayer? Do you agree with that or 
disagree with that?
    Mr. Bass. No, I would agree with that. One of the things is 
the access to the capital. So one of the things we do in Texas 
when we have a proposal, or we are looking at a project, we 
will look at trying to deliver the project through the 
traditional method, but we will also look at, well, what if we 
just issued toll revenue bonds and did a design-build project.
    What we find in many circumstances is that the traffic and 
revenue estimates from the public sector show that there is not 
enough demand to fully fund the project. So there is going to 
be a funding gap that would need to come from fuel taxes or 
registration fees. And when we look in our planning documents, 
there is no funding to fill that funding gap. What the private 
sector brings in many of these projects is that funding.
    But then also, the partnership--one of the keys of the 
design, build, finance, operate, and maintain, as been 
mentioned earlier, that in the initial construction, when that 
same party is going to be responsible for maintaining it over 
time, they are building in life-cycle costs that, when it is 
segregated, design, build-build, and then operate and maintain 
over time, I am not sure that really gets integrated into the 
delivery of projects under the traditional method.
    Mr. Capuano. I apologize, my time is way over. I appreciate 
the chairman's indulgence. And I want to come back to this, but 
I do want to conclude with that, to me, goes to my last point, 
which I will make later, but I want to just draw a big, bold 
line under it. Other than the quickness of being able to do 
these projects--which, I agree, the design-build does do--the 
other part of the problem is I am concerned about spending 
tomorrow's money today. But I am also concerned that what this 
really does is it draws a big, bold line under Government's 
inability or unwillingness to make tough decisions. And some of 
those tough decisions are to institute or increase tolls or 
other fees to bring those life costs into it. It doesn't mean 
we can't do it, we just don't do it. And so, therefore, we are 
shifting it off to somebody else to make that project.
    I apologize, and I thank the chairman for his indulgence.
    Mr. Duncan. Good questions. In fact, most people's main 
concern, or one of the main concerns about the public-private 
partnership is the question about whether we leave some of the 
taxpayers 20 or 30 or 40 years down the road left holding the 
bag.
    But I want to go--I am going to reserve my questions to the 
end and go now to Mrs. Miller.
    Mrs. Miller. Thank you, Mr. Chairman. To the panel, 
particularly to the gentlemen from Texas and Colorado, I am 
just very excited about Chairman Shuster actually having the 
Federal Government taking sort of a lead, I guess, if I will, 
from the States, where--they are always the incubators of 
innovation, and really, creative thought, and creative 
financing, and all these kinds of things, because certainly our 
country--and every country, a really developed nation--doesn't 
have enough--it doesn't have adequate funding to do all the 
infrastructure investment that we want to. So, I was 
particularly interested to hear how you are doing in your 
States.
    As you might be aware, there is--I think there are 27 
States currently that even have legislation allowing for a P3. 
I am from Michigan. My State does not. And so, my question is 
sort of how could you--what kind of advice could you give to a 
State that is contemplating doing a P3, but yet we don't have 
any legislation yet?
    You know, there must be some sort of best practices that 
you learned from your current legislation. Did you look at a 
particular State as a model, as far as their legislation is 
concerned, to assist their State legislatures or their DOTs in 
proceeding with a P3?
    And then, in addition to that, was there anything in your 
particular legislation that was really helpful? Or, if you 
could go back and tweak your legislation, so sort of, you know, 
helping the others to come along behind you, and whether or not 
you think it is appropriate for us at the Federal level, I am 
all about the Tenth Amendment, and never want to get 
interfering with the State, but rather, helping them a bit. And 
perhaps we should be telling the States early on here that 
there is a strong possibility this kind of thing may be 
included in our transportation reauthorization, so they might 
be thinking about looking to their State associations, et 
cetera, to put legislation in place for the State so that they 
can advantage themselves of this kind of a P3, if they are 
interested. If they are interested.
    So, I know it is sort of a broad-based question, but really 
wanting to position the various States. I mean, as I said, my 
State does not have P3 legislation. But I can think of a number 
of projects, one in particular, that I am going to be pushing 
here with my Governor and my State senators and House Members. 
And yet, I would like to be able to say, well, you know, you 
guys want to take a look at maybe Texas or Colorado, or some of 
the best States' practices, what they have done, and that could 
assist us in other States. So I throw that out there.
    Mr. Bass. Well, I would first say many of the successes in 
the States wouldn't be possible without your assistance. A lot 
of our P3s would not have moved forward without TIFIA and 
private activity bonds. They just would not have been moving 
forward.
    As far as other States' legislation, I believe we looked 
to--one of the forerunners in P3s in the U.S. was the State of 
Virginia. And so, we looked at that as perhaps a template.
    What I would tell other States is that it is not a silver 
bullet. It won't solve all of the problems. There are risks, 
and with those risks come pro and cons. For a while, the USDOT 
Office of Innovative Program Delivery had a group of P3 States 
that would meet and kind of share experiences, and was going to 
make those P3 experts, if you will, available to States that 
were considering P3 legislation, with the thought being that 
hearing from a colleague, rather than someone perhaps with a 
financial interest in it, they might be more comfortable with 
that.
    Lastly, one of the benefits in our legislation in Texas 
currently is before we move forward with any P3 project, we 
have a committee of local stakeholders that receives 
information from the DOT on the risk allocation for the 
particular project. And those local stakeholders then give 
their approval for the project to move forward under one of the 
different forms of P3s. And I think that is very helpful for 
us, because you have the grass roots effort in support of the 
project, and then also an understanding of what the risk 
allocation are.
    Mrs. Miller. Yes?
    Mr. Washington. And I would echo some of the things that 
Mr. Bass said. I think one of the big things is what this panel 
is doing right now. I mean you are bringing P3s out in the 
open. And so many States, it is thought to be some sort of 
black box, some sort of dangerous thing.
    So, I think part of this is education, education of the 
various States, education of city leaders, State leaders, on 
what P3s are, and the understanding that this is just one tool 
in the toolbox that, in our case, and in many of the other 
cases, can get projects done quicker. And there is mechanisms 
to put in the program that protects--and all of us are doing 
this--to protect future generations when we talk about 
operating and maintaining, in our case, for a 28-year period, 
and looking at various performance metrics and assigning 
penalties and incentives through that 28-year period.
    So, I think it is an education piece to educate the various 
States on the risk allocation and all those other things.
    Mr. Fierce. I would like to point out that--or offer that 
the AIAI would be happy to help and provide best practices. We 
are actively in the process of collecting best practices. And 
again, not only from all of the States that have enabling 
legislation, but also many of the members are active in P3 in 
other jurisdictions in Europe and in Canada, where it is much 
more prevalent.
    And so, one of the goals of AIAI is to collect best 
practices and share that with States who are either looking to 
enact enabling legislation for the first time, or perhaps to 
amend existing legislation.
    And I would also point out, as Mr. Bass said, Virginia's 
PPTA has absolutely been a model for the industry, and they 
have certainly gotten a lot of good projects out of their 
statute there in Virginia.
    Mr. Duncan. All right.
    Mrs. Miller. Thank you very much.
    Mr. Duncan. Thank you very much. Ms. Norton?
    Ms. Norton. Thank you very much, Mr. Chairman. This is a 
real learning experience, certainly for me, because all of my 
experience with public-private partnerships has been in real 
estate, which is far more traditional.
    I must tell you that when it comes to building, with the 
Federal Government itself building, and we have to deal with 
the CBO, much of what I have heard today wouldn't fly past the 
CBO because of where the risk is.
    Mr. Bass, I really want to take off from how you candidly 
answered just a few minutes ago that you did not think that you 
would have moved, or been able to move, without the TIFIA and 
the like. I would love to see what I have seen in real estate 
apply in this committee. Increasingly, I am coming away with 
the notion that there is no free money and no easy money 
anywhere in the public or private sector. And I am troubled, 
frankly, by the increasing reliance on public funds: the 
private activity bonds, the TIFIA, and the like.
    You know, this is in an experimental stage, and I think we 
ought to let the experiments play out. I regard the Dulles Toll 
Road as very different and interesting, and perhaps 
instructive, but certainly not typical of what we have been 
talking about today. I regard Mr. Washington's project as far 
more typical.
    And I must say, Mr. Washington, I had staff to compile the 
amount of Federal funding, and I am flummoxed by it, by the 
high level of public assistance involved. Of the $2 billion 
project, $1 billion from the Federal New Starts grant. I mean 
you have been very fortunate. It says a great deal about how 
well perceived what you are doing is. That is $1 billion, $280 
million from a TIFIA loan, $396 million in private activity 
bonds. A private partner put in $54 million in equity. That is 
less than 3 percent of the project cost. I try to imagine my 
work in real estate and trying to get through CBO with that 
kind of risk transference.
    The private activity bonds are expected to reduce the cost 
of financing. But I must say, compared to what? I mean, for 
example, compared to the cost of financing traditionally? I 
would like to see what control there would be.
    I am not sure about the performance metrics--what would 
happen if they weren't met. Apparently, even the risk of 
ridership is not assumed by the private partner. I am left to 
wonder what risk there is. I think this is a good deal for the 
private partner, which makes me wonder whether it is an 
equitable or fair deal for the public, particularly when you 
consider how much Federal money is involved here.
    And I would like to see how you would respond, Mr. 
Washington, and whether you would agree with Mr. Bass, that 
such a project as this could not have proceeded without the 
very high level of public funding and low level, frankly, of 
private risk. Yes, sir?
    Mr. Washington. Yes, ma'am.
    Ms. Norton. I am just using you as a case study. Please 
forgive me. I happen to have some of the rundown of figures 
there, and they amaze me in some respects.
    Mr. Washington. Sure.
    Ms. Norton. So I am trying to find out what the real 
advantage here----
    Mr. Washington. Right.
    Ms. Norton [continuing]. Was of the public-private 
partnership.
    Mr. Washington. Well, I will--thank you for the question, 
madam.
    Let me say that the private activity bonds, the transit 
agency was the issuer. And the private sector is paying that 
back. So the $396 million, that is the arrangement there, that 
we are the--the Government agency is the issuer. So I would add 
that, actually, to the $54 million in equity. So that is one 
thing. And that was an arrangement that----
    Ms. Norton. So how much is that, $300 million? So if you 
add the amount they are going to pay back with interest?
    Mr. Washington. Yes, ma'am.
    Ms. Norton. And that would be in what amount?
    Mr. Washington. I believe it is about 6 percent, if you 
will. And I will get that exact figure for you. I believe it is 
about 6 percent.
    So, that was the arrangement. So if you add those two up 
that the private sector is paying back on the $396 million, the 
public activity bonds, and then the private equity of $54 
million that they brought to the table, you are up over $450 
million or so. In terms----
    Ms. Norton. Still a fraction of the public contribution.
    Mr. Washington. Pardon me, ma'am?
    Ms. Norton. Still a fraction of the public contribution.
    Mr. Washington. Yes, yes, yes. There is no way that we 
could have done this project without the help of the Federal 
Government, both on the full funding grant agreement of $1.03 
billion and also the TIFIA. We could not have done this 
project.
    I think we were happy to be--to have been selected to go 
into FTA's Penta-P program back in 2007, 2008. This program was 
designed to expedite the New Starts process. And so, we are the 
only agency left, as I understand it, in that program to see if 
the private sector can be encouraged to invest in transit 
projects. And so, I think that had quite a bit to do with it, 
this pilot program, in our case, being the only agency left. 
And I am happy to say that we are about 60, 65 percent complete 
with the project, and about to open in less than 24 months. So 
I think that had a lot to do with it.
    But there is no doubt that we could not have done this 
public-private partnership, had we not been in the Federal 
Government's pilot program, and without the funding that came 
with it.
    Ms. Norton. Just so long as the Federal Government knows 
what it is doing--that it has simply got to fund these 
projects. I do think that has to be on the record, if we want 
them to succeed, and whatever advantages accrue. Let me ask 
you, though----
    Mr. Duncan. Well, and Ms. Norton, we will come back to you. 
I have got to get to some of the other Members.
    Mr. Barletta?
    Mr. Barletta. Thank you. You know, time is money. And I was 
mayor for 11 years, and when I was running for mayor, the main 
road in my city was going to be redone, total reconstruction. I 
was all excited, thinking how lucky am I, I am going to walk 
in, we are going to get a whole new downtown, everyone is going 
to think I had something to do with it. I served 11 years, and 
now the project is just starting. So the new mayor now is 
pounding his chest, he--the new road.
    But the point is that 10 years, because of all the delays, 
this $10 million project became a $26 million project, and the 
scope of the project has been cut almost in half. So time is 
money.
    You know, America's infrastructure needs to be fixed, and 
fixed in a hurry, our roads, bridges. You know, and we are 
struggling on ways on how to do that. At the same time, the 
private sector--my family was in the road construction 
business, as well--the private sector is sitting on the 
sidelines, dying for work, looking for work. And we all know 
competition drives down the price.
    So, I want to go back to, Mr. Kile, your comment about the 
financing of the highway project privately is roughly equal to 
the cost of financing it publicly. And a couple things were 
going through my mind as--you know, for example, a 30-year--and 
that may work out on paper, but on a 30-year maintenance 
project, for example, where the private sector is obligated to 
maintain that road for 30 years, versus the public sector.
    You know, maybe on paper, you know, the numbers may look 
different. But in reality, in that 30 years the public sector 
probably won't maintain the road, because they don't have the 
money to do it. And at the end of the 30 years, I believe it is 
going to cost the taxpayers a lot more money for reconstruction 
of that road, because it wasn't maintained, versus us doing 
that.
    As well as, you know, this competition again, also in the 
private sector, forces them to use technology. For example, I 
know the contractor that is doing the I-75 down in Florida. 
They are doing toll maintenance, total control of I-75. And I 
know that the technology that they are using, that they are 
buying, the equipment that they are buying to be able to 
deliver that for less money, will allow the private sector to 
go out and bid these projects and be able to do these projects 
less, which is a savings to the taxpayer.
    So, I guess what I am getting at is, Mr. Kile, in your 
analysis, does it take into account how P3s can provide, in the 
30-year maintenance contracts, the security and the savings to 
the taxpayer? Does it take that into account?
    Mr. Kile. So, in our review of existing studies, we did--I 
do note that we found that public-private partnerships that 
combine together elements of operations and maintenance with 
designing and building do tend to, on average, lower costs by a 
small amount. And I think that would be a reflection of some of 
the competitive forces of which you speak.
    I would also presume that in any particular contract that 
includes a 30-year maintenance component, that that is bid into 
the price of the contract, as well. And I can't speak to 
whether or not any particular State or locality would be able 
to maintain or operate that road either more or less 
effectively than that particular bid would be, simply because 
we didn't look at that issue.
    Mr. Barletta. Because I truly believe, in reality, that we 
are going to save the taxpayers a lot of money. When we get the 
private sector involved and doing projects, maintaining 
projects, and these public-private partnerships, and all 
different types that exist, I do believe the bottom line, 
because of the competition and how the private sector works, 
that there will be a savings to the taxpayer.
    But I guess our biggest hurdle is scoring, and how we 
overcome that. And the problem is that Government is so rigid 
in the way we do things. And sometimes the way we looked at 
things was because of the way things were done for the last 30, 
40, 50 years, but business and the private sector is more 
flexible. They are different, and it operates differently. And 
how do we get the Federal Government to begin--to be more 
flexible in realizing that, at the end of the day, in 30 years, 
we have saved the taxpayers money, but we may not be able to 
score and prove it to the Members of Congress here today who 
will decide whether or not we do that.
    Mr. Kile. Right. So, any time the Federal Government would 
enter in a contract--and CBO doesn't normally assess the cost 
of any particular contract; we are, rather, assessing 
authorizing legislation--but to the extent that the Federal 
Government is entering into a long-term commitment, it is our 
job to try to present the information about the cost of that 
commitment upfront, and that is a principle that CBO has, and 
OMB has, and has actually preceded the existence of CBO as a 
long-held budgeting principle in the Federal Government. And I 
think the idea is that, by providing that information on a 
consistent basis, project-by-project, long-term, short-term, 
that allows you and your colleagues to assess the cost and 
understand the benefits that----
    Mr. Barletta. But there are upfront costs where you are 
talking about--but how about over the 30-year time, 40-year 
time, 50-year time? How do we calculate that into----
    Mr. Kile. So, again, as I said, we don't estimate the cost 
of any individual project. But in understanding the nature of a 
long-term commitment, it is our job to provide information to 
you about the cost of that long-term commitment, whether it is, 
you know, a few years, or 30 or 40 or 50 years. And hopefully 
that allows you the information that you need to have to judge 
whether or not the savings that would come from the alternative 
approach are valuable. And I think that that is a judgment 
that, ultimately, you and your colleagues need to make, and it 
is not something that comes directly out of the cost estimate.
    Mr. Barletta. All right. Thank you.
    Mr. Duncan. Thank you very much. Mr. DeFazio?
    Mr. DeFazio. Thank you, Mr. Chairman. Mr. Washington, you 
didn't go into detail, and I wanted to get that, about the 
value capture district around Union Station. I am trying to 
understand that. How did that work?
    Mr. Washington. Yes, thank you for the question. Denver 
Union Station, as I said, is the multimodal hub of our whole 
system. We purchased Denver Union Station in 2001, I believe it 
was, for about $50 million, with the idea of that being the 
hub. I would have to say at that time we did not anticipate 
that there would be--that that hub would be such a tremendous 
attraction for developers.
    Mr. DeFazio. Right. I am just trying to get to--I 
understand that. I mean in Portland we have special taxation on 
light rail routes for beneficial property owners. What I am 
trying to get is the vehicle you are using for the value 
capture district. What is it? Is it property taxes? Is it--what 
is it?
    Mr. Washington. Yes, it is tax incremental finance, so TIF 
revenue.
    Mr. DeFazio. OK.
    Mr. Washington. Yes, sir.
    Mr. DeFazio. OK. That is what I was trying to get at.
    Mr. Washington. OK.
    Mr. DeFazio. OK. Just to all the panel, if you could, I 
think we have come a long way on P3s since I held initial 
hearings on this about 6 or 7 years ago. We have got best 
practices now that have been put out by DOT, or at least 
partially recently that I think are quite good and instructive, 
to avoid some of the early abuses, like with Mitch Daniels and 
Mayor Daley.
    But given that, given that it is a useful tool and we know 
how to better use it now, what percentage--you all know how 
massive our infrastructure deficit is. I am sure you have both 
read the Commission reports from the Bush era, you know how far 
behind we are. What percentage of that can P3s realistically 
address? You have to have a revenue stream, or you can have 
availability payments. Otherwise, it is mostly tolling.
    I come from the West, we are not going to toll the 
interstate system. Of the 140,000 bridges that need repair or 
replacement, we are not going to toll 140,000 additional 
bridges in America. What percent--because I just want to make 
the case here that P3s are a tool, part of the toolbox, but 
they aren't the solution. What percent could it address? 
Anybody got an idea? Go ahead, you are brave.
    [Laughter.]
    Mr. Washington. Yes, I would just have to speculate. I 
would think between 10 and 20 percent. I mean that is my best 
guess.
    Mr. DeFazio. And that would be using all the tools--I mean 
that would be both tolling and/or availability payments or 
other methods.
    Mr. Washington. Yes, sir.
    Mr. DeFazio. Of leveraging. Yes. Mr. Bass, you wanted to--
--
    Mr. Bass. For what it is worth, my guess would be less than 
that. As you said, you need unique characteristics in order for 
a P3 to work. Sometimes it needs to be a revenue-generating 
project. If you go to an availability payment model, in my 
opinion, at the end of the day that is just another way of the 
State issuing debt or borrowing money long-term, and there 
might be other, more efficient ways to do that within debt 
limits at the State level. So, I would probably say, overall, 5 
percent or less.
    Mr. DeFazio. Interesting. I am interested about your 
skepticism on availability payments. Mr. Kile, you addressed 
availability payments in your report, and you studied some of 
them. Do you have a--do you agree with his potential--his 
criticism and his concern there?
    Mr. Kile. Well, so I certainly would say that, ultimately, 
if the private sector is putting out money, it is doing so in 
expectation of a return, whether that is tolls or availability 
payments. And to the extent that they are availability 
payments, they are really drawing on the resources of either a 
State and local government, or the Federal Government.
    Mr. DeFazio. OK. Anybody else got a comment on that? Mr. 
Fierce?
    Mr. Fierce. Yes, I would like to make a comment on 
availability-style P3s.
    One, it is not really an either-or. You can have a toll 
facility that is--where the private-sector concessionaire is 
compensated on an availability basis, rather than a real toll 
basis. But if you look at some of the nations where P3 is much 
more active, Europe and Canada in particular, the vast majority 
of their transportation P3s are done on an availability basis.
    We believe that delivers all of the value benefits, the 
innovation, et cetera, without saddling the private sector with 
some things that are totally beyond----
    Mr. DeFazio. Right, but how do they finance those 
availability payments? I think it is through massive taxation 
that would be somewhat objectionable here, like $3 a gallon, 
and things like that.
    Mr. Fierce. It would be taxation or, again, user pay in the 
form of tolls, but where the private sector is only exposed to 
keeping the facility open for----
    Mr. DeFazio. Right, right. But do you agree that this is 
still--I mean the estimates we have had here, it is a tool, but 
it is a limited tool.
    Mr. Fierce. Yes, absolutely.
    Mr. DeFazio. OK.
    Mr. Fierce. In fact, I tried to make that point in my 
verbal comments----
    Mr. DeFazio. Yes, OK, great, thank you.
    Mr. Fierce. But I would agree with Phil's estimate, that 10 
to 20 is probably not a bad ballpark for----
    Mr. DeFazio. OK.
    Mr. Fierce [continuing]. The market.
    Mr. Bass. If I could expand on the availability payments, I 
think it is a valuable tool. I am not a huge fan currently, at 
the current market price. What we have heard in many cases is 
there is toll revenue generated by the project. And if it is 
sufficient, then everybody gets paid. If not, the State steps 
in and fills in the funding gap, which, in other sectors, would 
be known as an appropriation risk.
    Mr. DeFazio. Right.
    Mr. Bass. Well, an appropriation risk in Texas is nowhere 
in the double-digit interest rates. It is much more at 5 
percent or less. Even though the availability payment funding 
element may be 10 to 15 percent of the overall project, my 
understanding is that currently, the market pricing for that 
element is 10 to 11 percent.
    Mr. DeFazio. Well----
    Mr. Bass. To me, for the risk being assumed, an 
appropriation risk of various States, that seems a little 
expensive, given other options that might be available.
    Mr. DeFazio. Well, I hadn't heard that number. Thank you.
    Thank you, Mr. Chairman.
    Mr. Duncan. All right. Thank you, Mr. DeFazio. Mr. Rice?
    Mr. Rice. OK, I think we are kind of beating this--
everybody is kind of asking the same question in a different 
form.
    But if you have a properly structured design bill--let's 
just talk about a new construction project, just for 
simplicity--a properly structured design bill, the Government, 
theoretically, should be able to replicate the time, compressed 
time, either with a PPP or without one, correct? Does everybody 
agree with that? Mr. Kile?
    Mr. Kile. So I think that the advantage of--that the 
literature has found of linking together some elements--say 
design and build, just for example--is that it allows the 
designer to take into consideration issues that would not arise 
until the build. And, by putting those together, it may allow 
some savings that way.
    Mr. Rice. But you could do a design-build with or without a 
PPP, correct?
    Mr. Kile. I think that is probably correct.
    Mr. Rice. And so, the time constraint should be the same, 
either way. Is that right, Mr. Bass?
    Mr. Bass. Yes. I think it gets back to the earlier 
statement, whether or not you consider a design-build to be a 
P3 or not. I think it is a P3 101. But a design-build with or 
without financing from the private sector, you are still going 
to get the time benefits of accelerated delivery.
    Mr. Rice. Right. Mr. Washington, do you agree with that?
    Mr. Washington. Yes, I do. I would agree with that.
    Mr. Rice. And, Mr. Fierce, you agree with that?
    Mr. Fierce. Yes.
    Mr. Rice. All right. So, if it is not a time factor--and 
you should be able to replicate the cost savings, as well, 
assuming you have a properly structured design-build, whether 
you do it with a P3 or without a P3, is that correct, Mr. Kile?
    Mr. Kile. So, again, I think that goes back to who bears 
the risk in these public-private partnerships. And----
    Mr. Rice. Well, I am not talking about--I will get to risk.
    Mr. Kile. OK.
    Mr. Rice. I am talking about pure construction cost.
    Mr. Kile. So again I go back to what we found earlier, that 
there is some evidence that the cost can be lower. That is a--
taking into account the contracting issues. And presumably, 
those contracting issues are bringing together some 
communication that otherwise wouldn't have existed. That, in 
principle, could be replicated. Whether that happens in 
practice I think my colleagues on the panel would probably be 
in a better position to----
    Mr. Rice. What confuses me is you could do a design-build 
without having a public-private partnership.
    Mr. Kile. I think that is right.
    Mr. Rice. You could use the same contractor with or without 
a public-private partnership. Why would the cost be lower with 
a public-private partnership than without one?
    Mr. Kile. So I think it is just a matter of the experience 
shows that communication does actually in fact occur more with 
when those elements are coupled together than when they are 
not, and that the public-private partnership is the vehicle 
that has brought that together.
    Mr. Rice. So you think it actually saves money to do a 
design-build inside of a P3, or coupled with a P3, versus a 
design-build without private financing?
    Mr. Kile. All right. So, again, I go back to the studies, 
and the experience is relatively limited. As I mentioned in my 
statement, there are only about 100 of these in the United 
States that have been over $50 million. And so the experience 
with them is relatively limited. But, based on that limited 
experience, they have been delivered slightly faster and 
slightly less expensively than they otherwise would have been.
    Mr. Rice. Do you agree with that, Mr. Bass?
    Mr. Bass. Yes, I would say one of the--on the design-build, 
if you are just talking those elements, again, I think the cost 
savings are going to be the same. Where it becomes savings to 
the State and the taxpayers, I think, is once the operation and 
maintenance responsibilities are packaged together in that. So 
you have private sector looking at the initial cost, knowing 
that they are going to be the ones responsible for maintaining 
whatever they build for 15, 30, 50 years, depending upon what 
variety of P3 is utilized. I think that is where you get a lot 
of synergy and you get overall--you get savings over time. 
Maybe not as much upfront in just the construction of it, but 
in the 30- to 50-year operations, that is where a lot of the 
benefits come.
    Mr. Rice. So you think that comes from the--if a private 
contractor knows he is going to have to maintain it forever, 
maybe he is a little more careful when he builds it?
    Mr. Bass. Yes.
    Mr. Rice. And it should be that way, because if you do 
design-build either way, inside or outside of the----
    Mr. Bass. Correct. And some of it gets--I think Mr. 
Washington was talking before--in the traditional design-bid-
build, the State is very--generally speaking, the local 
government is very specific on the specifications. In a design-
build and P3 over time, it is more--this is the maintenance 
standard that needs to be achieved. We are not going to tell 
you and proscribe how to get there. It is just this needs to be 
maintained and attained, and then that allows the private 
sector to look at it and figure out how they can do that most 
efficiently.
    A lot of times the life-cycle cost from the public sector 
perspective, in my opinion, those life-cycle costs are not 
always integrated as well as they could be into the initial 
design.
    Mr. Duncan. Mr.----
    Mr. Fierce. One comment on the timing. You had indicated is 
the time for procurement and project delivery the same, and all 
of us here nodded our heads. You also, though, have to look at 
when the project can be delivered.
    So, I believe when we did the 895 project in Virginia, that 
project was on the State's wish list. We were able to bring it 
forward by about 17 years, and deliver the project earlier. So 
there you kind of get into the comment Mr. Barletta made 
earlier about waiting 10 years for this improvement to be made. 
So, not only do you deliver the project quicker, when costs are 
lower, but you also have that public sector benefit of there is 
10 years that the traveling public is enjoying the congestion 
relief, and enjoying the asset that you have delivered earlier.
    So the actual procurement might take the same amount of 
time, and the design-build may take the same amount of time as 
in a straight D-B delivery, but it may be that the P3 opens up 
funding much earlier, and they bring the project forward in 
time by many years. Again, I think on 895 it was estimated to 
be 17 years.
    Mr. Rice. I understand the financing advantage of a P3, and 
that, you know, it is not public financing. At least some of it 
is private. And it would appear to me--I don't understand why, 
I guess--except that maybe the contractor pays a little more 
attention when he is building upfront--but why the cost would 
be any different if you did the design-build inside or outside 
of a P3. It would appear to me the cost should be exactly the 
same in a normal world.
    But--so when you get into the financing mechanism, that 
financing costs money. Private companies are not going to--they 
are not going to put their money up unless they get a 
reasonable return.
    Mr. Duncan. I am sorry, the----
    Mr. Rice. The taxpayers are paying that--I am sorry. The 
taxpayers are paying that return as an additional cost on the 
project, in exchange for shifting risk.
    Mr. Duncan. We have got to move on to----
    Mr. Rice. Sorry.
    Mr. Duncan. So Mr. Maloney?
    Mr. Maloney. Thank you all for being here. Thank you, Mr. 
Chairman, for convening the panel. I just have some questions 
on the Federal Government's role in all this TIFIA. Is TIFIA 
program the right size? Or should be bigger?
    Mr. Bass. I think, under MAP-21, it is much closer to the 
right size than it was previously. And so I think, and would 
hope going forward, that you and your colleagues are able to 
continue it at least under the MAP-21 levels.
    Mr. Washington. And I would agree with that. You know, 
bigger is always better. So I would say if we can increase it, 
that would be great. I think if--streamlining the process would 
be wonderful, both on the TIFIA, the RIF, and the PABs. The 
public activity bonds definitely, we would like to see that 
increased. I think that is a huge tool for P3s around the 
country.
    Mr. Fierce. Yes, we believe that TIFIA is a great program. 
I think the word ``streamlining'' is exactly what we would like 
to see happen there, make the process more efficient----
    Mr. Maloney. Could have been a little faster on the Tappan 
Zee?
    [Laughter.]
    Mr. Fierce. The Tappan Zee was quite remarkable. But I 
would also echo everyone's comments on PABs, absolutely the 
life blood of P3 and transport in the United States. And we 
would love to see PABs topped off, or the cap lifted.
    Mr. Maloney. Mr. Kile, you have an opinion about that?
    Mr. Kile. CBO doesn't have an opinion on the size of these 
programs.
    Mr. Maloney. Fair enough. Is--if $1 billion is about right, 
would $5 billion be better? Or is there an upper limit that you 
would like to see? In other words, what is the right size? Do 
you have a view on that for TIFIA?
    Mr. Washington. On the--oh, TIFIA. Not sure what the right 
size is, but doubling it would be nice.
    Mr. Maloney. And what about the project--what about the 
percentage of the project that it covers? Is that--do we have 
that right, at 49 percent? Or is that too high, too low?
    Mr. Bass. I think Congress has it right at 49 percent. 
However, the implementation remains at 33 percent. Even though 
MAP-21 allows for the participation to be up to 49 percent, I 
am not aware of any project that receives more than 33 percent. 
I am aware of a few that asked for the 49 percent and were told 
to reapply at 33 percent.
    Mr. Maloney. Right, right. And I take it, then, by your 
answers, which anticipated my question, that the cap on PABs, 
you would like to see that higher, as well?
    Mr. Washington. Absolutely.
    Mr. Maloney. And is this a diminishing return? I mean and--
I mean we--I think what people need to understand about TIFIA, 
right, is that it--that for the amount of credit assistance we 
are giving, the amount of project cost is a multiplier of that 
that we are supporting. And I think with 49 loans, we are at 
something like $59 billion of project costs that TIFIA has.
    I mean let me just ask you all. Of those 41 loans that the 
TIFIA program has made, how many of those projects would be 
going forward without those TIFIA loans? Do you know? Do you 
have a sense of that? Is the answer none of them?
    Mr. Bass. I can speak for in Texas, and without TIFIA 
assistance for the projects in Texas, I am not aware that any 
of them would be moving forward.
    Mr. Maloney. Certainly not the Eagle project, right?
    Mr. Washington. No.
    Mr. Fierce. Few, if any.
    Mr. Maloney. Right. Is it fair to say that the TIFIA 
program has probably been the most successful Federal 
infrastructure policy of the last 15, 20 years?
    Mr. Fierce. I think we would certainly add our voice to 
that.
    Mr. Maloney. Let me ask about DOT's role. Would you--what 
do you think about the creation of a P3 unit within DOT to 
assist States with sort of best practices?
    Actually, excuse me. Before I leave TIFIA--because I have 
only got a minute left--on SH 130, are we going to see--what is 
going to be--are we going to see a bankruptcy on that? And what 
is going to be the hit to the TIFIA program if we do?
    Mr. Bass. I am not sure on the southern segments 5 and 6 on 
State Highway 130. Been reported and downgrades by Moody's 
rating agency for the bank loans that are on there. I think 
there is another payment coming up this summer, and after that, 
and it will be interesting to see if the developer and their 
investors are able to work to restructure. But I think we will 
know more by the end of this year.
    Mr. Maloney. Let me just ask you in the time I have 
remaining, Mr. Fierce, DBEs. Would you support increasing the 
prominence of the DBE requirement within an expanded TIFIA 
program?
    Mr. Fierce. Well, the devil is in the details, but we 
certainly see P3 as a platform that allows better delivery 
against those goals.
    Some of the goals can be quite demanding already. Our goals 
on the Capital Beltway for DBE and SWaM content was 40 percent. 
So we are not here advocating let's continue to tighten, 
tighten, tighten. Let's actually deliver against the goals we 
have. Let's see better progress against what we are doing 
already. And we think that P3, through the best value 
procurement process, really enables folks to give those 
programs their due. And we think they do deliver better results 
than conventionally delivered road and bridge programs.
    Mr. Maloney. Well, thank you, Mr. Chairman. My time has 
expired, but I--in a future opportunity, I would love to hear 
more about the role of DOT, creation of a P3 unit within DOT, 
what the proper Federal role is in assisting the States who are 
obviously on the front lines of this. And I appreciate the 
indulgence. Thank you.
    Mr. Duncan. Well, thank you very much. Mr. Meadows, thank 
you for your patience.
    Mr. Meadows. Thank you, Mr. Chairman. Appreciate your 
leadership. Thank each of you for your testimony, and sharing 
your ideas today.
    Mr. Washington, I will start with you. Your written 
testimony was very detailed, extremely detailed, and so I want 
to compliment you on that and, obviously, ask you, in your 
experience, what is the greatest danger of a P3 becoming 
nothing more than a Big Government program with all the 
inefficiencies of perhaps Government agencies? Because I heard 
your testimony earlier. You said you really just care about 
getting somebody from one place to the other and it taking 30 
minutes, which was refreshing to me, because as we add rules 
and regulations and review processes on top of it, you know.
    So, what advice would you have for this panel on how we can 
avoid just becoming a bigger bureaucracy, as it relates to P3s?
    Mr. Washington. Well, thank you for the question. I would 
say the greatest danger is not putting together a comprehensive 
concession agreement. I go to bed every night on Saturday 
nights reading the concession agreement for the Eagle project. 
I think where P3s get sort of sideways is not being very, very 
tight on what you expect, especially in the operating and 
maintaining phase.
    Mr. Meadows. So what you are saying is to go with that 
concession agreement, to make sure that you have dotted your 
I's, crossed your T's, and that there is not things that are 
either left out, or cost overruns that say, well, that was not 
part of our concession agreement, we are going to charge you 
extra for that? Is----
    Mr. Washington. Yes, sir.
    Mr. Meadows. Put in laymen terms?
    Mr. Washington. Yes, sir.
    Mr. Meadows. OK. So let me bounce back to TIFIA and some of 
the questions as it relates to that. What--in terms of 
concurrent review with regards to TIFIA and speeding up the 
process, is that something that you think that we could do? Or 
is there a certain pecking order that must take place, or would 
that help?
    Mr. Washington. Concurrent reviews are always welcome. We 
were really blessed to be, one, in the Penta-P program that DOT 
FTA put together, that streamlined approach. We have a term 
that we went from concept to contract in 3 years. And that is 
really unheard of, I think, when you look at new starts and 
projects and all of that. So, going into the Penta-P program, 
concurrent reviews, the fact that the Federal Transit 
Administration brought on a consultant team, a third-party 
consultant team, to review some of the submittals further, 
helped streamline that process.
    So, I do believe that, in our case, the streamline approach 
was instrumental in our success, and I would encourage that to 
continue.
    Mr. Meadows. All right, because we are all--each one of 
these projects are very different. And so, to say one is 
successful, and more successful because--it is comparing apples 
and oranges.
    Mr. Washington. Right.
    Mr. Meadows. Can you help this panel and this committee 
actually work with the chairman to define some of those what is 
a--how do we define success, you know? Is a 3-year approval 
process success? Is a 5-year? Can you help us, based on the 
success of your project, define those limits, in terms of where 
we should look more for concurrent review and approval 
processes?
    Mr. Washington. Well, to define success, some of the things 
that I put in my report talked about those performance 
specifications, rather than detailed design specifications. 
Establishing a rigorous schedule and timelines. I think a lot 
of times we get sidetracked, as public agencies, with missing 
deadlines.
    Mr. Meadows. So you would suggest that procurement and 
those timelines be tied to the TIFIA application and 
procurement process, then?
    Mr. Washington. As best as you can, I would say. But the 
schedule that I am talking about is just the general, overall 
procurement schedule.
    Mr. Meadows. Right.
    Mr. Washington. And that could be extended to reviews by 
DOT and other entities, as well, sticking to those.
    Mr. Meadows. My time is about to expire. I will yield back, 
Mr. Chairman. I thank you for your leadership in this matter.
    Mr. Duncan. Well, thank you very much, Mr. Meadows. We will 
go--Mr. Barletta, do you have anything else you--all right. We 
will go back to Mr. Capuano, and then I will conclude at the 
end.
    Mr. Capuano. Thanks, Chairman. And, again, gentlemen, thank 
you. I think this stuff is great. I like this much better than 
the typical hearings we have. I have actually stayed awake, and 
alert, and involved.
    [Laughter.]
    Mr. Capuano. But I do want to raise a couple of, obviously, 
issues that both are on my mind, and some of them that came up 
in the meantime.
    I just want to be clear that everybody here understands. 
Private activity bonds exist because, and solely, because of 
Federal tax policy. And, by the way, for those of you who 
haven't read it, the--Chairman Camp's proposal would repeal 
private activity bonds. And his estimate--actually, not his 
estimate, the estimate of the Joint Committee on Taxation--is, 
over the next 10 years, that would raise--by repealing, it 
would save our paying out $23.9 billion of taxpayer money.
    So, when you say that private activity bonds are not 
taxpayer-funded, they are. They only exist because the Federal 
taxpayers are actually giving tax dollars to investors. 
Otherwise, those investors go someplace else and make more 
money. Natural thing. So I just want to be clear about that, 
that is a big, bold line I want to draw under that.
    I also want to go back to what I said, Mr. Bass, Mr. 
Washington, especially the comment you made, Mr. Washington. I 
know--I am a former mayor. Your job is to build things and to 
move people. I get that. My job is a little bit different. And 
that is why I don't blame you for taking the money from any 
place you can get it. Mr. Fierce, you are in the private 
sector. Your job, your people's job, is to build things. You 
get the money from anywhere you want.
    But there is a big problem to me--at least a big question 
coming on these things. I am getting the feeling slowly that 
private activity bonds and TIFIA and P3s are all because we, in 
Congress, don't have the courage to put the money into things 
that you need: a Highway Trust Fund, transit fund. And I would 
just simply ask you, would you really, Mr. Washington and Mr. 
Bass, forget the policy and the philosophy? If you want to 
build things, wouldn't it be just easier if we did what we need 
to do, and find a way to fund the New Starts program? I am 
looking at your Eagle. Half the money is coming out of New 
Starts. That is traditional.
    Mr. Bass, I looked at some of your numbers, though not as 
clear, but the same idea. Most of your money is coming out of 
traditional financing on State and Federal Government thing. 
Wouldn't it just be easier if we fully funded the Highway Trust 
Fund, or if we fully funded the New Starts program, or some of 
the other traditional programs that we have, rather than trying 
to come up with all these fancy ways to avoid us doing 
something that no politician wants to do?
    Mr. Bass. I would say yes. Generally, the most efficient 
way to purchase anything is with cash. However, I didn't 
purchase my house with cash, because I am not in that 
position----
    Mr. Capuano. But even the traditional way is not cash. 
States almost always float bonds on these, but they are 
traditional bonds in the traditional sense of the word. They 
are straightforward. They are not secondary, backed up by 
taxpayers another way. They are straightforward State bonds.
    Mr. Bass. Right. And so, I would perhaps argue with the 
$23.9 billion savings, because if private activity bonds 
weren't there, would States then issue--still at tax-exempt 
rates, so the Federal Government is still not receiving the 
income----
    Mr. Capuano. That is a fair point.
    Mr. Bass. Or, conversely, do the projects just not happen?
    Mr. Capuano. Well, see, that is the other thing----
    Mr. Bass. And what does that do to the overall economy?
    Mr. Capuano. I understand. But if we put more money on the 
table, these projects would happen. And that is part of the 
problem, is that--Mr. Fierce, you say 17 years on a project. 
Well, of course, if I put more money on the table, projects are 
going to happen quicker. And it may not be 17 years, it may be 
a different prioritization. But the fact that we are putting 
money on the table, even directly or indirectly, makes projects 
happen faster shouldn't come as a surprise to anyone.
    And I tell you, Mr. Fierce, be careful of your examples, 
because the one you picked, the Pocahontas, is in trouble, and 
we all know it. So I don't want to nitpick, because I don't 
have a real problem with the ones that are in trouble, I really 
don't. I am not afraid of all of us making a mistake and 
hopefully learning from whatever mistakes we make.
    But I also want to talk to Mr. Kile. When you did these 
things, I mean some of the things--we talked about cost. First 
of all, it bothers me a little bit to say that future elected 
officials won't do their jobs. I am a former mayor. I 
maintained my roads. Now, I will tell you that I did make 
difficult decisions. Some of those difficult decisions? Yes, 
some maintenance on roads or buildings didn't happen when I 
really wanted it to happen, because I had to hire another cop, 
or another teacher, or whatever it might be. So, yes, that is 
difficult.
    But when we say that we don't trust future elected 
officials to do their job, we are also tying their hands in 
whatever crisis they may face 20 years from now. Some of the 
TIFIA bonds we are doing, the principle and interest don't 
become due for 15 or 20 years. Fifteen to twenty years from 
now, I don't know what Denver or what Texas is going to be 
facing. Maybe the Governor then will want to do something 
different with that money, and won't be able to, because the 
Governors today and the mayors today said, ``We are tying your 
hands, we are going to do this.''
    Now, I think that is terrible of us to say that all future 
elected officials won't do their jobs as well as we do, we are 
better than them. That is ridiculous, it is insulting. And, to 
be perfectly honest, I always think that the next generation, 
hopefully, will do better than us. Not worse, but better.
    But, Mr. Kile, I want to go back. When you did some of your 
numbers, did you take into account the tax losses given to 
investors for depreciation costs when they buy these things?
    Mr. Kile. So on the specifics of the tax loss, the 
depreciation, that would be a JCT estimate. But I think the 
general principle that you are on here is that the TIFIA is a 
loan from the Federal Government, and it is a loan at----
    Mr. Capuano. It is a great loan. I wish I could get one.
    Mr. Kile [continuing]. At preferred interest rates----
    Mr. Capuano. For my house.
    Mr. Kile [continuing]. That they can't on the private 
market, and that that imposes costs on the Government.
    And similarly, tax-preferred bonds like private activity 
bonds are a kind of debt instrument that does impose costs on 
the taxpayer.
    Mr. Capuano. But did you--I apologize--did you take into--I 
mean, as I understand it, the people who invest in these 
things--Texas cannot, and Colorado cannot depreciate your 
highways, because you don't pay taxes anyway, so you don't get 
depreciation. Private investors get to deprecate their 
investment in these items. And I have--my old days, before I 
became a full-time elected official, I was a tax attorney, 100 
years ago--so, you know, you don't want me doing your taxes any 
more, but I still remember the concepts.
    I have never really liked the concept of depreciation, but 
that is a different issue. Whether you like it or not, it is a 
massive item when you invest in something on a tax sheet. And 
did you take--and that costs--that money comes directly out of 
the pockets of Federal taxpayers. If you get--if somebody else 
gets depreciation, I, as a taxpayer, have to pay it. So did you 
take that into account, or did you not?
    Mr. Kile. Yes. As a general statement, that is one of the 
things that equalizes the cost----
    Mr. Capuano. So you did.
    Mr. Kile [continuing]. Between public and private 
borrowing.
    Mr. Capuano. And did you take into--for instance, I read 
in--I think it was your report, one of these reports--that both 
the people of Illinois and the people of Indiana, one of their 
complaints, or two of their complaints, one of which had to do 
with maintenance, they said that some of the private people 
weren't maintaining, but I will leave that alone. The other 
one, they were both pretty uniform that there was traffic 
diversion off of the roads that were sold, and on to other 
roads.
    Now, again, I can't speak for individual projects, because, 
obviously, some projects don't divert traffic, but some 
projects do, especially when you raise toll rates. Did you take 
into effect the--any estimated costs on the increased cost to 
those local cities and towns, or to the States, or whoever 
maintains those roads, when you divert 10 or 20 or 30 percent 
of your traffic off of one road and you put it on another road? 
This other road now has to be maintained at a higher capacity. 
Were any of those costs factored in?
    Mr. Kile. Right. So CBO actually generally does not assess 
the cost of any individual project. But I think the experience 
with the Skyway, for example, has shown that, as tolls have 
gone up, that some traffic has moved to other roads.
    Mr. Capuano. I guess, again, for me, I love the idea of 
coming up with new tools in the toolbox, I really do. I know I 
am probably sounding like I am not a big P3 guy, but it is not 
really the fact. I actually like the idea, I just want to make 
sure that we are trying to find the ones that work, versus the 
ones that don't, and, in the long run, what is best for the 
taxpayers. And, in the long run, making sure that tomorrow--
and, again, I come from Massachusetts, and I will tell you that 
we have had two major projects in my lifetime that have 
actually tied up Federal dollars because they ran into problems 
at the time and they had to put bonds out that basically said 
we will put up and we will pay for the next 10 or 20 years 
future Federal dollars.
    Right now, today, the Commonwealth of Massachusetts is 
losing hundreds of millions of dollars each year directly from 
the Federal Government, because it comes from the highway fund 
and goes directly into paying for past activity, which means we 
don't get to build the bridges or the roads or whatever it is 
today that we would otherwise be doing.
    And I am really concerned about that, because my big fear 
is you move a project up 17 years, yes, I get to use it. What 
happens 17 years from now when the next guy needs to do a road 
or a bridge? I have used their money. And I am really not 
interested in a drunken evening out, spending the family jewels 
to, you know, have a good time tonight. Now, don't get me 
wrong. Tonight it is going to be a great idea. But tomorrow it 
is not such a great idea.
    And that is kind of what I am trying to do. I am trying to 
find out the financing of these things. And I would appreciate, 
Mr. Bass, Mr. Washington, any details you can send me on the 
financing--well, within reason, I don't want 10,000 pages, 
because my staff will get killed. But I would really like to 
see. Again, I am not trying to prove anything, I am just kind 
of trying to figure out where P3s really should fit and where 
they shouldn't. And we might not even be there yet. We may not 
be able to make that judgment. But, if you can, I really 
appreciate that.
    Mr. Washington. Just a quick comment, and I really 
appreciate your comments. The PABs, TIFIA, all of these things 
are great programs. But I would just as soon not do them, and 
not have to do them. So, to answer your question whether the 
Congress can make this all easier by doing a new transportation 
reauthorization bill, amen and hallelujah.
    So, I think the other piece of this is project management, 
good project management. I think that is a huge key. That is 
what I was getting to when I talked to schedule adherence, and 
all of those kinds of things. That is a whole other piece. When 
you mentioned the projects in Massachusetts, those projects are 
all over the country, I think, just bad project management 
leading to cost overruns and all those things.
    But just to go on record, great programs, PABs, you know, 
we love those things. We are doing them because we have to do 
them, as I see it. And if we had a good transportation 
reauthorization bill, and New Starts programs, and all those 
things, we probably would not have to do these things, which I 
would welcome.
    Mr. Capuano. Thank you, Mr. Washington.
    Mr. Bass. I would echo that, and perhaps offer that some of 
the concerns you have with private activity bonds, or what I am 
hearing you say, is true whether that is a State general 
obligation bond or a State revenue bond or a State--the State 
is issuing debt and taking future revenues in order to get a 
project delivered today, whether that is associated with a P3 
or not.
    Mr. Capuano. Right.
    Mr. Bass. And so, those policy decisions are being made at 
the State and local level every day, in part because of the 
funding challenges that they are faced with.
    Mr. Capuano. That is true. Thank you very much, and I 
really appreciate the chairman's indulgence.
    Mr. Duncan. Well, good comments. Thank you, Mr. Capuano.
    Mr. Barletta, any additional thoughts?
    Mr. Barletta. No.
    Mr. Duncan. All right. Let me just say this. I am so 
pleased that we have had participation, active participation, 
by almost all the members of this panel, the congressional 
panel, and then we have had a great panel of witnesses. And you 
all have been, I think, very helpful, and have really impressed 
me.
    But let me just say a few things. You know, this is my 26th 
year on this committee, and I had several chances to move to 
other committees, but I chose to stay here because I think the 
work of this committee is extremely important, and I am 
interested in all the things that we work on. It has been 
referred to over the years as the committee that builds 
America.
    And I also have liked the bipartisan manner in which this 
committee has operated during most of that time. During that 
time--we have 6-year limits on chairmanships on the Republican 
side. So I chaired the Aviation Subcommittee for 6 years, I 
chaired the Water Resources and Environment Subcommittee for 6 
years, I chaired the Highways and Transit Subcommittee for 6 
years. So all very different kinds of things. But probably the 
most frustrating thing to me during all of that time is the 
length of time these projects take, when I think they could be 
done--and everybody tells me they could be done in half the 
time or a third of the time. And some other countries are doing 
things much faster.
    And then, also, I have noticed through the years that when 
we are forced to, we do these projects faster, like the 
Interstate 35 bridge in Minnesota, or some of the earthquake 
work in California, different things. But it is--in the past, 
it has always been the environmental rules and regulations and 
red tape that have held things up so much. And I have mentioned 
it many times in here.
    I will never forget, years ago, the--in front of the 
Aviation Subcommittee one time the Atlanta Airport people said 
it took 14 years from conception to completion for their newest 
runway, which is now many--several years old. But it was all 
this environmental stuff. And then, when they finally got all 
the approvals, they did the runway in 33 days. Now, they did it 
in 24-hour days, they were so relieved to get all the 
approvals, so you could say 99 days.
    And then, I chair the Highways and Transit Subcommittee, 
and the Federal highway people come to us and they tell us two 
different studies, the last two studies they had, it said it 
took 13 years from conception to completion, and another one 
said 15 years from conception to completion on the average 
highway project. And these weren't transcontinental roads, 
these were 9- and 12-mile projects, and so forth.
    Mr. Bass, do you see any--hopefully, some of the things we 
put in MAP-21 have helped, but I will ask any of you if you 
want to make any comments on that. Are we--we paid lipservice 
for years to environmental streamlining. Are we finally 
starting to make some progress in that area? And how do you, 
Mr. Bass--how has Texas aligned the P3 process with all the 
environmental rules and regulations? Any comments?
    Mr. Bass. Well, first, commenting on MAP-21, we are excited 
and in the process of taking over the lead responsibility, 
similar to what California did a few years ago, on the 
environmental review. And we think that is going to save a 
tremendous amount of time through the environmental process, as 
much as 25 percent is what I am hearing.
    But you are exactly right. The--on the P3 side, it is 
critical as we go through the procurement, to make sure that 
the project is on schedule, or already has been environmentally 
cleared, so we don't get an elongated procurement with the 
private sector as we keep waiting for the next permit, or the 
next environmental review. But we are excited by the 
opportunity provided in MAP-21 for the State to take over that 
primary role.
    Mr. Duncan. All right. Mr. Washington, you know from an 
earlier comment I made--and Mr. Capuano has been much more 
articulate about this--but I have great concern about, you 
know, a few years down the road, how these projects turn out. 
And what recourse--are you satisfied with the recourse that 
your agency has if a private sector operator doesn't meet the 
contractual terms of service 5 years from now, 10 years from 
now?
    Mr. Washington. Yes, sir, we are, because we have put 
together a very comprehensive concession agreement. This is a 
28-year operating and maintaining agreement with penalties and 
incentives. The penalties are much harsher to the private 
sector than the incentives are. And so, there is great 
incentive, I believe, for the private sector to keep the system 
operating in a good state of repair.
    One quick example that I thought was very, very relevant in 
preparing to come here is we had a couple of bridges that were 
not up to the requirements for the program. And because the 
concessionaire, the private-sector concessionaire team has, I 
think, to maintain and operate those bridges for a 28-year 
period, they came to us. It was really a combination of us and 
them coming to me and saying, ``Hey, listen, we need to replace 
these girders.''
    Now, I have to think that some design-build firms would 
have tried to give me the key and walk away after the 
construction on that defective bridge. Not all of them, but 
that could have happened. But the incentive to make sure that 
bridge was ready, because they have to operate and maintain it 
for a 28-year period, and the specter of penalties, I think, 
provided some pretty good incentive to replace those bridges 
with no impact on schedule or cost.
    And so, that example, when we talk about a full design, 
build, operate, maintain, and the life-cycle piece that Mr. 
Bass talked about, I think you get that if you put together a 
very good concession agreement, and there is great incentive to 
operate and maintain without being penalized.
    Mr. Duncan. All right, thank you very much. Mr. Fierce, I 
thought Mr. Rice, Congressman Rice, asked a real good question. 
He asked, ``How do we keep these very big P3 projects from 
becoming just another Big Government-type project?'' And we 
heard Mr. Kile say that, basically, in the projects of the 
limited studies that they have been able to do so far, that the 
costs have been roughly the same in the private sector and the 
public sector.
    Do you--you represent, or you work for a very large 
corporation. I know there are some economies of scale, but do 
you sometimes--does your company sometimes operate like a Big 
Government entity? And how do you keep it from doing that?
    And, secondly, in any of the projects that you have 
firsthand knowledge about, do you think the public sector could 
have done them as cheaply or more cheaply than your company 
has?
    Mr. Fierce. Well, in terms of the risk of a large 
corporation acting like a large bureaucracy, that is very real. 
And, you know, we try to avoid that by driving down 
decisionmaking authority and accountability as much as we can 
into the smaller operating segments. Presumably, that same 
lesson works in Government, but that is probably way above my 
pay grade.
    But in terms of kind of the big bureaucracy in terms of 
project delivery and how does it operate in one project to the 
next, yes, there is--some are better and more streamlined and 
less bureaucratic than others. It really does kind of devolve 
to the final P of the PPP, which is the partnership.
    When we really hit it out of the park and have a great 
project that we are proud of, typically our public-sector 
partner is also very proud of it, and it is because everybody 
has rolled up their sleeves and really acted in a collaborative 
manner, rather than--sometimes conventional project delivery 
tends to be a bit confrontational. And the best of the P3s tend 
to be very collaborative, and the partnership aspect of it 
really delivers value.
    Mr. Duncan. Well, you did--Mr. Washington talked about a 
$300 million savings on his project, and you talked about the 
$1.7 billion in savings, if I understood you correctly, on the 
Tappan Zee. Is that correct, $1.7 billion?
    Mr. Fierce. Yes. I was quoting from Chairman Milstein.
    Mr. Duncan. OK.
    Mr. Fierce. Against their internal estimates.
    Mr. Duncan. All right. Mr. Kile, why--in your studies that 
you have done, why do you think other countries have gone so 
much more into public-private partnerships than we have, here 
in this country?
    Mr. Kile. We really didn't--I don't think I have a complete 
answer on that. We really didn't look very carefully at the 
reasons that other--some other countries have used them more 
heavily than in the United States.
    Mr. Duncan. Did you look--so did you look at public-private 
partnerships in other countries?
    Mr. Kile. I am familiar with some, but I really haven't 
looked at them systematically.
    Mr. Duncan. I think we are going to try to look into that a 
little bit.
    Last week, Mr. Capuano and I and others went to an Aspen 
Institute breakfast with the president of the World Bank. And 
he was--he really impressed me. I thought he was one of the 
smartest men I have ever heard. And he was a former president 
of Dartmouth.
    And, anyway, he said he was becoming obsessed with trying 
to figure out a way that the--to help the public sector be able 
to deliver benefits to the public as efficiently and at the 
same cost or--as the private sector. And he said right now we 
are a long ways from that. And he thought the main reason was--
is that it is so hard, it is very difficult to get rid of poor, 
or bad, or incompetent employees in the public sector. I mean 
do you see that, or agree with that, or--you seem to say--or 
the impression I got was that you said the public sector was 
delivering efficiencies just as good as the private sector, or 
almost as good.
    Mr. Kile. So we didn't look at that particular issue, with 
respect to employees. Basically, I think in our review of 
studies that have looked at both public and private 
partnerships in the traditional approach, as I said, they are a 
little cheaper and a little faster. And I think that that 
experience is probably a reflection of the communication that 
goes on and the coordination in different phases of the 
program. And that is the evidence for that conclusion.
    Mr. Duncan. All right. Well, thank you. Thank you very 
much. I have really enjoyed this hearing, and I appreciate your 
hard work that you have put into your testimony. And you have 
provided a lot of good information to the panel.
    And that will conclude this hearing. Thank you very much.
    [Whereupon, at 11:51 a.m., the panel was adjourned.]


                          
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