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






 DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND URBAN DEVELOPMENT, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2015

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                     ONE HUNDRED THIRTEENTH CONGRESS
                             SECOND SESSION

                                ________

   SUBCOMMITTEE ON THE DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND 
         URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS
                       TOM LATHAM, Iowa, Chairman
 FRANK R. WOLF, Virginia            ED PASTOR, Arizona
 CHARLES W. DENT, Pennsylvania      DAVID E. PRICE, North Carolina
 KAY GRANGER, Texas                 MIKE QUIGLEY, Illinois
 JAIME HERRERA BEUTLER, Washington  TIM RYAN, Ohio
 DAVID P. JOYCE, Ohio               
 MICHAEL K. SIMPSON, Idaho          
                                    
 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mrs. Lowey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
                Dena Baron, Cheryle Tucker, Doug Disrud,
                    Carl Barrick, and Brian Barnard,
                           Subcommittee Staff

                                ________

                                 PART 4
                                                                   Page
 Department of Transportation.....................................    1
 Oversight Hearing: Office of Public and Indian Housing, 
Department of Housing and Urban Development.......................  135
 Department of Transportation Modes...............................  165
 Department of Housing and Urban Development......................  253
 Outside Witness Testimony........................................  461

                                ________

                     U.S. GOVERNMENT PRINTING OFFICE

 88-725                     WASHINGTON : 2014






                                  COMMITTEE ON APPROPRIATIONS

                    HAROLD ROGERS, Kentucky, Chairman

 FRANK R. WOLF, Virginia              NITA M. LOWEY, New York
 JACK KINGSTON, Georgia               MARCY KAPTUR, Ohio
 RODNEY P. FRELINGHUYSEN, New Jersey  PETER J. VISCLOSKY, Indiana
 TOM LATHAM, Iowa                     JOSE E. SERRANO, New York
 ROBERT B. ADERHOLT, Alabama          ROSA L. DeLAURO, Connecticut
 KAY GRANGER, Texas                   JAMES P. MORAN, Virginia
 MICHAEL K. SIMPSON, Idaho            ED PASTOR, Arizona
 JOHN ABNEY CULBERSON, Texas          DAVID E. PRICE, North Carolina
 ANDER CRENSHAW, Florida              LUCILLE ROYBAL-ALLARD, California
 JOHN R. CARTER, Texas                SAM FARR, California
 KEN CALVERT, California              CHAKA FATTAH, Pennsylvania
 TOM COLE, Oklahoma                   SANFORD D. BISHOP, Jr., Georgia
 MARIO DIAZ-BALART, Florida           BARBARA LEE, California
 CHARLES W. DENT, Pennsylvania        ADAM B. SCHIFF, California
 TOM GRAVES, Georgia                  MICHAEL M. HONDA, California
 KEVIN YODER, Kansas                  BETTY McCOLLUM, Minnesota
 STEVE WOMACK, Arkansas               TIM RYAN, Ohio
 ALAN NUNNELEE, Mississippi           DEBBIE WASSERMAN SCHULTZ, Florida
 JEFF FORTENBERRY, Nebraska           HENRY CUELLAR, Texas
 THOMAS J. ROONEY, Florida            CHELLIE PINGREE, Maine
 CHARLES J. FLEISCHMANN, Tennessee    MIKE QUIGLEY, Illinois
 JAIME HERRERA BEUTLER, Washington    WILLIAM L. OWENS, New York
 DAVID P. JOYCE, Ohio                 
 DAVID G. VALADAO, California         
 ANDY HARRIS, Maryland                
 MARTHA ROBY, Alabama                 
 MARK E. AMODEI, Nevada               
 CHRIS STEWART, Utah                

               William E. Smith, Clerk and Staff Director

                                  (ii)

 
DEPARTMENTS OF TRANSPORTATION, HUD, AND RELATED AGENCIES APPROPRIATIONS 
                                FOR 2015

                              __________

                                         Wednesday, March 12, 2014.

                      DEPARTMENT OF TRANSPORTATION

                                WITNESS

HON. ANTHONY FOXX, SECRETARY, DEPARTMENT OF TRANSPORTATION
    Mr. Latham. The subcommittee will come to order. I guess 
before we start, we should recognize our newest member, the 
gentleman from Idaho, Mr. Simpson. Welcome.
    Mr. Simpson. Thank you, Mr. Chairman.
    Mr. Latham. And I know you will be a very constructive 
member of the subcommittee.
    Mr. Simpson. I am on your team, Mr. Chairman.
    Mr. Latham. Thank you. That is what I like to hear.
    Today we welcome the Department of Transportation Secretary 
Foxx to kick off the fiscal year 2015 budget hearings. It is a 
good thing to start out with a conference bill that sets the 
foundation for the budget proposal.
    Chairman Rogers, who will be here shortly, Ranking Member 
Lowey, along with Chairman Mikulski and Senator Shelby really 
moved mountains to get the fiscal year 2014 omnibus done, and 
we are ready to move mountains again to get the bills done for 
fiscal year 2015 at the set level of $1.016 trillion.
    However, the Department of Transportation is a bit of a 
problem child this year, which is saying a lot when you have 
HUD also in the bill. Not only are the surface programs in need 
of reauthorization, but the trust funds are flat out of money. 
Next, the budget proposals to shift approximately $4 billion 
worth of existing programs--actually $6 billion if you look at 
the expansions and increases--from the discretionary general 
fund to a mandatory, not-yet-in-existence Transportation Trust 
Fund. I am guessing the President spent the $4 billion 
somewhere else. But if the past is prologue, we will need to 
find the $4 billion-plus under the $1.016 trillion to continue 
those existing programs, and I am hoping this is not an 
insurmountable problem.
    I am sure there will be a question or two on those topics 
this afternoon, Mr. Secretary, and I look forward to our 
dialogue.
    Before we get to the questions, I will recognize my good 
friend and colleague, the ranking member of the subcommittee, 
Mr. Pastor for his opening statement.
    Mr. Pastor. Thank you, Mr. Chairman. Good afternoon.
    I want to join you in welcoming Secretary Foxx to his first 
appearance before the subcommittee. Our colleague Mr. Price 
will provide a more formal introduction when he comes in.
    This afternoon we will discuss the President's fiscal year 
2015 budget for the Department of Transportation. This budget 
is familiar to other budgets. It requests robust funding for 
many programs, and shifts nearly all the surface transportation 
programs to the mandatory side of the budget. That, of course, 
is not within the subcommittee's jurisdiction; however, we can 
explore how to address our Nation's infrastructure needs and 
how to ensure that our transportation system is safe and 
efficient.
    Secretary Foxx, as the former member of a large city, you 
certainly know firsthand the important role that transportation 
plays in the quality of life of our citizens and the economy as 
a whole. I welcome you and look forward to hearing your 
testimony.
    Mr. Latham. Thank you very much, Mr. Pastor.
    I think the full committee chairman will be here shortly, 
but I would like to recognize the ranking member of the full 
committee, Mrs. Lowey.
    Mrs. Lowey. Well, thank you, Mr. Chairman and Ranking 
Member Pastor. And a very great welcome to Secretary Foxx, who 
really got going, and it has been a pleasure for me working 
with you.
    First of all, I want to commend the work of our chairman 
and Ranking Member Pastor, who both announced that this will be 
their last Congress. And Iowa and Arizona, along with this 
committee, have benefited greatly from their service. They will 
be sorely missed.
    And as we know, this is the Secretary's first hearing 
before the House Appropriations Committee. And I want to thank 
you personally for the Department's commitment to building the 
new Tappan Zee Bridge, and I look forward to continuing to work 
with you on the project.
    With a 25 percent increase for infrastructure spending 
compared to the 2014 enacted level, the President's budget 
answers the call for rebuilding our aging country's 
infrastructure, which the American Society of Civil Engineers 
grades on average as a D. That is before you came to this 
position, a D. We have work to do. For every billion dollars of 
infrastructure investment, we create or preserve nearly 35,000 
jobs, generate more than $6 billion worth of economic growth. 
At $18 billion above last year's bill, this budget would create 
over 630,000 jobs, and generate $108 billion in economic 
activity.
    I am particularly pleased that the budget request includes 
$825 million to assist with the implementation of positive 
train control on commuter and passenger rail lines. According 
to the National Transportation Safety Board, this automated 
technology would have prevented the devastating Metro-North 
crash in the Bronx last December, which killed one of my 
constituents. I hope that the fiscal year 2015 THUD bill 
supports this effort by helping rail lines install this 
technology in some way.
    Mr. Secretary, while we are on the topic of Metro-North, I 
am also anxiously awaiting the results of your deep dive into 
Metro-North's operations and the Department's report to this 
committee on your findings. I trust that you will have 
something to the committee by the March 17 deadline.
    The budget also includes $40 million to establish the Safe 
Transportation of Energy Products Fund to support prevention 
and response activities surrounding the transportation of crude 
oil. The Lower Hudson Valley has recently had two very close 
calls with trains that transport crude oil. Thankfully, at the 
time of the derailments, the oil tankers on the trains were 
empty. The Department and industry have taken some good first 
steps to make crude transport safer, but more must be done to 
hold responsible those accountable and safeguard communities 
like mine in the Lower Hudson River Valley.
    Lastly, as you know, Mr. Secretary, the Appropriations 
Committee doesn't have sole authority to provide the funding 
increase that you seek. Until Congress and the administration 
come together and agree on a pay-for that assures the long-term 
solvency of the Highway Trust Funds, I fear that we will 
continue to receive a failing grade for our country's 
infrastructure. The American people are looking at us for 
leadership. Last year we stood at the edge of the budgetary 
brink, and were able to pull ourselves back by supporting a 
compromise. This year I hope the administration feels the same 
sense of urgency for addressing the solvency of the Highway 
Trust Fund.
    And I thank you again, and welcome.
    Secretary Foxx. Thank you.
    Mr. Latham. Thank you, Mrs. Lowey.
    We would now like to recognize Mr. Price from North 
Carolina to introduce the Secretary.
    Mr. Price. Thank you, Mr. Chairman. I will gladly do just 
that.
    It gives me great pleasure to welcome my friend and fellow 
North Carolinian Secretary Anthony Foxx to the subcommittee. We 
look forward to his leadership and what he has to say to us 
today. We know that he understands the transportation and 
infrastructure challenges confronting our communities in North 
Carolina and across the country. He has been mayor of 
Charlotte, one of the Nation's fastest-growing cities, and he 
has been on the front lines, delivering transportation services 
to the public and boosting economic growth and creating jobs.
    During his time in office, Secretary Foxx helped to improve 
local transportation systems and the quality of life in 
Charlotte. I will just name a few of his efforts: extending the 
LYNX light rail system, the largest capital project ever 
undertaken by the city; breaking ground on the Charlotte street 
car project, which will leverage Federal and city financing to 
establish rail service in a critical corridor; expanding the 
Charlotte Douglas Airport, which is the sixth busiest airport 
in the world.
    Secretary Foxx now leads an agency with more than 55,000 
employees and a $70 billion budget that oversees our 
government's efforts to build the safest, most efficient 
transportation system in the world. As the President said in 
nominating Secretary Foxx, he has got the respect of his peers, 
mayors, Governors, all across the country. As a consequence, I 
think he is going to be extraordinarily effective.
    We all know we have pressing needs across the Nation, 
infrastructure needs. I trust that Secretary Foxx's experience 
at the local level is exactly what the doctor ordered at this 
point. It is going to prove extremely valuable shaping national 
transportation policy. And I know he will work tirelessly for 
national multimodal transportation investments that will 
further our Nation's prosperity and quality of life.
    So welcome, Mr. Secretary. You are off to a great start. 
And we are happy for the first time, really, to welcome you to 
this subcommittee here today.
    Mr. Latham. Thank you very much, Mr. Price.
    Mr. Secretary, your full written statement will be entered 
into the record, and you are recognized for 5 minutes for your 
opening remarks.
    Secretary Foxx. Thank you, Mr. Chairman, and to the ranking 
member. Thank you as well to Congressman Price. Thank you very 
much for the introduction. And also to Congressman Lowey, thank 
you very much.
    I want to say a particular word of thanks to the chair and 
the ranking member of the subcommittee. And I know that I speak 
on behalf of advocates of transportation everywhere when I say 
that both of you will be deeply missed.
    Today I am here to discuss the President's 2015 plan for 
the Nation's transportation system. While I come here as the 
U.S. Secretary of Transportation, our Department supports all 
50 States and territories, and a host of local and regional 
project sponsors. Today I also speak for them.
    What concerns our Department and our stakeholders is what 
concerns many of you. Year after year we have shored up the 
Highway Trust Fund with short-term measures, and now it is 
running out again, perhaps as early as August. On top of that, 
our last surface transportation funding bill was a 2-year bill, 
rather than a 6-year bill like the ones that came before it. 
When I speak to folks on the ground, including mayors and 
Governors, heads of DOTs in your States, they tell me that this 
funding and policy uncertainty is creating an invisible crisis 
in our country, a crisis where they are not willing or able to 
put new projects on the books because they don't know if they 
can fund them, which means they are leaving our already 
crumbling infrastructure to crumble further.
    To put a finer point on it, since 2009, our surface 
transportation programs have been operating under short-term 
extensions nine times, including a 2-day lapse in March of 
2010. And there have been 18 continuing resolutions, including 
8 in fiscal year 2011.
    Overall, our Nation has a massive infrastructure deficit, 
including 100,000 bridges that are old enough to qualify for 
Medicare, and billions of dollars in backlogged highway and 
transit needs. According to the World Economic Forum, our 
infrastructure quality has fallen to 25th in the world.
    To address these challenges, we must confront two 
realities. The first is that we are underinvesting, and the 
second is that our system is underperforming from an efficiency 
standpoint. If you can imagine America's infrastructure as a 
house, we have had years of termites in the basement. In 
effect, we are spending money by allowing the cost of repairs 
to rise as the damage becomes more extensive. The most fiscally 
responsible path is to invest significantly more in our system, 
which will spur job growth and allow us to meet growing new 
capacity needs and deferred maintenance.
    By working together we can change these trends for the 
better, and it is in that spirit that a couple weeks ago 
President Obama laid out his vision for a 4-year, $302 billion 
transportation plan that will put us back on the path of 
solving this problem. To fill the hole in the Highway Trust 
Fund, the plan draws on savings from progrowth business tax 
reform, a bipartisan pay-for. And I should point out that 
Chairman Camp has released his own variation of this proposal, 
which suggests to me there is an opportunity to get something 
done. In fact, we in the administration are also sending a bill 
to Congress that will provide program-by-program details behind 
every budget request that we have.
    To the issue of underperformance, we can and should 
continue to improve on efficiency within our system, and our 
proposal aims to do so. Our proposal enables us to redouble our 
efforts to increase the value proposition for transportation 
dollars spent, and we can do so without compromising project 
integrity or the environment. That is why major new initiatives 
in the President's budget include putting a premium on 
streamlining through an interagency review process, and on 
incentives to catalyze innovation at the local and the State 
level.
    The American people need and deserve funding certainty so 
they can plan. I would encourage the committee and Congress to 
do something different: Shock the world. Let's get a long-term 
funding plan in place and move America forward.
    Thank you very much.
    Mr. Latham. Very good. Thank you very much for your 
comments.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Latham. I guess we all understand the trust fund 
situation, the run-out in August, and the situation we have had 
with short-term extensions and all of that. In your budget, 
like you talked about, your 4-year, $203 billion proposal as 
far as infrastructure, you said you are going to be sending up 
specific legislation?
    Secretary Foxx. Yes, sir.
    Mr. Latham. When can we expect that?
    Secretary Foxx. We aim to send that legislation as early as 
possible in April.
    Mr. Latham. In April?
    Secretary Foxx. Yes, sir.
    Mr. Latham. Does that include also the funding mechanisms?
    Secretary Foxx. Details of the funding mechanism were 
alluded to in the budget proposal, in the Treasury section of 
the proposal.
    Mr. Latham. Specifically that are going to pay for this?
    Secretary Foxx. Yes, sir.
    Mr. Latham. Okay. But that will not be part of your 
legislation?
    Secretary Foxx. Well, just to elaborate further on the pay-
for, what is contained in the budget proposal in the Treasury 
section are several areas of opportunity in progrowth business 
tax reform, including the $1- to $2 trillion of estimated 
corporate profits that are overseas. Included in that is also 
reducing accelerated depreciation and eliminating last in first 
out accounting. And those are three different ways.
    I would say to you that there are many ways to address 
progrowth business tax reform. We are open to the suggestions 
of Congress on that, but that is really a Treasury discussion. 
It is one of those discussions that we are part of, but it is a 
Treasury--
    Mr. Latham. You are not going to specify what you are 
talking about?
    Secretary Foxx. Well, I have given three very clear ideas 
that are contained in the budget proposal.
    Mr. Latham. But they won't be in your bill.
    Secretary Foxx. Our bill will come in April. We will have a 
discussion about what the contents of that bill are at that 
time.
    Mr. Latham. Well, I am concerned. You know, you talk about 
short-term extensions and start-stop, and basically in your 
progrowth reforms, talk about a one-time revenue influx of 
approximately $150 billion, which is not sustainable, right?
    Secretary Foxx. Well, it is sustainable over a period of 4 
years, which is several grades better than 2 years or 18 
continuing resolutions.
    Mr. Latham. But you are not going to specify what they are.
    Secretary Foxx. Well, as I say, this is a dialogue, not a 
monologue, and we are looking for areas of opportunity to have 
bipartisan cooperation on a pay-for. Progrowth business tax 
reform has bipartisan interest, and we think there is an 
opportunity to get to yes.
    Mr. Latham. Maybe you are not aware. I know Secretary 
LaHood, we have had several conversations back and forth in 
public and private about funding for reauthorization for long-
term funding streams. Are you making any proposals for that?
    Secretary Foxx. Well, we believe that in terms of the 
President's proposal that 4 years of funding and policy 
certainty would do a lot more than what we have been able to do 
in the last few years.
    Mr. Latham. But no permanent fix. So you are talking about 
another start-stop thing.
    Secretary Foxx. Well, I believe, sir, that having been on 
the local level, and having experienced what it is like to not 
know what the future holds even 6 months or 12 months from now, 
that a 4-year bill would be light years ahead of where we have 
been.
    Mr. Latham. Are you suggesting any increase in the gas tax, 
or vehicle miles driven, or any other long-term funding?
    Secretary Foxx. Not in this proposal, sir, but we remain 
open to ideas that Congress has. To be honest with you, if 
there are other ideas that Congress has to solve this problem, 
we have expressed our openness to those suggestions.
    Mr. Latham. Have you taken those off the table? The 
administration previously did.
    Secretary Foxx. We have been very clear that we are open to 
any ideas that Congress has on this subject.
    Mr. Latham. So that is a change in policy?
    Secretary Foxx. Well, it is our position today.
    Mr. Latham. Which would be a change of policy. Okay.
    Why don't we go--Mr. Pastor. I see I have a yellow light 
here.
    Mr. Pastor. Thank you, Mr. Chairman.
    Secretary Foxx, this is not a situation in which it is 
directed to you in terms that you are responsible for the 
situation, but I think that the chairman, as he asked those 
questions, and looking at fiscal year 2015, that being an 
election year, being that probably major proposals, which 
include infrastructure development as well as tax reform, the 
probability is pretty small that it is going to happen. But the 
close reality is that come August the Highway Trust Fund will 
probably be near broke, if not broke. And so trying to be more 
of a realist, and trying to help you as Secretary of 
Transportation, have you and your staff looked at come August, 
Congress is gone for vacation or elections, what you would plan 
to do in informing the local ADOTs, Department of 
Transportation, et cetera?
    Secretary Foxx. Well, a couple of points on this. We 
believe that this situation will increasingly become dynamic as 
we get closer into the summer. There are a host of variables 
that have to be taken into account, including the facility of 
individual States at the point in time which, as we have said, 
is potentially as early as August.
    Mr. Pastor. Right.
    Secretary Foxx. So we are prepared to manage through the 
event should it occur, but our specific plans will have to be 
developed based on exactly what is happening at that particular 
time. And so we do not have what I would say is a blueprint 
today, but we are prepared and obviously looking at the Highway 
Trust Fund from month to month. We are making sure we are 
staying in contact with the States, and our plans will evolve 
as we get closer to that point. But I would also point out that 
our goal is to avoid that situation, as I think is probably 
everyone's goal in here, and we remain open to continuing the 
dialogue and hopefully coming up with an answer together with 
Congress.
    Mr. Pastor. Well, I agree that that is the goal, but 
achieving that goal sometimes is a few yards away, and you have 
to plan for what is the likely situation. And so trying to be a 
realist and trying to wish you success, I would counsel you 
that probably plan A ought to be come August that you will 
probably have to implement a plan that goes back to the States 
and local jurisdiction and deal with the trust fund so that the 
injury or the hardship doesn't fall too hard, and we are able 
to at least accomplish a few things.
    Secretary Foxx. Congressman, Mr. Ranking Member, I would 
tell you that having spoken already to many Governors and State 
DOTs, that I cannot overemphasize the impact of going over the 
cliff for the States, including the fact that they are going to 
be letting contracts in July. And if we don't have certainty on 
the funding situation, there will be projects that may not get 
moving as a result, and it will be hard to get those projects 
moving again later.
    I think that is probably the story that I can tell you from 
a local perspective is that at some point if Congress solves 
this problem, what we are losing is the opportunity to keep the 
pipeline of projects moving from the design phase all the way 
through completion. And over years and years and years of 
short-term measures, that is the problem that we are facing.
    So this is a problem that Congress has to solve, but I will 
say to you that I will spend every ounce of my energy and time 
with you to try to help find a bipartisan solution.
    Mr. Pastor. I appreciate that, Mr. Secretary.
    So I will yield back, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Pastor.
    Mr. Dent.
    Mr. Dent. Thank you, Mr. Chairman.
    And good afternoon, Secretary Foxx. Welcome to the job. And 
good to have you here in front of the subcommittee.
    I am not going to belabor the point either on the Trust 
Fund challenges except to say that, you know, there are some 
States out there like mine, Pennsylvania, literally bit the 
bullet on transportation funding fairly recently and did what 
they felt they had to do. And there was a lot of revenue in 
that equation as well. And I recognize that we are going to 
have to work together on a bipartisan, bicameral way to resolve 
this problem, and it is going to require a lot of leadership on 
the part of the administration, too, to help us deal with this 
funding issue I think in a responsible way, in consultation, 
too, with Chairman Shuster and Ranking Member Rahall, who are 
going to have a lot to say about this.
    I don't expect you to respond to that. We have talked 
enough about it already, but I know we are going to have to 
confront it.
    I want to move to the hazardous materials safety permit 
issue. I want to highlight an issue one of my constituents has 
brought to my attention. For a few years now, a company in my 
district has voiced a lot of concerns about the Federal Motor 
Carrier Safety Administration Hazardous Material Safety 
Program. This constituent's frustrations are twofold. He 
believes the standards used to evaluate carriers do not 
adequately measure safety. And, two, the current rules do not 
provide an appeals process prior to automatically being denied 
a permit. These seemingly arbitrary rulings are having real 
consequences and effect on their livelihoods and a lot of 
industries in my area.
    And pursuant to MAP-21, the Federal Motor Carrier Safety 
Administration was required to conduct a study of the HMSP 
program. That study should have been completed and reported 
back to Congress by October 1 of 2013. To date, we have not 
received that report. When can Congress expect that report, 
Secretary?
    Secretary Foxx. Sir, I will have to come back to you with a 
specific answer on the status of that report. I will go back to 
my staff and ask them to update your staff on that. I am also 
aware that you and the administrator of the Federal Motor 
Carriers, Anne Ferro, have spoken earlier this week about a 
specific situation.

                             Hazmat Report

    The Federal Motor Carriers Safety Administration transmitted the 
report on the implementation of the Hazardous Materials Safety Permit 
(HMSP) program on March 11, 2014. The report describes the FMCSA's HMSP 
program and provides information on the study overview, the number 
safety permits, State equivalency to Federal permits, and 
recommendations to improve the HMSP program. A copy of the report will 
be provided to staff.

    Mr. Dent. Yeah. And I just want to say, too, that I want to 
commend Administrator Ferro and her staff for the hard work in 
pursuing these available remedies for my constituents under the 
current regulatory structure, and she and her staff have been 
very helpful. And while the work is certainly appreciated, and 
much remains to be done to fix the current shortcomings and 
inequities currently in the present regulatory structure, I am 
aware that the FMCSA again wants to pursue a compliance safety 
accountability rulemaking before handling any of these HMSP 
issues.
    In considering Federal Motor Carrier Safety previously 
accepted a petition for the HMSP rulemaking, I am looking for 
your commitment that you will seriously consider expediting 
regulatory consideration of fixes to the Hazardous Material 
Safety Program. In the meantime, I simply ask that you utilize 
your agencies to the fullest extent possible to review, where 
you have the authority, to pursue administrative remedies and 
expedite interim solutions as soon as possible, because this is 
creating some real hardships in States like mine, where we have 
a lot of mining activities, and extraction, and cement, and 
others, and quarrying that goes on. It is having a very real 
impact. So I appreciate your consideration and that of Anne 
Ferro.
    On the issue of contract tower funding, the President's 
budget request included $140 million for the Contract Tower 
Program, and $10.35 million is used for the Contract Tower Cost 
Share Program. And by the way, currently there are 252 airports 
in 46 States that participate in that program, including 5 in 
my State. Can you elaborate on DOT's possible support for this 
important air traffic safety program in fiscal year 2015? This 
is a very important issue in my district as well.
    Secretary Foxx. Yes. The FAA's fiscal year 2015 budget 
request includes funding to continue to operate the Contract 
Tower Program. Given today's constrained budget environment and 
the increasing demand on our aviation system, Congressman, the 
FAA is taking a hard look at all the services they provide. 
And, as you know, there is a reauthorization process that will 
be underway in fiscal year 2015, and so we will have more 
discussion about that, but at present that is what our budget 
contains.
    Mr. Dent. How much time do I have, Mr. Chairman?
    Mr. Latham. You are under a minute.
    Mr. Dent. Okay. Thank you.
    Then I will just quickly go to airport infrastructure 
funding. The FAA has faced repeated financial obstacles, as you 
know, in recent years. We had the partial FAA shutdown in 2011, 
the government shutdown. I just want to say the President's 
proposal to fund highway and transit investments assumes that 
the Highway Trust Fund receives a one-time infusion of revenues 
from tax reform. What support is there within the 
administration for improving our Nation's airports? And can you 
speak a little bit about the FAA and its budget proposal?
    Secretary Foxx. Well, obviously our air system is very 
important, and our proposal would do a couple of things. First, 
it would implement a PFC charge that large hub airports could 
implement. It gives them flexibility to have more local control 
over resources. And we would reduce the AIP program by about 
$450 million. That reduction is basically paid for by the 
additional flexibility with the larger airports. The small 
airports are not affected by that. And so for the small 
airports, they are more or less held harmless, but there is 
more flexibility for the larger hub airports.
    Mr. Latham. Thank you.
    Mr. Dent has a really good way of asking a question just 
when the light turns red. Good job.
    Mrs. Lowey, I was going to recognize you, and then you 
could yield to Mr. Rogers. And then I will recognize you again.
    Mrs. Lowey. Oh, okay. Thank you, Mr. Chairman. It is my 
pleasure to yield to the distinguished chairman of the whole 
committee, Mr. Rogers.
    Mr. Rogers. I thank the gentlelady for yielding.
    I apologize for being late to the hearing. Consequently, I 
have a statement I will make rather than question, Mr. 
Secretary. But thank you for being here, and thanks for your 
hard work.
    Because Ranking Member Lowey and I have committed to move 
all 12 appropriations bills individually through the 
subcommittees, to the full committee, the floor, conference 
with the Senate, we plan to move our process along at a very 
brisk pace this year. Thus, this hearing is one of the earliest 
in history. Unquestionably, this return to regular order is 
critical to crafting bills that wisely expend taxpayer dollars. 
The fiscal year 2014 omnibus package--I started to say ominous, 
which it is----
    Mr. Simpson. It was.
    Mr. Rogers. But the omnibus package that we put together 
and passed in January through the work of this subcommittee and 
the other subcommittees on appropriations are a prime example 
of what we can accomplish together. This committee was able to 
provide every facet of the Federal Government with adequate, 
responsible funding, while continuing to reduce Federal 
spending, totaling $165 billion in cuts since 2010. And while 
these hard-fought reductions on the discretionary side of the 
ledger have been critically important and given us all an 
opportunity to make our government more lean and more 
efficient, the reality is that we need to tackle our mandatory 
spending programs, where two-thirds of spending is now located, 
the real driver of our debt.
    And yet I see no leadership from this administration to 
tackle that issue head on in its budgetary submissions, 
including yours. Quite to the contrary, your budget proposal 
proposes to shift even more money into mandatory programs for 
infrastructure spending, off-loading about $4.2 billion worth 
of fiscal year 2014 programs and activities over to the 
mandatory side, where the problem is. And just as 
disappointing, your proposal once again utilizes budget 
gimmicks that Congress has time and again said no to, gobbling 
up passenger facility fees, a nonexistent, nonauthorized 
transportation trust fund that no one knows what it is. 
Candidly, Mr. Secretary, our committee, we can't budget with 
imaginary money, and neither should you try.
    I am also concerned about the priorities this 
administration has which continues to push billions of dollars 
toward short stretches of high-speed rail projects when roads 
and bridges around the country are falling apart. California is 
banking on receiving upwards of $40 billion for its high-speed 
rail projects, including $2.5 billion in fiscal year 2015 
alone.
    How can we look our constituents in the eye and with a 
straight face and tell them that a stretch of high-speed 
railway in California with sparse ridership potential is a 
better use of Federal tax dollars than bridges over the Ohio 
River or an interstate highway through eastern Kentucky?
    It is our job to ask these questions and set these 
priorities straight in our appropriations process, and that is 
what this is all about. So I thank you for being here and 
hearing us out.
    I yield.
    Mr. Latham. Thank you, Mr. Chairman.
    And because the gentlelady was so gracious, she will be 
recognized for 5 minutes.
    Mrs. Lowey. You are very kind.
    And it is a pleasure again to welcome you here, Mr. 
Secretary.
    Over the past year, as you well know, there have been 5 
rail accidents on Metro-North's system in New York and 
Connecticut, which resulted in 6 deaths, nearly 130 injuries, 
one of whom was a constituent of mine. In fact, just 2 days ago 
another Metro-North worker was struck and killed by a train.
    DOT did launch a comprehensive and systemic safety review 
of Metro-North's operations in December. This committee 
requested a final report on DOT's findings by March 17. Can we 
expect to see your final report by March 17? Can you give us a 
preview of the findings? And are you getting everything you 
need from Metro-North?
    Secretary Foxx. Madam Ranking Member, first of all, we 
appreciate your leadership in leading the charge in requesting 
that report. Our staff has been working very hard with Metro-
North on the Operation Deep Dive. Our goal is actually to beat 
the deadline, and I feel like things are tracking well there. 
And our staff will be in touch with yours and with the 
committee as this process moves along, but I expect to beat the 
deadline.
    Mrs. Lowey. Thank you.
    Now, the budget requests $825 million to help implement 
positive train control systems on commuter railroads. The NTSB 
has stated that if a positive train control had been installed 
on the Metro-North's tracks, the deadly derailment in the Bronx 
would have been prevented.
    As you know, the freight and passenger railroads are 
required to implement PTC by 2015. How many railroads do you 
expect to meet the 2015 deadline, and what happens to those 
that don't meet the deadline? And the budget assumes that 
positive train control funding will be phased out by 2018. Will 
you request that the implementation deadline be extended beyond 
2015? And without the funding you requested in the budget, how 
difficult will it be for the commuter railroads to meet the 
2015 deadline? And is the Railroad Rehabilitation and 
Improvement Financing Program a viable option to fund PTC? Do 
you have any active applications for this purpose?
    And I thank you. If you can remember all of those, let's 
talk about positive train control in the couple of minutes 
left.
    Secretary Foxx. Sure. And any responses that I don't 
provide directly to the questions that you asked, I would like 
to submit for the record more full answers to those questions.
    [The information follows:]


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    Mrs. Lowey. Thank you.
    Secretary Foxx. The short answer is that we are hearing 
from railroads all the time about the December 31, 2015, 
deadline. Many of them are telling us that they will not be 
able to meet the deadline. We are very committed to getting PTC 
implemented, but just being very blunt, that is what we are 
hearing from the railroad community.
    Despite the difficulties of it, we are committed to doing 
everything we can at DOT to encourage and help move things 
along, and that is part of the reason why the budget request 
contains the $825 million amount to help implement this.
    We do think that in some cases, particularly for commuter 
systems, but also for some of the other rail systems, including 
short lines and so forth, that many of them will seek to take 
advantage of some of our programs, including potentially the 
RRIF program that you mentioned.
    So we are continuing to work through this issue, but we are 
hearing from industry that it is going to be tough to meet the 
deadline.
    Mrs. Lowey. Now, just lastly before we go to red, the last 
question was is the Railroad Rehabilitation Improvement 
Financing Program a viable option to fund PTC, and have you 
gotten applications for this purpose?
    Secretary Foxx. I would like to have our staff send you 
specifics on whether we have received applications. I am not 
aware that we have. But let's confirm that, and I will make 
sure we get that to you promptly.
    [The information follows:]

                                  RRIF

    Yes, we can fund PTC through RRIF under 45 U.S.C. 822(b)(1), and we 
do have a pending application for this purpose.

    Mrs. Lowey. Thank you so much. We appreciate your 
commitment. We look forward to working with you on this. Thank 
you.
    Mr. Latham. Thank you, Mrs. Lowey.
    Ms. Granger.
    Ms. Granger. Thank you, Mr. Secretary.
    While we were under sequestration last year, the Department 
of Transportation came close to canceling contracts for 
airports that were in the Contract Tower Program. And as a 
result then, Congress specifically included $140 million for 
that program in fiscal year 2014 from this subcommittee. But 
the President's fiscal year 2015 budget request doesn't include 
that specific funding. So I will ask you why it didn't. And 
also, will you commit to funding the Contract Tower Program 
without a specific line item in the fiscal year 2015 THUD 
appropriations bill?
    Secretary Foxx. Congresswoman, the FAA's fiscal year 2015 
budget does include funding to continue to operate the Contract 
Tower Program. I am not sure what the discrepancy may be, but 
we can certainly have our staffs reach back to you.
    [The information follows:]

                            Contract Towers

     Yes, funding for contract towers is included in the FY 
2015 President's Budget.
     Congress provided $140 million in the FY 2014 
appropriation to continue to operate existing contract towers. This 
includes $129.7 million for the base program and $10.3 million for the 
cost share program.
     FAA's FY 2015 budget request includes the funding needed 
to continue to fully operate the contract tower program.
     The Contract Tower and Cost Share programs do not appear 
as distinct line items in FAA's budget justification. Funding for these 
programs is included in the $7.4 billion request for FAA Operations.

    Ms. Granger. Okay. Good. Thank you.
    Another question has to do with your Competitive Surface 
Transportation Grant program. Can you tell me how that differs 
from the TIGER grant program.
    Secretary Foxx. Let's see. Are you talking about the CIP 
program under the highway----
    Ms. Granger. It is the Competitive Surface Transportation 
Grant program is the way it is listed.
    Secretary Foxx. I think it is the Fixing and Accelerating 
Surface Transportation. Is that--okay. So the FAST initiative 
is an initiative that is really driving innovation at the State 
and local level. We have, as you know, out of our $70-plus 
billion budget, more than half of it is distributed to States 
by way of formula. And as I pointed out in my opening remarks, 
our desire is to attack the infrastructure deficit both by 
addressing the revenue issues through progrowth business tax 
reform, and, secondly, by addressing it by increasing 
efficiency in the system.
    Well, the reality is we have precious few tools to require 
States to operate more efficiently. And so the FAST program is 
designed to award funding for projects in States that actually 
implement process innovations that are designed to accelerate 
the delivery of project. So it is actually trying to use a 
carrot to get projects done faster, and our hope is by funding 
a few projects and incentivizing at the State level, we help 
all projects move forward on a more accelerated basis.
    Ms. Granger. All right. Thank you.
    Thank you, Mr. Chairman.
    Mr. Latham. Thank you very much.
    Mr. Quigley. We will go in order of appearance here when 
the hearing started.
    Mr. Quigley. Thank you, Mr. Chairman.
    Mr. Secretary, I have learned very quickly to ask you these 
questions as specifically as possible.
    Mrs. Lowey brought up the tragedy that took place in New 
York surrounding areas. Positive train control. The first issue 
is will there be an extension of this deadline or not? Do you 
conceive any way that this is going to go forward without an 
extension, and freight and passenger rail will be able to 
comply without it?
    Secretary Foxx. Well, Congress has basically put a deadline 
on positive train control, December 31, 2015, and we are doing 
everything we can to help the rail industry get there. To be 
honest, what we are hearing from the rail industry is that they 
are not going to be able to make the deadline.
    Mr. Quigley. Right.
    Secretary Foxx. So we are going to keep doing everything we 
can, but I am just telling you what we are hearing back from 
the rail industry.
    Mr. Quigley. And at some point you all are going to have to 
help us. We got to do this together. There are lives at stake, 
but there is a certain realistic aspect to this and how will we 
get this done as soon as possible. So, you know, at this 
juncture it is hard for you to imagine that this is going to 
be--they are going to meet these deadlines without an 
extension, correct?
    Secretary Foxx. I think that is fair to say.
    Mr. Quigley. Okay.
    Secretary Foxx. And, again, we continue to offer any 
technical assistance that Congress may need as it looks at this 
issue.
    Mr. Quigley. And we appreciate that.
    The financial assistance outlined with the $825 million you 
talked about is one thing. There is also the current omnibus, 
which seems to give you extraordinary discretion about how to 
use funds to various rail programs. Would this be one of those 
that you would include?
    Secretary Foxx. We would use every tool at our disposal to 
try to help the industry meet the obligations under PTC.
    Mr. Quigley. Well, we would encourage you, given the risk 
that is involved, the tragedy that could have taken place in 
Chicago and many other cities unfortunately just as easily.
    With the time I have left, bicycles. It seems that we are 
buying fewer cars and driving fewer miles. And the good news is 
they are riding their bikes more. But in Illinois, the number 
of deaths nationally and number of deaths attributed to 
automobile accidents has gone down, but it is not true for 
bikes and pedestrians. Those numbers have actually gone up, the 
deaths for bikes and pedestrians. Nearly 17 percent of Illinois 
traffic facilities are now bicyclists and pedestrians.
    Will the Department of Transportation prioritize the 
establishment of separate performance measures for bike and 
pedestrian safety? And what is the stance on the rise in these 
fatalities and what you can do?
    Secretary Foxx. It is an issue of great concern to me as 
well, Congressman, having been a mayor, and having left a 
community that was seeing an uptick in both bicycle and 
pedestrian accidents and fatalities. We view that as one of the 
issues that we as a Department need to tackle. And so it is one 
of my top priorities.
    We will be advancing a bill, as I said, as early as 
possible in August, and I would love to have a conversation 
with you once that bill hits the street.
    Mr. Quigley. And in the meantime, if you could pass on to 
us some of the measures that you have that are possible to deal 
with these issues to the committee and to my staff, I would 
certainly appreciate that.
    Secretary Foxx. Sure.
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    Mr. Quigley. Thank you, Mr. Chair. I yield back.
    Mr. Latham. Thank you, Mr. Quigley.
    Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    And thank you, Secretary Foxx, for being here. I have a few 
questions, so I am going to talk a little fast.
    First, I would like to focus on the New Starts title, 
specifically the Columbia River crossing, which connects 
Vancouver, Washington, to Portland, Oregon. And I see that the 
administration is requesting $65 million again for the project, 
and here is the problem. The project is dead. The only votes on 
this project in Clark County, Washington, where the bridge 
would land on the Washington side, the Clark County residents 
voted against it not once, but twice, in 2012 and then in 2013. 
Specifically, they voted against the light rail portion, which 
is where the funding that you all are proposing would go to, 
not necessarily fixing the bridge. And in the Washington State 
Legislature it denied proposals to fund the project in 2013, a 
year ago, and then they didn't even consider it this session, 
which I think closes today or tomorrow. And then last week, the 
Oregon Legislature refused the only funding proposal left for 
the bridge, and now they have adjourned for the year.
    So I guess I want to know why the administration is still 
pushing a project on States and citizens who appear not to want 
it.
    And then secondly, what I really would like from the 
Department is to finally acknowledge that this proposal is not 
the right one. We recognize, I believe, we need a fix here. You 
know, the I-5 connects Canada and Mexico. It is a Federal 
responsibility. We have to keep at this. But will you all 
refocus and help us come up with a real solution that both 
Oregon and Washington can support?
    Secretary Foxx. Well, let me say that at the time that our 
budget was developed, there was still activity associated with 
the project. And it is clear that the project as it had been 
conceived and proposed is not moving forward. And so for that 
reason, that is why it appears in our budget.
    We don't have large pools of discretionary dollars in the 
Federal Highway Administration to move getting a bridge like 
this done, and that is part of the reason, I suspect, that the 
proposal came to us the way it did with the heavy FTA component 
to it.
    You know, I think the folks at the local level are going to 
have to pick up the pieces and figure out what they want to do, 
and we will continue to try to help communities as we can.
    Ms. Herrera Beutler. And I think you hit the nail on the 
head, the community needs to decide what is best for them. And 
I agree, this project has gotten bigger and bigger and more 
costly and more costly. I mean, the light rail piece that you 
all were talking about funding was I think almost $200 million 
more than the most expensive mile of light rail in the country. 
So I definitely think we can do better with the limited 
resources that we have to work with.
    You know, one of the things I really want to see, as we are 
putting together a solution, it is I-5, it is still a Federal 
responsibility, it still needs to be shorn up for safety 
purposes. You know, I want to see us move people. Last year 
your predecessor said we, quote, ``don't build bridges to get 
people places more quickly or relieve congestion.'' I am not 
going to ask you to comment on your predecessor, but I would 
hope that as we are moving forward with a solution, that when 
we come up with something that is going to help us for safety 
purposes, it also is okay that we address congestion, and we 
would like your help with that.
    Secretary Foxx. Well, you know, I have high admiration for 
my predecessor. He is a great, great guy and, I know, a friend 
of many people in this room.
    But separate and apart from that, we as a Department don't 
pick projects for communities. They pick them, and then we try 
to support them. And in this case there was a coalition of 
folks at the local level and the State level that prodded this 
project along over a long period of time. If there is a 
different combination of folks that want to figure something 
else out, that is up to the community, and we will continue to 
wait and see what happens.
    Ms. Herrera Beutler. Hopefully you will be willing to work 
with the community and help fund what the community comes up 
with. I guess that is backing into the question.
    Secretary Foxx. That is always our posture.
    We also have the problem of what to do with funds that have 
been sunk into this project, and we will continue to work on 
that issue as well.
    Ms. Herrera Beutler. And before my time expires, skipping 
over, there is a lot of uncertainty over the shipping of oil 
through southwest Washington via rail. And rightly, there are 
strong concerns regarding the safety of the rail cars that 
carry the oil. And I think industry agrees that we need new 
safety standards. I assure you our communities are very much in 
support. And we are hoping that newer, stronger safety 
standards be issued as soon as possible. And where is DOT--or 
perhaps maybe on the next round you can answer where DOT is in 
the rulemaking process and what we should expect in new oil car 
safety regulations. So perhaps you can think about that. And we 
can move on, and maybe he can answer that next round.
    Mr. Latham. That would be fine.
    Ms. Herrera Beutler. Okay. Thank you.
    Mr. Latham. I would appreciate that.
    Ms. Herrera Beutler. Thanks, Mr. Chairman.
    Mr. Latham. Thank you very much.
    Mr. Price.
    Mr. Price. Mr. Secretary, the missing Malaysian Airline 
flight jetliner has raised many questions that are relevant to 
several executive departments, Homeland Security, State, and 
especially Transportation. A massive international sea search 
with more than 40 planes and ships from at least 10 nations 
searching the area so far turned up no trace of the plane. But 
even if we were to quickly find the plane wreckage, many 
questions are going to remain until we have information that is 
contained in flight data recorders, or black boxes. In the 
event of an accident, this data is essential in determining 
what went wrong.
    Safety experts have worried for a long time that delays in 
retrieving recorder information that can help explain a crash 
can keep critical information hidden, yet recovering these 
black boxes and the data they track is no simple matter. We are 
reminded of that in the case of this Malaysian Air flight. But 
nearly every major commercial air accident that has occurred 
over water or in remote areas has resulted in a costly and 
time-consuming recovery. In many cases, including the planes 
that brought down the Twin Towers, the boxes are never 
recovered. In addition, some recorders when they are found 
don't yield high-quality data because they have been damaged by 
a crash.
    Now, there is technology, automatic deployable flight 
recorders, that is extremely useful in such instances. This 
technology is not new. It was developed in the 1960s in Canada. 
It has been used by the military for decades. Deployable units. 
They usually contain both the flight data and cockpit voice 
recorder, as well as an emergency locator to help them be 
found.
    High-profile cases have led to the call for a broader 
application of deployables on commercial aircraft, as you well 
know. The International Civil Aviation Organization currently 
has such a recommendation under consideration. A 1999 National 
Transportation Safety Board recorder symposium included a 
discussion of ADFR benefits. And the 9/11 Commission staff 
recommended that the Federal Government take steps to ensure 
the survivability and quick recoverability of black boxes from 
commercial air crashes.
    So as a result of these recommendations, I secured funding 
a few years ago for a pilot program at the Transportation 
Security Administration that successfully tested in concept the 
ability of ADFRs to improve rapid access to flight data 
following commercial aviation crashes, while also providing 
localization of downed aircraft and potential survivors.
    I am one of a bipartisan group of Members that has strongly 
urged the use of deployables on American commercial passenger 
aircraft. In fact, I previously introduced legislation, along 
with Representative Duncan of Tennessee, the SAFE Act, which 
would require the installation of a second backup set of 
deployable flight data and cockpit voice recorders on new 
commercial passenger aircraft, specifically those that are 
expected to operate long distances over ocean or remote-
location routes. This legislation would also create a 
reimbursement mechanism for the security upgrade.
    Well, now the need for this has once again been 
demonstrated. The pilot work has been done at TSA. The ball is 
in the FAA's court. I wonder what degree of attention you have 
paid at this early point to this deployable technology. As you 
know, the fiscal year 2014 Appropriations Act included language 
that encourages the FAA to evaluate costs and benefits of this 
technology, and to work with the NTSB to support U.S. and 
international initiatives to develop standards for use of this 
critical safety technology on commercial passenger aircraft. So 
I wonder if you could give us an update what your agency is 
currently doing to follow through on this directive and where 
you think we might go with this.
    Secretary Foxx. Well, thank you for the question.
    The FAA is doing exactly what you suggested, which is they 
are evaluating the technology. And specifically, they are in 
the process of developing a plan to determine the cost-benefit 
of deploying the technology.
    It is unclear at this time, obviously, how that might have 
impacted the situation with the aircraft in Malaysia. There is 
a lot of activity around the investigation there, and that 
remains a dynamic situation.
    But to your greater point, it is a technology that we are 
aware of, and we are working very hard, and you have my 
commitment to continue working hard, to get this figured out.
    Mr. Price. Good. I do think it is time to move ahead on 
this. And, you know, it surely wouldn't take too many searches 
like the one we are undertaking now. I mean, these costly, 
agonizing, expensive searches. I mean, how many of those would 
it take to pay for this on every commercial aircraft, 
particularly newly manufactured commercial aircraft going 
forward? You have to ask what kind of cost-benefit ratio there 
would be here. I would think it would be highly favorable. This 
technology exists. It has been on military aircraft. The TSA 
has done its due diligence on this. I really urge you to move 
this ahead.
    Secretary Foxx. Thank you.
    Mr. Price. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Price.
    The gentleman from Idaho Mr. Simpson.
    Mr. Simpson. Thank you, Mr. Chairman. Let me first say how 
glad I am to be a new member of your subcommittee. It is an 
exciting subject.
    Secretary Foxx, thanks for being here today. This is kind 
of a strange question. I ask this both as chairman of the 
energy and water appropriations committee and as a new member 
of the Transportation Committee. One of the emerging issues 
that is being debated is the export of liquid natural gas. 
Congress changed the law to allow the Maritime Administration 
jurisdiction over offshore LNG projects. DOE has two permits to 
export LNG pending that, as noted, will require your Maritime 
Administration to oversee and approve construction and 
shipping.
    What arrangements and formal working relationships have you 
established with the Department of Energy to ensure that you 
are working through any applications and approvals 
expeditiously? And has your Administrator formalized an 
agreement with the DOE for these offshore projects? Onshore 
projects, as you know, require FERC approval, but offshore 
Maritime Administration and Department of Transportation must 
approve these. If not, why not? And if not, when can we expect 
to see you and Secretary Moniz maybe formalize a Memorandum of 
Understanding to move this forward?
    Secretary Foxx. Sir, I would like to come back on the 
record on that question and get you a thorough response to it. 
That is one that I was--it was a surprise.
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    Mr. Simpson. Okay. Thank you.
    Mr. Simpson. Recently the Department of Transportation 
released its conditions of performance report on the Nation's 
highway and transit systems. The report estimated highway and 
transit needs for all levels of government based on a range of 
growth assumptions. The low-end highway need was $123.7 billion 
per year, and the low-end transit need was around $22 billion 
annually. Higher-end assumptions was obviously higher, but 
about the same ratio.
    The highway need is about six times the transit need under 
the report that was done, and while I am certainly not opposed 
to transit, there are great needs in both transit and highways. 
However, your budget and reauthorization proposal would change 
the proportions of Federal support from today's 4-to-1 highway 
program dollars to transit program dollars ratio of basically 3 
to 1 in spite of the fact that we still have about a 6-to-1 
need ratio between highways and transit.
    Could you explain to me and members of the subcommittee 
your reasoning behind this budget and how it seems to 
contradict what the report said?
    Secretary Foxx. Well, the report focuses on maintenance 
needs. It doesn't focus on future capacity needs. And so we are 
taking a very limited, although a sizable limited, look at the 
overall system needs that we have as a country. That is the 
first point.
    The second point is that what our proposal--I am going to 
make sure we are clear on what our proposal does and what it 
doesn't do. In order to shore up the Highway Trust Fund over a 
4-year period, we need $63 billion to do that. Our proposal, 
using progrowth business tax reform and the transition dollars 
available, would put $150 billion into our surface 
transportation system, $63 billion of which would actually 
backfill the Highway Trust Fund.
    We don't change the split in the Highway Trust Fund. The 
80-20 split that has been traditionally there would still be 
there even with the additional $63 billion. What is different 
is what we would do with the additional dollars above and 
beyond backfilling the Highway Trust Fund. And there, we are 
addressing needs that we see happening in metro regions across 
the country.
    This is not just an urban challenge of tackling the 100 
million people that we are going to have in this country above 
what we have today by 2050; this is also a suburban issue and a 
rural issue. Connecting these regions is going to be very 
important. Making sure people have predictable travel times 
that are consistent every single day is something that transit 
can give us that in some cases our highway system can't.
    So I say to you it is not that we are changing the formula 
within the Highway Trust Fund, it is just that additional 
dollars from a new source gives us the ability to do what we 
believe the country needs.
    Mr. Simpson. I can't see what the lights look like.
    Mr. Latham. Thirty seconds.
    Mr. Simpson. Let me ask you this real quickly before it 
turns red. Your budget and reauthorization proposal would 
increase transit over 60 percent, but the rural transit 
program, so-called 53-11 program, would increase by 2 or 3 
percent. Assuming that there is to be some cost increases, that 
is effectively a decrease in the rural transit programs, while 
the others are receiving huge increases. Why is that, Mr. 
Secretary?
    Secretary Foxx. Actually there are several programs that 
are added into our budget that we think will have significant 
rural components to them. For example, the bus rapid transit 
proposal, which is about $2.2 billion over 4 years, that 
proposal will actually help us connect rural areas, suburban 
areas to metro areas, which are job centers, places where 
people go to the doctor, pharmacy, or what have you.
    So I haven't done an exhaustive look at the numbers that 
you just gave out, but I will be happy to have our staff 
respond back with really the full story on where the rural 
opportunities are.
    [The information follows.] 


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    Mr. Simpson. Thank you.
    Secretary Foxx. Yes, sir.
    Mr. Latham. Thank you, Mr. Simpson.
    Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman.
    Welcome, Secretary Foxx.
    Secretary Foxx. Thank you, sir.
    Mr. Ryan. I have a lot of family that lives in Charlotte, 
and I remember the buzz down there when you were doing the 
light rail project. So it is good to have you hit the helm now 
here, and knowing that that is a focus. I think it is the 
future of transportation, so thank you for your leadership 
already on this.
    Just to follow up on Mr. Simpson's question, in eastern 
Ohio we have a lot of natural gas that is now coming out of the 
ground, and we are looking for opportunities to ship it around 
the world, if possible. And I think it ties into the situation 
we are dealing with right now in the Ukraine where Ukraine gets 
60 to 70 percent of its natural gas from Russia. And I think we 
have an obligation geopolitically to expedite the process the 
best we can.
    So I will submit a question for the record unless you want 
to answer it about generally what DOT is doing to address the 
infrastructure needs to help deal with the booming natural gas 
industry in some nontraditional areas like eastern Ohio and 
western PA.
    Secretary Foxx. Again, we will follow up with you on the 
record. PHMSA does provide a supporting function to the Federal 
Energy and Regulatory Commission's siting and approval process 
for LNG facilities. FERC is the ultimate authority that may 
grant a permit to construct LNG facilities, and we have several 
applications that are pending review at the Department today 
that will help facilitate this issue. But I want to make sure 
we get you a full response.
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    Mr. Ryan. Okay. Dealing with pipelines and all the rest. So 
we will submit a couple questions that you can follow up on.
    The other question, too, I think there is an opportunity 
for us to convert a lot of our buses, for example, over to 
natural gas. Is there anything in this budget that can help 
expedite that process and help drive up some of the demand here 
in the U.S.?
    Secretary Foxx. We have had programs in the past, and we 
will continue to be entrepreneurial here with fuel alternative 
programs. In fact, back in the fall we launched a NOFA for one 
such effort.
    And one of the conversations that is very robust in the 
transit community right now is this issue of alternative fuels. 
And, you know, I think what I would say here is that that over 
the next 5 to 10 years what is going to happen is the 
conversation is going to become much more of a mainstream 
conversation. Some of our typical programs are also going to be 
programs that are supportive of these efforts. So I would look 
at the programs like the New Starts, the BRT proposal and so 
forth as ones that have great potentiality to help on this 
issue.
    Mr. Ryan. Are there any incentives as far as getting--you 
know, we obviously have a million gas stations around. It is 
harder to put up stations for natural gas, for example. Is 
there anything in here that areas like mine could look at to 
try to at least get that up off the ground?
    Secretary Foxx. This is a place where the function of the 
Department of Energy and the Department of Transportation have 
some intersect. I would like to come back to you with a 
specific response that takes into account both the DOT and the 
DOE impacts there to be more comprehensive.
    Mr. Ryan. Okay. I just think there is a great opportunity 
for this administration to take the lead on some of this. I 
mean, we have plentiful natural gas, and there is an 
opportunity for you to drive it. And we talk a lot about how do 
we get the post office working on natural gas? How do we use 
the Department of Transportation and the grant process for new 
buses, or retrofits, or whatever the case may be to move in 
this direction? So I think there is a great opportunity for you 
to take the lead here.
    One last question. I know this is more or less HUD, but 
there is some interaction and interfacing going on between 
Department of Transportation and HUD with the Livable Cities 
program. Can you talk a little bit? Is there money in here for 
that? Is that primarily funded through HUD, which I seem to 
think it is? And is there something that we could maybe do from 
this committee that would allow that to function better in your 
time that you have been there? Is there something we can do, 
because I think it is a great, great concept.
    Secretary Foxx. Yeah. We do see increasing intersection 
between the transportation facilities that are being placed in 
communities and the concomitant development that occurs around 
those facilities. The Livable Communities Initiative has been a 
wonderful collaboration.
    We have quality-of-life measures, if you will, built into 
lots of our programs, and it is now becoming more, as I say, 
sort of a more mainstream consideration as we look at some of 
our programs like New Starts, as we look at TIGER and others. 
We do have planning money in the TIGER grant process this year, 
$35 million, which can help communities plan, and we will look 
to do that.
    I apologize, Mr. Chair.
    Mr. Latham. Thank you very much, Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman.
    Mr. Latham. Mr. Wolf.
    Mr. Wolf. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. I want to thank you for your 
support for the Silver Line out to Dulles Airport. That has 
been strongly supported by Secretary LaHood and by the entire 
congressional delegation in the House, and Senator Warner and 
Senator Kaine in the Senate. I don't know if you met with Jack 
Potter yet. Have you spoken to Jack Potter? I would recommend 
you might want to meet with the Airport Authority Board. But 
DOT has been very supportive, and I want to thank you. And I 
will call them and ask them to give your office a call if I 
can, because it a great investment, I think.
    I want to ask you a question that I have been thinking 
about. We are seeing more localities, even the District of 
Columbia, now moving toward legalizing marijuana. This 
committee has done yeoman's work on both sides of the aisle on 
all the safety issues. I was chairman of this committee for 6 
years. Safety came up over and over, .08, 21-year age drinking. 
Is anyone down at DOT looking at I won't say the drunk driving 
aspect of smoking marijuana, driving an automobile, driving a 
truck? Because I saw there was the conference out in Denver; 
the police were very confused on how they can see if there is 
an intoxication or whatever. Are you doing anything? Is there 
anything planned on that?
    Secretary Foxx. NHTSA is currently conducting research to 
improve our understanding of this area. There are also State-
level efforts that are underway that are supported by NHTSA, 
including a nationwide network of 7,000 drug-recognition 
experts. These are officers who are trained to recognize and 
document signs of drugged driving. We also understand that 
States are also doing driver evaluations performed by these 
officers, assisted by criminal justice professionals.
    The reality here is that the Office of National Drug 
Control Policy is a partner with us on this issue, and while 
Federal law has not changed, we recognize that this is an issue 
that needs to be tackled. And we will continue being committed 
to working with States that have legalized marijuana to find 
acceptable standards.
    Mr. Wolf. Are you looking at other countries, for instance 
in Holland and places like that, to see what their experience 
was, or are you just domestically looking locally in the United 
States, or are you looking abroad, too?
    Secretary Foxx. As a data-based organization, our goal is 
always to look not only domestically, but to look 
internationally where we can. I will come back to you with the 
specific nature of what NHTSA has looked at internationally.
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    Mr. Wolf. Thank you very much.
    Secretary Foxx. Yes, sir.
    Mr. Latham. Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman. I know sort of like the 
wedding feast at Cana, you want to save the best for last. So I 
appreciate you being here, Secretary Foxx.
    Mr. Latham. Your time has expired.
    Mr. Joyce. I would like to start with a statement and 
follow up with a question, and sort of tag onto what my 
distinguished colleague Mr. Ryan had brought up, that being, 
Mr. Secretary, I want to take a few moments to raise with you 
the growing importance of the Great Lakes/St. Lawrence Seaway 
system for the moving of commercial goods by water to and from 
the Great Lakes region.
    As you know, 90 percent of all trade around the world moves 
by water, and it is critical that we educate domestic and 
overseas industries on the safety, reliability, and 
environmental advantages of moving their products on and 
through the Great Lakes/Seaway system. It is an underutilized 
asset.
    Under your leadership the Department's St. Lawrence Seaway 
Development Corporation has safely and efficiently operated and 
maintained the U.S. Portion of the St. Lawrence Seaway for more 
than half a century. I am pleased to see the President's fiscal 
year 2015 budget request continues to support the SLSDC's 
multiyear asset renewal program to modernize the U.S. seaway 
assets and a proactive approach to infrastructure renewal. This 
program is crucial to ensuring the long-term reliability of the 
seaway for our regional industries.
    I have recently met with Seaway Administrator Betty Sutton 
and would ask your office to begin working with the SLSDC to 
find new ways to utilize the corporation's current and possibly 
future authorities to expand the economic development and job 
creation in the region. A number of us in the Great Lakes 
Coalition have been discussing this concept of transforming the 
SLSDC to advance the regional economic development, and we will 
be sending you our ideas in the near future.
    I have a question, sir. Funding has been allocated in the 
administration's budget for a Rapid Growth Area Transit 
Program, which is meant for communities experiencing fast-
growing populations. In northeastern Ohio we have the Greater 
Cleveland Regional Transit Authority, or RTA, which does an 
excellent job servicing Cleveland. And although transit 
ridership is growing at a rate higher than the national 
average, unfortunately Cleveland is not an area where the 
population is currently expanding. Just as important as growing 
our transit is taking care of our current transit assets, such 
as RTA's bus fleets and rail infrastructure. What is the 
administration's vision for maintaining our current transit 
infrastructure?
    Secretary Foxx. That is a very good question. And when it 
comes to our transit infrastructure, we have to recognize that 
we are seeing over the next 30 years 100 million new people net 
in this country, which is going to create a lot of pressure on 
our conventional transportation systems. That is one of the 
reasons why this issue of an infrastructure deficit that I 
mentioned at the outset is so important. We have got to tackle 
that, because we are going to outstrip our ability to move 
people in a quick fashion if we don't.
    Having said that, we have a significant amount of money set 
in our budget for state-of-good-repair needs, and that money is 
there specifically to try to deal with maintenance issues that 
you just mentioned.
    The Rapid Growth Area Transit program is designed for 
communities that are experiencing the kind of population surges 
that I am talking about, and our criteria for that program 
would basically fall down to three areas: communities that are 
experiencing moderate to significant population growth; 
secondly, moderate to significant transit ridership growth; and 
third, the capacity to pay the operating expenses associated 
with the additional capacity.
    Again, as I pointed out earlier, we don't view this as a 
specific program for urban areas. We think this is actually 
going to support suburban areas as well as rural areas, too, 
that are connected.
    Mr. Joyce. So in other words if we hit points two and 
three, we won't be denied?
    Secretary Foxx. I think if you hit points one, two, and 
three, you are going to be fine.
    Mr. Joyce. Population isn't growing in northeastern Ohio.
    Secretary Foxx. Well, you know what? I think the issue is 
you have lots of options for transit funding in this proposal. 
You have the options under New Starts, Small Starts, in 
addition to this particular program. And so our proposal is 
going to try to help address these issues wherever they happen 
to be. But in your case maybe it may be a Small Starts as 
opposed to this program.
    But there are going to be opportunities. I would just 
encourage the committee and the Congress that we shouldn't 
prejudge the outcome on the funding source. We are open to 
other ideas. But we think the progrowth business tax reform is 
one that hits the sweet spot for this Congress.
    Mr. Joyce. Great. Thank you for your time. I yield back.
    Mr. Latham. Thank the gentleman.
    Mr. Secretary, you are proposing to fund TIGER grants at 
$1.25 billion, which is a high-water mark for this account, 
certainly outside of the stimulus. But DOT really has yet to 
demonstrate publicly that it has the capacity to competitively 
compare projects in a manner that clearly shows the national 
interest--or even regional.
    In a 2011 report on TIGER program, the GAO found project 
selection data to be limited, and cited an absence of 
documentation for awards made contrary to the recommendation of 
application reviewers. I am looking at some winning projects 
funded in the last 2 years of TIGER grants, and some of these 
really do not appear to meet any kind of a national interest.
    The City of Fresno received $16 million toward a $20 
million reconstruction of a pedestrian mall, which is really 
ironic considering most of your projects are geared to taking 
cars off the road. The City of Fresno didn't even vote on the 
proposal of the TIGER grant until February of 2014. You had 
already given the grant. They hadn't even approved it. I don't 
know how you could effectively evaluate the merit of the 
project when the city didn't even know what the money was going 
to be used for.
    And Missoula County received $4.6 million toward a 7-mile 
bicycle trail between Missoula and Lolo, Montana. I don't know 
if that is Montana's number one transportation need.
    South Florida Regional Transportation Authority received 
$18 million towards an $83 million streetcar line. It should 
have been evaluated and funded under the New Starts or Small 
Starts program.
    The City of Philadelphia received $19 million towards an 
almost $26 million transit state-of-good-repair effort. The 
state of good repair is a requirement under the Core Capacity 
Program, and Philly got a windfall over and above other transit 
systems.
    I think the Department has really demonstrated you haven't 
gotten it right, and the GAO recommendations should give a 
serious look at that. I can't see a reason to grossly increase 
the amount of earmark money, whether you are doing it or 
whoever, until we can see how the money is being allocated and 
the criteria that you use to evaluate the programs, which 
obviously you are not following in TIGER grants.
    Tell me anything here that has national or regional 
interest, which was supposed to be part of the TIGER grant.
    Secretary Foxx. Well, let me start with a couple points. 
First, the TIGER program has done tremendous amounts of good 
across this country. The criteria that is used by the team to 
go through and evaluate projects, a project can be of national 
significance, but a project can also be of regional and local 
significance, too. And in the case of Fresno, for instance, 
there was an application submitted by the City of Fresno for 
that project. My guess is, although I would like to come back 
and confirm this--
    Mr. Latham. They hadn't even voted on it.
    Secretary Foxx. There was an application for a proposal 
from the City of Fresno. We don't make grants if there hasn't 
been a request. There was a request.
    Mr. Latham. So why is that national interest, or even 
regional interest?
    Secretary Foxx. Let's look at Fresno. Fresno is one of the 
poorest cities in America. The mayor of Fresno----
    Mr. Latham. This is transportation.
    Secretary Foxx. Absolutely. And transportation has economic 
development----
    Mr. Latham. Pedestrian mall?
    Secretary Foxx [continuing]. Aspects of it.
    The City of Fresno has basically a downtown core that has 
been stripped out over years. The mayor is trying to redevelop 
that city to create more momentum so that the region can 
attract jobs for the community. And in that particular case, 
that project----
    Mr. Latham. It is transportation.
    Secretary Foxx. Right. Transportation creates jobs.
    Mr. Latham. For a pedestrian mall?
    Secretary Foxx. Transportation creates jobs.
    Mr. Latham. What does this have to do with transportation?
    Secretary Foxx. It is not just a pedestrian mall; it is 
actually opening the center of the city for cars.
    Mr. Latham. It is a pedestrian mall.
    Secretary Foxx. It is a pedestrian mall that is being 
removed so that cars can move through so that downtown can 
grow.
    Mr. Latham. The GAO says the projects were selected in the 
absence of documentation for awards made contrary to 
recommendations by the application reviewers. So your own 
reviewers were saying these did not qualify, but went ahead 
anyway and gave out these grants.
    Secretary Foxx. Was that in the year 2013?
    Mr. Latham. 2011.
    Secretary Foxx. That predated the projects you are talking 
about.
    Mr. Latham. Have you changed the criteria?
    Secretary Foxx. We are using objective criteria. I am not 
aware of any projects that I have supported that have gone 
against the staff recommendation.
    Mr. Latham. Again, I mean you are asking for $1.25 billion 
for things that have nothing to do with transportation and even 
haven't been approved locally as far as being a priority.
    I see I am out of time, but we need to talk further, 
obviously, on this subject.
    Mr. Pastor.
    Mr. Pastor. In the final fiscal year 2014 bill, we included 
about $42 million for rail corridor planning and safety 
activities. Fiscal year 2014 will end September 30, or the end 
of September. How will the FRA solicit applications for the 
initiative, and when do you expect to start making awards?
    Secretary Foxx. Could you repeat the question, sir?
    Mr. Pastor. How soon do you think the FRA will solicit 
applications for this initiative, the $42 million that was in 
the 2014 bill, and when would you expect it to make awards of 
this money?
    Secretary Foxx. Our goal there would be to get the process 
started as soon as possible.
    Mr. Pastor. Right.
    Secretary Foxx. I know our team is working to try to get it 
done as soon as possible this spring. So the goal would be to 
get it--I can't give you a specific date. I will have to come 
back to you on a date, but I expect that to happen early 
spring.
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    Mr. Pastor. Okay. That would be fine.
    And also in this bill, the fiscal year 2014 bill, we 
included about $600 million of additional money for TIGER 
grants that you will have the opportunity to decide on.
    Secretary Foxx. Yes.
    Mr. Pastor. And following the chairman's comments, what is 
your expectation in terms of how soon--well, are you going to 
go back to old applications to be considered in this new money? 
Is this going to be just new applications? And when do you plan 
to start the process and begin awarding the money, since the 
fiscal year is the end of September?
    Secretary Foxx. Sure. If I am correct, the notice of 
funding availability was made public 2 weeks ago today, sir, 
and the application period will close April 28.
    Mr. Pastor. Let me interrupt you. So that means only 
applications that have come in during this period will be 
considered.
    Secretary Foxx. They have to be new applications. And many 
times we find that communities resubmit round after round, but 
they do have to submit.
    Mr. Pastor. Okay. And you anticipate awards when, end of 
August, sometime in August?
    Secretary Foxx. We hope sometime before the end of the 
summer, yes, sir.
    Mr. Pastor. Okay. In the past years--and I bring it to your 
attention because this has been a situation with the Department 
of Transportation, and there has been a number of studies by 
different institutions, and it deals with your IT and computer 
capabilities, technology, equipment. And it seems that over the 
years, less money and assets have been given to continually 
update your computers, your programming, your cybersecurity. 
And I don't know what you have in this year's budget, but it is 
something that in the past this subcommittee has heard from 
various institutions that have investigated and analyzed the 
Department of Transportation.
    So I bring it to your attention because it is something 
that we have talked about and have heard about over the years, 
and it is something that you may want to begin if not--if you 
haven't done it already, begin investigating where you are at. 
And then in this budget, do you address some of the problems 
that you may know are there?
    Secretary Foxx. Yes, sir. It is an issue of concern for us. 
That is one of the reasons why our IT director has been very 
focused in leading cross-departmental teams to develop a 
strategy for the Department on this issue. And we are 
implementing protocols all the time designed to tighten up our 
cybersecurity situation. But it is an evolving issue, it is 
dynamic, and as resources are needed, we will certainly make 
sure that comes to the attention of the committee.
    Mr. Pastor. Thank you, Mr. Secretary.
    I yield back.
    Mr. Latham. Thank you.
    Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you.
    And back to the question, would you like me to kind of 
repeat?
    Secretary Foxx. That would be helpful.
    Ms. Herrera Beutler. Okay.
    Secretary Foxx. I have had a few since.
    Ms. Herrera Beutler. Shipping of oil, rail on rail, 
particularly through southwest Washington, naturally people are 
concerned about the safety. And in speaking to industry 
leaders, they are ready and willing to move forward on new or 
tighter standards that ensure safety.
    I guess what I am also hearing in some concerns is where 
DOT is in the rulemaking process, because I think everybody 
agrees--in fact, what I am hearing from certain folks is they 
are going to shoot for the highest known safety standards and 
move forward, because they have been waiting for the rule for 
some time, and we kind of need to move forward. So I guess I 
wanted to know where DOT was at with that.
    Secretary Foxx. We are continuing to work to move this rule 
along as quickly as we can.
    Ms. Herrera Beutler. What kind of time line do you see?
    Secretary Foxx. It is hard to say, but I tell you we are 
working as hard as we can. It is not lost on me that this is an 
area of need in terms of certainty for the industry. We called 
the industry to action about a month and a half ago, and the 
rail industry has been really good about offering voluntary 
steps.
    We have to have an all-of-the-above strategy on this issue. 
It is not just the tank cars, by the way; it is also addressing 
some prevention-oriented areas such as testing the material, 
which we have issued fines and also Executive Orders to require 
that the material be tested and classified appropriately. It is 
also a matter of----
    Ms. Herrera Beutler. You mean the commodity?
    Secretary Foxx. Yes, the actual crude oil itself, to make 
sure that it is packaged properly. And in addition to that, we 
also think that there are other measures that we will be 
continuing to work through.
    But trust me when I say that we are going to work as hard 
and as fast as we can to get this rule out and on the street as 
soon as possible.
    Ms. Herrera Beutler. All right. And switching gears to 
general aviation, the President's budget again calls for user 
fees both on commercial and general aviation, and Congress has 
repeatedly rejected this proposal. And I guess I would say, 
since you are coming back with it again, have you studied the 
impacts this would have on general aviation and the related 
economy around this industry?
    And I guess I would ask, you know, as we are talking about 
where money is being spent and how it is being spent, where it 
comes from is pretty important as well, and is that part of the 
consideration?
    Secretary Foxx. Well, in the case of the user fee that you 
are mentioning, the Treasury Department estimates that that 
would generate about $960 million in fiscal year 2015 and about 
$11.4 billion over the next 10 years.
    Ms. Herrera Beutler. So that is money taken out of the 
industry. So have you studied what impact that would have on 
the industry itself? I mean, because that is----
    Secretary Foxx. Well, part of the purpose of it is to help 
with deficit reduction.
    Ms. Herrera Beutler. So it is not about necessarily whether 
or not we are--I mean, we talked about jobs, and inner cities, 
and growing jobs, and transportation helps us grow jobs. But to 
take the money out of the industry that is in large part small 
business and private, jobs come from there, as is wealth to 
take it out of there, is that--so now we are focusing on 
deficit reduction or not? We are talking about jobs?
    Secretary Foxx. Well, you know, I have a lot of easy 
choices to offer you, and one of them is that the proposal that 
the administration has offered over several terms have offered 
this up as one part of a deficit reduction strategy, but also 
as a way of trying to more equitably share the cost of the air 
traffic space to the users. So I highlighted the deficit-
reduction aspect of it because I understand that that is an 
issue that this Congress cares deeply about, and it is also 
something that the President cares deeply about.
    Ms. Herrera Beutler. So with that, I guess, you know, one 
of the things I would just mention, and the chairman spoke to 
it in his opening remarks about a long-term plan. With the 
trust fund going dry, you know, I applaud that you are looking 
for places to get financing, but what we really need is a long-
term, big-picture plan to pay for repairing our aging 
infrastructure. And I think you are right; having the 
infrastructure in place can help us grow jobs. But I guess I 
would say we can't keep coming back to proposals that have been 
shot down in a bipartisan way, so to speak, and look for a 
bigger-picture proposal. I guess I would ask you to consider 
that.
    Thank you.
    Mr. Latham. The gentlewoman's time has expired.
    Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.
    Mr. Secretary, just to return for the moment to the 
discussion about the TIGER program, I heard your strong 
defense. I certainly agree with that defense of that program 
and the uses to which it has been put. I certainly can testify 
to that in terms of the rail facilities, the Union Station 
project in Raleigh, which is going to facilitate rail transit, 
transportation, but also be a transportation hub. It is going 
to spur lots of economic development in that part of town and 
so forth. It is money well spent.
    And if the question is is there a demand for this, I do 
have the figures from the last 3 fiscal years. Fiscal year 
2011, we were talking about $14.1 billion in TIGER applications 
for $527 million. Fiscal year 2012, $10.2 billion in 
applications for $500 million. Fiscal year 2013, $9 billion in 
applications for $500 million.
    It sounds to me like there is a need out there. That is not 
to say every last one of these applications is worthy, but when 
you have got $9 billion worth of applications and $500 million 
to dispense, you can be pretty selective, and you can apply 
those criteria, and it sounds to me like you are doing just 
that.
    Moving to a couple of other programs. I want to ask you 
about the adequacy of the funding levels. The Capital 
Investment Grants you have stressed in this budget, and here, 
too, I wonder if you could comment on the current level of 
interest in the program. How many takers are there out there 
who would--communities who would like to get started with 
transit or who would like to expand their transit systems?
    Of course, your home city of Charlotte has benefited 
greatly from these resources. And we now have a project 
development agreement in Durham-Chapel Hill. That is good, too. 
There is plenty of demand out there.
    You have proposed $2.5 billion for the Capital Improvement 
Grant Program for 2015. That is a $500 million boost over 
current funding levels. I wonder if you could comment on the 
adequacy of that, or what it will let you do, as compared to, 
say, the flat funding that was proposed in MAP 21.
    And then finally, the Rapid Growth Area Transit 
Discretionary grants. That anticipates bus/rapid transit 
development. Here, too, you are requesting an additional $500 
million for this new discretionary grant program targeting BRT. 
How does that relate to the Capital Investment Grant Program? 
You think this new pilot in the BRT area would remove some of 
the pressure on New Starts?
    You know, there is a lot of debate going on in my 
community, as you know, about the virtues of BRT and rail. They 
are complementary. The plan that we are envisioning would be 
complementary. But there are questions, for example--maybe you 
would want to comment on them--on the relative impact that a 
BRT system is likely to have on economic development, as 
opposed to light rail encouraging economic development because 
of the fixed right of way. So how do you see the new money for 
BRT intersecting with the more generous funding, still not 
overly generous, I would say, for New Starts?
    Secretary Foxx. Great question, Congressman. Within the New 
Starts program, we think that this is an area where the 
uncertainty and unpredictability over the past years has worked 
a very difficult problem for local project sponsors, because 
many of them have to go through an extensive and expensive 
design process to even get to the point where they get into the 
Federal program, as the Durham project has, and because of 
that, there is pent-up demand on the one end. But what is 
important here is not just the amount, but is actually having a 
pathway over a 4-year period of time to get projects from the 
planning stages into the design stages so they can actually 
move forward.
    I would say that the demand for New Starts is increasing, 
and the need for it is also increasing because of the 
population trends that I mentioned before. How it relates to 
the BRT program is that there will be communities that, for 
whatever reason, cannot or do not want to go to the extent of 
putting in rail to support their systems, but they need rapid 
support for fast-growing populations, and the BRT program is 
designed to address those situations.
    Mr. Latham. The gentleman's time has expired.
    Mr. Simpson.
    Mr. Simpson. Thank you, Mr. Chairman. I don't have any more 
questions, but that won't stop me from saying something.
    Mr. Latham. Sure.
    Mr. Simpson. And I say this respectfully. One of the 
biggest problems we face in this country, other than the debt 
and deficit we are facing in this Nation, is our infrastructure 
backlog. I am not just talking about roads and bridges; I am 
talking waterways, harbors, dams, the electrical grid, water 
and sewer systems throughout this country. Most of them are 
reaching their expected life expectancy.
    We have got a $750 billion water and sewer problem. We 
throw about $5 billion a year at it, which means 150 years from 
now we can address the backlog that exists today. Funding 
streams are going down. The example I use, my wife gave me her 
SUV that got 18 miles a gallon, went and bought a Prius. She 
gets 52 miles to the gallon, which means she drives the same 
distance she used to, pays 40 percent of the gas tax that she 
used to pay, putting the same wear and tear on the road. We are 
getting more efficient cars. What are you going to do about 
electric cars?
    And I got to tell you in all honesty, the plan here that 
says we are going to have a progrowth business tax reform--and 
we can have a real debate about whether this is progrowth or 
not, because I kind of fail to see how a retroactive tax on 
LIFO that brings in revenue one time that funds something for 4 
years is actually a long-term solution. And what we need, and 
sometimes this takes Presidential leadership, administrative 
leadership, is how are we going to address these funding needs 
in the future on a permanent basis? And I don't think a one-
time solution that fixes it for 4 years theoretically is going 
to do the trick. So I just throw that out there. There are many 
of us in Congress, and believe me, if I had the answer, I would 
be brilliant, and I am not. I would be the Secretary of 
Transportation, but I am not.
    Mr. Ryan. Thank God.
    Mr. Simpson. Thanks very much. I appreciate that.
    But what we need is to work both with Congress and the 
administration to solve some of these problems in the long 
term. I am not going to like the solution. Neither are you. It 
is going to be tough solutions that are going to require some 
tough decisions by Congress. And so we need to be able to work 
together to try to solve this on a long-term basis rather than 
this let's fix it for now, and we have got an election this 
year, so let's not do anything now, and we will do it the year 
after that. But as you know, we are always up for election.
    So anyway, thank you, Mr. Chairman. That is just me 
ranting. If you would like to----
    Secretary Foxx. Yes, if you wouldn't mind.
    First of all, I appreciate the sentiment. Our proposal is 
really calibrated to deal with the fact that this is not a new 
problem. This is a problem that has been around for a while. 
And as I mentioned in the opening of my comments, 18 continuing 
resolutions since 2009.
    While the gaps ultimately have gotten filled, what is 
missing in the equation, maybe invisible to folks in 
Washington, but I saw it very clearly as a mayor, is that you 
don't know what tomorrow looks like.
    So I completely agree with you that the issue of addressing 
this problem is important, but because there hasn't been a 
settling point on getting to a longer answer, this proposal 
actually, you know, may not be perfect in the eyes of some, but 
it is a proposal that addresses what we understand are some of 
the touch points in this Congress around taxes and lots of 
other things.
    So we don't apologize for this proposal. It is a good 
proposal. And if there are other ideas that emerge in this 
Congress that are better ideas that get us a longer draw on 
solving the problems that we have, as we have said, we are open 
to them. But we believe that it is important for us to have a 
proposal that we think has bipartisan interest and put it 
forward, and that is exactly what this is.
    Mr. Simpson. Thank you for being here today.
    Secretary Foxx. Yes, sir.
    Mr. Latham. If I could just comment. You should also be 
aware that this administration has never made a proposal, never 
put forth legislation in an authorization or a pay-for to do 
exactly what you talked about. So I just want to make that 
point.
    Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman.
    Let me just follow up on what Mr. Simpson was saying. I 
think that a big, bold infrastructure proposal--and I get it; 
this is short term, let's do what we can, let's use this 
immediate revenue to do what we can do in the short term--I 
think the American people will support it. Because there is a 
lot of people in the city of Akron, right now, for example, 
they need combined sewer. It is outdated. It is 6-, 7-, $800 
million. If they bond that out themselves, the rates are going 
to go up dramatically in the city, as you know as a mayor, 
further drive people to the suburbs, which is going to put more 
of a burden for water, sewer, transportation costs for all the 
rest of us to keep the sprawl going. Meanwhile, our cities are 
rotting.
    So I think the initiative from the administration would be 
supported. And I think Mr. Simpson is right, and I don't 
normally say that publicly about my buddy, but I think there 
could be a bipartisan support. So I would also encourage you 
and the President to step out on this issue, and we will 
support you. And we will go out and make the argument to the 
American people, because they are driving on the roads. And you 
look in Ohio and a lot of the other places, because of the cold 
winter, the roads are a wreck now all over the place. So I just 
want to encourage you to do that, and we are happy to sit down 
and work with you on it.
    Two other things. I want to speak to the TIGER grant that 
has had an amazing ripple effect in Kent, Ohio. Twenty million 
dollars has led to over, I think, $110 million in other 
matching investments, whether it is State, local, private 
investments. There is hotels now, there is downtown, there is 
businesses. They are now talking about phrase two of it, of 
this project. Tying the university together, Kent State 
University, with the City of Kent has been an amazing project. 
So these TIGER grants, I think, are a major benefit to a lot of 
communities.
    And then lastly let me just say what Mr. Joyce brought up 
with the St. Lawrence Seaway. I think there is a great 
opportunity for the administration here as well to use the St. 
Lawrence Seaway organization as an opportunity for more 
economic development in the Great Lake regions. If you look at 
where the manufacturing institutes that the President is 
pushing, 15 and eventually 45 of them, 1 is in Youngstown, 
Ohio, 1 is in Detroit, 1 is in Chicago, all in the Great Lakes 
region. So to take an initiative like this and basically say 
the St. Lawrence Seaway organization could be a port authority 
for economic development for the entire Great Lakes region I 
think would put us in a great position in all of these older 
industrial areas and give us one more tool in the toolbox for 
economic development. So I would also ask you to look very 
closely at that.
    I don't have a question. I am just following the leadership 
of my friend Mr. Simpson.
    Yes.
    Secretary Foxx. If I might, further to this question of the 
proposal, one thing our proposal does that, as I am listening 
to the conversation, there are sort of several different 
conversations. There are some that say it should be longer, and 
to that we say we are open to ideas. Show us how you pay for 
it. We have got a pay-for. We are ready to work on it.
    What our proposal also does is that it goes above Highway 
Trust Fund current levels to increase funding and support for 
infrastructure in this country. And I think if I could leave 
you with one point, it is that backfilling the Highway Trust 
Fund is helpful, but, that is kind of looking through the rear-
view mirror. If we are looking at the windshield, we have got 
an awful lot coming at us in terms of population and needs as a 
country. And I think what can get lost in this conversation is 
the fact that we are offering a proposal that substantially 
increases investment in American infrastructure above current 
levels, and if there is another way to do that that folks think 
is more doable, we are open to those ideas.
    Mr. Ryan. No, I hear you, and I am supportive of the 
proposal. Just this is a short term because that is the 
political situation we are in right now. And there is no doubt 
about it. You know, maybe me and Mr. Simpson can put something 
together, or maybe not. I don't know.
    Mr. Simpson. Don't hold your breath on that.
    Mr. Ryan. Yield back the balance of my time.
    Mr. Latham. The gentleman yields back.
    Mr. Joyce.
    Mr. Joyce. Thank you.
    In following up on the manufacturing aspects that Mr. Ryan 
has brought up, specifially eastern Ohio and western 
Pennsylvania and the oil and gas play that Mr. Ryan had brought 
up, it is a tremendous ability to direct ship from the Great 
Lakes to Europe. That is another reason why it makes that St. 
Lawrence Seaway project very important for us.
    In the President's proposal to fund highway and transit 
investment, it is assumed the Highway Trust Fund would receive 
a one-time infusion of revenues from tax reform. I am curious, 
what is the administration proposing as far as their vision for 
our Nation's airports?
    Secretary Foxx. Well, as you know, we have our FAA 
reauthorization process that is going to happen over the next 
year or so, and we expect robust discussion on a bipartisan 
basis as we look to frame a vision for the longer term there.
    I think as far as the budget proposal is concerned, we 
think that this proposal offers not only the opportunity to 
continue advancing our airspace and our air systems, allowing 
us to continue to move forward with emerging technologies-- 
unmanned airspace is potentially one of them--but also to 
continue to modernize the airspace through NextGen and other 
technologies. So we have in this budget proposals that help us 
continue moving the ball in the airspace. But I think the 
reauthorization process will open up new debates about how we 
go forward on a more long-term basis.
    Mr. Joyce. The proposal is talking about the FAA and what 
you are going to do for the infrastructure for airports?
    Secretary Foxx. Yeah. I mean, we continue the airport 
investment program. We continue to invest in the back-office 
systems that support the national airspace. We continue to try 
to modernize it using 21st century technology, working hard to 
get us off of the World War II radar systems into a 21st 
century GPS system. Those are the types of things that we are 
going to continue working towards.
    Mr. Joyce. So I take that as support for NextGen?
    Secretary Foxx. Absolutely.
    Mr. Joyce. Thank you.
    Secretary Foxx. Thank you.
    Mr. Joyce. Thank you for coming today.
    I yield back.
    Mr. Latham. We just started a vote on the floor, so I think 
we will conclude the hearing right now. You must create a lot 
of interest. This is the first time I have ever seen 100 
percent participation of a subcommittee, and that is probably 
because of the afternoon hours too.
    Mr. Simpson. Your leadership, Mr. Chairman.
    Mr. Latham. Yeah, I think it is my leadership. I don't 
know, if I did earmarks like the Secretary does, you would get 
one, Mr. Simpson.
    But thank you very much. It is extraordinarily important 
that we maintain open and free dialogue and communicate. 
Obviously, we are not going to agree on everything and 
prioritize. But the only way we are going to be able to be 
successful and get our bill done and have you folks support it 
certainly is going to be that open communication back and 
forth, and we look forward to having that continued 
communication. And thank you very much for your participation 
today and for your testimony.
    Secretary Foxx. Thank you, sir.
    Mr. Latham. And the committee is adjourned.


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                                          Wednesday, April 2, 2014.

 OVERSIGHT HEARING: OFFICE OF PUBLIC AND INDIAN HOUSING, DEPARTMENT OF 
                     HOUSING AND URBAN DEVELOPMENT

                                WITNESS

HON. SHAUN DONOVAN, SECRETARY, U.S. DEPARTMENT OF HOUSING AND URBAN 
    DEVELOPMENT
    Mr. Latham. The hearing will come to order. This afternoon, 
we welcome Secretary Shaun Donovan to the subcommittee for an 
oversight hearing on housing issues.
    Secretary Donovan. Good to be back.
    Mr. Latham. Good to see you after your skiing trip and all 
those good things. You and Ranking Member Pastor can go travel 
somewhere now, too.
    Secretary Donovan. You are welcome.
    Mr. Pastor. We are going to Iowa.
    Mr. Latham. Okay, you are going to Iowa? Good, good.
    Due to a scheduling conflict we had to postpone our fiscal 
year 2015 general budget hearing for HUD until next Thursday, 
April 10th. Today we will review the budget request for Public 
and Indian Housing programs, learn about your ideas for program 
reforms, and look at the challenge of meeting long-term 
commitments in the Project-Based Rental Assistance account.
    For a number of years we have seen renewals of the voucher 
program and other housing programs steadily crowd out other 
high priority programs. This year is no different. HUD's 
request for Public and Indian Housing programs grow $1.1 
billion or 4.4 percent over the enacted level. At the same 
time, community planning and development programs, for example, 
see a reduction of $9.8 million in the budget request.
    The Ryan-Murray budget agreement for fiscal year 2014 and 
2015 reflects a broad bipartisan agreement that we must live 
with relatively flat budgets this year and next year and 
actually well into the future.
    Chairman Rogers and Chairwoman Mikulski have stated very 
publicly that they will abide by the Ryan-Murray agreement for 
fiscal year 2015 in spite of the administration's multi-billion 
dollar gimmicks across the budget. In the case of this 
subcommittee, the President's budget offloads billions of 
transportation spending to the mandatory side.
    As we consider your request for fiscal year 2015, the 
committee will move forward honoring the bipartisan agreement 
to effectively freeze the top line for both domestic and 
defense spending, and we will not use gimmicks to increase 
spending. To meet this goal we need to have an honest 
discussion about how we continue to serve our most vulnerable 
citizens while focusing on hard choices and cost-saving 
reforms. Sticking to the budget agreement means that when some 
programs grow, others must be cut back.
    You have been on the job now for 5 years, and we appreciate 
your leadership and open communication with the committee. I 
have confidence that your remaining years, hopefully years, as 
Secretary will finally bring in some urgently needed reforms so 
that HUD's housing programs effectively serve the national 
interests while protecting the taxpayer.
    I look forward to your testimony and would like to 
recognize my good friend and ranking member, Mr. Pastor, for 
his opening statement.
    Mr. Pastor. Good afternoon, Mr. Chairman.
    And thank you, Mr. Chairman.
    I welcome Secretary Donovan this afternoon.
    The programs we are reviewing today are some of the most 
important programs in HUD's portfolio. Public housing and 
Section 8 house more than 5 million tenants, many of whom are 
for vulnerable populations. More than half the tenants in 
public housing are elderly or disabled. These programs are the 
largest in HUD's portfolio. Together, public housing and 
Section 8 rental assistance represent $36.3 billion or 85.9 
percent of the fiscal year 2015 budget request.
    We have a responsibility and a commitment to ensure that 
these programs run efficiently while having a positive impact 
on tenants' lives. I look forward to hearing an update on two 
of the administration's initiatives in this area, the Choice 
Neighborhood Initiative and the Rental Assistance Demonstration 
program.
    I look forward to the Secretary's testimony this afternoon.
    And thank you, Mr. Chairman. I yield back.
    Mr. Latham. Thank you, Mr. Pastor.
    Following your opening statement members will be recognized 
for 5 minute rounds of questioning based on seniority here on 
the committee.
    Secretary Donovan, you are recognized for your opening 
statement, and your full statement will be submitted for the 
record.
    Secretary Donovan. Chairman Latham, Ranking Member Pastor, 
members of the committee, it is a pleasure to be with you today 
to discuss the Department of Housing and Urban Development's 
public housing programs with a specific focus on the innovative 
proposals contained in our fiscal year 2015 budget.
    We come together today at an important time for the 
American people. Although our Nation has come a long way since 
the depths of an historic economic crisis, there are still too 
many families struggling to get by. One example, according to 
HUD's latest worst case housing needs study, in 2011 roughly 
8\1/2\ million families spent more than 50 percent of their 
income on rent and/or lived in substandard housing. This was a 
jump of more than 43 percent since 2007, the largest increase 
over a 4-year period in the quarter century history of the 
survey.
    Recognizing that so many are in need, HUD's fiscal year 
2015 budget is designed to build ladders of opportunity so that 
families from all backgrounds have a fair chance to lift 
themselves up if they work hard and play by the rules.
    Public housing is at the heart of these efforts because it 
provides affordable rental homes to low-income families. HUD's 
proposed budget dedicates a significant amount of funding to 
support this critically important work by addressing capital 
needs to preserve existing units, empowering families with the 
resources to secure affordable units, and ensuring that once 
they obtain affordable housing, these families have the support 
to grow and thrive.

                                  RAD

    And with all of these efforts, we are looking for new and 
innovative ways to make a difference on the ground, especially 
in tight fiscal times. Case in point is our Rental Assistance 
Demonstration, which is helping public housing authorities and 
owners of assisted housing tap the private market to make 
physical improvements to their units.
    With a backlog of $26 billion in capital needs for public 
housing, this effort couldn't be more timely. That is why this 
budget proposes legislative changes to RAD that will eliminate 
the 60,000 unit cap and allow for a greater portion of public 
housing stock to convert. Specifically, these measures will 
enable HUD to address the more than 180,000 units of 
applications that we have on hand today and create 
approximately $6 billion in private financing for the 
recapitalization of public housing at no cost to the taxpayer.
    The budget also provides $10 million for a targeted 
expansion of RAD to public housing properties in Promise Zones 
or other high priority communities. In total this means more 
quality affordable housing options for families, and to help 
them seize these opportunities, the budget includes $20 billion 
for the Housing Choice Voucher program to help more than 2.2 
million low-income families afford decent housing in 
neighborhoods of their choice.

                        SPECIAL PURPOSE VOUCHERS

    In addition, the budget provides 40,000 special purpose 
vouchers, including 10,000 new vouchers targeted to homeless 
veterans and also includes $9.7 billion for the project-based 
rental assistance program to maintain affordable rental housing 
for 1.2 million families, and once families are in these units, 
we want to see them succeed.
    This is an area where we are doing some of our most 
innovative work. For example, the budget provides $25 million 
for the evidence-based Jobs-Plus program, a proven model for 
increasing the employment and earnings of public housing 
residents. They receive on-site employment and training 
services, financial incentives that encourage work, and 
neighbor-to-neighbor information sharing about job openings, 
training, and other employment-related opportunities.
    The Opportunity, Growth, and Security Initiative includes 
an additional $125 million for Jobs-Plus, which together with 
the base funds in the budget could assist up to 50,000 
participants.

                            PHA FLEXIBILITY

    Another proposal in the budget provides flexibility to help 
PHAs improve supportive services for assisted families, the 
Family Self-Sufficiency program which connects residents to 
resources and services that lead to economic independence and 
self-sufficiency will be consolidated and aligned to enable 
PHAs to better serve voucher and public housing residents, and 
as part of the forthcoming legislative package, we propose 
expanding our Moving to Work program to help even more public 
housing authorities design and test innovative, local 
strategies aimed at helping residents succeed.
    In total with all these efforts, we are looking for 
creative ways to achieve our desired results in tough fiscal 
times. We do so with the primary goal in mind, to give more 
Americans a fair chance to thrive if they work hard. HUD's 
fiscal year 2015 budget is designed to do just that, with our 
innovative public housing programs at the center of this work.
    We are eager to discuss these items with Congress as you 
work through the appropriations process and look forward to 
your questions. Thank you.
    Mr. Latham. Thank you very much, Mr. Secretary.
    [The information follows:]


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    Mr. Latham. The request refers to a comprehensive package 
of legislative reforms that you will be submitting to the 
authorizing committees this spring, it is my understanding; is 
that right?
    Secretary Donovan. That is correct.
    Mr. Latham. Okay. I think we can all agree this is the 
right time for reforms, to ensure that the HUD housing 
assistance programs serve the neediest populations, control 
costs, and lead to greater self-sufficiency for the residents. 
However, we have heard promises to work with the authorizers in 
the past, including during last year's hearing. So I hope you 
can appreciate the fact that we may be somewhat skeptical as to 
whether you are really serious about making reforms.
    What makes you think that you have a better opportunity 
this year and what do you see as some of the barriers that 
might pop up?

                          LEGISLATIVE REFORMS

    Secretary Donovan. So, first of all, I would say we were 
very encouraged by some of the advances we did make in the 2014 
budget. There is hundreds of millions of dollars of savings in 
the voucher program and in other programs based on the work 
that we did with you but also with the authorizing committee.
    Having said that, we literally on the day we introduced the 
budget, briefed the authorizing committees. I personally made 
calls to the authorizers to encourage them to work with us. We 
are actively engaged in discussions on potential legislation 
this fall. Obviously you know better than I do that in an 
election year and with other challenges we can't guarantee any 
legislation getting done, but we will do everything we can to 
make progress.
    I would also note we have proposed a range of legislative 
changes which we think are appropriate for an appropriations 
bill. That is why we divided the legislative proposals. Some we 
included language with the budget, others we are saving for 
what we consider an authorizing package later, and we look 
forward to working directly with the committee on things that 
clearly fall within appropriations language.
    Mr. Latham. That really goes to my next question about the 
selection of programs that you want us to expand, rather than 
the authorizers. Whether you are talking about the RAD or the 
rent policy demonstrations, change in medical deductions and 
authority for the public housing authorities to merge their 
operating and capital funds and so on. Will constraining 
renewal costs be one of your goals as far as reforming the 
voucher system? Tell us what you are proposing there.
    Secretary Donovan. Absolutely. We believe with the changes 
that we were able to make working with you in the 2014 budget, 
we already expect savings in the voucher program of just over 
$200 million in 2015. In addition to that, we believe that the 
changes we have proposed, for example, to medical deductions 
will save at least tens of millions of dollars more.
    The other thing that I would point out, we have been 
working to move to a more efficient contracting model in our 
project-based Section 8 program over a number of years. We have 
actually run that competition twice and lawsuits have delayed 
that. There is specific language that we proposed in the budget 
that would clarify that we have the right to do this through a 
NOFA process which we believe already and was confirmed by one 
judge in a prior court. If that language gets approved, we 
think we could save $100 million within the project-based 
Section 8 program next year.
    Mr. Latham. Okay. In 2012 GAO reported to Congress that 20 
different Federal agencies administer 160 programs to support 
home ownership and rental housing. I wondered, are you working 
within the administration to identify where there is 
duplication and are there efforts to consolidate programs so 
that the tax dollars serve the national interest rather than 
just duplicating programs?
    Secretary Donovan. We are. We have established a rental 
housing working group across the entire administration that has 
looked for ways to consolidate and also to better align 
programs. I would also point to RAD, which I mentioned earlier. 
RAD alone has already gotten applications that would 
consolidate almost entirely the Rent Sup program, and we are 
looking as well, the potential to consolidate RAP and the Mod 
Rehab program, and with the right language and the lifting of 
the cap, we should be able to do that in the coming years.

                             RAD EXPANSION

    Mr. Latham. Well, why start another program when you have 
160 of them there already? I mean, what are you talking about 
eliminating? Is there any report from this working group?
    Secretary Donovan. Well, I would be happy to provide more 
specifics about that. But, again, we don't see RAD as a new 
program. It is using a time-tested Section 8 program and moving 
other programs that, frankly, I would call them orphan 
programs, a small number, moving them into Section 8 to be able 
to truly consolidate them.
    Mr. Latham. Okay. My time has expired.
    Mr. Pastor.
    Mr. Pastor. Thank you.
    Mr. Chairman. Mr. Secretary.
    The Rental Assistance Demonstration, RAD, was created in 
the 2012 appropriation bill, and the program allows public 
housing authorities to modernize and preserve existing housing 
by leveraging outside capital. As you said, it had a cap of 
60,000.
    Secretary Donovan. That is right.
    Mr. Pastor. It was extended I think last year, the 60,000 
was extended, and it is going to expire December 31st of this 
year, and since you and the chairman were having the dialogue 
on RAD and some of the programs, and you alluded to some of the 
orphan programs, et cetera, but let me ask a question first.
    This program is really, it is in its infancy, at least it 
took you time to get it going and maybe a year in existence, 
maybe a year and a half in existence. What tools or what 
methods of evaluation have you compared it to so that now you 
can say it is working, it is not working, we still need, we 
still have some glitches so that we know as you ask for further 
expansion where we are at today.
    Secretary Donovan. So, first of all, I think the two 
biggest indicators of success thus far, first, that despite a 
cap of 60,000 units, we have demand as of the end of last year 
for three times that, 180,000 units have applied, and we 
continue to hear significant demand beyond that. So obviously 
if you put it this way the housing authorities are voting with 
their feet and applying and really want to do this. Second----
    Mr. Pastor. Let me ask a question. Why do you think the 
PHAs are using this mechanism to increase the demand?
    Secretary Donovan. So two things I would say. One is that 
they are able to raise capital that far exceeds what they can 
do within their traditional means in the public housing 
program. Those 180,000 units could raise $6 billion of other 
private and public capital to help them do the repairs with no 
additional cost to the taxpayers. So, that is an opportunity 
they just don't have anywhere else.
    And, second, I believe it allows them to use a time-tested 
program, Section 8, that they understand, they know well 
because it is an existing time-tested program that has lower 
regulatory burdens and other challenges relative to public 
housing, the traditional public housing program. So it has 
benefits administratively and in terms of efficiency for them.
    That is why I would go to the fundamental point, I don't 
see this as a, you know, a demonstration in its infancy because 
we are using programs that have been around for decades. 
Project-based Section 8, project-based vouchers are time 
tested, and all we are really doing is converting them, not 
trying a new program or a new alternative.
    Mr. Pastor. In raising the capital, are these PHAs crowding 
out other low-income tax credit programs or the market itself?
    Secretary Donovan. We heard some initial concern about 
that. What we have seen in practice is that only about 10 
percent of the transactions are using the 9 percent credits 
which are competitive. Thirty percent of the projects are using 
what we call 4 percent tax credits, which are tax-exempt bonds. 
Those have not been oversubscribed in States, and so it is not 
crowding out other, and the additional 60 percent of projects 
are just using private financing, whether through FHA or other 
sources. So there was some concern initially that it would be 
crowding out, but in practice we haven't seen that extensively.
    Mr. Pastor. So the new demand for 180,000, the expansion to 
increase that number of units, is that generally throughout the 
country or is there certain areas that are relying on this 
program or wanting this program to expand?
    Secretary Donovan. We have seen some variation, but every 
State in the country has housing authorities that have applied, 
and there is great demand in all regions of the country.
    Mr. Pastor. You have PHAs that are larger than others. I 
mean, you probably have, as you well know, smaller ones and you 
have larger ones. Is the balance equal or do you find that the 
larger and more urban areas that are now using this program?
    Secretary Donovan. Interestingly, there was some 
expectation that the larger housing authorities would use it. 
It has really been the opposite. We have a disproportionate 
number of small and medium sized housing authorities that are 
using the program. The percentage of units represented by small 
and medium sized housing authorities is bigger than you would 
expect given their representation in public housing overall.
    Mr. Pastor. I will yield back.
    Mr. Latham. Thank you, Mr. Pastor.
    Mr. Dent is recognized.
    Mr. Dent. Thanks, Mr. Chairman.
    Good afternoon, Mr. Secretary.
    Secretary Donovan. Good to see you.
    Mr. Dent. Included in the fiscal year 2014 omnibus spending 
bill were a number of provisions designed to reduce the 
administrative costs for public housing authorities. However, 
regulations for many of these reforms such as the streamlined 
biennial inspection protocols have not yet been issued by HUD. 
Can you tell me what your timetable is for writing the 
regulations necessary to implement these cost saving measures?

                           REGULATORY CHANGES

    Secretary Donovan. Absolutely. One of the things that was 
very helpful in the way you all crafted the bill was you gave 
us the ability to implement these through notice, so we are 
literally, as we speak, drafting that notice. It will be issued 
this spring and allow us to go forward and start to realize 
those savings to some degree in 2014, but largely in 2015.
    We will then follow that notice with a full regulatory 
process, but it was extremely helpful that you gave us the 
ability to implement these three notice so that we could get 
going quickly. Obviously the housing authorities are eager to 
get going on these, and they are looking forward to that 
notice.
    Mr. Dent. Thank you. And also, Mr. Secretary, I understand 
that many public housing authorities across the country have 
coordinated with their State associations and elected 
representatives to develop proposals that are within HUD's 
regulatory authority to reduce administrative burdens and help 
them save some money.
    Several public housing authorities in my district are 
contemplating taking a similar approach, but they are 
discouraged by the response received by their counterparts 
specifically in North Dakota and Virginia, and what would you 
recommend is the most effective method by which these public 
housing authorities may propose time and money saving 
suggestions to the Department and how would the Department work 
to implement good ideas received from these public housing 
authorities?
    I would just also point out, I do have a correspondence I 
saw from Senators Kane and Warner to you I guess it was back in 
September and then your response I guess was back in October 
back to them and then also a similar letter from Senator 
Heitkamp in January on the same issues.
    Secretary Donovan. Obviously it will depend on the 
specifics of the issue whether we have authority to implement 
it, but what I would suggest is that we set up a follow-up 
meeting with your office with the housing authority to sit down 
and to specifically discuss their ideas.
    We are preparing guidance that would provide greater 
flexibility through our own administrative authorities in a 
range of areas. We have a notice that we issued last year that 
did that. We are looking at further steps, so it would be a 
good time to do that.
    Mr. Dent. I would very much like to take you up on your 
offer to sit down with some of----
    Secretary Donovan. Great.
    Mr. Dent [continuing]. My housing authorities who have I 
think some very thoughtful ideas about how they could realize 
some greater efficiencies while maximizing the number of people 
staying in the public housing units. So I would appreciate 
that.
    And finally, on the issue of housing counseling, what can 
you tell us this year? How are we doing in terms of oversight 
and in terms of making sure that these programs are as 
effective as they can possibly be? I know we have, that not all 
home counseling programs are created equally, some are better 
than others, and what are we doing to make sure that they are 
all living up to better standards? Again, some are doing quite 
well. There have been some reports a few years ago about some 
of the programs that were not quite up to snuff. Can you fill 
us in?

                           HOUSING COUNSELING

    Secretary Donovan. We are in the process of developing a 
comprehensive testing regime for housing counselors. This was 
part of the HERA legislation that was passed and is something 
that we are moving actively toward.
    The other thing I would mention, we are proposing an 
increase in housing counseling this year in our budget, along 
with an initiative in the Federal Housing Administration called 
HOC which will increase the use of counseling in order to not 
only help make sure families can stay in their homes, typically 
what we see is a 30 percent better chance of staying in your 
home if you get counseling, but we also expect it to save 
between $1,000 and $2,000 a loan for the taxpayer through safer 
loans in FHA. So we are expanding the use of counseling to 
better protect the FHA fund and expand access to credit.
    Mr. Dent. I will yield back then, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Dent.
    Mr. Price is recognized.
    Mr. Price. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary, we are glad to have you here.
    Secretary Donovan. Good to be back.
    Mr. Price. Let me ask you a number of questions, I think 
most of which are straightforward and won't require too much 
elaboration, but they are nonetheless important questions that 
have been raised by various stakeholders and that I am not 
certain I am clear on what the Department's position is.
    First on these vouchers that were lost due to sequestration 
and that are being restored, there is some debate about 
whether, whom those should go to, and the waiting lists, of 
course, are pretty long and compelling, but also there is 
specific populations such as homeless persons, victims of 
domestic violence, people who otherwise might be 
institutionalized, people with disabilities who arguably have a 
special claim or a special need on these restored vouchers. 
What is the Department's position on this? How much leeway are 
you permitting and to what extent are you directing the use of 
these vouchers?

                        SPECIAL PURPOSE VOUCHERS

    Secretary Donovan. Largely speaking we leave local 
discretion to communities to determine their priorities. Each 
housing authority has their own plan with particular special 
priorities they may place based on local needs. So, most of the 
additional vouchers that would be created are of that type, but 
we are proposing, as I mentioned in my testimony, 40,000 
special purpose vouchers, 10,000 for homeless veterans and 
30,000 for what we call tenant protection vouchers, which are 
targeted for families that might otherwise lose their homes 
through opt-outs of other forms of housing or situations like 
that.
    Mr. Price. And what will be the plan for the distribution 
of those additional vouchers?
    Secretary Donovan. For the VASH vouchers specifically, the 
Veterans Affairs Supported Housing vouchers, we measure very 
carefully each year the need based on the number of homeless 
veterans, particularly chronically homeless veterans, and we 
match the distribution of those to need. Tenant protection 
vouchers go to where we have these specific cases. So, in other 
words, if there is a building in one community that is leaving 
a program and residents are at risk of being evicted, we would 
provide those from HUD directly to that, those residents of 
that facility.
    Mr. Price. That would be a matter of HUD's determination, 
not necessarily an application process on the part of----
    Secretary Donovan. Exactly. That is not competitive or 
anything like that, and then finally the bulk of these are 
distributed through formula that is set by appropriations 
through our regular distribution of renewal funds for Section 8 
vouchers.
    Mr. Price. Presumably if a local authority had a specially 
compelling case that needed to be brought to the Department's 
attention, they would be encouraged to do that?
    Secretary Donovan. You have in past years, and we would 
want to continue this, provided some emergency funding. So, for 
example, the effects of sequestration last year meant that 
there were many, many housing authorities, almost 200, that ran 
out of reserves and needed some help in order to make sure they 
weren't evicting tenants. The flexibility you gave us allowed 
us to meet some of those special needs in the regular voucher 
renewal pot.
    Mr. Price. Now, let me turn to administrative fees. In the 
last 10 years do you know how many public housing authorities 
have turned in their Section 8 program vouchers because there 
were simply insufficient funds to operate them?
    We hear about that, and of course it is extremely 
frustrating. What is the status of the administrative fee study 
that is being conducted by ABT, I understand and what interim 
proposals is HUD advocating to help these programs survive?

                          ADMINISTRATIVE FEES

    Secretary Donovan. I am glad you asked about that because 
it is an area where I am very, very concerned. Administrative 
fees fell to an all-time low last year. Less than 70 percent of 
documented need, and although 2014 raised that to 75 percent 
proration, it is still too low, and in fact we saw the effects 
of that.
    In 2013, for example, we saw the number of housing 
authorities that are turning back VASH vouchers. So these are 
housing authorities that are turning away new vouchers to help 
house homeless veterans, we saw the number of those housing 
authorities double last year. So we are very concerned about 
the administrative fees.
    On the administrative fee study, we have completed the work 
on 30 out of the 60 housing authorities that are part of the 
study. We will be providing by the end of this week a summary 
of that research. What it shows is that very well run voucher 
programs, need about 92 percent of the formula allocation that 
has traditionally been the level, and again I would compare 
that to 2014's level of 75 percent. We are proposing to 
increase that substantially but still not get up to 92 percent 
in our budget this year.
    Mr. Price. Thank you.
    Thank you, Mr. Chairman.
    Mr. Latham. Thank you.
    Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    And I guess you may have already touched on it with the 
VASH vouchers. I am sorry, I am on Mucinex and sometimes it 
makes your tongue a little funky. It is a little head cold, and 
that is all on camera, that is great.
    The VASH Veterans Assistance Supportive Vouchers. Am I 
saying it right? And I know we were, you absolutely said it, 
that was one of the things I asked you about last year is they 
were returning those vouchers because there just wasn't enough, 
and when you are talking about veterans, we are talking about 
needing wrap-around services, it is extremely difficult.
    Secretary Donovan. Absolutely.
    Ms. Herrera Beutler. Or should I just say it takes a lot of 
time and effort to put together the wrap-around services to 
make these work, and so the administrative fees are crucial and 
to go from 68 percent to 75 percent in the Ryan-Murray budget, 
I mean, I know you are putting together the study, and I am 
curious as to when the study is going to be out. In addition, 
do you think the 75 percent reimbursement is enough for this 
year? Is that--are we still going to see those vouchers 
returned?
    Secretary Donovan. Obviously we don't know yet. We are 
going to be making the allocation in the next few months, and 
we will wait and see. I am hopeful that with a higher level of 
admin fees this year, although it is at 75 percent, that there 
will be fewer that turn them back, but it is still, 75 percent 
proration is not enough for administrative fees, and, look, 
this is a program that is working.
    Ms. Herrera Beutler. Yeah.
    Secretary Donovan. It is not only saving lives. We have 
reduced veterans homelessness by 24 percent in the last 3 
years.
    Ms. Herrera Beutler. Oh, wow.

                     CHRONICALLY HOMELESS VETERANS

    Secretary Donovan. It is also saving money because the 
alternative when you have a chronically homeless veteran on the 
streets, they use emergency rooms, they go to prisons, they 
have all kinds of other impacts that have human costs but also 
have economic costs to the taxpayer, and so we believe that 
this is an investment that is not only good for these veterans 
and good for our country, but good for taxpayers as well.
    Ms. Herrera Beutler. So do you think, is it the fall that 
your study is expected, so that we at least know what our 
baseline should be?
    Secretary Donovan. Again, we have initial results we will 
be providing by the end of this week that shows at least based 
on the first 30 housing authorities that it is about 92 percent 
is an adequate level.
    Ms. Herrera Beutler. Okay.
    Secretary Donovan. But the full final study will be 
completed this year.
    Ms. Herrera Beutler. Okay, thank you, and thank you for 
your work on that.
    Secretary Donovan. Thank you.
    Mr. Latham. Thank you.
    Mr. Quigley.
    Mr. Quigley. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary.
    Secretary Donovan. Good to see you.
    Mr. Quigley. Upon questioning from the esteemed ranking 
member, you were talking about the RAD program. Chicago's 
program has been approved but as you talked about, there is a 
cap. You mentioned the demand is 180,000 and the cap is 60.
    Secretary Donovan. Yes.
    Mr. Quigley. I didn't--I was just waiting for the magic 
language of your discussions about your desire or efforts 
within the agency to expand or lift the cap. Can you comment on 
that?
    Secretary Donovan. I would love to lift the cap. It is not 
something that is within my power without legislative authority 
and something that we were hoping to get done this year in the 
budget. We can continue to make efforts with authorizers, but 
clearly the best opportunity is in the 2015 budget to lift that 
cap, and that is what the President has proposed.
    Mr. Quigley. And it is going to be part of your efforts as 
well though?
    Secretary Donovan. Absolutely. It is proposed in our 
budget. We have continued to tell housing authorities like 
Chicago, which has the biggest application of any housing 
authority in the country, but just missed the 60,000 units, we 
have told them that we will continue to process their 
applications in the hope that the cap will get lifted, but 
clearly it is not something within my power to be able to do. 
We need to work with the committee to lift that cap.
    Mr. Quigley. Sure. And my agency is a little concerned 
about something else. You were talking about Moving to Work. 
Obviously the CHA is a Moving to Work agency, but in the budget 
request HUD has given the authority to reduce funding for 
voucher renewal costs to individual public housing authorities 
as a result of cost savings for the enactment of Section 8 
authorizing provisions.
    Now, I understand the need to cut costs, but this language 
seems pretty broad, and you are making some of these agencies 
nervous that they are going to lose some of these funds, excess 
funds.

                          MOVING TO WORK FUNDS

    Secretary Donovan. Simply what we are trying to do there, 
Congressman, is to say where we achieve cost savings through 
making the program more efficient, streamlining, as we did last 
year in the bill, that we be able to apply those across the 
board, including MTW agencies.
    Traditionally those kind of cost savings have had no effect 
on the funding levels for MTWs, and it only seemed fair to us 
to apply that evenhandedly. If you have concerns that we make 
sure it is evenhandedly, we would be happy to work with you on 
revised language around that.
    Mr. Quigley. How long do you think this process has gone on 
before this change, I mean the way before you are talking about 
this proposed change? I guess the point is a lot of these 
agencies have built in their ability to do their work on this 
funding.
    Secretary Donovan. They have also, I think, to be fair, 
been protected from reductions or cuts that other housing 
authorities have had to bear more broadly, and again, agencies 
who aren't MTWs might ask is it fair that they absorb more 
than, you know, a pro rata reduction of their fees, their 
renewal burden because MTW agencies don't, and so that is why 
we included the provisions to be able to try to implement some 
of these fairly. We would be happy to work with the committee.
    We are also, frankly, looking to expand the MTW program and 
have proposed that we do that in a way that hopefully the 
committee will be able to support.
    Mr. Quigley. And in a way that protect the agencies like my 
agency in particular. But we look forward to working with you 
to make sure, as you say, those are as fair as possible, it 
takes as little burden as we can from an agency that has an 
extraordinary demand in the city of Chicago.
    Thank you, Mr. Chairman. I yield back.
    Mr. Latham. I thank the gentleman.
    I am going to follow up on a couple things here with the 
VASH vouchers.
    There was a bureaucratic problem between VA and HUD. Has 
that been resolved or can you give us the status of how they 
are----
    Secretary Donovan. I would tell you it may not be perfect 
everywhere around the country, but it is dramatically better, 
and what we are seeing is shorter amounts of time to get 
veterans referred and into housing, but perhaps most 
importantly we have seen the percentage of veterans who are 
chronically homeless using VASH go up dramatically to where it 
is close to 70 percent of all those using VASH, and why is that 
important? Because VASH is sort of our Cadillac, if you will, 
of approaches.
    It is the most intensive services. It really works most 
effectively when we are working with the chronically homeless 
who may have long-term challenges with PTSD or mental illness, 
substance abuse, and too often the vouchers were being used in 
a way that wasn't as efficient and as effective as possible, it 
wasn't targeted in the best way, and not only are we getting 
the vouchers out faster, but we are also better targeting them, 
and what that means ultimately is that we are going to get more 
cost savings as well as really help more veterans get off the 
street with the vouchers.
    Mr. Latham. Can you, and maybe for the record, give me the 
information breaking down between urban and rural areas? Rural 
people don't use VASH at all, I mean, it is not available 
apparently, it doesn't work.
    Secretary Donovan. We have been making allocations in rural 
areas. We don't see, obviously, the same concentration of 
veterans in certain communities, but we have been----
    Mr. Latham. Right.
    Secretary Donovan. Making allocations at some, and we will 
certainly provide that information.
    Mr. Latham. I mean, for a lot of us, services in sparsely 
populated areas are not there.
    The Moving to Work that Mr. Quigley was talking about, to 
date there is no housing authority that has lost its status on 
the Moving to Work. It appears they are not all real high 
performers, like in Philadelphia where there is a lot of 
corruption and ended up in receivership and still retained its 
designation. Is there any standard as to who keeps it and who 
loses it?
    Secretary Donovan. We do have a set of standards that we 
will apply, and there are specific requirements.
    Mr. Latham. What do you have to do to lose it?
    Secretary Donovan. So specifically in the Philadelphia 
example, they actually continued to perform based on their MTW 
agreement. Obviously there were huge problems, that is why we 
went in and replaced the board, that is why we took them into 
receivership. But the types of problems they were experiencing 
were really about a housing authority director who, frankly, 
was out of control and a board that wasn't overseeing that. 
With the changes that we made, we were still confident that 
they were performing on all the metrics that an MTW requires.
    Mr. Latham. Okay. I burned up a lot of time here, but this 
is a big question. In the past few years as you are keenly 
aware, it has become nearly impossible to determine how many 
months of funding are provided by the request for the Project-
Based Rental Assistance Account.
    One consistent theme of the administration's proposals is 
they always manage to push payment liabilities into future 
years in order to provide more room for spending in that budget 
year. We had short-term funding 2 years ago, then a hole in the 
funding last year, and now this year we have a proposal to 
rebase contracts to the calendar year. This program is one of 
the cornerstones of Federal affordable housing and a platform 
for critical policy innovations like the RAD program.
    I would hope you would agree that the stability of Project-
Based Rental Assistance is too important to be, you know, part 
of annual budget games. Once and for all, can you tell us how 
many months of funding per contract are necessary to ensure a 
stable, well-functioning Project-Based Rental Assistance 
program?

                         FULL FUNDING FOR PBRAS

    Secretary Donovan. So from my perspective, what we are 
proposing this year is trying to do exactly what you said, 
which is to get us to a point where we will no longer have the 
question marks about whether funding is provided, and I will 
say this, Congressman, if you believe you can find an 
additional $1.3 billion this year that would bring us back to, 
quote unquote, ``full funding'' based on the current system, we 
would take it, and we would be happy.
    But recognizing the budget challenges, what we are saying 
is rather than continuing to go through what we have gone 
through these last few years where we are providing short 
funding, let's accept once and for all that we move to a 
system, which is how we do the voucher program, where we can 
provide funding for all the contracts on January 1st, there is 
a one-time savings from doing that, and then going forward 
provide 12 months of funding.
    Mr. Latham. There is also a huge hole the next year.
    Secretary Donovan. It actually creates no hole the next 
year. The exact, 12 months of funding starting January 1st is 
$10.8 billion. Whatever starting point you begin with, if you 
stay with the current starting point, it would still be $10.8 
billion in 2016. So this is, this rebaselining creates no 
additional demand in 2016. All it does is move these contracts 
to a January 1st date the same way that vouchers does and gets 
you a one-time savings in this year. And I believe it will 
actually be better for the program because at least we are 
saying, okay, we have got a new baseline, we are going to try 
and provide 12 months of funding from that date, and that we 
know what it is going to be going forward as opposed to the 
uncertainty.
    As you know, there is lots of private financing that comes 
into these contracts, right? And the more uncertainty there is, 
the higher the interest rates, the more reserves they are going 
to require. So we really do believe that given the challenges 
that we have, again, I would be happy to take an additional 
$1.3 billion to get to full funding under the current 
timelines, but if that is not possible, which I think we can 
all agree is going to be extremely tough, we believe it is 
better to say, okay, let's reset the annual funding date, and 
to be very clear, it does not create any additional funding 
needs in future years. It does not shift any burden.
    Twelve months of funding is 12 months of funding in 2016, 
no matter what the starting date is.
    Mr. Latham. Okay, we will continue the discussion.
    Mr. Pastor.
    Mr. Pastor. Thank you, Mr. Chairman.
    I am going to have one more question on the RAD. In the 
2015 budget request, you asked for an additional $10 million. 
What will that do to the RAD program in this fiscal year?
    Secretary Donovan. The idea there, the vast majority of 
these conversions under RAD can be done with no additional 
funding. There are, however, a very limited number where either 
because they may be in high poverty communities where it is 
harder to attract private capital, they may be in rural 
communities where it is harder to get private financing, other 
challenges like that.
    We would attach a slight increase to the amount of money 
that could be provided through the public housing subsidy in 
order to make the renovation of those units possible. So it is 
a very targeted amount of money for a small number of the units 
converting to allow a RAD conversion and extensive renovation 
to be feasible.
    Mr. Pastor. The Next Generation Management System (NGMS) 
has been a centerpiece of HUD's information technology 
transformation initiative efforts. The system when operational 
will consolidate many of the individual public housing IT 
systems into one holistic system. To date, HUD has spent more 
than $50 million on this effort. Can you give us an update on 
the progress of NGMS, Mr. Secretary?

                          NGMS IMPLEMENTATION

    Secretary Donovan. Absolutely. Just getting the specifics 
here.
    So NGMS did become operational, the first module of it, 
which is the budget formulation and forecasting module, last 
August. In addition, the portfolio and risk management tool 
became operational in September. We are adding functionality 
and making changes. Both of those sort of modules of NGMS will 
be fully operational this year, and we are obviously continuing 
to add new functionality in other modules on an ongoing basis. 
But NGMS is operational, it is already adding value in the 
Department.
    Mr. Pastor. Would you say 50 percent complete, 25? What 
percentage can you give me?
    Secretary Donovan. To be honest, Congressman----
    Mr. Pastor. I like honesty.
    Secretary Donovan [continuing]. I would like to get back to 
you with a more detailed analysis of that. I don't know off the 
top of my head what percentage I would say.
    Mr. Pastor. The implementation, as you go forward, what is 
the relationship between the public and Indian housing and the 
chief of information office on the project and who has the 
final say on the scope of it?
    Secretary Donovan. So what we have done, as I think most 
technology projects of this scale, is to create a team that 
includes the information technology experts from the CIO office 
along with program officials who have expertise about the way 
the program should run to create a joint team that has 
oversight.
    Ultimately the decisions are being made by the Deputy 
Secretary and by myself if there are disagreements within that 
team, but that joint team is managing the project and 
overseeing its implementation.
    Mr. Pastor. As you continue the implementation, when do you 
expect the core data infrastructure that houses the current 
public and Indian housing centers and the voucher management 
system to be implemented? Or have you done that already?
    Secretary Donovan. So, in fact, that is already in place. 
The core data infrastructure is part of the PIH data warehouse. 
The important move that is still to come is that we are 
actually moving towards a single integrated data warehouse for 
all of HUD, but at this point the core PIH data infrastructure 
is there and is already feeding into NGMS.
    Mr. Pastor. Could you give me a further definition of what 
is left to incorporate in the whole HUD warehouse?
    Secretary Donovan. So, for example, we have certain 
grantees or entities' projects that receive funding from 
multiple HUD programs, just to give you one example, where they 
may have public housing money but also have HOME money. There 
may be city entities that have their block grants but also are 
drawing other kinds of HUD funding as well.
    What a single integrated data warehouse will give us is the 
ability not just for all the PIH programs to talk to each 
other, but to actually have linkages between all the data 
across all of HUD's programs in a single warehouse. Right now 
we have to basically create those linkages separately rather 
than having it all reside with single identifiers that go 
across all of HUD's programs.
    Mr. Pastor. Just take a minute, Mr. Chairman.
    So Phoenix has a housing authority, also receives CDBG 
monies and other HUD monies, so then once everything is 
completed, HUD will have the information of all HUD funding for 
one particular municipality or agency.
    Secretary Donovan. Or a project. Exactly, in a single 
integrated data warehouse.
    Mr. Pastor. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Pastor.
    Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.
    Mr. Secretary, let me ask you one very specific question 
following up on the discussion of the Rental Assistance 
Demonstration, and then I want to move to Choice Neighborhoods, 
a key proposal in your budget.
    I am inspired to ask this question by the situation of one 
of your applicants, the Fayetteville Housing Authority in our 
district, but I think it is reflective of a broader situation. 
That is, a certain number of these applications, and I 
understand maybe 115, 120,000 units outside the cap are at risk 
in this sense.
    We are talking about applications already received that 
already have, that depend on financing arrangements where it 
is, let's say, a tax credit deal or another financing 
opportunity that may expire or terminate for those units that 
are outside the RAD cap. Any special plan for taking that into 
account or accommodating those situations? That really 
represents a lost opportunity.
    Secretary Donovan. It is a huge lost opportunity, and 
frankly while that is a specific case with tax credits, every 
one of these transactions is bringing in some form of private 
financing, which is going to have some set of deadlines or 
risk, and so other than the first come, first served way that 
we did set up the list, it would be, I would be very hard 
pressed to say, you know, this deadline takes precedence over 
that one.
    The right way to solve this is to be able to lift the cap 
and allow these housing authorities to move because, again, 
recognize what we are doing here is with not a single extra 
dime of taxpayer money, we are allowing the housing authorities 
to not only bring in billions of dollars of financing to create 
jobs, to improve the lives of residents, and every one of those 
120,000 units that is waiting has a story, it may not be 
identical, but similar to the one that you are hearing.
    Mr. Price. Well, an expiring tax credit is a pretty 
compelling story, but I am aware it is not the only sort of 
situation we may be referring to here, and I of course agree 
with your basic conclusion that the solution to this is not to 
try to distinguish too finely among different classes of 
applicants but really to get this cap lifted and get on with 
the program. There is clearly a huge demand and a huge need.
    Now let's talk about Choice Neighborhoods. That is a 
program, as you well know, to revitalize severely distressed 
public housing and the surrounding area. It is the successor of 
the HOPE VI program which had a similar goal. Here, too, I have 
every reason to appreciate these programs. Raleigh, Durham, 
Fayetteville, these cities have benefited greatly.
    Secretary Donovan. Greatly, yes.
    Mr. Price. And in many instances have been model HOPE VI 
cities. Your $120 million, your request in this budget is $120 
million for Choice Neighborhoods. I take it that would be maybe 
four projects in a year?

                          CHOICE NEIGHBORHOODS

    Secretary Donovan. Roughly, yes. A number of planning 
grants, but in terms of implementation grants, that is right.
    Mr. Price. And how does that compare to what HOPE VI was at 
its high point and the kind of progress we were able to make 
with that appropriation?
    Secretary Donovan. It is a smaller number of projects, to 
be frank. That is part of the reason we proposed----
    Mr. Price. Smaller is putting it mildly. What was the high 
water mark, do you know?
    Secretary Donovan. In inflation-adjusted terms I am not 
sure, but I know that there was, I think, four to five hundred 
million dollars at least annually. We can--575 was the high 
point historically. And if you did it in today's dollars, it 
would be even higher.
    Mr. Price. So now we are talking 120. That is four projects 
if we are lucky, and even that represents an increase from last 
year's abysmally low appropriation.
    Secretary Donovan. Congressman, I would just add, this is 
one of the reasons why we thought it was important to include 
in the Opportunity, Security and Growth Initiative an 
additional $280 million because we agree with you, $120 million 
is not enough, and the President believes if we do some common 
sense things on reforming both mandatory and discretionary 
funding, some tax changes, we could fund things like Choice 
Neighborhoods that really make an enormous amount of sense in 
terms of creating growth and opportunity, creating jobs.
    Mr. Price. Yes, it does show what could be done if a kind 
of ideological rigidity around here were to be relaxed and we 
were to have a more adequate budget.
    There is nothing anywhere else in the housing budget that 
comes close to Choice Neighborhoods, is there? I mean, I don't 
know what it would be. Nothing else that takes this kind of 
comprehensive approach.
    Just finally, I want to understand the handling of public 
housing here, and this is just a short, easy question I think. 
Both of these programs, HOPE VI, Choice Neighborhoods both aim 
at revitalizing severely distressed public housing. As I 
understand, the requirements as to what kind of area would be 
cleared aren't exactly the same, and I am not sure how the 
requirements as to what kind of housing replaces it, the kind 
of mix of housing that replaces it. Is that the same? Of 
course, public housing is in big trouble here, too.
    Very great area of need. Does the transition from HOPE VI 
to Choice Neighborhoods promise to alleviate that or could it 
possibly make it worse? How is public housing treated, in other 
words?
    Secretary Donovan. So public housing continues to be the 
primary kind of goal, the revitalization of public housing of 
Choice Neighborhoods. We did include the ability to take a 
privately owned multifamily property and have it be the target 
of a Choice Neighborhoods grant.
    But I would say the other thing that we have done is build 
into Choice Neighborhoods in a way that some HOPE VIs achieved 
but not all of them much more partnership from other agencies 
so that we are seeing, for example, many of the Choice 
Neighborhoods are receiving Promise Neighborhoods grants from 
the Department of Education, they are receiving Byrne Criminal 
Justice Investments from the Department of Justice, so much so 
that for every dollar we put into Choice Neighborhoods 
implementation, we are raising $8 from other public and private 
sources. That is what I really think goes to your point of 
nothing else quite has this catalytic impact that Choice 
Neighborhoods does because we are able to leverage every dollar 
of Federal money so effectively across both public and private 
dollars.
    Mr. Price. Thank you.
    Mr. Latham. Going back to our previous subject about 
Project-Based Rental Assistance, I have a letter here from a 
whole list of different organizations and councils and groups 
that deal with this, and they basically are saying exactly what 
I am talking about: the fact that you are just shifting off 
costs, another $1.1 billion in 2016 that you are going to have 
to back-feed, back fill to keep the programs going. Do you have 
any proposal for offsets in 2016's budget or are you going to 
have another gimmick?

                              PBRA FUNDING

    Secretary Donovan. So, Congressman, just to be clear, and 
we actually did reach out and talk to these groups and 
disabused them of their mistaken view of this. To be clear 
about the way this works----
    Mr. Latham. I am sure they will be happy to hear that.
    Secretary Donovan. Were they happy, Laura?
    Look, I think what they will tell you----
    Mr. Latham. So they are all wrong, right?
    Secretary Donovan. No, no. What they will tell you and what 
I would agree with is if you can find an additional $1.3 
billion, which----
    Mr. Latham. We have to do it next year then. You are 
kicking the can down the road here.
    Secretary Donovan. Think about it this way. If the average 
start date for a contract now is in July-August of the year, 
right? And what we are saying, okay, we are going to find that 
extra $1.3 billion, fund every contract starting on average in 
July or August, whatever it might be. If you do that this year, 
right, and you say how much will it cost to fund those 
contracts from July to July the next year, it is $10.8 billion.
    What we are saying is given that we have not been able to 
do that for a number of years now, let's just all agree that we 
are going to change the system, move it to January 1st. That is 
the way the Section 8 system works. We have a one-time savings, 
which is basically taking the start dates from the average of 
July to January. And then forever more we will fund them 
January to January.
    Mr. Latham. Which is a gimmick to spend on other new 
programs that you can grow, and then you are going to have to 
back fill again next year.
    Secretary Donovan. You never have to back fill it because 
every January you are funding for a year, so the same cost is 
$10.8 billion next year.
    Mr. Latham. You have to come up with about $1.1 billion 
more in 2016.
    Secretary Donovan. You don't. You don't, because----
    Mr. Latham. You are magical, you really are.
    Secretary Donovan. What it is doing is shifting the funding 
dates later in 2015. So it is a one-time savings that never has 
to be made up as long as you are funding from January to 
January the following year. So it really--it is not a gimmick. 
We think it is just acknowledging the fact of the challenge you 
have had the last few years, which is we have never been able 
to get back to full funding on the contract year that currently 
exists.
    And again, if you can find a billion three to get us to 
full funding this year, we would love to take it, and then we 
will have a $10.8 billion cost in 2016 as well, but we just 
think that is going to be hard given the challenges that you 
have, and we think it is better rather than having this 
uncertainty to just say let's shift it to January 1 for every 
contract, and all agree that going forward that will be the new 
program year, just as we do with vouchers, and that will have 
no--it will create a cost of $10.8 billion, which is the same 
12 months of funding that you would need if your starting date 
was an average of July or whatever else it might be.
    Mr. Latham. Okay. Then can you commit to full funding in 
the 2016 budget proposal?
    Secretary Donovan. I would love to be able to commit to 
full funding. We believe that it will make it easier to do full 
funding in the following year.
    Mr. Latham. So are you going to find the money then?
    Secretary Donovan. I will do everything I can to find the 
money. Look, Congressman, I used to run this program at HUD. I 
think it has been a huge problem.
    Mr. Latham. That is the problem.
    Secretary Donovan. I think it has been a huge problem, the 
uncertainty that we have had.
    Mr. Latham. Right.
    Secretary Donovan. And we worked hard to get extra money in 
the Recovery Act to bring it back to full funding, but that has 
then eroded after these years, and, again, I really mean it, if 
we could find the billion three this year to get back to full 
funding on the current cycle that we have, that would be ideal, 
that would be my first choice.
    But I think it is better to go to this new funding year 
than to continue to have the kind of uncertainty we have had 
the last few years where it is not, it is you know, it is 
partial funding each year, it is not quite enough, and that 
actually creates more uncertainty for lenders, for others.
    If we are not going to be able to get to the full funding, 
we believe that this is a second-best alternative, it is the 
right thing to do to say, okay, let's go to January 1st and 
let's reset, let's have a new year just the way vouchers are 
done, and let's all commit that we are going to try to keep it 
at that going forward, and it really doesn't create the extra 
cost that--I know there has been confusion about this, and I 
understand why it gives the appearance that it might, but it 
actually doesn't if we stick to that new year.
    Mr. Latham. Okay. Thank you for that answer.
    Secretary Donovan. More than you wanted, right?
    Mr. Latham. Mr. Pastor.
    Mr. Pastor. I went to Arizona State where one plus one was 
two. Mr. Donovan is from New York, so we will have to go back 
and----
    Mr. Latham. Harvard math.
    Mr. Pastor. He is a Harvard man, okay?
    Secretary Donovan. We would apparently be using a Matchbox 
set and cars at the office to show people how this actually 
works.
    Mr. Pastor. Well, good. Well, you may have to come back and 
show me Choice Neighborhoods with cars and buildings how this 
thing is going to work.
    A lot of members saw that HOPE VI was very successful, and 
I have to tell you that in at least in Arizona we had very 
successful HOPE VI projects, not only in Phoenix but in Tucson 
and other places. So it was some, a little bit of reluctance to 
all of a sudden have those success stories not being able to be 
expanded to other housing projects in other parts of 
metropolitan Maricopa County or Pima County.
    And maybe what you can explain to me, as I look at HOPE--
not HOPE VI, but Choice Neighborhoods, with the impact and the 
amount of dollars that you are going, millions of dollars you 
are going to put in, it kind of reminds me of an urban renewal 
light, and I lived through that experience, and I have to tell 
you that the results of that whole urban renewal light or urban 
renewal as an initiative has mixed results for all the efforts 
and monies that were used, and so probably there is still a 
sense of--well, I hope they are successful, but to see all of a 
sudden everything emphasized on four communities or five or 
eventually 10 or whatever the number may be, there is great 
expectation and obviously you have, this administration has a 
very short time span in its implementation.
    If there is one thing I realize, being in Congress as long 
as I have been, when administrations change, initiatives 
change, and so as I think that is a truism that I have seen not 
only in housing but transportation and energy and water, et 
cetera. And so that creates for me a little bit of a hesitancy 
and a little bit of doubt in terms of, it is a great 
initiative, it is almost at the end of an administration where 
I saw success with HOPE VI. That is probably what causes me to 
have a little angst about the Choice Neighborhoods program 
because I have seen the results of other programs in the past, 
and they had mixed results, and so that is my situation with 
Choice Neighborhoods. You might respond to it.

                          CHOICE NEIGHBORHOODS

    Secretary Donovan. So I guess I would say two things in 
response to that. One is, I think what we tried to do here is 
take the best of HOPE VI. HOPE VI was incredibly successful in 
lots and lots of places. There were places where it didn't 
engage, you know, the police, local anchor institutions, other 
institutions in the community enough or it didn't get enough of 
a mixed income.
    It also just focused on public housing, and there may have 
been a dilapidated privately owned property across the street 
or foreclosed homes or other things in the surrounding 
neighborhood that limited its success. And so I think what we 
tried to do is take the best lessons from HOPE VI and make that 
sort of standard practice in Choice Neighborhoods. That is one 
thing. The other thing is, we really are different from urban 
renewal.
    Mr. Pastor. In terms, then, where you had all the 
neighborhoods in this country had a shot at some money, you 
said no mas, we are just going to limit it to the ones we 
choose, basically is Choice Neighborhoods.
    Secretary Donovan. Well, HOPE VI was----
    Mr. Pastor. I mean, isn't that the reality?
    Secretary Donovan. No. HOPE VI was about the same amount of 
money per grant. There was just more money. And if we had more 
money for Choice Neighborhoods, we could reach a lot more 
neighborhoods. In fact, in some ways we are reaching more 
neighborhoods because we are doing planning grants as well. So 
we have reached dozens of other communities with small amounts 
of money to help them get going, and I think that goes to my 
second point, which is the big difference here I think between 
Choice Neighborhoods and urban renewal is this is a locally 
driven process.
    What we are looking for in our competition is do you have 
strong groups in your community with a very clear vision of 
what you want to do, and that is why for every dollar we are 
putting in, there are eight other dollars that they are 
bringing to the table. That is what gives me hope that when the 
administration ends that these projects are going to keep going 
is because most of the money isn't ours. Most of the money is 
being raised locally, it is being driven by local planning 
groups, and there is strong momentum whether or not I am here 
or, you know, obviously HUD will continue to be involved.
    Mr. Pastor. Sure.
    Secretary Donovan. But this is really a locally driven 
effort, what is their vision for the neighborhood? What is the 
community's vision for the neighborhood? Not us coming in like 
urban renewal and saying, well, you have got to knock down 
everything and build the exact same public housing project in 
every single neighborhood in the country, and I think that is 
really the approach we have tried to take. Honestly, that 
follows on HOPE VI. It takes the example from that.
    Mr. Pastor. But I guess the, where I don't have as much 
hope is that the reality is that most of the money that is 
being wrapped around through these planning--once the planning 
grants are done and the initiative, most of that money, as I 
see it, maybe I am wrong, but at least as I see it, grants from 
Justice, grants from Education, grants from Transportation.
    So there is still a great reliance on Federal money to 
make, to ensure that this neighborhood choice project or plan 
is implemented and successful. I mean, maybe you and I see it 
differently, but that is how I see it.
    Secretary Donovan. A huge share of that is private money, 
too. Just like with HOPE VI the biggest amount of money that 
you are bringing in is private money, and that is a big part of 
what drives the success, too, is you have other folks. Maybe 
what we could do is give you a little bit of a side-by-side of 
a typical HOPE VI project, typical Choice Neighborhoods and how 
they are the same and how they are different, and that might 
help on this point.
    Mr. Pastor. Bring your model with houses and model cars and 
maybe my math at issue will also improve.
    Mr. Latham. Do you have anything else? Okay.
    Not to beat a dead horse here, but----
    Secretary Donovan. Please.
    Mr. Latham. Did you try to find the $1.3 billion this year, 
did you ask OMB to come up with it, or what happened?
    Secretary Donovan. We looked hard. You know as well as I do 
the limitations under the Murray-Ryan budget. And we simply 
could not figure out how to find an additional $1.3 billion 
without huge damage to other programs.
    So we felt in that context this was the best choice, and I 
really do believe that if we go to--this is a funding cycle 
that works in vouchers. We provide all the money on the fiscal 
year, well, actually the calendar year, January 1, so we do 
believe that this is workable.
    Mr. Latham. Okay. Getting back to the Rental Assistance 
Demonstration you were talking about taking. They currently 
have an authorized cap of 60,000, you said there were 180,000 
units waiting to enter the program. You want to completely 
eliminate the cap. I don't know how we have any kind of 
certainty on the budget going forward if you have no cap or 
there is no containment of it. Do you have a suggestion on how 
we write appropriation bills to do that?
    Secretary Donovan. Given what you have done, you have 
basically required that we take a dollar of public housing 
money and move it either into the project-based Section 8 
account or into the voucher account if they are project-based 
vouchers, it has been about 50/50, and the way you have written 
it, the additional, the renewal of that shows up in the 
following year.
    So we would continue to budget in the way that we have been 
doing to put in our budget the expected cost in the following 
year. But on a net basis the cost should be zero because you 
are taking a dollar out of the public housing account and 
putting it either in the voucher account or the project-based 
Section 8 account.
    Mr. Latham. So how do we add additional units to the 
project base if we are unable to support the 12 months of 
funding for the existing units that we have today?
    Secretary Donovan. Because money will be freed up out of 
public housing to create room for that.
    Mr. Latham. There won't be any additional demand outside of 
this?
    Secretary Donovan. Again, any unit--the additional demand, 
even if every unit of public housing came in we would still 
have the dollars from the public housing account that you could 
move into the voucher account or to the project-based Section 8 
account. That is what we did with the first 60,000 units, and I 
think it has been working effectively. We have been able to 
budget for those in future years. And, again, on a net basis 
there is no additional Federal cost.
    Mr. Latham. And you are going to have the authorizers do 
this, right?
    Secretary Donovan. We would love to.
    Mr. Latham. She is smiling.
    Mr. Pastor. She knows better.
    Secretary Donovan. I will not guarantee for you today.
    Mr. Latham. You are supposed to be straight faced back 
there.
    Secretary Donovan. She is confident.
    Mr. Latham. Confident, good.
    Secretary Donovan. But not confident enough that we didn't 
include it in our 2015 budget proposal. How's that?
    Mr. Latham. Not totally confident, okay. The gentleman 
wants to know if you would settle for 180,000?
    Secretary Donovan. I think the problem is we know we have 
more housing authorities that are interested, so lifting the 
cap entirely, I think if we could talk about 250,000 or more, 
it would give us room to be able to continue to take 
additional--no, no, but seriously we have other housing 
authorities that are, we know are coming in, want to come in, 
and if we just did 180,000 we would only deal with what we had 
in house as of December 31st.
    Mr. Latham. This is the last question or request. If you 
could provide the committee with a 5-year, 10-year, 15-year 
cost projection that assumes you receive the authority you are 
asking and all the conversions to the project base platform, I 
would like that.
    Secretary Donovan. Happy to do that. What we can also do is 
provide the public housing numbers which show the corresponding 
reduction.
    Mr. Latham. Can you also provide the $1.3 billion to make 
it up?
    Secretary Donovan. If I had it, I would.
    Mr. Latham. We have to find that.
    Secretary Donovan. Have you found it?
    Mr. Latham. No, not yet, but I am looking in my pockets.
    Do you have anything additional, Mr. Pastor?
    Mr. Pastor. Absent the RAD, you are now letting public 
housing authorities use capital, housing capital money 
interchangeably with operating funds. How is that working out? 
I know you have had smaller PHAs do it.
    Secretary Donovan. That is exactly right.
    Mr. Pastor. Now you would let more do it. Would this--is 
this an alternative now to the expansion of RAD?

                            PHA FLEXIBILITY

    Secretary Donovan. We don't see it as an alternative. We 
see it as flexibility. As you said, housing authorities that 
are less than 250 units already have this flexibility.
    And this is one of the innovations from Moving to Work that 
we think has been successful, and so we are trying to expand 
that to other housing authorities, but even if they can blend 
or move money between the operating fund and the capital fund, 
it doesn't give them the ability to go and raise private 
capital in the same way that RAD does. So it is not a 
substitute in that sense.
    Mr. Pastor. That is it.
    Mr. Latham. Thank you very much, Mr. Pastor.
    And thank you for your time today, Mr. Secretary.
    I know we will have a number of questions for the record, 
and I am sure I will and other members of the subcommittee will 
also.
    I would ask that you and your staff work as quickly as 
possible to get those answered, cleared and returned to us 
within 30 days if possible. We are going to be on a fast track 
getting our bill done.
    Secretary Donovan. Good to hear.
    Mr. Latham. Well, hopefully.
    Secretary Donovan. Especially when we bring that $1.3 
billion check.
    Mr. Latham. That is right. Slightly used twenty dollar 
bills are fine. It will really help us if we get those 
responses to help us write the fiscal year 2015 bill.
    I look forward to seeing everyone tomorrow at 10 a.m. when 
we meet with a number of the DOT intermodal administrators.
    So with that, thank you very much for your testimony and 
the hearing is adjourned.
    Secretary Donovan. See you next week.
    Mr. Latham. Right.
                                           Thursday, April 3, 2014.

                   DEPARTMENT OF TRANSPORTATION MODES

                               WITNESSES

MICHAEL HUERTA, ADMINISTRATOR, FEDERAL AVIATION ADMINISTRATION
GREG NADEAU, DEPUTY ADMINISTRATOR, FEDERAL HIGHWAY ADMINISTRATION
JOSEPH SZABO, ADMINISTRATOR, FEDERAL RAILROAD ADMINISTRATION
THERESE McMILLAN, DEPUTY ADMINISTRATOR, FEDERAL TRANSIT ADMINISTRATION
CYNTHIA QUARTERMAN, ADMINISTRATOR, PIPELINE AND HAZARDOUS MATERIALS 
    SAFETY ADMINISTRATION
ANNE FERRO, ADMINISTRATOR, FEDERAL MOTOR CARRIER SAFETY ADMINISTRATION
PAUL JAENICHEN, SR., ACTING ADMINISTRATOR, MARITIME ADMINISTRATION
    Mr. Latham. The Subcommittee will come to order. This 
morning we will focus on the Presidents' Fiscal Year 2015 
budget request for seven DOT federal administrations. As you 
know we heard from Secretary Foxx on March 12th and we will be 
able to delve deeper and ask more specific questions today. Why 
don't I ask each of you your name and your position, if you 
would.
    Mr. Jaenichen. My name is Chip Jaenichen. I am the acting 
Maritime Administrator.
    Mr. Huerta. My name is Michael Huerta. I am the Federal 
Aviation Administrator.
    Mr. Szabo. Joe Szabo, Administrator, Federal Railroad 
Administration.
    Mr. Nadeau. Greg Nadeau, Deputy Administrator, Federal 
Highway Administration.
    Ms. McMillan. Therese McMillan, Deputy Administrator, 
Federal Transit Administration.
    Ms. Ferro. Anne Ferro, Administrator, Federal Motor Carrier 
Safety Administration.
    Ms. Quarterman. Good morning. Cynthia Quarterman, 
Administrator, Pipeline and Hazardous Materials Safety 
Administration.
    Mr. Latham. Very good, thank you. Welcome to all of you and 
we do have a lot of issues to discuss today. Not only are the 
surface programs in need of reauthorization, but the Highway 
Account of the Trust Fund is expected to go broke by August. 
Further, the Administration's Surface Transportation Budget 
Proposal ships approximately four billion dollars' worth of 
existing programs, six billion if you look at the expansions 
and increases, from the discretionary general fund to a 
mandatory, not yet in existence, Transportation Trust Fund. We 
also face the challenge of safe transportation of domestic 
crude oil, production of which has increased forty fold over 
the last five years. In the aviation area, we want to discuss 
the FAA's efforts to advance NextGen and ensure air traffic 
operations are efficient. And of course we want our funding 
decisions to result in the most efficient and safe as systems 
possible across all transportation modes. Chairman Rogers and 
Chairwoman Mikulski will abide by the Ryan-Murray Agreement for 
FY 2015 which translates into relatively flat budgets for this 
year and well into the future. As we consider your requests for 
FY 2015, this committee will move forward honoring the 
bipartisan agreement. The THUD bill will conform to our portion 
of the one trillion, sixteen billion dollar allocation and to 
meet this goal we need to have an honest discussion about how 
we continue to provide money in the most efficient and 
effective manner. We have received your statements and because 
we have a significant amount of ground to cover today and 
limited time, I will ask that our witnesses dispense with 
reading opening statements and instead be entered in for the 
record. I will also keep my remarks to a minimum so we can 
advance questions. But first, I want to recognize my colleague, 
ranking member of the subcommittee, Mr. Pastor, for his opening 
statement.
    Mr. Pastor. Well, Mr. Chairman, in the interest of time I 
will submit my opening statement for the record and am looking 
forward to hearing from the panel. Thank you.
    Mr. Latham. Mrs. Lowey, would you like to make a statement?
    Mrs. Lowey. A brief one, and thank you Mr. Chairman, and 
welcome. I appreciate your giving me the opportunity to say a 
few words this morning about your very important work. Let me 
just say Administrator Szabo and Administrator Quarterman, the 
lower Hudson Valley has recently had two very close calls with 
DOT-111 tank cars used to transport crude oil. In one instance, 
a train carrying almost a hundred empty DOT-111 tank cars, 
which had previously transported crude oil, struck a semi-
truck, pushed it 500 yards down the track. Thankfully, since 
the cars were no longer carrying crude, a spill was avoided. 
The rail line used to transport crude oil through my district 
runs along the Hudson River, which in addition to being a 
source or drinking water for the communities that live along 
it, has been recognized as an estuary of national significance 
under the Clean Water Act, an American Heritage River, and a 
National Heritage Area. As you can imagine, a spill would be 
absolutely devastating to the ecology and economy of my 
district. I applaud the Department of Transportation for taking 
some very good steps to make crude transport safer, but I 
remain very concerned about our abilities to deal with a worst 
case scenario. Thank you.
    Mr. Latham. Thank you Mrs. Lowey. I want to start with 
questions, unless anyone has an overwhelming need to have an 
opening statement here. Mr. Szabo, within your $5 billion rail 
budget proposal, $1.3 billion is set aside to develop high 
performance rail networks or high speed rail. This is 
interesting because the California High Speed Rail Authority's 
business plan assumes $2.5 billion of new appropriations every 
year. In all, California is relying on $24 billion in Federal 
funding to complete construction of the initial operating 
segment over ten years. I am not sure if you are giving us the 
signal that you have given up on the project but how does your 
budget propose to find the $2.5 billion dollars for California?
    Mr. Szabo. Well first off, Chairman, we absolutely have not 
given up on the project. We remain very strong and very 
committed to what we believe are the merits of that project. 
Our budget proposal sets up grants that would be competed on a 
competitive basis. There is no presupposition that the money 
would go to one project over another. The business plan for 
California calls for private investment and that is a key part 
of it. In addition to the additional multiyear funding that the 
Governor is now proposing using cap and trade dollars, so----
    Mr. Latham. But you have got $1.3 billion in your budget 
and they assume that they are going to get $2.5. What happens 
if they don't get $2.5?
    Mr. Szabo. Well again, they are looking at private 
investment as well as substantial additional new dollars coming 
from the Governor's budget, so a stronger state contribution 
than first had been proposed.
    Mr. Latham. They received $3.5 billion for high speed rail 
and they were supposed to pay $180 million dollars in April as 
part of their matching requirement. On February 21st you 
notified the committee by email that it had accepted changes to 
the grant agreement between the department and the California 
High Speed Rail Authority. The email took great pains to advise 
us that this change was not another amendment to the agreement, 
but an update. This is the sixth change that showed the $250 
million dollar contribution from cap and trade funding 
beginning in July of this year, and delayed $180 million dollar 
matching payment owed by California already. My staff asked 
several times in several different ways if anyone at the 
department was discussing, involved in negotiation, thinking 
about or interested in making changes to the agreement or 
payment structure. They were told no. Is the department less 
than candid to the committee or what is----
    Mr. Szabo. No, Mr. Chairman, we were very candid. It is 
very, very clear if you read the agreement, that the agreement 
requires California to regularly update the funding 
contribution plan, and so almost on a quarterly basis you will 
see updates to that plan. It is a living document that reflects 
the realities of those revenues that would be available from 
California. There is a significant change in the proposal of 
revenues from California, so it is absolutely appropriate that 
they update their funding contribution plan to reflect the 
reality--the new revenues that were coming in.
    Mr. Latham. What new revenues are coming in?
    Mr. Szabo. The cap and trade dollars that are proposed by 
the Governor.
    Mr. Latham. Have they passed that?
    Mr. Szabo. The budget is up for a vote now and I believe 
that by June 1----
    Mr. Latham. You are assuming that it is going to pass and 
that there is no----
    Mr. Szabo. Well that is what they are proposing and of 
course if it doesn't, then we would take a look at a new 
funding contribution plan from them. So, the decisions are made 
based on the facts at hand at the time.
    Mr. Latham. Who made the decision to accept the change? Was 
it you or OMB or----
    Mr. Szabo. The department. I mean, Mr. Chairman, accepting 
the funding contribution plan is a somewhat routine matter.
    Mr. Latham. Excuse me?
    Mr. Szabo. I said, it is a somewhat routine matter. Again, 
it is expected that they will regularly update that plan, so--
--
    Mr. Latham. Where does it say that it is a living document, 
that it can be changed just with an email?
    Mr. Szabo. The grant agreement provides that it regularly 
be updated to reflect the facts at the time. So it is an 
expectation.
    Mr. Latham. So what happens if they don't get the $2.5 
billion this year?
    Mr. Szabo. Then they have to amend their funding 
contribution plan and we make a decision based on the facts 
that are presented to us.
    Mr. Latham. Okay, there are no facts saying that they are 
going to have the revenue.
    Mr. Szabo. Well at this point, there is no reason to 
believe they won't see the Prop 1A dollars. We believe that 
those issues--the outstanding issues there are resolvable and 
then there is the proposal for cap and trade dollars for this 
year followed up by a multi-year commitment and there is 
actually a strong possibility that they are going to see more 
revenues than had originally been proposed.
    Mr. Latham. Is the $180 million that was due in April 
through June--is that now due in July or some other time or 
what is the status?
    Mr. Szabo. I would actually have to go back and take a look 
at the funding contribution plan and see what it states. I 
don't have it here in front of me, but again, what has been 
spelled out in the document is what our expectations are.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Latham. I have got six seconds left, so I will 
recognize Mr. Pastor.
    Mr. Pastor. Thank you, Mr. Chairman. Good morning, Mr. 
Huerta, and to all the members of the panel. Mr. Huerta, I 
would like to talk about the FAA and Comptroller staffing. The 
FAA has lost hundreds of air traffic controllers during the 
hiring freeze that was imposed during sequestration. The FAA 
recently put out a job announcement and the response was 
overwhelming. There were nearly 28,000 applications filed. 
However, I understand that only a very small percentage, less 
than ten percent of the applicants, made it through the initial 
cut. Normally, you would expect, probably at minimum, 30 
percent of the applicants to make it through the first review. 
The question is, are you--what determination have you made 
for--on the results of the first review so far?
    Mr. Huerta. Thank you Mr. Pastor. We did make changes to 
the hiring process for traffic controllers for this round and 
in doing that, what we wanted to do was evaluate all the 
candidates against a standard set of criteria, revise the 
testing process and make it more uniform and objective across 
the country as a whole. You are correct. We did receive 28,000 
applications. We have only 1700 positions that we expect to 
fill out of that pool. And we received about ten percent 
through the first screen. We are confident that we will be able 
to get the 1700 out of the process as it continues through. It 
is our intention that this process would take place on an 
annual basis, whereas our past practice was to have lists that 
were in existence for a very long period of time that we would 
draw off of. What we found is that that was actually blocking 
subsequent applicants from being able to apply into the process 
and so what we wanted to get to was a more orderly process 
where we hire according to our needs in a given year and then 
enter into a new process for that so we can ensure that we are 
getting the best qualified candidates.
    Mr. Pastor. In making your evaluation more objective 
nationwide, and you made some changes--what were those changes, 
and obviously the results were not as you had expected, in 
terms of the initial cut?
    Mr. Huerta. I wouldn't say that they weren't as we 
expected. What we did was we put together a series of factors 
that had been shown by the Civil Aerospace Medical Institute as 
being accurate predictors of success in air traffic. That was 
validated by an independent third party and then that combined 
with the air traffic examination--the ATSAT exam that is well 
known which actually tests the actual skills for traffic 
control. The combinations of those two things is what enables 
us to, we believe, come up with a much higher success rate for 
those candidates that do make it through the process. And so we 
feel that the process is going to yield a very good pool of 
candidates. We are monitoring it very carefully this year and 
if we see that there are things that we need to change, we 
would obviously do that in the subsequent round.
    Mr. Pastor. Without asking specific questions in terms of 
what was on the test or what was on the test or what was on the 
application, what were some of those factors--a general sense 
of what you are considering now that you may not have 
considered before?
    Mr. Huerta. A lot of it has to do with measuring an 
individual's aptitude to deal with the sort of environment that 
an air traffic controller deals with--being able to make 
decisions quickly, decisively, being able to react to different 
circumstances under pressure. It is essentially to a series of 
factors that give us a better understanding of the individual 
and their suitability for the position. But again, I want to 
come back to--this is a very competitive process. We have only 
1700 positions we are going to fill from a universe of 28,000 
applicants. And so we would expect that people that might be 
qualified wouldn't make it all the way through the process and 
we would encourage them to reapply in subsequent rounds.
    Mr. Pastor. Since there has been a number of bills that 
have passed this subcommittee and have become law throughout 
the years, there has been a recognition that we would like to 
make the workforce more diverse. Has this new examination or 
new application process--has it shown a bias toward any 
particular group?
    Mr. Huerta. We won't know until we are done at the end of 
the process and we see the pool relative to the applicant pool 
that came in. What we did want to do though was ensure there 
was not adverse impact that could be predicted based on any of 
the aspects of the process, and we feel confident that we have 
no adverse impact. But we will evaluate the pool once it has 
completed the process.
    Mr. Pastor. So then, the 1700 positions will be filled by 
this initial pool that you have now?
    Mr. Huerta. Correct.
    Mr. Pastor. Thank you Mr. Chairman. I yield back.
    Mr. Latham. Thank you Mr. Pastor. Okay, Mrs. Lowey.
    Mrs. Lowey. Thank you, Mr. Chairman. Administrator 
Quarterman, I would like to follow up on my brief comment 
before. I know that PHMSA is currently working on an updated 
rule that will govern the use of DOT-111 tank cars. It is my 
understanding that a new rule isn't expected until the end of 
2015. As you well know, the Association of American Railroads 
has called for the aggressive phase out of DOT-111 cars built 
before 2011, that do not meet the higher industry 
specification. There doesn't seem to be an adequate sense of 
urgency to address this important safety issue, in fact, I 
wonder how you sleep at night, worrying about why this rule 
isn't done. I can't believe I was--I have been to the tracks; I 
have watched these cars go by. Last time I was there I saw 90 
cars marked DOT-111 and I said boy, this is a game of Russian 
roulette. How do you know what is going to happen? So my first 
question is, Administrator Quarterman, when can we expect a new 
rule on tank cars? While the new rule is being drafted, has 
PHMSA considered a moratorium on the use of DOT-111 cars that 
do not meet the higher industry lead specifications? What would 
be the effect of such a moratorium on the use of these old DOT-
111 cars on the transport of crude and other materials, and is 
there anything that this committee can do to expedite the rule 
making process?
    Ms. Quarterman. Thank you Congressman Lowey. Let me start 
by saying that the department, PHMSA, FRA, all of us involved 
in the transportation of these materials share your concern and 
have been working very hard on this issue and we are concerned 
also about oil spill as well as incidents and deaths that might 
be associated with the movement of crude oil. And that is why 
the department has been working very, very hard to ensure----
    Ms. Lowey. For how long?
    Ms. Quarterman. For how long have we been working?
    Ms. Lowey. Hard, on this issue--on the rule?
    Ms. Quarterman. We have been working on the rule for quite 
a while. We have been working on the broader issue for a number 
of years. I went out to the Bakken myself at the end of 2012 
when I began to hear stories about the increase in the movement 
of crude by rail as well as issues associated with trucks. So 
we came back to the department and put together an interagency 
team including FMCSA, FRA, and FHWA to talk about some of the 
issues that had arisen and to try to figure out, if there are 
issues coming that we don't see yet. That was helpful to us 
when the Lac-Megantic incident occurred last year. We were 
already starting work so we were able to hit the ground 
running. The department's approach to this very complicated 
issue is a very comprehensive one. It is a three prong 
approach. From our viewpoint on safety, the very most 
important--the first thing you must do is prevent anything from 
happening. And by prevention, that means preventing any 
derailments that might occur associated with the operations of 
the train or the equipment. So that is the first leg. The 
second leg is mitigation. And that means that if something 
occurs, we want to make sure that as few people as possible are 
affected by that and that we are prepared on the third leg for 
response. The DOT-111 is one piece of that comprehensive 
approach. It is by no means a silver bullet. And we recognize 
that and that is why the secretary pulled together a group of 
executives from both the rail industry and the crude oil 
industry and brought them to the department and said, we can't 
wait. We need to do something today as we see more and more 
incidents occur. We want you to take some immediate steps to 
ensure that we don't have an incident like the one that 
occurred in Quebec. We are very happy that the industry, for 
the most part, stepped up to help us with that. In particular, 
AAR signed an agreement with the secretary very recently, I am 
sure you are aware of. It does a number of things that are 
important--number one, more frequent inspections of the track 
to ensure that derailments don't occur. It also does a very 
important thing. We have under the PHMSA regulations a routing 
rule that routes certain very dangerous cargo on a special 
route. As of yesterday, that had not occurred for crude oil 
trains, because we had not seen the numbers of unit trains of 
crude moving across the country. It only applied to chemicals 
like toxic inhalation chemicals and radioactive materials. We 
have since that time, under the AAR agreement, changed the 
routing protocol for those trains going forward so that they 
will also go on those special routes. Another important factor 
in this is braking as we saw in the incident that occurred in 
Castleton. It is important to be able to control the train well 
and to slow down. So one of the things that came in the AAR 
agreement was distributed power--the use of distributed power 
or the use of cars at the end of the train that could help 
control the train in terms of braking. Those are extremely 
important aspects of the agreement. Another is to slow the 
trains down. We have an agreement that the trains will slow 
down to 40 miles per hour if they are a unit train of crude oil 
and they carry one 111 tank car or more. With respect to the 
regulation that you are referring to itself, the DOT-111 tank 
car, I can tell you that Administrator Szabo and myself have 
sent a strong message to our team--they had been sequestered 
for months--responding to our request that we move forward 
immediately with a rule making on this issue. You may not know, 
but the rule closed for comment on December 5th of 2013. We got 
more than 150,000 comments on this rule. Within the course of 
the past few months, our team has been drafting. We have a 
draft of a rule we hope to move out very soon. I am not certain 
of where the 2015 date came from. Our marching orders are get 
this done ASAP. So we are working towards that goal. But I just 
want to emphasize that the tank car itself is not the only 
solution to this. We have other initiatives as well. Along with 
Administrator Ferro and Szabo, we have a group of folks within 
PHMSA and across the department and including North Dakota 
representatives who have been going out to the Bakken area and 
doing a strike force, going to the trains to the first time, I 
think in--I am beyond my time. Is that okay? For the first time 
in history, we have been taking oil out of the trains, sending 
it to labs, and trying to determine the constituents of the 
crude, because we are concerned that when the Lac Megantic 
incident occurred, that the size of the explosion was something 
that was unexpected. And we need to know what the constituents 
of the crude are, and what can we do if anything to decrease 
the volatility of that crude when it moves. Thank you very 
much.
    Ms. Lowey. Thank you Miss. I just want to thank you Mr. 
Chairman for your indulgence, and next time I see those 90 cars 
going by, I won't worry about it anymore, because I know you 
are studying it. Thank you very much.
    Mr. Latham. Thank you Ms. Lowey. Mr. Dent.
    Mr. Dent. Thanks Mr. Chairman and good morning. Thank you 
Administrator Ferro for you and your office's continued 
willingness to work with us on reforming the HMSP program and 
the OS issues that have been challenging for some of our 
constituents who have smaller to mid-size companies in terms of 
compliance. So thank you for all that. I had just a couple 
quick questions. As part of the 2014 Omnibus, the final report 
language is included related to the HMSP, at least as it 
relates to administrative fixes, quote, FMCSA shall report 
within 60 days of enactment. What improvements to HMSP program 
can be made within existing authorities to provide relief to 
those operators prior to instituting rule making. And when 
FMCSA anticipates implementing each of those interim 
improvements that was on page 37 of the report, the President 
signed the Omnibus into law on January of this year, which 
would make March 17th, 60 days after enactment. As we are now 
into April, Administrator Ferro, when can the committee expect 
this report?
    Ms. Ferro. Thank you Congressman Dent. The report in 
question will be available within the next three months. We 
had, just within the past month, completed the report required 
under MAP-21 that really analyzed the elements of the program 
and achieved a much broader stakeholder outreach than an early 
draft I had seen of the report last year. And that additional 
work prompted a delay on the delivery of the MAP-21 report, 
which includes some very--core recommendations that precede a 
rule making, but also support a rule making, to improve the use 
of inspection performance data on evaluating HMSP applicants 
and permit holders more rapidly and with a better sensitivity 
than the current process, that will improve the process. And so 
within the next three months, you should see the report 
required under the Omnibus that you just referenced.
    Mr. Dent. Okay, that one, and you mentioned the MAP-21. I 
guess last month----
    Ms. Ferro. Yes.
    Mr. Dent. Your administration released its report requiring 
on MAP-21; as part of that report they made six recommendations 
to improve HMSP. Is that what you are referring to?
    Ms. Ferro. That is what I am referring to, yes.
    Mr. Dent. Okay, and so I guess that is due by October 2014, 
is that right?
    Ms. Ferro. The report itself?
    Mr. Dent. Yes.
    Ms. Ferro. The report itself, from MAP-21, was delivered 
last month. There are elements within that report that 
incorporate recommendations for a rule making.
    Mr. Dent. Oh, excuse me. Not the report, but to be 
initiated by October.
    Ms. Ferro. The initiation of that work, I would like to 
follow up with timeline on each of those initiatives before I 
commit on a rule making, but it is clearly part of our agenda 
for the next 12 months--is a component of developing that rule 
making. Pardon me.
    [The information follows:]

                    Hazarous Materials Safety Permit

     The Agency is currently developing a full and complete 
implementation plan for the recommendations, focusing on the process of 
identifying those elements that can be implemented without initiating a 
resource-intensive rulemaking during FY 2015.
     Toward that end, the Agency is developing a comprehensive 
implementation plan for the recommendations relating to the 
incorporation of current performance data as the primary means of 
monitoring carriers that have an HMSP once the permit is granted, 
rather than the current out-of-service rate checks during the renewal 
period.
     The full implementation plan and timeline will be 
submitted to Congress this summer.

    Mr. Dent. That is fine, just follow up with us on the 
timing then, that is fine.
    Ms. Ferro. Yes.
    Mr. Dent. And some of the recommendations that appeared and 
previously suggested ways to fix HMSP, yet there are--they are 
contingent on funding. What funding priority has FMCSA given to 
these recommended program enhancements?
    Ms. Ferro. Our 2015 budget was developed before we had 
completed the analysis of the program and consequently those 
elements that we can move forward with in the near term we 
will. A core component of the program revisions includes a 
broader rule that we refer to as Safety Fitness Determination 
and that is the proposal that will in fact be on the street 
this fall.
    Mr. Dent. Okay.
    Ms. Ferro. In terms of incorporating an adjudication 
process or an appeals process, I think that is what industry 
has called for, that is a component that requires additional 
resources.
    Mr. Dent. Got you and for the report recommendations that 
require rule making, what priorities would these rule makings 
have?
    Ms. Ferro. The Safety Fitness rule making is my top 
priority now that I have got the electronic logging proposal on 
the street.
    Mr. Dent. Okay, thanks.
    Ms. Ferro. Thank you.
    Mr. Dent. And then, thank you. Thanks for all your help 
again on that issue.
    Ms. Ferro. Thank you.
    Mr. Dent. Of HMSP, and Administrator Huerta, thanks too, to 
Bonita DeLeone for his help and cooperation on some very 
important regional economic development issues. Very much 
appreciate his help. I would like to raise to you one of the 
FAA's most successful and cost effective industry government 
safety partnerships--the FAA Contract Tower Program. Currently 
252 airports, I guess, in 46 states, participate in the 
Contract Tower Program, including five airports in the 
Commonwealth of Pennsylvania. The safety and cost effectiveness 
of the program has been validated numerous times in several 
reports by DOT's Office of Inspector General as well as the FAA 
safety audits. Without this program, as you know, it enjoys 
widespread bipartisan support in Congress and many smaller 
communities would not enjoy the clear safety benefits these 
Towers provide. Can you just please give us your commitment 
today for FAA's continuing support of this important air 
traffic safety program?
    Mr. Huerta. Thank you, Mr. Dent. You are quite correct. 
Congress last year provided $140 million in the FY2014 
appropriation to continue the Contract Tower Program and our 
2015 budget request includes the same $140 million for the 
Contract Tower Program. I will say that should Congress support 
that in 2015 we are in a good place for 2015, however given 
today's budget environment and the need to focus on the 
increasing demand that we have on all of our aviation services 
we are taking a hard look at the full scope of services that 
the FAA does provide. With ongoing technology and with 
continued safety enhancements we need to ask if there are areas 
where we could do things differently and you have my commitment 
that as the FAA works through that process we will coordinate 
closely with you and this Committee and our stakeholders in 
doing so.
    Mr. Dent. Thanks. I yield back, Mr. Chairman.
    Mr. Latham. You were out of time anyway, Mr. Dent.
    Mr. Dent. Then I take it back.
    Mr. Latham. We are trying to remain flexible, Mr. Quigley.
    Mr. Quigley. Thank you, Mr. Chairman. Administrator 
McMillan, $120 million for core capacity which is a good thing 
considering if you look at the language of the budget, and the 
$275 million that the President's current budget seems to 
allocate for core capacity. Chicago Transit Authority is one of 
the few of the only that seemed to qualify at this point. But 
as I said before I believe more people ride the CTA in a month 
than Amtrak in a year. These are important funds. Could you 
give us your best thoughts on how these are going to be 
implemented and how the process will go forward?
    Ms. McMillan. Thank you very much, Congressman. And indeed 
the Core Capacity Program we believe was a welcome addition to 
the family of projects that are funded under the Capital 
Investment Grant program focusing as you noted on our larger 
urban systems where they may not need capacity by extending 
their footprint but building within the footprint that they 
have. And we have heard from the industry of great interest and 
as you noted the CTA is the first formal applicant to the 
program. We have been working very closely with them in 
refining their request and have admitted them into----
    Mr. Quigley. And as with this Committee first seems to be 
important.
    Ms. McMillan. Exactly. But we have also heard from a number 
of other properties. For example BART in the San Francisco Bay 
area, the MBTA in the Boston area, the DART system in the 
Dallas area, as well as not surprisingly the New York MTA, that 
they are also very interested in participating with this 
program. Therefore the funding requests that we made this year 
anticipates further requests this fiscal year and we will be 
working all of them in terms of specific dollar amounts.
    Mr. Quigley. Thank you. Mr. Szabo, Mr. Yoder is not on the 
Sub-Committee but he's on the Committee and he has the same 
interest he asked me to discuss and that involves the--I know 
the FRA is focused on working cooperatively with freight 
railroads to enhance safety including the short line and 
regional railroads, talking about cooperative partnerships here 
with industry that generate real safety benefits, but we're 
asking the Committee to consider finding some sort of 
cooperative relationship between FRA and smaller railroads to 
help them develop these safety culture and practices. If you 
could comment on that.
    Mr. Szabo. We have been in some discussions with the short 
line association about what I'll call a short line safety 
institute, I guess is kind of the best name I can give it at 
the moment. And it's a critical piece of our safety initiatives 
for crude by rail. You know, the Class Is have strong safety 
departments, they have strong resources, a high level of 
professionalism. It's much more of a challenge for these small 
railroads, for these mom and pops and so the vision has been to 
find a way through the Association to put together this safety 
institute to where they would go out and do risk analysis 
focusing first on crude routes for the short lines, for the mom 
and pops and help them better understand the changes that need 
to be made to advance safety. You know, and it is something 
that we would be looking to potentially fund out of our 
research and development budget.
    Mr. Quigley. We appreciate your ongoing efforts toward that 
end. Mr. Huerta, we are well on our way to ``Hare 
Modernization'' being implemented, but the result is we are 
getting fewer runways running over fewer and fewer neighbors. 
It gets to the issue of noise in and around our airports. You 
sent me a letter in December about your agency reviewing 65 DNL 
which at best can be seen as an arbitrary antiquated figure 
from the 1980s when traffic was lower. And I'm hoping we have 
some progress to report on how noise impacts people in your 
analysis.
    Mr. Huerta. Thank you, Mr. Quigley. Yes, the DNL standard 
that has been place, it has actually been in place since the 
1970s, and as we had discussed we have done some work in 
analysis leading up to us conducting the survey of whether we 
should reopen and relook at the whole question of DNL. We have 
secured funding for such an effort at this point and are now 
working through the process of structuring the results of--or 
structuring the framework of what the survey would look like.
    Mr. Quigley. Time frame?
    Mr. Huerta. We are expecting that it would be about a two 
year effort to conduct the survey, it's a highly analytic 
process and which would take us a little beyond the end of 
2015. I am seeing what we can do possibly to tighten that up a 
little bit. And then following the results of that we would 
make a determination as to what we would do with the DNL 
standard.
    Mr. Quigley. Thank you. And, Mr. Chairman, I yield back. I 
just for the record note that the original recommendations from 
the EPA at that time was 55 and it is a noise level diluted 
over an extraordinary period of time. Thank you.
    Mr. Latham. Thank you. Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman. Mr. Huerta, thank you 
for coming today. As you know the cost of jet fuel is now the 
airline industry's largest operating cost with the average cost 
of a gallon of jet fuel up by 260 percent since 2000. One of 
the reported benefits of NextGen is to allow airlines to 
operate more efficient routes thereby reducing fuel burn. 
Despite the FAA's investment of billions on NextGen 
implementation, GAO and the Department of Transportation IG 
have repeatedly highlighted significant cost overruns and 
program delays with key NextGen programs. Do we have any 
concrete data that demonstrates that airlines have realized any 
significant operational benefits from NextGen today, and if so 
can you please provide it to the Committee?
    Mr. Huerta. Certainly. Nationwide the biggest activity that 
will result in fuel savings is through the use of performance 
based navigation systems. This reduces track miles flown, it 
results in much more efficient tracks flown, tremendous savings 
on fuel and on emissions. Nationwide the FAA has implemented 
more than 7,000 PBN procedures in routes as of the end of last 
year. And this includes nearly 700 arrival and departure routes 
at commercial airports. At the same time we have also made very 
significant progress in the build-out of the ground 
infrastructure that enables us to further advance NextGen 
capabilities. As of February of this year we've installed 93 
percent of the ADSB ground infrastructure which we expect to 
complete in the spring. Now the implementation of NextGen 
procedures that are known as area navigation or RNAV to keep 
aircraft safely separated on new precision flight paths is 
showing significant progress while also delivering specific 
benefits to users. And we're doing this in the metropolitan 
context, working in particular metropolitan areas with the all 
the users of the systems so that we can have a full 
understanding of what their respective needs are. It translates 
into significant fuel savings and we do have metrics on our 
website that document those actual fuel savings at specific 
airports around the country.
    Mr. Joyce. Given your background in the private sector, 
sir, are you convinced that airlines today will receive a 
return on their investment for the NextGen equipage?
    Mr. Huerta. NextGen equipage is a multilayered and 
multifaceted enterprise. To date a lot of the work on equipage 
the airlines have done has been in focusing on ensuring that 
they can take advantage of the advanced navigation capabilities 
that I just talked about. The burden is on the FAA to 
demonstrate that they will actually get the operational 
benefit. And it is for that reason that we have structured the 
NextGen portfolios to focus much more on delivery of 
capabilities as opposed to delivery of systems. A system isn't 
worth anything if the users aren't able to take advantage of 
it. So we have been working closely with industry to identify 
what are their highest priorities, in what order should we be 
deploying particular capabilities, and then working with them 
to ensure that they're getting the benefit they need. I think 
in working in this cooperative fashion we will be able to 
ensure that we match benefits with investments because a cost 
benefit case clearly needs to be there for them to make the 
investment.
    Mr. Joyce. Thank you. According to your agency flight 
delays and cancellations cost the economy over $30 billion 
annually which underscores the need to implement NextGen as 
quickly and as efficiently as possible.
    Mr. Huerta. Absolutely.
    Mr. Joyce. When you read the most recent GAO and DOT IG 
reports on the FAA's efforts to implement NextGen, I can't help 
but think history is repeating itself. What steps have you 
taken to address the delays and the costs overruns that have 
been raised by the GAO and the Department of Transportation IG 
reports?
    Mr. Huerta. I think we've made good progress in addressing 
previous contractual difficulties. And I think probably the 
best example of that is our En Route Modernization program. 
When I joined the agency three years ago that was a program 
that was encountering significant challenges. We have re-
baselined the program; it is now on track, it is meeting its 
schedules and it's milestones and we will complete the build-
out of that program by next year. In fact only two of twenty En 
Route centers currently are not operating in that program which 
is a very different place than we were a couple of years ago 
when only two were operating on it. And so the vast majority of 
air traffic in the En Route environment is being done in the 
new system. What that illustrates is a level of contractual and 
baselining discipline that has been put in place by our new 
program management organization and those lessons are being 
carried forward to TAMR, our Terminal Modernization program, 
Data Comm, which is really a game changer program that really 
replaces the traditional voice communications with data 
communications that link directly to flight managements 
systems. We have to be very vigilant in ensuring that these 
highly complex programs as they are implemented, that we are 
imposing the appropriate level of program discipline in order 
to ensure that we can best manage scarce taxpayer resources.
    Mr. Joyce. Mr. Chairman, I realize that I am out of time, 
can I follow up with one quick question?
    Mr. Latham. Very quickly.
    Mr. Joyce. Thank you. Do you agree a sensible stepping 
stone to NextGen would be to promptly adopt policies and 
procedures, specifically performance based navigation 
procedures, which would enable airlines to fully utilize the 
advanced avionics already on these planes?
    Mr. Huerta. That is what we are doing. The earlier 
reference I made to PBN is actually to really focus in the near 
term on how do we accelerate the deployment of Performance 
Based Navigation procedures. Those yield maximum fuel benefit. 
It really makes the case for continued investment and it helps 
build a sense of confidence that the benefits will in fact be 
there. So, yes, I agree with that.
    Mr. Joyce. I yield back, Mr. Chairman.
    Mr. Latham. On the first round here there will be 
flexibility, the second round will not be. Mr. Price.
    Mr. Price. Thank you, Mr. Chairman. Mr. Huerta, I want to 
raise the question with you about a report that in our Bill 
last year we required of your agency regarding the economic 
feasibility of the deployment of flight recorders that would 
eject when an airplane crashes and would float if it crashes 
over water. We of course couldn't anticipate how much more 
relevant that question appears today than when we posed it 
because of the missing Malaysian Air Flight 370. But suffice it 
to say that Congressional interest and interest in lots of 
other quarters has been reawakened by this episode, interest in 
an automatic deployable flight recorder that includes flight 
data record information, cockpit voice recorder, and emergency 
locator transmitter in one survivable, floatable box. 
Recovering these black boxes and the data they track is no 
simple matter, as you well know. Nearly every major commercial 
air accident that has occurred over water or in remote areas 
has resulted in costly and time consuming recovery; in some 
cases it is never recovered. Congress has a longstanding 
interest in this technology. Congressman Duncan, Rogers, 
Pascrell, many others join me in supporting legislation we have 
introduced three times since 9/11 that would have fitted 
commercial aircraft with this available technology. It didn't 
come out of the blue. I mean the technology was developed in 
the '60s; it has been used by the military for decades. As you 
know the 9/11 Commission recommended that the Federal 
government take steps to ensure the survivability and quick 
recoverability of black boxes from commercial crashes. And so 
as a result of these recommendation that I secured funding 
through our Homeland Security Subcommittee for a TSA test, a 
series of tests on the ability of ADFRs to improve rapid access 
to flight data following commercial aviation crashes. And then 
most recently as I referenced the Appropriations Bill passed 
last year we called on FAA to conduct a cost benefit analysis 
on the use of FDRs on long range commercial aircraft. We 
certainly didn't expect to have the need for this underscored 
quite so dramatically quite so soon.
    Well, with all this in mind let me just ask you a couple of 
questions. With the 24 hours news cycle it is common that 
following an accident assumptions are quickly made about the 
potential cause of the accident. The longer the search goes on 
the more the speculation is fueled. We know officials analyze a 
lot of information following an accident, but we have to wonder 
isn't the timely recovery of black boxes one of the most 
important tools in helping prove or disprove with secure, 
tangible evidence whether or not this was the result of a 
terrorist attack for example or a pilot error or an aircraft 
malfunction. Now Homeland Security has expressed their intense 
interest in these questions. I assume you share that interest. 
Secondly, as we track this incredible Malaysia recovery effort 
that the costs of all this, the human costs, the economic 
costs, just are overwhelming. Seems obvious to me what that 
cost benefit analysis of yours is going to show. We estimate 
about $30,000 per aircraft to deploy these black boxes. That 
may or may not be totally accurate but the costs of these 
searches are overwhelming. And the costs that need to be built 
into your analysis are going to need to include not the only 
the cost to install the records obviously but also the search 
and rescue costs for non deployable recorders, the estimated 
impact to the aviation industry, to passenger travel. I mean 
this really needs to be a broad ranging study. I assume that 
that is what you have in mind. So I hope that you can this 
morning confirm that and also give us the timetable as to when 
this information will be available.
    Mr. Huerta. Thank you, Mr. Price. The FAA has been working 
with industry over a number of years on the whole question of 
ADFR systems and their possible application in commercial 
aviation, and we continue to work with the NTSB, industry, and 
the international regulatory authorities on the development of 
technologies that would better support the location of wreckage 
in remote or otherwise over water accidents. This is a terrible 
situation and it is a very tragic accident and we share your 
concern about the lack of knowledge about what actually 
happened to the aircraft. In fact we have had two FAA technical 
experts and a regional expert on the ground supporting our 
Malaysian counterparts; we will do it as long as we need to.
    Yesterday there were news reports that the International 
Air Transport Association had also expressed support for really 
studying the whole question of better tracking systems. Not a 
specific technology per se but what can be done in order to 
take advantage of what we know about technology so that we as 
an industry can have much better tracking mechanisms. It is a 
complicated issue as you point out. In addition to the costs 
associated with installation there is also the cost of 
operation, there is significant bandwidth challenges that our 
technical folks are looking at in terms of what we can 
understand about how this information might be streamed under 
those particular options. And then we have to consider the full 
range of possibilities that are out there. It is something that 
I am very concerned about. I am pleased that the international 
airline industry is stepping up and saying let us work together 
to figure out how we can resolve it.
    With respect to your question about a timetable, I am going 
to have to take an IOU and get back you with a specific 
proposal and a suggestion on that and I am happy to do that.
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    Mr. Price. Well, I hope you can do that. I don't know why 
that would take a long time to tell us. I raised this with 
Secretary Foxx; I am raising it with you. We have enough to go 
on here I think to conduct that analysis and get it turned 
around quickly. Thank you. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Price. Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman. Administrator 
McMillan, I have a quick background and a question for you. On 
February 11th of this last year I sent you a letter regarding 
the Project Management Oversight Consultant for the Columbia 
River Crossing in Southwest Washington. Unfortunately I have 
not yet had a response to that letter. And although the project 
is now dead I would appreciate a response from you on a couple 
of related questions because I believe it is important for this 
Committee to understand how oversight is performed at FTA. For 
years the PMOC on the Columbia River Crossing Gannett Fleming 
issued PMOC reports for the project on a monthly basis and they 
were diligent and provided tremendous detail. They were very, 
very helpful. In fact due to the complexity and lack of 
transparency in the planning process these reports were about 
the only source of reliable information on the project, they 
were tremendous. And it was brought to my attention that in the 
spring of 2013 FTA decided to stop accepting PMOC reports and 
meetings with Gannett Fleming on the project. And when my staff 
inquired about this decision they were told that FTA put an end 
to the reports and meetings because the Oregon legislature was 
going to be voting whether or not to fund the bridge and FTA 
wanted to wait until after the vote to continue the reports. 
And since I didn't get a response to my letter I guess my 
question is why would FTA and the only really reliable source 
of information for the six months leading up to the vote that 
would ultimately decide the fate of this project--this is a 
project your predecessor vowed to provide $850 million for and 
the President's request this year calls for $65 million, and 
why on earth not allow the people who are being asked to vote 
on this that valuable information and the citizens who live in 
the region that quality information?
    Ms. McMillan. Congresswoman, I'll take----
    Ms. Herrera Beutler. Yeah.
    Ms. McMillan. Good question, thank you.
    Ms. Herrera Beutler. Yeah.
    Ms. McMillan. As you noted the Federal Transit 
Administration does take very seriously putting oversight 
attention to the projects. The timing of the Columbia River 
Crossing project as you know was unusual and had a number of 
elements to it that we wanted to ensure that we were providing 
appropriate information at various stages along the way. We 
worked very closely with our fellow federal agencies in looking 
at the various elements of it. I would need to get back with 
you on specific timing relative to the PMOC reports themselves, 
but I would say that we were very responsive I believe in 
getting appropriate information out to the public on this 
process and its varying stages at the points that it was 
delivered.
    Ms. Herrera Beutler. So you don't necessarily know the 
rationale behind why the reports stopped? I mean they were 
great reports. We got tremendous information and was really the 
only source. So I don't understand why--what we were told was 
you are going to stop them leading up to the vote and I don't 
know if it was because there was push from with the 
administration to get the project going and so you felt like 
holding the information back would help that.
    Ms. McMillan. No. In no way would we hold back valuable 
information. I will get back to your office specifically with 
the timing schedule that you just outlined. I don't have that 
answer here right now but will follow up with you.
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    Ms. Herrera Beutler. Thank you. The timing schedule and the 
rationale behind stopping them. If there was some sort of event 
that took place because they were really heavily relied upon. 
Okay. Thank you. Do I still have time, Mr. Chairman, or am I 
done?
    Mr. Latham. Yes.
    Ms. Herrera Beutler. All right. Administrator Ferro--am I 
saying that right? Okay. When I talk to experienced truckers, 
men and women with a lot of experience in safety on the roads 
they almost always tell me that recent actions--I mean almost 
always--by the Agency especially new regulations I the 
Compliance, Safety, Accountability program are causing them to 
think about leaving the industry. It happens often. What is 
your response to these folks and what are we supposed to do 
about that? Obviously we want safety but at the same time I 
trust some of these people who have been in this industry for 
decades. Are you hearing similar complaints?
    Ms. Ferro. I deliberately am out and about quite a bit 
talking with drivers, talking with companies, talking with 
enforcement, all stakeholders and victims advocates as well to 
understand and learn from them about the impact of our rules 
and our programs. And in this case CSA is a program. It's 
really three parts, a system, a process change and a rule. The 
rulemaking is not complete yet and I can come back to that if 
we have time. With regard to how CSA is affecting drivers and 
companies and the overall safety climate at its heart we are 
using performance data to identify companies that present the 
highest risk to the traveling public and to themselves. And 
that performance data is gathered through roadside inspections 
that our state law enforcement partners carry out across the 
country every year to the tune of about three and a half 
million inspections per year, about a third of which are clean 
inspections. The violation data and the clean inspection data 
from that work becomes the body of the safety measurement 
system that is that first component of the CSA program. And in 
many cases for companies what it looks like is a report card. 
It is not a safety rating. It is data and analysis we use to 
prioritize the highest risk but it is the interest of 
transparency and open government and kind of following on the 
heels of what we have always done at this agency we make the 
data public and the analysis public. And it is that report card 
piece that is problematic to companies that show trends in 
noncompliance or in safety risk that put them at odds perhaps 
with customers and others. For drivers we just rolled out a 
program to ensure that drivers understand the data. We do not 
rate drivers; this is not a report card on drivers. It is for 
companies, it is on companies, but drivers can see it and use 
it.
    Ms. Herrera Beutler. I apologize, I am out of time.
    Ms. Ferro. Yeah. That is right.
    Ms. Herrera Beutler. Thank you.
    Ms. Ferro. Thank you.
    Mr. Latham. Thank you. Actually someone is finally 
concerned about being over time. Mr. Szabo, not to beat a dead 
horse which I think it probably is, but we really have some 
serious concerns about the funding sources of $68 billion 
project, the high speed rail in California. California Superior 
Court has ruled against using $9 billion in bond funds, private 
funds have not been identified, cap and trade funds have to be 
voted on by the legislatures and there is opposition to that, 
and we cannot afford the $2.5 billion in funds in 2015. The 
California High Speed Rail Peer Review Group which is charged 
with evaluating funding plans and prepares independent judgment 
as to the feasibility and reasonableness of those plans says, 
and I quote, ``Whatever is started will not be finished and 
whatever is finished may have only limited utility.'' So these 
are the independent people who have looked at this and that is 
their judgment. You have delayed, tapered, amended, updated, 
and the project is still on the ropes. Your email stated that 
the funding plan was scheduled to be updated again late spring.
    Mr. Szabo. That's correct.
    Mr. Latham. What else are you doing to do to try to save 
the project?
    Mr. Szabo. Well, first off, Mr. Chairman, the Governor 
remains absolutely committed to the project. He believes and we 
agree that it is important to both the transportation and 
economic future of the State of California. The entire picture 
changes with dedicated predictable, sustainable funding. 
Putting rail on parity with the other surface transportation 
modes we think that is fundamental to achieve a balanced 
transportation network and to allow people to move in the mode 
that is most efficient for a particular journey. As I said 
before the funding contribution plan will be updated at regular 
intervals. There is no reason at this point to believe that the 
defects that were alleged in the Prop 1A Bonds cannot be cured. 
In fact there is an appeal going on at this moment to do that 
and there is a high level of optimism. The bottom line is we 
have no intention of prematurely killing this project. We 
believe the merits are too strong and too important to the 
state and we support the Governor.
    Mr. Latham. Are you committed to making sure that 
California actually in the end holds up their end of the 
bargain? Actually----
    Mr. Szabo. Absolutely. Oh, yeah, absolutely, Mr. Chairman. 
There is ironclad provisions in there that protect the federal 
taxpayers.
    Mr. Latham. But you keep changing it every other day.
    Mr. Szabo. We haven't made a change in many months to the 
agreement itself. And frankly that is not unusual in a project 
this large and that complex. Talk to some of the other modes 
here that have built complex projects. Seeing amendments to the 
agreement is not something that is that rare or that unusual--
--
    Mr. Latham. They are not updates, right?
    Mr. Szabo [continuing]. As facts change. Well, I am talking 
about--you were stating the fact that we are in what, amendment 
number--was it six or seven?
    Mr. Latham. Six or whatever, yeah.
    Mr. Szabo. So we are talking about two separate things. So 
number one amendments to the agreement are not unusual. What 
was done relative to the funding contribution plan was not an 
amendment to the agreement. In fact it is a requirement, it is 
an absolutely requirement of the agreement that they regularly 
update the financial contribution plan.
    Mr. Latham. You are changing the contract with an update.
    Mr. Szabo. No, it is a requirement of the contract.
    Mr. Latham. You are--the----
    Mr. Szabo. It is a requirement. We can bring you the 
language to show you it is an absolute requirement of the 
contract to update the funding contribution plan.
    Mr. Latham. Okay. We will probably continue----
    Mr. Szabo. We will continue to talk.
    Mr. Latham [continuing]. To--yes. Okay. Ms. Ferro, 
typically it is the government's responsibility to demonstrate 
benefits outweigh the cost of new regulations that are imposed 
on working families and businesses, however your department 
began enforcing a revised hours-of-service regulation this past 
summer that has cost some truckers millions of dollars more in 
lost productivity and lower pay than your own estimates of the 
expected safety benefits that come from that. Absent an 
adequate safety justification the administration has speculated 
that drivers will use additional time off from driving to sleep 
more and that this additional sleep will deliver health 
benefits to drivers who may live longer. Does the rule specify 
bed time for drivers?
    Ms. Ferro. Absolutely not, Mr. Chairman.
    Mr. Latham. I didn't think so. But then how does the 
department have any confidence in how much additional sleep 
drivers are going to get?
    Ms. Ferro. The hours-of-service rule that you reference is 
a rule that was developed in a very public fashion to update 
the rule that was in place since 2003 which had updated a rule 
that was about 60-70 years old at that time. The hours-of-
service rule development included a very rigorous regulatory 
evaluation as we are required. And as you indicated, Mr. 
Chairman, we are expected and mandated to ensure that we have 
done a full analysis and demonstrated both the costs as well as 
the benefits of any rule we develop. And in this case the net 
benefits approximate $250-$300 million a year. That does not 
erase the fact that there was about a $500 million cost to 
industry predicted in the hours-of-service rule changes because 
of the core change in the rule that is intended to achieve a 
better rested driver. To give drivers the opportunity for more 
reset by reducing the maximum hours they could work from about 
82 hours a week down to 70 hours a week. That is still a very 
long week. And all science and much of the data and analysis 
used in analyzing the effects of this rule reinforce the fact 
that accumulated fatigue impacts that individual's ability to 
be alert and safe behind the wheel as we all want them to be 
when they are operating this heavy equipment around your 
family, my family, their own passengers in the case of a bus. 
We are talking specifically about the truck hours-of-service 
rule. That fatigue reduction or the--I should--let me back up, 
the impact of cumulative fatigue actually goes beyond just 
ensuring that the driver themselves can be alert and has the 
opportunity to get more rest, but it also does get back to the 
health of the driver. Every workplace study in recent years 
reinforces that prolonged long hours particularly under the 
kind of strenuous conditions drivers operate under----
    Mr. Latham. You are talking about life time health.
    Ms. Ferro. Yeah, absolutely.
    Mr. Latham. Has there been--is there any precedent for 
doing this?
    Ms. Ferro. There----
    Mr. Latham. It certainly just looks like you are trying to 
find some way of----
    Ms. Ferro. Oh, not at all. No. In fact the law requires us 
to ensure that rules we introduce and propose and finalize do 
not have a deleterious effect on a driver's health. And so 
health is part of the analysis.
    Mr. Latham. But you are taking credit for lifetime health 
benefit.
    Ms. Ferro. There is a component of the evaluation that 
incorporates lifetime health. The larger safety component is 
lives saved. So again back to the purpose of the rule and the 
impact of the rule assessed an overall impact on about 15 
percent of the driving population of commercial vehicle 
activity. That is companies and drivers that generally run the 
longest distances over the road, so that may be using that 80 
hours a week and those that operate at night. That turns out to 
be about 15 percent of the entire industry of over 500,000 
companies that we regulate. And so again we did factor in the 
cost, we recognized there would be a cost; we were very clear 
about that. In this case the benefits, the overall safety and 
health benefits outweigh the cost. And the vast majority of the 
industry now has adjusted. It is true that some drivers took a 
financial hit. It could be a whole day, a whole trip. And in my 
view that doesn't justify going beyond a 70 hour work week. It 
certainly does reinforce that the industry does has an 
opportunity to compensate qualified drivers to keep them on the 
job in a better, perhaps a healthier work environment 
ultimately to ensure they are safe behind the wheel of that 
truck.
    Mr. Latham. I think we will probably come back to the 
issue, Mr. Pastor.
    Mr. Pastor. Mr. Szabo, I think we are beating a dead horse 
because as we try to get this bill through the House and into 
the Senate, it is going to rear its ugly head and be one of the 
issues that will come up probably later this fall. So I guess 
the Chairman wants to get as many facts on record as he can and 
Mr. is it Nadu? Is it----
    Mr. Nadeau. Nadeau.
    Mr. Pastor. Nadeau? You may want to compare the changes of 
possibly the high speed rail with the Big Dig and see how they 
compare because I remember the days of the Big Dig that that 
was always an issue of some of the changes. But the question I 
am going to ask Mr. Jaenichen, during the sequestration we had 
a problem with the Maritime Security Program. And I think we 
resolved in the CR. What's the status of it today for in this 
budget?
    Mr. Jaenichen. Yes, currently the omnibus that was passed 
by the Congress fully funded the program at $186 million for 
the fiscal year 2014. The fiscal year 2015 budget also requests 
$186 million for full funding that program to maintain all 60 
ships in the program.
    Mr. Pastor. So that is the number that is required to 
ensure our security with the Maritime in terms of moving people 
around equipment, et cetera?
    Mr. Jaenichen. That is to support the Department of Defense 
for their sea lift requirement to be able to support equipment 
and supplies, yes, sir.
    Mr. Pastor. Also, I have heard that there is concerns in 
the training of your students at the Maritime Academies. That 
it possibly the training ships, where they are trained, there 
is a concern about the condition and et cetera. So can you give 
me an assessment of what the situation is with the academies 
and the workforce you're developing?
    Mr. Jaenichen. Yes, thank you for that question. The ships 
themselves, we provide the six to eight Maritime Academies with 
a training ship. Part of our budget includes the maintenance of 
that. Of the $17.7 million that is in the fiscal year 2015 
request, $11.3 million goes to the actual maintenance, repair 
of those vessels to ensure that it meets the Coast Guard 
requirements for its certification.
    We do have some concerns because the average age of those 
ships is 35 years old, the oldest of which is at the State 
University of Maritime, New York Maritime College SUNY and that 
is the Empire State which is approaching 52 years old. We need 
to take a look at a school ship recapitalization. We're putting 
together a plan now to do that.
    Mr. Pastor. What alternative do you have if the ship is not 
able to provide the proper training?
    Mr. Jaenichen. There are some signification challenges with 
being able to meet the licensing requirements for each of the 
students at the State Maritime Academies. Under the current 
rules for certification and training of them to be able to 
reach their--or get their Coast Guard license, they have to 
have 360 days at sea. And so, if a training ship goes out of 
service, we are going to have challenges being able to get all 
the students at all the State Maritime Academies through the 
proper at sea training that is required to be able to be 
certified.
    Mr. Pastor. Thank you. Mr. Szabo, I think in the Omnibus 
Bill that we passed 2014 there was monies appropriated for 
planning and other re--what's the status of that and what--
could you give me what the status is currently?
    Mr. Szabo. Yes. Congressman, we will be coming out very 
soon with a notice of funds available for the funds that were 
provided to us in the fiscal year 2014 budget. Planning will be 
eligible, multi-state planning, corridor planning, 
infrastructure improvements for high speed rail projects and as 
well as technology grants.
    Mr. Pastor. Will there be consideration given to planning 
that has occurred and needs further planning? Will they have 
any kind of priority or consideration?
    Mr. Szabo. Certainly, the goal is always to try and support 
work that has already begun to try and make projects, continue 
to move forward in the pipeline towards reality. We are aware 
of some good work that has been done in the Southwest, and 
proposals will be based on merits but some real good work has 
been done there in the Southwest.
    Mr. Pastor. Thank you. Chairman, I will yield back.
    Mr. Rogers. Thank you, Mr. Pastor. And Mr. Dent is 
recognized.
    Mr. Dent. Thanks, Mr. Chairman. Mr. Jaenichen, the MARAD 
Budget is again requesting 168, excuse me, $186 million dollars 
for the regular Maritime Security Program to support the 
authorized level of up to 60 ships. Looking at your budget on 
pages 92 and 93, it appears that MARAD is vastly exceeding its 
capacity goals under this funding proposal with the extremely 
scarce defense resources, why should we overfund this program 
when we can meet the capacity goals with fewer hours and 
probably fewer ships?
    Mr. Jaenichen. I need to understand the question. The 
program that is currently authorized is the Maritime Security 
Program. Are you referring to the $186 million for that 
program?
    Mr. Dent. That is correct, $186 million for the Maritime 
Security Program.
    Mr. Jaenichen. Yes, that program itself is based on 
requirements that are provided by the Department of Defense. 
They are undergoing a review right now for mission capabilities 
and assessment and we will anticipate seeing that. Right now, 
the 60 ship requirement stands with the rebalance to the 
Pacific and the longer sea lanes; they anticipate that the sea 
list requirement will stand. That program right now as it 
exists has carried over 90 percent of the supplies and 
equipment that have been required by the Armed Forces both in 
Afghanistan and Iraq. We will need to continue to evaluate the 
cargo specifically as the Department of Defense cargos come 
down in this fiscal year and next fiscal year to see how there 
might be an impact on that particular program.
    Mr. Dent. And then the program also faced some challenges 
under sequester and MARAD needed to examine the available ships 
and capacity in the program. Was there ever a discussion of 
giving preference to U.S. flagged and U.S. owned ships in the 
event of a downsizing of the fleet? And if not, why not?
    Mr. Jaenichen. As we took a look at the sequestration, we 
had a significant shortfall. And so, as we took a look at the 
program itself we had several vessels that were going to be at 
risk. So we went through a very conscious program that was 
coordinated with the Department of Defense to select the ship 
types that would potentially have to be removed. That did not 
necessarily consider whether the actual operating agreement 
holder was a section two citizen, i.e. an American citizen or a 
documented citizen. All of the ships are U.S. flag and they are 
owned by U.S. companies although some of them are documented 
citizen companies.
    Mr. Dent. And the final question then I will yield back, 
Mr. Chairman. How can we better align the dollars and Fleet 
with capacity goals and the needs?
    Mr. Jaenichen. Right now from our perspective, pending this 
capabilities assessment that is going to be done by the U.S. 
Transportation Command, we are aligned at this point until I 
see something different. They are on record. Most recently, 
General Fraser has stated that the 60 requirement still stands.
    Mr. Dent. Okay, thank you very much and I will yield back 
with the time remaining, Mr. Chairman.
    Mr. Rogers. Noted, Mr. Dent. Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman. Administrator Huerta, 
if you would, could you tell us what is being done to help 
accelerate the deployment of Performance Based Navigation 
procedures that will conserve fuel and reduce costs associated 
with travel. Section 213C of the F.A.A. Modernization and 
Reform Act directed the F.A.A. to categorically exclude 
National Environmental Policy Act, NEPA, requirements for 
procedures that would reduce aircraft, fuel consumption 
emissions and noise on an average per flight. The DOT's IG 
efforts to implement the Act did not address this categorical 
exclusion requirement. Can you provide a status report and 
explain what role, if any, the requirement has played in 
expediting PBN procedures?
    Mr. Huerta. There were two specific provisions included in 
section 213 related to the categorical exclusion. The first we 
were able to implement. The second has presented more of a 
technical challenge for us and that is the specific requirement 
to consider the aggregate of the three factors you talked about 
on a per flight basis which is inconsistent with how any noise 
modeling or any environmental modeling has been up until--in 
the past.
    In light of that, we put together a technical team under 
the auspices of the NextGen Advisory Committee to advise us on 
how we put together a methodology to work through that. That 
was presented to the NextGen Advisory Committee a couple of 
meetings ago so that would have been something less than a year 
ago. And we are now considering that recommendation about how 
we can move forward and what is the best way to factor that in 
technically to how we evaluate these projects but we have done 
a lot of good work on that.
    Mr. Joyce. The F.A.A. mandated that aircraft operators 
equip for ADS-B by 2020?
    Mr. Huerta. ADS-B out by 2020, correct.
    Mr. Joyce. ADS-B was sidetracked when an F.A.A. aviation 
rulemaking committee concluded that the required multibillion 
dollar investment by airline and general aviation operators 
cannot be justified at the present time. What initiatives do 
you plan to undertake and to effectively lay out the business 
case for ADS-B in and other long term NextGen programs to 
ensure sufficient buy-in by all the airline operators?
    Mr. Huerta. Yes, let me take a moment and talk about what 
an ARC is. An aviation rulemaking committee is actually 
comprised of the regulated industry. And so, the process we 
were going through was actually to consult with those that 
would be regulated by the rule as well as those that are the 
proponents of the rule and those that are the proponents of the 
technology in order to develop a sense of is now the right 
time? And as you correctly point out, the ARC which does 
represent this consensus view is that we are not quite ready 
for primetime here.
    There are a number of factors that were cited in the ARC 
report. Paramount among them was the lack of an international 
standard. And we have been engaged with our international 
counterparts really to work through that issue and really focus 
on how do we--the point you made and that we were talking about 
in the earlier round. How do we make sure that the benefits 
case catches up with what the deployment schedule would be so 
that we could put forward an overall proposal where we are able 
to match up the benefits with the investments and we are 
continuing to work that with industry.
    Mr. Joyce. Thank you. I have no further questions. I yield 
back at this time, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Joyce and your time remaining is 
noted. Ms. Ferro, going back to the subject we were on as far 
as the new rule and using lifetime health benefits and 
healthier outcomes, how do you quantify or what measure do you 
use to confirm that there are these benefits? How do you track 
this?
    Ms. Ferro. Mr. Chairman, on a couple of points on the 
specifics I would love to follow up with you and we will lay 
out the exact case and the research on which it was based with 
regard to the health benefits of the rule. I want to reinforce 
there are crash reduction and fatality reduction benefits in 
this rule as well to the tune of an estimated, conservatively 
estimated, 19 lives saved per year of those driving around not 
in terms or driver mortality and their longevity of life but in 
terms of individuals operating around and in.
    Mr. Latham. Was that enough to offset the cost of the----
    Ms. Ferro. I will need to come back with the specific 
numbers. I do not have them off the top of my head today.
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    Mr. Latham. Go ahead.
    Ms. Ferro. I just want to reinforce, the rule itself for 
the vast majority of drivers, the rule had virtually no impact 
or very little impact and I will talk specifically about what 
that is. For a driver who operates 60 hours a week or less 
within a seven day period, they do not need to use the restart. 
The primary component of the rule that really impacted their 
rest time doesn't even factor in because drivers still can run 
in a 14-hour window and drive up to 11 hours in that window.
    That did not change. So the other 15 percent are the ones 
that generally, as I mentioned, run the longest hours, exceed a 
60-hour seven day week or a 70-hour eight day week. But those 
that stay within those limits do not even use the restart--
because it is a voluntary component.
    The element of the rule that impacted all drivers is the 
addition of a 30-minute break sometime within that 14-hour work 
window. And that needs to be taken sometime before the ninth 
hour of work if, in fact, they are going to be driving in the 
ninth hour or later. So that 30-minute break, it is a pretty 
standard work break for most folks. For drivers that are not 
accustomed to taking a full 30 minutes, they may add 15 minutes 
to a break they might already take for a cup of coffee or a 
bathroom break.
    So that 30-minute break would have impacted them. And there 
is a component that took effect as soon as the rule was final 
which is almost two years ago now which allows drivers to use 
the cab of their truck to take that off duty time. That had not 
been allowed in the past. If they were waiting at a dock, they 
could not count sitting in their truck with no responsibility 
for the vehicle as off duty time. And they can now under this 
rule. So there are really kind of two pieces, sort of a give 
and a take, on that 30-minute break expectation. But the vast 
majority of drivers, I just wanted to explain why the vast 
majority were not affected by the rule.
    Mr. Latham. Okay.
    Ms. Ferro. Yes.
    Mr. Latham. Talking about the restart provision, we had a 
study that was mandated by Congress to look at the benefits and 
the study acknowledged that your rule changes have put more 
trucks on the road during daylight hours which is something 
that is of great concern. Most of the truckers would rather 
drive at night with less traffic, much more efficient, much 
safer. And, you know, you cause a lot more interaction between 
other trucks and trucks themselves, other trucks, non-
commercial motorists. Did your study evaluate the safety and 
congestion impacts of large trucks being forced by the 
regulation in daytime hours?
    Ms. Ferro. Yes, I would like to address that. The study in 
question that was mandated under MAP-21 was a field study, the 
components of which needed to mirror the elements and the study 
structure of two lab-based studies that we used in determining 
the restart components of the rule. So the field study did not 
address or talk about the impact of traffic on the road.
    Mr. Latham. Is that not important?
    Ms. Ferro. Well, and we spoke about it in the rule itself 
and the regulatory evaluation. Because there is a component, 
about half of that 15 percent of those long over the road 
drivers, about half of those generally run nighttime schedules. 
The rule does not stop nighttime schedules and it does not stop 
nighttime driving at all.
    Mr. Latham. But the restart forces a lot of them to drive. 
You are saying they cannot drive at night.
    Ms. Ferro. I am going to finish that piece. What we are 
saying, they absolutely can drive at night. If they choose to 
use the restart, they have to include two periods between 1 
a.m. and 5 a.m. for during their off duty time. The goal there 
is to ensure they are getting two nights of rest when their 
circadian rhythms are at their lowest.
    It does not stop them from running a nighttime schedule the 
rest of the week. It does not stop them from resuming a 
nighttime schedule when they finish their off duty time if 
they, in fact, need to use that 34-hour restart.
    Mr. Latham. If they have to use night, two nights, when 
would they drive then?
    Ms. Ferro. Well, they have got five other days of the week. 
They have got five other days of the week when they are driving 
and running full nighttime schedules.
    Mr. Latham. Are you doing anything to look at the safety 
and costs of putting a lot more trucks on the road in the 
daytime?
    Ms. Ferro. We have examined that issue and there is a bit 
of a fallacy in it and the fallacy is this. Trucks, for any of 
us who commute to Washington or drive almost anywhere, you see 
a lot of traffic on the road at about 5 a.m., commercial 
traffic. Before this rule ever took effect last July, that is 
just standard scheduling and we will continue to see it. In 
this case, we are talking about half of that 15 percent, so 
about 7 percent that we are running over nights that may now 
shift their schedules.
    Their schedule could reenter them into traffic any day of 
the week, not a Monday at 5 a.m. So number one, how it is 
diluted within the bulk of the other traffic, it does not 
change the fact that folks are still running nighttime.
    Mr. Latham. But you are acknowledging the fact that you are 
putting more trucks on the road during peak time?
    Ms. Ferro. I am not. I am not.
    Mr. Latham. That is what you said.
    Ms. Ferro. No, we recognize that for drivers that seven 
percent that may be impacted by those two overnights, that they 
may come on the road at a different time after their restart. 
They may come on at 10 a.m. I mean it is a matter of, this is 
an industry that is incredibly unpredictable when it comes to 
demand because they are moving warehouses. So how the different 
carriers shift their schedules is really up to them. What I am 
reinforcing is that there is already a high density of traffic, 
commercial traffic, on our highways in those early morning 
hours that was in place well before July of last year and it 
continues to be in place.
    Mr. Latham. I think there is a huge safety component by 
putting more trucks on the road during those peak times. My 
time is expired. Mr. Pastor.
    Mr. Pastor. Thank you, Mr. Chairman. Mr. Szabo, Amtrak has 
requested that the revenue generated on the Northeast Corridor 
be used for capital improvements on the Northeast Corridor. As 
you know, the Corridor has got--revenues help with the 
operating costs required for the long distance trains. If 
Amtrak follows this new approach, how can we be assured that 
the National Network will not suffer as a result?
    Mr. Szabo. Well, if you take a look at our budget request, 
it supports all components of our National Rail Network, and it 
does concur in support of Amtrak's approach of having operating 
surpluses be reinvested into the capital on the Northeast 
Corridor. But our budget also fully supports State Corridor 
service and fully supports long distance service. It provides 
that rural connectivity that is so critical to these small 
towns that otherwise would be disenfranchised. And so, our 
budget proposal is comprehensive in, in fact, supporting all 
three pieces to that and is consistent with Amtrak's plan to 
put the operating surplus back into the Corridor.
    Mr. Pastor. The Highway Trust Fund, assuming the worst case 
scenario, when do we--when will the Trust Fund no longer have 
any monies to appropriate?
    Mr. Nadeau. The estimate that we have posted in the 
Department's website, at the insistence of the Secretary, 
tracks August, September, as the point at which a zero balance 
could occur and the implications of that are quite serious.
    Mr. Pastor. How confident are you that Federal Highway cash 
management measures will prolong the life of the Trust Fund?
    Mr. Nadeau. Well, the implications of the necessity of that 
action will require our state partners to seek reimbursements 
on a less-frequent basis. So delay of payments to states is the 
first casualty of that situation, followed by the potential, 
depending on the length of the failure to correct the shortfall 
in Trust Fund, potential reductions in actual levels of 
reimbursements.
    The implications of that, simply the prospect of that 
occurring are already being evidenced across the country. The 
Director of Highways in the State of Arkansas, for example, 
just reported that 10 highway projects that were scheduled to 
be let have been postponed.
    Thirty projects that they were planning on advertising in 
the remainder of the fiscal year, about 30 projects valued 
about $450 million, and another group of projects for next year 
about that same level, of value have all been, essentially, 
postponed or held, pending some certainty with respect to the 
cash shortfall of the situation.
    So, the implications are already being felt, and State DOTs 
are, essentially, having to make judgments as to how they are 
going to manage the situation should it occur. The Director of 
DOT in Rhode Island, just has 54 EPW that he has already 
suspended all advertising and rely on FY '14 apportionment. So 
the effect in the way states are going to manage the situation, 
once we are forced to take that action is, they are already, 
essentially, taking action.
    Mr. Pastor. What discussions are you having with the Office 
of Management and Budget? Do you think the Department will 
request a general Fund transfer into the Trust Fund? If not, 
why not?
    Mr. Nadeau. Well, as you know, and I you discussed at 
length with Secretary Foxx at a recent visit with you, the 
President has proposed a four-year funded, $302 billion surface 
transportation program with sufficient funding to address the 
shortfall in the Highway Trust Fund of a four-year period; and, 
of course, if action is taken on a timely basis to address the 
current shortfall as well.
    So, the administration has put a proposal on the table that 
will address and, hopefully, avoid the situation we just 
discussed, that I just described, occurring.
    Mr. Pastor. Can I just finish this?
    Mr. Latham. Please.
    Mr. Pastor. I know you have read the transcript of the 
testimony, and probably you have--in reading the testimony you 
have come to the opinion that the response to the Secretary was 
that, the likelihood of legislation going forward to meeting 
the needs of the proposal, or implemented proposal are pretty 
slim, and I think there was great likelihood that probably it 
was not going to happen. And we are asking the question, with 
that prospect, what would be the probability that the 
Department would ask for general funds?
    Mr. Nadeau. And I believe his response, and I certainly 
would concur, is that absent action, serious implications, I 
just described, will take place. Therefore, whether it is the 
proposal that the President and the Secretary have put on the 
table, or some other alternative solution which the Secretary 
expressed his openness to discussing with Congress. It is 
imperative that a solution is found in a timely manner, to 
avoid the economic implications of what I just described.
    In one particular state, in Arkansas, for example, are not 
replicated across the country. It could have a fairly 
devastating impact on the economy, and certainly on recovery 
and job growth. So I think the Secretary was clear that he is 
open to working with Congress on a solution. The imperative is, 
of course, to address the problem.
    Mr. Pastor. Thank you.
    Mr. Nadeau. Thank you, sir.
    Mr. Latham. I am just curious on that point. Specifically, 
how are you going to pay for it?
    Mr. Nadeau. A proposal in the President's budget is on the 
four-year--pay for with a Pro-Business Tax Reform Policy----
    Mr. Latham. You have got talking points now, right? 
Specifically, what tax changes are you going to make, to pay 
for? They are pro-business, pro-growth; it is actually pro-
growth is the----
    Mr. Nadeau. Pro-growth, I am sorry.
    Mr. Latham. Is the talking point, so.
    Mr. Nadeau. As you know, Mr. Chairman, the Treasury Green 
Book, published with the publication of the President's budget 
proposal, does describe, generally, elements of the Tax Reform 
Proposal----
    Mr. Latham. Have you got the specific proposal that you put 
forth?
    Mr. Nadeau. I think that the President has in his budget, 
and I think further----
    Mr. Latham. Tied into this pro-growth Tax Reform?
    Mr. Nadeau. Addressing several elements that I know you 
discussed with the Secretary, which I would be happy to review.
    Mr. Latham. Okay.
    Mr. Nadeau. But I think it is a credible approach to a 
long-term solution----
    Mr. Latham. Do you have meetings to practice these pro-
growth things and stuff to make sure everybody is on the same 
page. Okay. Moving right along here.
    Ms. McMillan, one issue that constantly comes up at home is 
the inequitable Transit Formula Funding across the country, and 
MAP-21 made a bad situation even worse, regarding the formula 
allocation for mid-sized cities, as in Iowa, and places like 
that. We requested a transit formula analysis in the fiscal 
year 2014 House Report, and I asked the Secretary, when he was 
here a few weeks ago, for an update on when we might see the 
report. I am hoping you can give me an answer. When will we 
have the report that was requested on the allocations?
    Ms. McMillan. Thank you, Mr. Chairman. I will get back to 
your office on the specific date.
    [The information follows:]

                         Transit Formula Report

     While FTA will report to the Subcommittee by the end of 
May on its analysis, we have heard from the transit industry that the 
amount of resources provided under the MAP-21 Bus and Bus Facilities 
formula is inadequate. We understand that the transit industry also 
believes that while predictable funding provided through a formula is 
good, it often does not allow for transit agencies to address needs 
when substantial investment is needed, like a large bus purchase or 
building a bus garage.
     In response to these concerns, the President's 2015 budget 
significantly grows the amount of resources to be distributed under the 
Bus and Bus Facilities grant program from $427.8 million to $1.9 
billion. The budget also proposes that 70 percent of the finding would 
be distributed through a formula and that 30 percent would be awarded 
through a discretionary grant process to help address large one-time 
investments that a formula does not address well.

    I need to get a handle on that specifically and what I 
would like to say though is, what we have been hearing, 
similarly, from small and mid-sized cities, the major concern 
with the Bus And Bus Facilities Formula Program, I am not sure 
if that is what you are----
    Mr. Latham. Right.
    Ms. McMillan. Okay. I do have some answers for that. We 
have been--let me just say that----
    Mr. Latham. Is it both business--I am sorry.
    Ms. McMillan. What I would say is that together with the 
transit industry, we have been hearing a lot of feedback on the 
ramifications of moving from what had been a discretionary 
program to a formula program. And the issue was that the new 
formula, based on frankly about half of the funding level that 
have experienced under SAFETEA-LU, has resulted in much smaller 
pieces of the pie available, particularly for our smaller 
operators, and that is a problem.
    What we are proposing as part of our Fiscal 2015 Budget, 
for the Bus and Bus Facilities Program, is in fact to greatly 
increase the funding level to $1.9 billion from only $450 
million currently, to address the needs that we have hearing 
from our smaller operators. And in addition, to include back 
within that amount some discretionary capabilities, so that we 
can help smaller entities that have these one-time, lumpy, big 
cost, that a formula Program just strung over a period of years 
simply will not accommodate for them, and be able to match the 
benefits of having that type of program; with the certainty of 
a formula Program at sufficient levels to meet the needs of our 
transit agencies across the country.
    Mr. Latham. Looking at the apportionments that are under 
the Urban, Non-Urban Programs, I am trying to understand the 
purpose behind the high-density program that provides hundreds 
of millions of dollars on top of the Urban Formula already, but 
it only goes for seven northeastern states. What is the purpose 
of the extra funds, if that was created only for seven states?
    Ms. McMillan. That program was established to recognize 
high growth in those particular areas. Again, I think that the 
combination of the Major Formula Program at the 5307--the 5307 
Major Formula Program coupled with the Bus Facilities Program 
at a Formula level of the small urbanized----
    Mr. Latham. How do you determine growth--?
    Ms. McMillan. I am sorry?
    Mr. Latham. Population-wise, that is not true, the 
northeast is not growing, in comparison to other parts of the 
country.
    Ms. McMillan. Well, my apologies if I misstated the fact. 
What I will get back to your office, with some specifics on 
those comparisons.
    [The information follows:]

                      High Density Transit Program

     The High Density program (Section 5340(d)) funds are 
apportioned based on a statutory formula and to qualifying urbanized 
areas (UZAs) and States included in section 5340. The finds are 
allocated to UZAs in States with a population density equal to or 
greater than 370 persons per square mile. Based on this threshold and 
2010 Census data, the States that qualify are Maryland, Delaware, 
Massachusetts, Connecticut, Rhode Island, New York and New Jersey 
(these are the same States that qualified under SAFETEA-LU).
     The amount of funds provided to each of these seven States 
is allocated on the basis of the population density of the individual 
State relative to the population density of all seven States. Once 
funds are allocated to each State, funds are then allocated to UZAs 
within the States on the basis of an individual UZA's population 
relative to the population of all UZAs in that State.

    Mr. Latham. If they are high density already, don't they 
have the capacity already--without these additional funds that 
come off from the other 43 states? I don't understand.
    Ms. McMillan. What we have seen is that in large part for 
our major areas, quite frankly, for the biggest systems the 
federal dollar tends to be the minority dollar. Local and state 
contributions to major federal areas actually exceed, often, 
what the federal dollar contributes in terms of capital and 
operating needs. So that is, you know, just one observation I 
would put out there in terms of the funding combination.
    Mr. Latham. You apparently are putting forth your 
reauthorization package. Are they the same seven states in that 
proposal which you have? Are you talking about doing this 
again?
    Ms. McMillan. We--our proposal, again, will be forthcoming. 
I don't have the specifics on that piece of it yet.
    Mr. Latham. Are you doing anything to help mid-sized cities 
in your proposals?
    Ms. McMillan. Yes. There are a couple of things I think 
that are very beneficial to mid-sized areas, and small urban 
areas such as we see in states such as Iowa. As I said before, 
I think the improvement, or the modifications that we are 
suggesting for the Bus and Bus Facilities is a significant 
improvement for those areas. And, again, we have been hearing 
directly from small and mid-sized communities, that that would 
be a huge improvement, lifting the amount of funding and 
reinstating the discretionary amount.
    We have also put forward a new program for rapidly-growing 
smaller urban areas, our Rapid Growth Area Transit program, 
which is intended to complement New and Small Starts, and be 
very location-specific on communities that are experiencing 
significant to moderate population growth as well as transit 
ridership growth.
    And the idea is for them to hopefully get ahead of 
congestion, that is potentially coming with that rapid growth, 
and be able to put Bus Rapid Transit projects on the ground 
fairly quickly, and we would assist them in that process so 
that they might avoid conditions that would deteriorate with 
the pressures that they may see.
    Mr. Latham. Well, I hope we can address this. It is a huge 
equity issue, and it is a huge problem for the small, mid-sized 
bus transit, certainly.
    You don't have any questions?
    Mr. Pastor. Well, Mr. Chairman, I want to thank all the 
Panel members for their----
    Mr. Latham. We are not closing yet.
    Mr. Pastor. Oh. The answer is no, I don't have any 
questions. And to assure you, I was going to close.
    Mr. Latham. I know. Okay.
    Mr. Pastor. So you can have the remainder of the time. And 
I am getting close to my hours of--what is the service--Hours-
of-Service too, so.
    Mr. Latham. I think we both are. Just one last question, 
Mr. Huerta, always good to see you. Your budget request, once 
again, proposes two new aviation fees. One increasing the 
passenger facility charge from $4.50 to $8.00 per flight, and 
another to charge $100 per flight fee on general aviation 
flights. These fees have been repeatedly rejected by Congress 
in the past, and I would expect the same will happen.
    Have you engaged, really, the user community to get input 
on these fee increases?
    Mr. Huerta. Let me talk about the two of them separately, 
if I might. First of all, with respect to the increase in the 
PFC that is coupled with a commensurate reduction in the AIP 
Program itself. And the idea is that larger airports which have 
the resources to generate their own financial resources through 
the passenger facility charge, would be excluded from certain 
aspects of the AIP Program, thereby ensuring that those 
remaining funds could be made available to the mid to smaller 
airports. And that does enjoy a great deal of support in the 
airport community, particularly the larger airports who have 
felt constrained by the PFC cap.
    As it relates to the $100 fee, what we are trying to do 
here is address the larger question of recognition that FAA 
provides a wide variety of services and many of them at no 
cost. Two segments of the industry, and we have a significant 
General Fund subsidy for those activities. I think the 
President has put forward a proposal of a way that we could 
close that gap, that is the conversation we have been having, 
and we know that there is significant challenge there, but I do 
think that the aviation industry is starting to have some 
serious conversations among themselves about the broader 
question, of how do we pay for the suite of services that the 
FAA is going to provide. And that is a conversation that we 
look forward to continuing to have with you on this Committee 
as well with the industry.
    Mr. Latham. Have you done any kind of analysis, 
economically, as to the effects, on private aviation? Have you 
done any analysis?
    Mr. Huerta. You know, in terms of the--there is a wide 
variety of costs that we have to look at. We have done 
different analyses up there, I would simply observe that, it 
costs us as much to handle a private airplane in controlled air 
space, as it does an A380. And if you look at their relative 
contributions to the Aviation Trust Fund, they are dramatically 
different. And that, I think that the larger question we need 
to have is, where is the service being provided, and how do we 
pay for it?
    Mr. Latham. All right. Now, Mr. Pastor, if you would like 
to close.
    Mr. Pastor. Thank you. Thank you. I am getting to the 
hours--I want to thank all the Panel members for their 
testimony, and answering the questions, and look forward to 
working towards a Bill. Hopefully, it will get done sometime in 
the near future, so that we don't have a CR, and we are able to 
fund the agencies, hopefully, the best we can.
    So, thank you very much for your testimony.
    Mr. Latham. Okay. And I also want to thank each of you for 
your time today, and for your testimony. I know we will have a 
number of questions for the record, and I am sure other members 
of the Subcommittee will also as well.
    I would ask you to work--you and your staff--as quickly as 
possible to get those questions answered, cleared, and returned 
to us within 30 days. Yes, Mr. Huerta?
    Mr. Huerta. Mr. Chairman, I just wanted, on behalf of all 
of our colleagues and Secretary Foxx, we know that both you and 
Mr. Pastor will be retiring at the end of the year, and we 
wanted to join together and thank you for your support for the 
Department over so many years.
    Mr. Pastor. Right. Thank you.
    Mr. Latham. Thank you.
    Mr. Pastor. Thank you very much.
    Mr. Latham. That is what was meant with our Hours-of-
Service. Your answers, again, if we get your responses within 
30 days, we are going to be moving a Bill quickly, we hope, and 
we need to have those responses as soon as possible.
    With that we will conclude. Our next hearing will be 
Secretary Donovan on April 10th. So with that, the Subcommittee 
is adjourned. Thank you.


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                                          Thursday, April 10, 2014.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                                WITNESS

HON. SHAUN DONOVAN, SECRETARY, DEPARTMENT OF HOUSING AND URBAN 
    DEVELOPMENT
    Mr. Latham. The hearing will come to order, and we want to 
welcome the HUD Secretary Shaun Donovan here this morning. We 
apologize for the late start here, but we have had a crazy 
morning with votes.
    Secretary Donovan. Understood.
    Mr. Latham. So I am going to pass on my opening statement, 
other than to welcome you.
    We will recognize Mr. Pastor.
    Mr. Pastor. Mr. Chairman, good morning. I will yield to 
Mrs. Lowey.
    Mrs. Lowey. Well, you set an important precedent, so I will 
pass as well and put my statement in the record.
    Mr. Latham. If you want to have an abbreviated opening 
statement, that would be fine.
    Mrs. Lowey. Just welcome, Mr. Secretary. We know of your 
very, very essential work, and we look forward to putting 
together a bill that gives you the opportunity to continue to 
serve the people.
    Secretary Donovan. Thank you.
    Mr. Latham. Unless you had something very profound or very 
complimentary towards the chairman, we will pass.
    Secretary Donovan. You know, as matter would have it, I do. 
It is a 17-minute opening statement.
    [The information follows:]


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    Mr. Latham. Thank you.
    Secretary Donovan. Seriously, I do want to say this is the 
last time I will be testifying in front of both you, Mr. 
Chairman----
    Mr. Latham. You are leaving?
    Secretary Donovan. Wishful thinking. Wishful thinking--and 
the ranking member, and I just wanted to thank you for your 
years of dedicated public service. We have been through 
decisions that were easy to make because we were able to expand 
opportunity, improve government. We have been through difficult 
decisions even as recently as last week on our MultiFamily 
Transformation. And I can't thank you enough for your dedicated 
public service.
    Mr. Latham. That was good. The question starts as 
highlighted in my opening statement.
    Your request assumes FHA receipts of $14 billion in fiscal 
year 2015. This is $1.4 billion over this year's projection and 
a whopping $2.8 billion over CBO's latest estimate for 2015. If 
the CBO estimates remain this low, receipt scoring changes will 
create a significant hole in your budget. And I just ask you, 
what are the driving factors or changes in assumptions that 
resulted in a $1.4 billion increase over 2014 and a $2.8 
billion difference with CBO?
    Secretary Donovan. This is obviously very critical for 
being able to put a strong budget together. I think the key 
thing I would point to is we made two very significant changes 
last year in our premiums. That significantly increased the 
returns. So even though volume we are predicting to be lower, 
the returns are higher because of those premium changes.
    As I understand it, CBO has not yet factored those into the 
scoring, and so as they update their scoring, our hope is--
obviously there are other assumptions that may be different, 
but our hope would certainly be that we would see an increase 
based on those premium increases that we instituted last year.
    Mr. Latham. It is going to be very difficult to fill the 
holes, obviously, with a $2.8 billion shortfall, and will cause 
some really difficult choices for us to make. I would ask that 
you talk to the CBO, share your assumptions and models, and 
report back to the subcommittee on the differences. You are not 
even on the same page, not even on the same chapter, the way it 
looks, and it will have dire consequences if it isn't changed.
    There are a number of municipalities that are considering 
using eminent domain to acquire underwater performing mortgages 
and then refinance them as to FHA products. I understand a city 
in California has mailed letters to mortgage holders offering 
to buy these mortgages at a discount and threatening to use 
eminent domain if the mortgage holders don't sell.
    Where do you stand on that issue? Just give us some input 
and guidance.

                             EMINENT DOMAIN

    Secretary Donovan. Absolutely.
    I am actually quite familiar with the eminent domain 
process, having led the agency in New York City that is 
responsible for eminent domain there.
    There is a fundamental legal question here that is up to 
the courts on whether the mortgages themselves generally and 
then also specifically the mortgages on the homes that they are 
looking at qualify under public purpose for eminent domain. 
That is a determination that needs to be and will be made by 
the court, because not only of the regular process, but the 
lawsuits that have been brought. So I think it is too early for 
us to take a legal position on this until the courts have 
acted.
    Having said that, to be clear, we would not provide 
financing at values that were above what the court determined 
the value to be. And I think that is one of the fears that have 
been out there is that somehow eminent domain would bring the 
values down, write down these mortgages, and then somehow they 
could be refinanced at a significantly higher value by FHA. And 
that obviously that would not be the case.
    Mr. Latham. Wouldn't it create great uncertainty for the 
financial markets?
    Secretary Donovan. What I would say on this is that there 
is already the underlying system of eminent domain that exists 
on the properties themselves, and given that the mortgages sit 
beyond that, that I don't believe that it creates substantial 
uncertainty. There is some uncertainty that it creates which 
has to be resolved by the courts, but unfortunately I don't 
think there is any shortcut to the legal process that has to 
play out under these decisions, because ultimately eminent 
domain is a very specific local decision on whether this 
property does qualify under the rules of public purpose.
    Mr. Latham. Well, it may be a local issue, but it has 
national consequences, and I think is very significant as far 
as creditworthiness, interest rates, everything else. No sane 
investor is going to go into something, make a loan to someone, 
if they know, in fact, the city can just decide that they can 
take away the house and lower the value.
    Secretary Donovan. The law requires in eminent domain that 
full value, market value be paid, and so I think the greatest 
risk here is if we get a bad decision from the court that----
    Mr. Latham. But if they are taking a whole neighborhood; 
the market value is going to be dramatically changed.
    Secretary Donovan. If a correct decision were to happen, if 
they determine that it is possible, they would have to value it 
as it currently is, not as the decision might change the 
neighborhood.
    Mr. Latham. In the last fiscal year bill, we had asked for 
a report by April 1st of 2014, which would be past due. On this 
issue of as far as the implications, do you know when we can 
see that?
    Secretary Donovan. I don't know immediately. Let me ask my 
team.
    We will have it to you very shortly.
    Mr. Latham. Okay. Good. I appreciate that.
    Mr. Pastor.
    Mr. Pastor. Good morning, Mr. Chairman.
    Good morning, Mr. Donovan.
    I am going to talk about CDBG. While the overall number for 
CDBG programs is about the same as last year's budget request, 
the funding request for formula grants to cities, counties and 
States is at the lowest level since 1976. The CDBG program was 
last reauthorized in 1994. Many things have changed in the last 
20 years. Priorities have changed, funding has decreased, 
building methods have changed. So there has been a lot of 
changes in the last 20 years.
    In light of these changes, what can HUD do to ensure that 
the program is still responsive to the communities and their 
requests?

                     MOVING CDBG FORWARD INITIATIVE

    Secretary Donovan. It is a terrific question. And, first of 
all, to be very clear, we strongly support reauthorization of 
the program. And as we are approaching this major anniversary 
of the program later this year, we have undertaken a program 
that we call Moving CDBG Forward, an initiative where we 
reached out to more than 20 different sets of stakeholders, 
held forums around the country to get input and comments, and 
based on that, we have suggested a set of changes to CDBG.
    We will be providing legislative language as part of our 
upcoming package to the committee, and basically it focuses on 
a few key things; first of all, to update the formula and the 
targeting of CDBG to make sure that we are reaching the 
neediest places. As you know, for example, Arizona, there has 
been enormous development in Arizona since the CDBG formula was 
created, and we really don't believe that the current formula 
best meets the needs of particularly places that have developed 
substantially over the last few decades.
    We also believe that there are ways that we can both 
streamline the program and improve its administration; for 
example, providing more flexibility to communities, 
particularly the smallest communities, to be able to form 
regional coalitions, to share back-office functions, a range of 
things like that. And then there is also accountability to make 
sure that we are able to measure the impacts and ensure that 
CDBG is having the kind of impacts that we all want for it.
    So I look forward to discussing that. It is obviously a 
first step for us, and we wanted to be able to work closely 
with the committee on any potential changes this year.
    Mr. Pastor. In some cases the money, especially for smaller 
rural communities, the money comes through the State, and then 
the State--and then sometimes there is a lot of considerations 
that are used to determine what cities get what and what they 
don't. And is that something that you want to change, or is 
that something that you still want to keep in place?
    Secretary Donovan. Well, clearly, the State program is an 
important piece of it, and we are not suggesting that we move 
to a system where every local community is an entitlement 
community. On the other hand, if we provide more flexibility 
for communities to join together and reach a scale where they 
would qualify as an entitlement community, there would be more 
options for some of those smaller communities to come together.
    Mr. Pastor. I don't believe that reauthorization is 
probably a priority in this year's session, so would you look 
at some regulatory changes to bring about some of these changes 
where you can and--where you can make the changes?
    Secretary Donovan. Absolutely. And, in fact, one of the 
efforts that was part of this Moving CDBG Forward outreach that 
we did was to identify things that we could do on an 
administrative basis or a regulatory basis to improve the 
program. So, absolutely, that will be part of what we are 
undertaking, but we do want to discuss those with the committee 
as well and get your input, even if they are not--don't require 
legislative change.
    Mr. Pastor. So what is the timeline on celebrating the 
anniversary and bringing about some of these changes?
    Secretary Donovan. So we should have in the next 6 to 8 
weeks, I would expect, the package of legislative changes, and 
that would be for the entire administration, but it would 
include the specifics of this language and then to be able to 
work with you going forward over the summer both on the 
legislative piece of this, but also on the regulatory piece.
    Mr. Pastor. Thank you, Mr. Chairman. I yield back.
    Mr. Latham. You are out of time.
    Mr. Pastor. Well, okay.
    Mr. Latham. Thank you, Mr. Pastor.
    Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    And following up on that, and what I understand--and 
correct me if I am wrong--that some of the proposal is to be--
is eliminating small grantees, which likely means, you know, 
that the small guys will have to compete for statewide CDBG 
funding, statewide grants; is that accurate?

                   FLEXIBILITY FOR SMALL COMMUNITIES

    Secretary Donovan. We do have and in past years there have 
been proposals. Because there have been such significant 
reductions in CDBG, we now have some grantees operating with 
programs that are just a few hundred thousand dollars, and 
literally it is extremely difficult for them to be able to keep 
up with the administrative and other changes.
    Ms. Herrera Beutler. It is interesting----
    Secretary Donovan. What we are proposing is to allow them 
the flexibility to be able to join with neighboring communities 
for administration and other steps----
    Ms. Herrera Beutler. But you are not requiring----
    Secretary Donovan [continuing]. That would allow them to 
keep those grants.
    Ms. Herrera Beutler. But you are not requiring that they do 
that in order to apply for these grants.
    Secretary Donovan. We are not requiring it, but we want to 
provide more options around that.
    Ms. Herrera Beutler. I think some of the challenges--part 
of the reason these are small communities is they are hundreds 
of miles from other communities, and so that is part of the 
reason--and a couple hundred thousand dollars, though, isn't 
much in the scope of your budget. It is a ton of money a small 
community that is applying for one of these grants. I mean, 
that is a tremendous asset.
    And I have heard from a number of my small communities that 
we need to protect, and I fully intend on helping protect, 
their access to these things. I mean, trust me, these small 
communities do band together where they can find efficiencies 
because they have to. But part of the reason this is such a 
valuable option for them is because, you know, they are 
competing against large cities, and to require them kind of to 
be on that same playing field seems to me to be putting those 
rural communities at a disadvantage.
    Secretary Donovan. We are putting barriers in the way of 
them being able to work together through CDBG and our other 
block grants, and that is one of the things we want to change 
with these proposals.
    But I also think it is important that we recognize when we 
start to get to a scale of grants to communities where it is 
almost impossible for them to keep up with the requirements for 
accountability and reporting, that we risk wasting money that 
would be better spent if we can improve the program and create 
some of these efficiencies.
    Ms. Herrera Beutler. Well, let me ask, you are not going to 
lend to a grantee who can't fulfill the administrative 
obligations, correct? I mean, I am sure that is part of letting 
a grant is they have to be able to fulfill everything.
    My point being, they are not going to be asking and 
applying for if--and you are not going to be giving it to them 
if they can't do it.
    Secretary Donovan. We do make the awards, and then they are 
required to meet requirements of the award.
    Ms. Herrera Beutler. Yeah.
    Secretary Donovan. And so it would be a many-year process 
to track, create accountability, remove funding. Our step is to 
actually revoke funding if they are not meeting those 
requirements. So we would be awarding it to those communities.
    Ms. Herrera Beutler. Absolutely. My point is, having worked 
on development for a small nonprofit, you don't get the award 
unless you can demonstrate you can fulfill the obligations and 
requirements of the award generally, and I assume that is how 
you operate.
    Secretary Donovan. That is at the local level. It is a 
block grant, and it is made by formula to the local community, 
and then we will check if they are complying. So it is a 
somewhat different process in terms of our relationship with 
the State or local government than the State or local 
government with an individual grantee, such as a nonprofit.
    Ms. Herrera Beutler. Totally switching tracks, something 
that we talked about a couple of weeks ago, I think it was a 
couple weeks ago, PBRA. And I kind of wanted to clarify, 
because I felt like after our last conversation, I was clear as 
mud as to where we were. And this is with regard to moving the 
calendar year.
    Secretary Donovan. Yes.
    Ms. Herrera Beutler. Now, moving the calendar year does not 
mean that you planned to end what looks like--it doesn't look 
like it is--it appears to be somewhat underfunding, but we have 
had--you know, we have kind of a different perspective on that.
    Do you think it will end? Do you think this is going to 
help end the uncertainty around kind of the reliability of the 
Federal funding felt by the owners, the managers, the lenders, 
and the residents of these properties?
    Secretary Donovan. Absolutely, Congresswoman. We would not 
be proposing it if we didn't believe that this was a way to try 
to get the program back to a stable and clearer funding base to 
eliminate some of the uncertainty, and, by doing that, actually 
decrease the cost of financing and increase investment into the 
homes and communities of the families that depend on it.
    Ms. Herrera Beutler. Thank you.
    Mr. Latham. Thank you.
    Mrs. Lowey, welcome.
    Mrs. Lowey. Why, thank you, Mr. Chair.
    Welcome.
    Secretary Donovan. Thank you.
    Mrs. Lowey. In the wake of Superstorm Sandy, a number of 
people took out SBA loans to quickly repair damage to their 
businesses. After the disaster, a package was passed months 
later. A lot of these same people also applied for CDBG-DR 
funding, but were subsequently denied because they weren't 
allowed to receive money from both programs. A number of these 
small business owners now feel taken advantage of by the 
Federal Government because they aren't allowed to secure grant 
assistance. We obviously can't fault small business owners for 
not postponing repairs to their businesses until Congress had 
done its job and passed a supplemental.
    Has HUD considered reexamining this rule so that under 
certain circumstances small business owners can receive funding 
from both programs?
    Secretary Donovan. Yes. In fact, we have had many 
discussions with not only New York State, but the other 
grantees, and we have clarified this in two ways; one, that if 
there are initial needs beyond those that were funded by the 
SBA loan, absolutely, they are eligible to get CDBG above and 
beyond the SBA loan. Second, if for some reason the 
circumstances have changed, and they are unable to repay an SBA 
loan, if it would create risks for them in terms of the future 
of the business, we can replace that SBA loan with CDBG.
    But I want to be clear, what we are trying to achieve here, 
we have limited resources, and if we have businesses that have 
an ability to repay a loan, if they can afford a 2 percent or a 
5 percent interest rate, or whatever it might be, we want to 
make sure we are targeting the CDBG to the neediest businesses. 
So replacing SBA with CDBG assistance would be a case-by-case 
decision made by the grantee. We made it clear that that is 
allowed. That is, in fact, happening. But we do want to make 
sure that the CDBG is targeted to the neediest businesses.
    Mrs. Lowey. But it is possible.
    Secretary Donovan. Yes, absolutely.
    Mrs. Lowey. On rental assistance, similar to last year's 
budget request, the fiscal year 2015 budget includes a request 
to expand the Rental Assistance Demonstration Program. The 
program allows PHAs to modernize, preserve existing housing by 
leveraging outside capital. The budget request includes 10 
million in funding, eliminates the 60,000 unit cap, extends the 
program through fiscal year 2017. And currently the program as 
authorized at no more than 60,000 units is set to expire at the 
end of the calendar year.
    In New York, we have had tremendous success with this 
program. We have utilized it to help renovate and preserve over 
1,300 units of affordable rental housing.
    Mr. Secretary, can you give us an update on the first round 
of RAD projects? What kinds of projects are you seeing? What 
kinds of markets are they in? Do you think there is sufficient 
demand to support a program expansion?

                      RENTAL ASSISTANCE DEMO (RAD)

    Secretary Donovan. Not only do I believe there is demand to 
expand the program, we already have, as of the end of last 
year, three times the demand that we can meet. So 180,000 units 
have applied.
    I think it is very important to recognize that this is not 
only benefiting the residents of public housing, but the $1.8 
billion in capital that will be generated on those first 60,000 
units under the cap, and that is at no cost to the taxpayer, no 
additional cost whatsoever to the taxpayer, has created or will 
create 34,000 jobs, primarily in construction, but in a range 
of other areas as well.
    So this is a win-win. It is creating jobs, it is creating 
better housing, and it is lowering costs in the long term, 
because when you fix the roof today, obviously, you don't have 
to do more major repairs down the line.
    So we believe, given the demand that we have seen, 180,000 
units, that it would make great sense to expand the cap. Just 
the 180,000 units we have in would be an additional $6 billion 
of capital that would come in. So it would roughly triple, more 
than triple, the number of jobs that would be created as well.
    Mrs. Lowey. Thank you, Mr. Chairman.
    Secretary Donovan. I am sorry. One other thing I would just 
quickly mention.
    Interestingly, there was early concern that RAD would be 
reaching the largest housing authorities. In fact, we are 
seeing that the smaller housing authorities are 
disproportionately represented. In other words, smaller housing 
authorities are more likely to have applied for RAD and to be 
using the program. So it really is reaching--to your question, 
which I forgot to answer--it is reaching all parts of the 
country, but particularly smaller housing authorities, smaller 
towns, rural communities.
    Mrs. Lowey. Thank you.
    Mr. Latham. Thank you, Mrs. Lowey.
    Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman.
    Good morning, Secretary Donovan.
    Secretary Donovan. Good morning.
    Mr. Joyce. Vacant, foreclosed, and abandoned property has 
been a serious problem for communities around Ohio and 
certainly across the country. Since the downturn of the housing 
market, this problem has become crippling to some responsible 
homeowners. Studies have found that vacant properties reduce 
prices of nearby homes between as much as $8,600 to $17,000 per 
property in certain cities. These properties are often magnets 
for crimes like murder and drug trafficking, and they increase 
public safety costs.
    I support creative solutions to the abandoned housing 
crisis.
    Can you elaborate on some of the programs in the 
administration's budget with funds usable for demolition? In 
the future do you have any programs in mind that would be 
restructured for demolition purposes, given the current need?

                       NEIGHBORHOOD STABILIZATION

    Secretary Donovan. Absolutely. I think you are well aware, 
Congressman, that the neighborhood stabilization effort, which 
was part of the Recovery Act, was enormously successful in 
being able to spur not just renovation of vacant homes, but job 
creation and lifting values of surrounding properties. It is 
reversing the very cycle that you describe.
    So given the budget constraints and the fact that we don't 
have continued investment in the Neighborhood Stabilization 
Program, we have been looking for creative ways to continue to 
spur that kind of development. One is using repayments of 
neighborhood stabilization funds. Communities are now taking 
those and reinvesting those to do more of that work. We have 
also been working with communities under CDBG and other 
traditional programs that we have to provide flexibility to 
increase investment in those types of properties, and even in 
some cases demolition of those properties. And we have also 
provided a lot of flexibility, including recently to Ohio, 
through the hardest-hit funds that are at Treasury to use those 
for blight-removal activities. And so those are a few.
    We have also begun, and this is something that is important 
for Ohio as well, to use our FHA resources in new ways. We have 
been doing targeted neighborhood stabilization loan sales and 
other efforts that are trying to make sure that FHA isn't part 
of the problem with our vacant or foreclosed homes.
    Mr. Joyce. I don't know if you are familiar with Jim 
Rokakis.
    Secretary Donovan. Yes.
    Mr. Joyce. There are some things going on in Slavic Village 
you may want to take a look at. Technically, that is in 
Congresswoman Fudge's district.
    Secretary Donovan. Yes.
    Mr. Joyce. We are working together, along with Congressman 
Ryan, because I think it is very important that you take out 
the houses that have bad bones, for lack of a better word, and 
make sure those are removed, because you don't want to 
necessarily debilitate the neighborhood, but you certainly want 
to make sure that the people who are there and working to 
stabilize the neighborhood stay, and the houses that can be 
rehabbed are rehabbed. They are using a method that is 100% 
private at the moment that is very interesting. It is worth 
your looking into.
    Secretary Donovan. We will follow up with your office right 
after the hearing.
    Mr. Joyce. Sure. I have a few more.
    Following up on testimony that you gave in response to a 
question from our esteemed chairman last week, you mentioned 
that you were seeking a more efficient contracting model and 
project-based Section 8 program. You went on to paraphrase the 
language that your agency has requested in its budget request 
concerning this program. The procurement process for the 
program would not be a formal, competitively bid process, but 
will instead utilize a less formal NOFA, or Notice of Funding 
Availability.
    During the testimony you mentioned that using a less 
formal, and in my view, less competitive procurement process 
was confirmed by one judge in a prior court. As you know, the 
prior court's decision was overturned by a Federal court of 
appeals. Can you comment on the overturning of this decision?

                    PROJECT-BASED SECTION 8 PROGRAM

    Secretary Donovan. We believe the decision is wrong, and 
that the court didn't look closely enough at the specifics of 
Section 8. Just as we provide HAP contracts directly to housing 
authorities, we believe under the project-based Section 8 
program, we have clear authority, and that was what the earlier 
court confirmed, to be able to enter directly into those types 
of contracts.
    The problem, we believe, with the full procurement process 
is that it will not allow us to take into account sufficiently 
the importance of the ability of the partner that we have to 
work with other sources of affordable housing funding and to 
include a mission component on preservation of those units in 
the same way.
    Just to be very specific, we have traditionally done this 
kind of work with State housing finance agencies and local 
housing authorities. We actually created a great deal of 
competition by allowing these teams to cross State lines. They 
do subcontract with private entities. But the problem is if we 
go to a purely procurement process, not only will it greatly 
lengthen the process, make it more complex, it will also likely 
lead to places where we have no public involvement in the 
oversight of these properties, where we wouldn't have State 
housing finance agencies, we wouldn't have housing authorities, 
and we would lose the ability to partner with them where they 
can bring tax credits, other resources that will be able to 
better preserve these properties.
    So we think there is great risk in doing this in a way that 
will be bad in the long run for these properties, and so we 
want to work cooperatively with the committee to make sure that 
we are clear about the flexibility that we have in doing this.
    Mr. Joyce. I believe I am out of time.
    Mr. Latham. The gentleman's time has expired.
    Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.
    Mr. Secretary, welcome back to the subcommittee.
    Secretary Donovan. Good to be back.
    Mr. Price. I want to talk to you about a persistent problem 
having to do with the Housing Opportunities for People with 
AIDS program, HOPWA.
    The allocation formula, the allocation of formula funds, 
has been an ongoing issue since the inception of HOPWA, almost, 
but the initial arrangement was that 75 percent of the funds 
have been distributed using the cumulative number of AIDS cases 
as reported by the CDC, including those who have died. I am 
sure you are well aware of this. HOPWA was enacted within 4 
months of the Ryan White HIV-AIDS program, and both programs 
have relied to the same degree on the cumulative number of AIDS 
cases in distributing funding to eligible jurisdictions. After 
all, that was the data that CDC reported, cumulative data.
    Since then, however, Congress has made some prudent 
adjustments to the Ryan White Program. The program now uses the 
number of people actually living with AIDS and HIV. That 
formula better represents the need, it allows States like mine 
and other Southern and rural States to receive funding to 
better address the changing HIV epidemic. And we do have a very 
serious problem.
    The HOPWA formula, however, has remained the same. That is 
what I want to ask you about. Both Congress and numerous 
Presidential administrations have acknowledged the disparity. 
Following the first change to the Ryan White Program formula in 
1997, the GAO released a report regarding the performance of 
the HOPWA program in which it recommended that HUD look at 
recent changes to the formula used by the Ryan White Program 
to, quote, ``determine what legislative revisions are needed to 
make the HOPWA formula more reflective of current AIDS cases.''
    In response to that report, the House Appropriations 
Committee included the GAO language in its report accompanying 
the 1998 HUD Appropriations Act, directed HUD to make 
recommendations to the Congress about an updating of the 
formula.
    Additionally, the administration's National HIV-AIDS 
Strategy released in July of 2010 stated that HUD would work 
with Congress to develop a plan, including seeking statutory 
changes, if necessary, to shift to HIV-AIDS case reporting as a 
basis for formula grants for HOPWA funding. The four most 
recent HUD congressional budget justifications echoed this 
goal.
    So since the release of that strategy document, HUD has 
solicited comments from the policy advocates, grantees, hopeful 
clients about how and to what degree the formula might be 
changed. In other words, you have done your work, and I commend 
you for it.
    Secretary Donovan. Thank you.
    Mr. Price. Congress must act. I am going to be urging the 
committee to include report language to this effect.
    In the meantime, I do want to commend you for continuing to 
advocate for HOPWA formula changes, and I would appreciate your 
comments on this aspect of your budget submission.

                        CHANGES TO HOPWA FORMULA

    Secretary Donovan. Congressman, I think you have said it 
well. This is an urgent priority that we change the formula. 
And to be very frank, the formula simply doesn't make any sense 
anymore. To have a formula that is based on not just cumulative 
cases of AIDS--so, in other words, in the entire history of the 
disease, every single case that has happened over time is now 
built into the formula--it also--the formula was created at a 
time where we never imagined that we would have people living 
with HIV, but not full-blown AIDS. So that whole group is left 
out.
    And I say this as a New Yorker and someone who implemented 
these programs at the local level. New York and a very few set 
of other communities benefit greatly from this outdated, 
nonsensical formula, and they benefit at the expense of 
communities represented by every one of you here today that 
simply doesn't make the right amount of funding to match the 
real needs that are on the ground today in communities around 
the country.
    So this is something that I would very much urge the 
committee to look at, the legislative proposal that is in our 
budget, and to pass it this year.
    Mr. Price. As you say, this formula antedates the advances 
we have made in HIV-AIDS diagnosis and treatment, keeping 
people alive. It simply doesn't match the realities of the 
current epidemic, the current spread of the disease. So I thank 
you for including this in your budget request. I very much hope 
Congress can act on it.
    Secretary Donovan. Thank you.
    Mr. Price. Thank you, Mr. Chairman.
    Mr. Latham. Thank you Mr. Price.
    Mr. Dent is recognized.
    Mr. Dent. Thank you, Mr. Chairman.
    Good morning, Mr. Secretary.
    Secretary Donovan. Good morning.
    Mr. Dent. Last week I appreciated your comments. I asked 
you about some of HUD's regulatory authority to reduce 
administrative burdens and help save some tax dollars. And I 
mentioned North Dakota and Virginia had some issues there, and 
you had offered to meet with some of my folks. And I just want 
you to know the Allentown Housing Authority will be in touch 
with your office and will follow up with your staff afterwards 
just to try to follow through on that. So appreciate your 
comments from last week on that issue.
    Secretary Donovan. Thank you.
    Mr. Dent. On the CDBG issue, Ms. Herrera Beutler, I think, 
touched on it briefly, but your fiscal year 2014 budget request 
included proposed legislation to revise the entitlement 
qualification criteria for CDBG. The changes included possible 
elimination of grandfathering and a minimum grant threshold for 
entitlement communities. Your proposal for fiscal year 2015 
shows that feedback from listening sessions with grantees would 
be included in any such proposal going forward.
    Mr. Secretary, what are your new proposals for revising the 
CDBG entitlement criteria? And can you also share some of the 
insights and recommendations that you received from these 
listening sessions?

                       CDBG ENTITLEMENT CRITERIA

    Secretary Donovan. I would really point to two things. One 
is we obviously heard concerns along the lines the 
Congresswoman mentioned, that smaller communities do like to 
have direct access to that funding.
    So what we included was a set of options, more flexibility 
for communities to team together on administration, on 
oversight, on a bunch of these expenses, so that we could 
create a way for them to keep the funding directly, but still 
meet the needs, I think, to run the programs you talked about, 
efficiency and savings, to run the programs more effectively 
and more efficiently.
    The second thing I would say is that we did look at a 
number of ways to make the program simpler to use and less 
costly for grantees that came out of those sessions, things 
like synchronizing planning and reporting cycles and other 
kinds of options and flexibilities in the administration of the 
program. And so there are a number of those that will be 
included with the legislative language as well.
    Mr. Dent. Were those some of the insights and 
recommendations that you gathered from the sessions?
    Secretary Donovan. Absolutely, they came directly from 
those conversations.
    Mr. Dent. Okay. Thank you.
    And one final question or comment. I would like to discuss 
a casework issue related to my office that we spent several 
months on, working on, which I discussed briefly with you last 
December. There is a manufactured housing operation in 
Pennsylvania that had their operation shut down by HUD on 
December 3rd, 2013, what appears to have been a clerical error. 
The company's leadership acted, I thought, pretty quickly to 
obtain the necessary paperwork from HUD. They found this to be 
a needlessly difficult task. They were given little guidance 
regarding their error and how to rectify it. The long delays 
resulted in the workers being laid off from their jobs until 
the paperwork came through, and they were finally permitted to 
get back to work.
    It seems to me there is room for improving some of HUD's 
communications with the private sector. And, Secretary Donovan, 
I guess the question is what is HUD doing to improve its 
customer service and ensure that no company is unfairly harmed 
by bureaucratic intransigence while doing their due diligence 
to comply with Department rules and policies?
    Secretary Donovan. Congressman, I want to thank you 
directly for your intervention here. To be frank, this was an 
issue where certainly, from our perspective, it wasn't just a 
clerical error. This was something where there were some 
significant concerns about the structural integrity of this 
proposed sort of alternative design that had been approved in 
the past. There had been changes made, and the company--we had 
reached out a number of times to this company to try to get 
this resolved, without success, and it was only when your 
office became involved that we were able to move the process 
forward.
    I am pleased to say we have resolved that, as you know, 
that workers are back at work. But we certainly saw this as an 
issue where we have taken the steps, we had done outreach and 
had not been successful in being able to get the company to 
comply. And we will continue to try to work with them. And I 
would be happy, if you have specific suggestions of where you 
think our communication fell down, to try to correct those.
    Mr. Dent. Thank you, and the staff, too. The company had 
reached out me to--you know, to try to help move this along. 
And things did get better after we did intervene and your 
office got involved, and I appreciate that. We will follow up 
with you after the meeting about how to, you know--just some 
things we thought could have been done a little bit better. But 
thank you again.
    Secretary Donovan. Thank you.
    Mr. Dent. Yield back.
    Mr. Latham. Thank you, Mr. Dent.
    Mr. Quigley is recognized.
    Mr. Quigley. Thank you, Mr. Chairman.
    Welcome back, Mr. Secretary.
    Secretary Donovan. It is good to be back.
    Mr. Quigley. Following up on Mr. Price's questions about 
HOPWA and the new formula, you are absolutely right in what a 
dramatic difference and how important this could be to my 
committee and the HIV-AIDS community in Chicago. Because they 
are so interested, and so am I, could you give us a little more 
insight as to the timing and when we might see details of the 
formula, and a little more information about how this formula 
is going to be different from the existing?

                      LEGISLATIVE CHANGES TO HOPWA

    Secretary Donovan. The legislative language we put out, I 
was just confirming, it was actually part of the budget that we 
published. We have a further legislative package that will be 
coming, but the specifics of the language on this proposed 
change was included in the budget itself.
    Mr. Quigley. When might you see the new language that you 
just referenced, the one that is still to be released?
    Secretary Donovan. That new language I would expect to be 
out--it will be for the entire administration, I would expect, 
in the next 6 to 8 weeks. The key language for HOPWA was 
included into the budget that we did publish, so I don't expect 
any additional proposals in this further legislative----
    Mr. Quigley. Change that language at all.
    Secretary Donovan. We have spent a lot of time on this. As 
Congressman Price referenced, there has been a lot of focus 
from the CDC, from a range of organizations around the country 
on this. We think we have reached the right proposal in the 
legislative language based on those discussions. And so we 
really hope that the committee will take it up and pass it this 
year.
    Mr. Quigley. Thank you.
    The Office of HIV-AIDS Housing, does it currently have some 
vacancies in that office?
    Secretary Donovan. It does. We have been working to try to 
create a better alignment between the office that works on HIV 
and AIDS and our office that works on homelessness, because we 
see increasingly a significant overlap in those populations, 
and we believe better coordination between those offices will 
help us better serve those with HIV and AIDS who are 
particularly vulnerable to homelessness.
    Mr. Quigley. And how will that affect your filling the 
existing vacancies? You are just trying to get people who are 
going to work on both issues, or are you going to change the 
whole system and have them coordinate more?
    Secretary Donovan. Effectively what we are doing is having 
the HIV-AIDS Office report within the Office of Special Needs 
Programs to the same office director, which will give us better 
coordination and allow us, frankly, to use more resources that 
are within the homelessness office to be able to expand our 
focus on HIV and AIDS, and not only better coordinate, but to 
have just more bodies, more folks that are working on it and 
able to focus on the HIV-AIDS programs.
    Mr. Quigley. Thank you, Mr. Secretary.
    Mr. Chairman, I yield back.
    Mr. Latham. Thank you very much, Mr. Quigley.
    We just got called for votes, which will end the hearing 
this morning, but I think we can go for about another 10 
minutes. Maybe I will get one round and one for the ranking 
member.
    Mr. Secretary, performance on the CDBG grants allocated for 
Hurricane Sandy has been painfully slow, and after a year and a 
half, few homes have been rebuilt. It is looking like it will 
be years before billions of dollars in recovery grants for 
infrastructure and public services will actually be put to use. 
Perhaps even more frustrating, there are billions of dollars 
that remain unallocated by HUD, while eligible grantees from 
2011, 2012, and 2013 storm seasons await action by the Federal 
Government.
    Exactly how much funding remains unallocated, and why is 
HUD still holding those funds at the agency level over a year 
and a half after Sandy and 4 months after the last eligible 
storm would have made landfall?

                      HURRICANE SANDY ALLOCATIONS

    Secretary Donovan. At this point, there is about 4 billion 
that remains unallocated. We look forward to meeting with the 
committee very shortly to discuss that. Basically the issue 
was, because this allocation covered storms up through December 
of 2013, we needed to wait for the final information about the 
impact of those storms. And particularly, as you know, CDBG 
goes to unmet needs, so we had to look at what needs of those 
storms were being met by FEMA, SBA, other programs. We now have 
full data on those storms and the unmet needs, and we are 
prepared to meet with you in the coming days to discuss with 
you a proposed way to allocate those remaining funds.
    Mr. Latham. It is my understanding there are a lot of 
eligible grantees from other storms besides Hurricane Sandy 
that were not treated equally regarding their unmet needs, and 
funds being provided to those non-Sandy storms. What percentage 
of unmet need has been provided to the non-Sandy storm 
grantees? And is that the same percentage as the Sandy storm?
    Secretary Donovan. In the proposal that we want to discuss 
with you, we would treat them exactly the same as the way the 
Sandy grantees have been treated. There have been some updates 
and changes that have been made over the last few years in the 
way that we allocate funds.
    Mr. Latham. The question is currently.
    Secretary Donovan. Currently.
    Mr. Latham. I mean, is the Sandy percentage much greater 
than the other ones?
    Secretary Donovan. Currently it is somewhat higher for 
Sandy because we have added in, at the direction of the 
legislation, resilience needs and other needs that were not 
included before.
    Mr. Latham. That was my next question.
    Secretary Donovan. Again, we are literally at the point 
where we want to sit down and talk through with you a way to 
make sure that we are being very even-handed about the needs 
across the country.
    Mr. Latham. Grants to the Sandy communities were 
considerably higher than other grantees because of their unmet 
needs estimates with the multiplier you called resiliency. Has 
this ever been done before, and do you plan to offer non-Sandy 
grantees the same multiplier? ``Unmet needs'' is not a climate 
change program. Has this ever been done before in other 
communities?
    Secretary Donovan. It is an approach that is different from 
the approach that we have used in the past. Frankly, I think it 
is a better approach. And I think if you talk to grantees, they 
are very clear that the problem is they are often funded just 
to build back what was there before.
    And I think in particular Cedar Rapids is a community that 
was hit very hard and wants to do the right thing in terms of 
building community-level flood protection, and that kind of 
need hasn't been funded through CDBG before.
    Mr. Latham. So you are offering them resiliency?
    Secretary Donovan. As I mentioned, we look forward to 
sitting down with you literally within the next few days to be 
able to present to you a proposal of how to do that.
    Mr. Latham. Why Sandy communities and not other ones?
    Secretary Donovan. Because these formulas have changed over 
time. As a result of the work that was done in the Sandy task 
force, we identified what we thought was a better way to 
allocate CDBG, and we want to now go back and make sure that we 
are treating all of those communities in an even-handed way.
    The other thing I would just say is recognize that when 
allocations were made to those earlier communities, they were 
much smaller. We didn't know there was going to be a Sandy 
allocation of the scale that was made, and so this is a chance 
to go back and supplement earlier appropriations, which, in 
terms of meeting unmet needs, were much, much smaller.
    And so had we had a crystal ball and known that this 
allocation was coming, we might have looked at doing something 
different. We didn't, obviously, and this is a chance to be 
able to go back and make sure that it is being even-handed. I 
very much understand your concerns. We believe you are right to 
make sure that we are doing this in an even-handed way, and we 
do have a proposal we want to share with you on that.
    Mr. Latham. Thank you.
    Mr. Pastor.
    Mr. Pastor. Mr. Secretary, last year I asked you about your 
IT. You had a number of people look at your IT and say it was--
you needed to upgrade it, you needed to modernize it.
    So the question is how far along are you with the system 
you have now? And at the last hearing, you talked about a 
transformation where you integrate--you were going to integrate 
to PHAs. And so in the budget request, how far does it get you? 
And is there also programming for cybersecurity?

                               IT SYSTEMS

    Secretary Donovan. So I think we have made real progress 
working with the committee. For example, our NGMS system, which 
will consolidate and improve our oversight of rental 
assistance, has made significant progress. We have implemented 
this past year the first two components of that system. We are 
also making real progress on our FHA transformation, technology 
initiative. So we are making progress.
    I will say that we are concerned that the level of funding 
these past few years has not been substantial enough for us to 
move these key projects as quickly as we would like, and we do 
want to discuss with the committee the ability to make sure we 
have adequate funds for new system development, not just 
maintenance of funds.
    And this goes directly to your question about 
cybersecurity. We have made real advances. For example, we have 
acquired software that will allow us to scan every outgoing 
email for what we call PII, you know, personal identified 
information. But if we are not able to upgrade these systems 
overall, we will continue to have unsupported systems that do 
not have the latest in security. And so that is an issue we are 
concerned about in terms of the overall budget for developing 
new systems.
    Mr. Pastor. Thank you.
    Secretary Donovan. Thank you.
    Mr. Pastor. Thank you, Mr. Chairman.
    Mr. Latham. With the votes on the floor, I think we are 
going to have to adjourn the hearing. I know there are a lot of 
questions that people have that will be for the record. We 
would ask that if we could get the response back as quickly as 
possible. Within at least 30 days, we are going to be starting 
to write the bill pretty quickly.
    Secretary Donovan. Absolutely.
    Mr. Latham. We appreciate your efforts to make that happen. 
Thank you very much. This will be the last hearing. I know you 
hate that.
    Mr. Pastor. I am going to reconsider. I am having second 
thoughts here. I want to see Donovan one more time.
    Mr. Latham. My people at home have pretty well accepted.
    But I just want to publicly thank Mr. Pastor, been a great, 
great friend, ranking member, for all your cooperation. And it 
has been a real treat and an honor to have this opportunity to 
serve here with you.
    Mr. Pastor. Well, Mr. Secretary, the people ask me why I 
decided to retire. I could not bear being up here 1 year 
without Chairman Latham, and so I thought I would hang it up. 
But I have to tell you that I have really enjoyed his 
leadership. And obviously we have had a friendship for many 
years. And thank you and thanks to Chairman Latham for your 
leadership and your friendship.
    Secretary Donovan. Thank you both for your leadership and 
friendship. It has meant a lot to communities around the 
country.
    Mr. Latham. Very good. Thank you. The hearing is adjourned.


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                           W I T N E S S E S

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                                                                  Page
Donovan, Hon. Shaun............................................135, 253
Ferro, Anne......................................................   165
Foxx, Hon. Anthony...............................................     1
Huerta, Michael..................................................   165
Jaenichen, Paul..................................................   165
McMillan, Therese................................................   165
Nadeau, Greg.....................................................   165
Quarterman, Cynthia..............................................   165
Szabo, Joseph....................................................   165


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