[Senate Hearing 113-590]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 113-590
 
                      NEW ROUTES FOR FUNDING AND 
                     FINANCING HIGHWAYS AND TRANSIT

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

                                HEARING

                               BEFORE THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 6, 2014

                               __________




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                          COMMITTEE ON FINANCE                                                   
                                                    
                      RON WYDEN, Oregon, Chairman

JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
Virginia                             CHUCK GRASSLEY, Iowa
CHARLES E. SCHUMER, New York         MIKE CRAPO, Idaho
DEBBIE STABENOW, Michigan            PAT ROBERTS, Kansas
MARIA CANTWELL, Washington           MICHAEL B. ENZI, Wyoming
BILL NELSON, Florida                 JOHN CORNYN, Texas
ROBERT MENENDEZ, New Jersey          JOHN THUNE, South Dakota
THOMAS R. CARPER, Delaware           RICHARD BURR, North Carolina
BENJAMIN L. CARDIN, Maryland         JOHNNY ISAKSON, Georgia
SHERROD BROWN, Ohio                  ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado          PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania
MARK R. WARNER, Virginia

                    Joshua Sheinkman, Staff Director

               Chris Campbell, Republican Staff Director

                                  (ii)
  

                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee 
  on Finance.....................................................     1
Hatch, Hon. Orrin G., a U.S. Senator from Utah...................     3

                         CONGRESSIONAL WITNESS

Boxer, Hon. Barbara, a U.S. Senator from California..............     5

                               WITNESSES

Kile, Joseph, Ph.D., Assistant Director for Microeconomic 
  Studies, Congressional Budget Office, Washington, DC...........     9
Layne, Hon. Aubrey L., Jr., Secretary of Transportation, 
  Commonwealth of Virginia, Richmond, VA.........................    10
Dhru, Jayan, senior managing director, corporate and 
  infrastructure ratings, Standard and Poor's Ratings Services, 
  New York, NY...................................................    12
Barend, Samara, senior vice president, AECOM Capital, New York, 
  NY.............................................................    14
Edwards, Chris, director of tax policy studies, Cato Institute, 
  Washington, DC.................................................    16

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Barend, Samara:
    Testimony....................................................    14
    Prepared statement...........................................    41
    Responses to questions from committee members................    50
Boxer, Hon. Barbara:
    Testimony....................................................     5
    Prepared statement with attachment...........................    57
Dhru, Jayan:
    Testimony....................................................    12
    Prepared statement...........................................    61
    Responses to questions from committee members................    66
Edwards, Chris:
    Testimony....................................................    16
    Prepared statement...........................................    69
Hatch, Hon. Orrin G.:
    Opening statement............................................     3
    Prepared statement with attachment...........................    81
Kile, Joseph, Ph.D.:
    Testimony....................................................     9
    Prepared statement...........................................    84
    Responses to questions from committee members................   104
Layne, Hon. Aubrey L., Jr.:
    Testimony....................................................    10
    Prepared statement...........................................   107
Wyden, Hon. Ron:
    Opening statement............................................     1
    Prepared statement...........................................   117

                             Communication

Adams, Travis et al..............................................   119


                      NEW ROUTES FOR FUNDING AND 
                     FINANCING HIGHWAYS AND TRANSIT

                              ----------                              


                          TUESDAY, MAY 6, 2014

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:07 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Ron 
Wyden (chairman of the committee) presiding.
    Present: Senators Rockefeller, Stabenow, Nelson, Menendez, 
Carper, Cardin, Bennet, Casey, Warner, Hatch, Grassley, Crapo, 
Thune, and Isakson.
    Also present: Democratic Staff: Joshua Sheinkman, Staff 
Director; Michael Evans, General Counsel; Todd Metcalf, Chief 
Tax Counsel; Ryan Abraham, Senior Tax and Energy Counsel; and 
Todd Wooten, Senior Tax and Energy Counsel. Republican Staff: 
Chris Campbell, Staff Director; Tony Coughlan, Tax Counsel; 
Jeff Wrase, Chief Economist; and Nicholas Wyatt, Tax and 
Nominations Professional Staff Member.

   OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM 
             OREGON, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. The Finance Committee will come to order. The 
Finance Committee is here today to discuss how to meet the 
country's extraordinary need for investment in roads and 
highways and other infrastructure projects.
    My bottom line is, you cannot have a Big League quality of 
life, and you certainly cannot have Big League economic growth, 
with Little League infrastructure. The status of our roads and 
highways affects all Americans, from commuters to exporters to 
rural Americans who drive long distances for just about 
everything. And, in the global competition for investment in 
jobs, the condition of our infrastructure is a major 
determinant of how the outcome plays out.
    By any calculus, our investments in infrastructure lag way 
behind the competition. China, for example, invests 8.5 percent 
of its gross domestic product in infrastructure, and in some 
parts of Canada, they invest 10 percent. The U.S. invests only 
1.7 percent. No American can be happy with the prospect that it 
is easier to move goods from a Chinese factory to a Chinese 
port than from an American factory to an American port. That is 
what is at risk here.
    The American Society of Civil Engineers, the trusted gurus, 
so to speak, of infrastructure, write an annual report card 
that grades our country's roads and highways. In 2013, we 
earned a D-plus, not exactly anybody's definition of success. 
The report found that nearly a third of our roads are in 
disrepair, and nearly half of our highways around cities suffer 
from congestion. Americans waste millions of hours and more 
than a billion gallons of gasoline sitting in traffic every 
year. That is what has to change.
    Now, there are two priorities to consider. The first is 
reauthorizing and fixing the Highway Trust Fund, which feeds 
money into transportation projects. Unfortunately, it has less 
money coming in than it has going out. Fixing it in the short 
term will require $10 billion to keep the fund solvent through 
the calendar year. Getting through fiscal year 2015 will take 
another $8 billion.
    What happens if the authorization expires, or the fund 
dries up? According to one report, 6,000 projects grind to a 
halt, putting many thousands of construction workers out of a 
job and causing headaches, what I call ``traffic migraines,'' 
from one end of the country to the other.
    Then for the longer term, Congress needs to find a 
sustainable source of funds that will keep this crunch from 
happening again. It would be a tragic mistake to let highway 
funding become another stop-and-go extender like Medicare 
physician payments and many other important tax incentives have 
been. Relying on short-term policies, emergency patches, and 
temporary extensions makes forward-looking strategies 
impossible. And when it comes to infrastructure, our business 
community advises that planning ahead is absolutely essential.
    Some proposals offered over the last few months, like using 
new tolls on existing roads, or charging motorists based on the 
number of miles they drive, in my view raise questions about 
privacy and feasibility that would need to be answered. We are 
going to examine them thoroughly.
    It is going to take $100 billion just to keep the Highway 
Trust Fund solvent for 6 years. Meeting that bar will give the 
States a chance to think ahead, and construction workers will 
not have to worry about being laid off because of Washington 
inaction. And while the Congress develops fresh, long-term 
policies for the trust fund, it should also consider ways to 
encourage Americans to use the cleanest and most efficient 
fuels. But we ought to face it. Fixing the trust fund is just 
the bare minimum in terms of the investment needed. It is time 
to aim higher and to do it on a bipartisan basis.
    That is where the second priority comes in: getting private 
capital off the sidelines and into this effort. There are a 
whole host of innovative proposals. I see Senator Warner is 
here, and Senator Blunt, Senator Bennet, Senator Schumer, a 
number of my colleagues, have bipartisan proposals for the long 
term. And the only place you have to look to find proof that 
you can get private capital off the sidelines is the Build 
America Bonds program. The Build America Bonds program had been 
proposed by Democrats and Republicans for years and years when 
it was finally included in the Economic Recovery Act.
    In this very hearing room, colleagues, Senators hoped--we 
hoped--that it might generate $5 to $10 billion worth of 
infrastructure projects over its lifetime. By the time the 
Recovery Act period was over, Build America Bonds had helped to 
finance more than $180 billion worth of projects in my home 
State and from one end of America to another.
    So the lesson is clear. There are hundreds of billions of 
dollars in private capital sitting on the American sidelines. 
Some of that can surely be invested in American infrastructure. 
So I would like to aim higher and do everything possible to 
build a bipartisan coalition for policies that generate $1 
trillion in American infrastructure.
    From a purely commercial standpoint, investing that capital 
in critical American infrastructure projects certainly has the 
potential to be more profitable and improve more lives than a 
number of the alternatives. It is important not to punt 
investments further into the future. Maintaining a good-quality 
road is cheaper than rebuilding a failing one, especially--
especially--while interest rates are low. And it is tougher to 
invest in new transportation projects if the country's roads 
and highways are falling into disrepair. The price tag for a 
strong national infrastructure is only going to grow in the 
future, so it is time to get to work.*
---------------------------------------------------------------------------
    * For more information, see also, ``Overview of Selected Tax 
Provisions Relating to the Financing of Surface Transportation 
Infrastructure,''Joint Committee on Taxation staff report, May 5, 2014 
(JCX-49-14),https://www.jct.gov/
publications.html?func=startdown&id=4599.
---------------------------------------------------------------------------
    [The prepared statement of Chairman Wyden appears in the 
appendix.]
    The Chairman. Finally, before I recognize Senator Hatch and 
introduce our colleague, the chair of the Environment and 
Public Works Committee, who has been a passionate advocate for 
transportation, fortunately, I want to take a moment to 
recognize the unfortunate passing of our former colleague, Jim 
Oberstar. Jim Oberstar spent his entire career working on 
transportation policy, first as a staffer who worked on the 
legislation that created the Department of Transportation in 
the 1960s, then during the years that he represented 
Minnesota's 8th district for more than 3 decades in the House. 
He was a titan of transportation policy, especially in 
aviation. All who fly in America should be grateful to Jim 
Oberstar, and I would just like to say, because I think some 
colleagues did not get to serve with him, I did not get a 
chance to serve with anyone more decent and caring than the 
late Congressman Jim Oberstar, and I just wanted to recognize 
his passing this morning.
    Senator Hatch?

           OPENING STATEMENT OF HON. ORRIN G. HATCH, 
                    A U.S. SENATOR FROM UTAH

    Senator Hatch. Well, thank you, Mr. Chairman. I share your 
viewpoint with regard to Jim Oberstar. He was a fine, fine man 
and a great member of Congress.
    I thank you for holding this hearing. I also want to thank 
the chair of the Senate Committee on Environment and Public 
Works, Senator Boxer, for joining us today. Welcome. We are 
grateful to have you and your advice.
    I think we can all agree that a long-term surface 
transportation reauthorization is an important goal, most 
notably because it will allow States to plan for the long term 
when it comes to funding infrastructure programs. However, the 
old admonition that there is no such thing as a free lunch 
still holds, which is why this hearing is so important.
    According to current estimates, the Highway Trust Fund will 
be unable to meet obligations sometime this summer. This is the 
result of what is becoming a longstanding problem when outlays 
from the trust fund are greater than the receipts from the 
dedicated Federal excise taxes.
    When it comes to paying for all or some of the highway 
bill, a number of ideas have been floated, some good, some bad. 
One of the ideas I have heard most often is the proposal to 
raise revenue by taxing overseas earnings of U.S. global 
corporations. Now, this idea, sometimes referred to as ``the 
repatriation proposal,'' is, in my view, not a very good one.
    As we all know, under current law the U.S. defers taxes on 
earnings companies make overseas until the money is brought 
back into the country. And because the U.S. has the highest 
corporate tax rate in the developed world, many companies 
prefer to keep their money offshore for long periods of time. 
We simply have to attack that problem. Some have suggested that 
we change the rules of international taxation in order to 
immediately subject those funds to U.S. taxes so that we can 
use the revenue to, among other things, shore up the Highway 
Trust Fund.
    Make no mistake. I believe we should have a robust 
discussion as to how our tax system should deal with overseas 
earnings. However, given the economic implications of any 
changes to this system, that discussion should take place in 
the context of a broader debate about tax reform, not as a part 
of an ad hoc effort to pay for a highway bill.
    Now, I hope that today's discussion does not simply devolve 
into a debate about the wisdom of the repatriation proposal. 
That said, we do face a near-term problem in that 
reimbursements to the States will likely be impacted if the 
trust fund is not shored up in the very near future. Neither 
the chairman nor I wants to see a slowdown in payments. Let us 
keep in mind that, however we deal with the immediate shortfall 
in the Highway Trust Fund, the long-term funding problem will 
still loom before us.
    I am more than willing to have a discussion about long-term 
financing options such as bond proposals and public-private 
partnerships, but we should remember that, in this committee, 
we are dealing with a funding problem more than a financing 
problem with a system that was created based on a user-pays 
model, where certain Federal excise taxes, such as the gas tax, 
were intended to serve as proxies for use of certain resources, 
such as the Federal highway system. Personally, I would like to 
preserve the user-pays system and prevent our Federal 
infrastructure programs from becoming another tax extender, 
dependent every year or two on an infusion of cash from the 
general fund of the Treasury.
    In addition, while it is wholly appropriate and necessary 
for us to thoroughly examine the revenue side of the funding 
equation, we should also have a complete examination of the 
spending side. Since its inception in the 1950s, the Highway 
Trust Fund has been called upon to fund an increasingly broad 
scope of activities, such as bike paths and other so-called 
enhancements, in quotes. Additionally, there are many 
requirements and regulations that increase the costs of Federal 
highway projects. So, if we are going to talk about revenues, 
we should also talk about reforms that will address costs as 
well as outlays.
    Now, Mr. Chairman, I look forward to working with you to 
examine the short- and long-term issues we face when dealing 
with this important part of our infrastructure. And I look 
forward to working with our other colleagues on this committee 
and throughout the Senate as well and having a robust 
discussion of all of these issues during today's hearing.
    I want to thank you again, Mr. Chairman, for holding this 
hearing.
    [The prepared statement of Senator Hatch appears in the 
appendix.]
    The Chairman. Thank you, Senator Hatch. And we are going to 
be working on this in a bipartisan fashion, and we are going to 
work with the Environment and Public Works Committee in a 
bipartisan way.
    I am very pleased that the chair of the committee, Senator 
Boxer, is here, and I just would like to note that virtually 
every time that Senator Boxer and I have talked about this over 
the years, initially with Jim Inhofe but now with Dave Vitter, 
Senator Boxer has emphasized how important it is that these 
issues are addressed in a bipartisan way.
    So we welcome the chair of the Environment and Public Works 
Committee. We will make your prepared remarks a part of the 
record, and you may proceed as you like.

               STATEMENT OF HON. BARBARA BOXER, 
                 A U.S. SENATOR FROM CALIFORNIA

    Senator Boxer. Thank you. Senators, thank you. All my 
friends, I am just so happy to be here, and I want to talk to 
you straight from the heart and straight from the shoulder, 
because where we are is in a very difficult place. And, if we 
are going to succeed, Mr. Chairman and Ranking Member, you are 
both right in that we have to examine everything. We have to do 
it in a bipartisan way. People who travel on the roads, people 
who cross the bridges, every political party--this is something 
that must bring us together.
    I want to say, first of all--because you know how I am, 
very direct--I think a short-term extension really leads to a 
major problem. It extends uncertainty. And uncertainty is a 
death knell for our States. So whatever you do--and I know how 
hard it is--we really need to push for a multi-year solution.
    I come here in friendship. I want you to know that Senator 
Vitter and I have--I know how Senator Vitter and I argue on the 
environment issues, but on public works we have been joined at 
the hip. We, our Big Four--along with Senators Carper and 
Barasso--have agreed in principle on a highway bill, and we are 
closing it out today, and we should mark it up next week. And I 
want to say, particularly to Senator Hatch, it includes 
reforms. So did MAP-21. And believe me, we all came away a 
little bruised and battered because we had to make these 
compromises. But we did it.
    Our bill will be based on current levels plus inflation. 
So, Senator Wyden, I know your vision, which I share, is for a 
much larger look at this. But our committee, in order to just 
save the Highway Trust Fund, has come up with a proposal that 
is based on current spending plus inflation. Also, we move 
around some funds within. Considering what Senator Hatch said, 
there are some things we think we can move away. And we came up 
with some good funds to do some interesting things.
    Now, I just want you all to know this very 
straightforwardly: the trust fund runs out of money in the 
summer. Let me say it again. The trust fund runs out of money 
in August. And we need, in order to fix this bill, to keep it 
just to its current level plus inflation, we need you, with our 
help and support, to figure out how to pump $18 billion into 
the Highway Trust Fund.
    I share Senator Hatch's view. It should be a user-pays 
situation, because we do not want that uncertainty that you 
talked about.
    Now, I am going to just be very brief, because I have 2 
minutes left. I want to give you some quotes, and I see Senator 
Isakson here. According to Georgia's Department of 
Transportation, if Federal funding is cut, I quote, ``We would 
not be able to fund any new projects.'' They say it is a 
potential disaster for a State that is very dependent on the 
Federal transportation dollar.
    In Iowa, I say to Senator Grassley, the Iowa DOT described 
the impacts of going 1 full year without a Federal highway 
program. They said, ``For the Iowa DOT, this will result in 
cutting our anticipated construction program in half for 2015. 
This will have an impact on local jurisdictions, and they will 
not be able to begin any new construction projects that involve 
Federal funding.'' And I could have done this for every one of 
your States, but I did do it for Oregon. [Laughter.] Oregon DOT 
said it would be hit hard because it might be forced to delay 
or cancel a large number of highway projects. Quoting them: 
``Basically, our entire capital construction program could be 
affected.''
    I am going to hold up a picture for you. You are going to 
wonder, ``What is she thinking?'' But it is a photograph of a 
Super Bowl stadium, and 100,000 people fit in there. We have 
800,000 construction workers who are out of work. That is eight 
of these stadiums. Just to put it into perspective, at the 
height of the recession, we had 2 million unemployed, so we 
had--how many of those? Twenty. So we are down to eight. But we 
cannot go back to those days. And this does not count the 
thousands of businesses, both small and large, that would be 
affected.
    Now, there are lots of solutions. In my 30 seconds, a gas 
tax rise is supported by the Chamber of Commerce. A lot of us 
do not support it at this point. President Obama does not 
support it at this point. It is a problem. But it should be 
looked at.
    Now, what the Governor of Virginia did and what the 
Governor of Michigan is doing right now is, they are supporting 
a plan that would take away the gas tax at the pump and replace 
it with a sales tax on the wholesale price of gasoline and 
diesel. This is a Republican Governor who signed that into law, 
I want to say to my colleagues, and a Republican Governor 
looking at it. It is an easy solution. You do away with the gas 
tax. You replace it with this sales tax. It brings in the money 
that you need, and you can adjust it, depending on what it is 
that you want to accomplish.
    So I am going to put my statement in the record, and I will 
include a letter from the Governors of a whole slew of States, 
including, Senator Bennet, Colorado and South Dakota and 
Pennsylvania and Maryland, and lots of other States that are 
represented here, saying, please do not fail us.
    I will close with this. Colleagues, failure is not an 
option for us. We need to do this. It is our time to figure it 
out. And I want to be there for you. I know Senator Vitter 
feels the same way. And we will stand by. We will help you in 
any way with technical support--not that your staff needs it, 
but we are there.
    Thank you so much for this opportunity.
    [The prepared statement of Senator Boxer appears in the 
appendix.]
    The Chairman. I thank the chair of the Environment and 
Public Works Committee, and I think that is an ideal closing to 
say ``failure is not an option.'' And I would also like to note 
that I have very much appreciated your effort to try to do some 
serious streamlining in terms of getting these projects through 
the regulatory hoops. And I think that also is a step towards 
bringing both sides together.
    I think at this point, Senator Hatch would like to read a 
statement, I believe, from the ranking minority member, Mr. 
Vitter. Is that correct?
    Senator Hatch. Yes, he has asked me to read his statement.
    Senator Boxer. I would like to stay for that.
    Senator Hatch. Well, you do not have to, but I do not blame 
you if you want to. [Laughter.]
    Well, I want to thank you, Senator Boxer, a great chairman 
in this area. Unfortunately, Ranking Member Vitter was unable 
to join us this morning, but I do have a letter from him that 
he would like me to read, if I can, or at least put part of it 
in the record.
    His letter reads: ``Thank you, Chairman Wyden and Ranking 
Member Hatch, for holding today's hearing. Highway 
infrastructure is a critical component of our Nation's economy 
and our quality of life. A first-class infrastructure is 
fundamental to connect people in communities and is a critical 
building block in developing, sustaining, and growing an 
economy--something we must all remember and prioritize as we 
move forward.
    ``Putting such a structure on sound footing will restore 
the stability and certainty in the Highway Trust Fund, which is 
so vital to economic growth in this country. I am mindful of 
the comments of several Finance Committee members from the last 
markup on highway funding. I would like to tell my friends on 
my side that I am sensitive to the principles laid out at that 
time. A bipartisan solution to this problem is the only way 
forward.
    ``So, as we work toward such a solution, we must again 
adhere to the following principles. We must work to maintain 
the user-based system. We should avoid spending down the 
balance of the trust fund and work to keep a healthy cushion to 
ensure against funding crises and disruption. We should provide 
for as long a multi-year authorization as possible to minimize 
uncertainty. And finally, we should preserve investment levels 
and not increase the overall tax burden on taxpayers.
    ``If we are going to be successful at putting such a 
structure back on a sustainable course and deliver on the 
economic promise of sound infrastructure investment, we must 
work to put trust back in the Highway Trust Fund. Adhering to 
the principles I have laid out will bolster our efforts toward 
rebuilding that trust and finding a bipartisan solution.
    ``Again, I thank Chairman Wyden and Ranking Member Hatch 
for holding this hearing. Sincerely, Senator Vitter.''
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Hatch.
    Senator Hatch. I would like this letter----
    The Chairman. Without objection, it will be entered into 
the record at this point.
    [The letter from Senator Vitter appears in the appendix on 
p. 83.]
    The Chairman. It is very clear that the chair and the 
ranking member of this committee and the chair and the ranking 
member of the Environment and Public Works Committee, we are 
all going to work very closely together. And to you, Chairman 
Boxer, a special thanks for your energy and your passion. That 
is what it is going to take to make this happen.
    Senator Boxer. Thank you very much, everybody.
    The Chairman. Thank you.
    Let me now announce the witnesses for the panel. I do want 
to let Senator Warner introduce the witness from Virginia.
    Our first witness will be Dr. Joseph Kile, who is the 
Assistant Director of the Microeconomic Studies Division of the 
Congressional Budget Office.
    Then we have Mr. Aubrey Layne, Secretary of Transportation 
for the State of Virginia. Senator Warner will give him a 
formal introduction.
    Our third witness will be Jay Dhru, who is the senior 
managing director of corporate and infrastructure ratings for 
Standard and Poor's Ratings Services.
    Our fourth witness will be Ms. Samara Barend, who is the 
senior vice president and public-private partnership (P3) 
development director for AECOM Capital.
    And our final witness will be Mr. Chris Edwards, who is 
director of tax policy studies for the Cato Institute.
    Senator Warner, why don't you introduce Mr. Layne?
    Senator Warner. Thank you, Mr. Chairman. I want to 
introduce my good friend, Aubrey Layne, who is the Secretary of 
Transportation for Virginia. Under Governor McAuliffe, Aubrey 
Layne was sworn in as Secretary of Transportation just 
recently, in January of this year. He oversees an agency with 
10,000 employees with a combined budget of more than $5 
billion--something that I paid a great deal of attention to 
while I was Governor.
    Aubrey has served on our oversight board prior to being 
Secretary--the Commonwealth Transportation Board. He began his 
career as a CPA with KPMG. He was active in the private sector. 
He was president of a very successful public-private initiative 
in the education space. And what I think he is going to talk 
about beyond the concerns about what happens to the Highway 
Trust Fund is that Virginia, actually over the last 20 years, 
has been really a leader in public-private initiatives. I think 
he is going to give a shout-out for the bipartisan initiative 
that we have created, the BRIDGE Act * that has five Republican 
and five Democratic cosponsors. And I think he will make the 
point, while this is a useful tool in the toolbox, it is not 
the silver bullet, that you have to have that permanent funding 
source. You can leverage private capital, but, if you do not 
have that permanent funding source, you are not going to be 
able to get things done.
---------------------------------------------------------------------------
    * The Building and Renewing Infrastructure for Development and 
Growth in Employment Act.
---------------------------------------------------------------------------
    So, Mr. Chairman, I really appreciate the fact that we have 
the Secretary of Transportation here. He can also comment, as 
was mentioned by Senator Boxer, on some of the changes we have 
made in Virginia transportation recently. Thank you.
    The Chairman. Thank you, Senator Warner.
    I thank all of our witnesses. It is customary here that 
your prepared statements are made a part of the record, and 
that will be done. If you could use your 5 minutes or so to 
summarize, you can see there are a host of Senators here who 
would like to ask questions. That will be helpful. Let us begin 
with you, Dr. Kile.

    STATEMENT OF JOSEPH KILE, Ph.D., ASSISTANT DIRECTOR FOR 
MICROECONOMIC STUDIES, CONGRESSIONAL BUDGET OFFICE, WASHINGTON, 
                               DC

    Dr. Kile. Thank you, Chairman Wyden, Senator Hatch, and 
members of the committee. I appreciate the opportunity to be 
here today to talk about the status of the Highway Trust Fund 
and options for financing highway construction.
    In 2013, about $156 billion was spent to build, operate, 
and maintain highways in the United States. Another $60 billion 
was spent on transit systems. About one-quarter of that total 
came from the Federal Government, mostly through the Highway 
Trust Fund.
    Although the trust fund's balances were stable or growing 
for several decades, since 2008 lawmakers have transferred $54 
billion from the general fund of the Treasury to the trust 
fund. With its current revenue sources, the Highway Trust Fund 
cannot support spending at the current rate. By the end of this 
fiscal year, CBO estimates that the balance in the highway 
account of the trust fund will fall to about $2 billion, and 
the balance in the transit account will fall to about $1 
billion. Because of those declining balances, the Department of 
Transportation will probably delay payments to States at some 
point this summer.
    In 2015, CBO estimates that the shortfall will be about $13 
billion, as future spending from the trust fund outpaces 
revenue collected. If lawmakers do not act to address that 
shortfall, all of the receipts credited to the fund during the 
next year would be needed to meet obligations made during or 
before 2014. Beyond that, if nothing changes, the shortfall in 
the trust fund would steadily accumulate in subsequent years.
    Lawmakers have three broad options to address the projected 
shortfalls in the trust fund. One option would be to reduce 
Federal spending on highways and transit projects. If lawmakers 
choose to address the shortfall entirely by cutting spending, 
the authority to obligate funds from the highway account would 
have to decrease by more than 30 percent over the next decade, 
and similarly, the authority to obligate funds from the transit 
account would need to decline by about 65 percent compared with 
CBO's baseline.
    A second option would be to increase the revenues credited 
to the trust fund. For instance, one approach would be to 
increase the existing taxes on gasoline and diesel fuel. The 
staff of the JCT estimated that a 1-cent increase in the tax on 
gasoline and diesel fuel would raise about $1.5 billion each 
year. As such, increasing those taxes by 10 to 15 cents per 
gallon would eliminate the projected shortfall. Another 
approach for increased revenues would be to impose new taxes on 
using the highway system such as one based on vehicle miles 
traveled.
    A third option for addressing the shortfall would be to 
continue to transfer money from the general fund to the Highway 
Trust Fund. Unless spending were cut or revenues were 
increased, that would require a transfer of $18 billion in 2015 
and between $13 and $18 billion every year thereafter through 
2024.
    The projected shortfall in the trust fund has generated 
interest in greater use of borrowing by State and local 
governments, sometimes in conjunction with the private sector. 
The Federal Government encourages such borrowing through tax 
preferences that provide a subsidy for highway financing 
projects. In addition, the Federal Government offers direct 
loans that encourage State and local governments and the 
private sector to borrow money for highways. Through both of 
those channels, though, the Federal Government bears some of 
the cost of such financing.
    Despite some prominent examples, the experience with 
private financing in the United States is very limited. In 
particular, highway projects that have used private financing 
have accounted for about one-half of 1 percent of all spending 
for highways over the past 25 years. Some of those projects 
have failed financially because the total revenues for the 
projects were overestimated. Perhaps because of that 
experience, projects that are still under construction rely 
less on tolls as a revenue source. More commonly, private 
partners are compensated from a State's general fund, thus 
limiting the risk that the private partner will not be repaid. 
As a result, the risk of lower-than-expected revenues stays 
with the public sector.
    Regardless, however, borrowing is only a mechanism for 
making future tax revenues or future user fees available to pay 
for transportation projects today. It is not a new source of 
revenues. Borrowing can augment the funds readily available for 
highway projects today, but revenues that are committed to 
repaying borrowed funds will be unavailable for new 
transportation projects or other government priorities in the 
future.
    Thank you very much for your time, and I would be happy to 
answer any questions that you might have.
    [The prepared statement of Dr. Kile appears in the 
appendix.]
    The Chairman. Thank you very much, Dr. Kile.
    Our next witness will be Mr. Aubrey Layne.

     STATEMENT OF HON. AUBREY L. LAYNE, JR., SECRETARY OF 
     TRANSPORTATION, COMMONWEALTH OF VIRGINIA, RICHMOND, VA

    Mr. Layne. Good morning. I would like to thank Chairman 
Wyden, Ranking Member Hatch, and Senator Warner for the 
opportunity to speak with you today on a vitally important 
matter that concerns our Nation.
    As Senator Warner mentioned in my introduction, prior to 
being appointed by Governor McAuliffe, I served on the 
Commonwealth Transportation Board for 5 years, where I was very 
involved in the funding for transportation projects in 
Virginia. I was introduced at that time to the three As of 
transportation: appropriation, allocation, and authorization.
    Now, as Secretary of Transportation, I certainly understand 
there is a fourth A, and that is accountability, as I see 
myself as a primary fiduciary for the taxpayers of the 
Commonwealth and our country. I oversee and set policy for the 
Commonwealth's seven transportation agencies, with an annual 
budget of close to $5.5 billion.
    Now, I think I am the only panelist today who is directly 
responsible for implementing policy and delivering projects. As 
a State that recently tackled some of the big issues that you 
are looking at here today, I have a few points I would like for 
you to consider.
    First of all, the Federal Government has a strong role in 
surface transportation. This is a partnership with the States, 
and we need a strong, reliable partner. Many States are 
stepping up or have stepped up, but we can only do so much. We 
need the Federal Government to do its part. And the solutions 
that we come up with here should include all modes of 
transportation--highways, transit, and rail--and should be 
long-term in nature.
    And last but not least, the conversation here today should 
also be about growth of the system. It is not enough simply to 
patch holes. We have to discuss how we invest at what levels to 
support sustained economic growth.
    I can give you a few examples of how this has worked in 
Virginia. As you may know, last year the Republican-led General 
Assembly and Republican Governor worked across the aisle with 
Democrats to pass the first long-term solution to 
transportation funding in Virginia in over 25 years. The 
compromise raises almost $3 billion over 6 years for State-wide 
revenues, and it has multiple parts. One, we converted the 
cents-per-gallon tax to a wholesale sales tax. We also 
increased the general sales tax, and a portion of the existing 
general sales tax was transferred to transportation, and we 
also increased the motor vehicle sales tax.
    The key here is, in the State of Virginia we increased both 
general fund revenues and non-general fund revenues. This 
needed funding provides Virginia with approximately $1.1 
billion annually in revenue available for transportation 
projects such as highway, rail, transit, aviation, and ports.
    We combined these State-wide revenues with the $1.1 billion 
we have traditionally received from the Federal Government to 
help fund projects ranging from freight rail improvements, 
large highways, public-private partnerships, to passenger rail 
expansion.
    To fund many of these projects, we work hard to leverage 
our government funding. So, in addition, we look to other 
sources of revenue such as Transportation Infrastructure 
Finance and Innovation Act loans, private activity bonds, 
contributions from developers and local governments, State 
bonds, toll revenues, and loans and lines of credit from the 
Virginia Transportation Infrastructure Bank. Basically, if 
there is an option to invest in infrastructure in Virginia, we 
have explored it. But even with all our efforts, the Federal 
Government remains a critical partner. The Federal program 
represents more than half of our expenditures that are 
available for our annual capital revenues.
    As you know, the Federal Highway Trust Fund is facing an 
impending insolvency. If nothing is done, the consequences will 
be dire. In Virginia, we expect our construction program will 
grind to a halt this October and imperil our ability to pay 
contractors for existing contracts. We ask Congress to act to 
shore this up.
    Now, there are lots of options that have been outlined in 
the past for how this can be accomplished. But the option of 
how to best solve this Federal revenue problem is for this 
committee and other members of Congress to decide.
    However, the trust fund is not the only pending emergency. 
Key transportation programs are left out of the trust fund and 
go through the appropriations process. TIGER grants,* new 
starts, and passenger rail are just as important to us as 
Federal trust fund revenues. Unfortunately, we do not know from 
year to year whether these programs will exist or how much will 
be funded.
---------------------------------------------------------------------------
    * The Transportation Investment Generating Economic Recovery grant 
program.
---------------------------------------------------------------------------
    Now, I understand there is a lot of debate going on about 
the type of investments, and, as you consider these questions, 
I would ask that you remember that transportation is not an end 
in itself. The focus should be on how an investment achieves an 
outcome, how we help move people and goods efficiently, improve 
the economy, and spur economic growth.
    Now, finally, as I said, we are looking at every way to 
leverage funds, and I know the committee is examining some of 
these options. We strongly support the BRIDGE Act, but I want 
to address the misconception that I continually hear. Public-
private partnerships and financing are helpful, but they are 
not silver bullets and cannot solve all the transportation 
problems. Financing in P3s of large-scale projects is 
necessary, but it is only a part of the procurement process. 
And I will remind the committee that there are two Ps before 
partnership: public and private. And without those funds, we 
could not have P3.
    So, just wrapping up here, the problems that we face are 
significant, and we ask Congress to act in a bipartisan manner 
to get this resolved. We look at transportation as underpinning 
our economy and, quite frankly, underpinning our freedoms. So 
we think that this solution is necessary, not only to support 
projects, but the quality of life in our Nation.
    Thank you very much.
    [The prepared statement of Mr. Layne appears in the 
appendix.]
    The Chairman. Thank you very much, Mr. Layne.
    Mr. Dhru?

 STATEMENT OF JAYAN DHRU, SENIOR MANAGING DIRECTOR, CORPORATE 
    AND INFRASTRUCTURE RATINGS, STANDARD AND POOR'S RATINGS 
                     SERVICES, NEW YORK, NY

    Mr. Dhru. Chairman Wyden, Ranking Member Hatch, and members 
of the committee, my name is Jay Dhru, senior managing director 
with Standard and Poor's. As a leading provider of credit 
ratings, research, and analytics, our teams of analysts assess 
risk and assign credit ratings to public-private partnership 
projects, or P3s, such as the I-95 Express Lanes managed lanes 
project in Virginia, the Goethals Bridge replacement in New 
York, and the Ohio River Bridges Project.
    Thank you for the chance to share our views on the 
challenges and opportunities involved in addressing what we 
believe to be a $200-billion annual gap in funding for the 
repair and new construction of critical U.S. infrastructure.
    We all agree that reliably moving people and goods is 
essential to reaching any nation's economic potential. My 
testimony will focus on how the needs of infrastructure can be 
financed through a range of investment sources, including the 
government and private sectors.
    With governments tightening their belts and banks repairing 
their balance sheets, funding the $200-billion annual gap is 
daunting. At the same time, providers of public infrastructure 
spending--Federal, State, and local governments--have pulled 
back. From 2008 to 2010, States cut spending as revenues 
declined by 12 percent in order to balance their budgets. 
Similarly, new debt issuance by State and local governments 
declined by $64 billion over the last 5 years, 60 percent of 
which was simply used to refinance existing bonds.
    While public funds for new projects and existing 
infrastructure repair decidedly are under pressure, who fills 
that void? Our analysis has found that institutional investors, 
such as insurance companies, pension funds, and other non-bank 
lenders, are well-
positioned. In fact, infrastructure has many advantages for 
investors, including higher yields, the tolerance and need for 
long-term investments, and diversification. S&P has estimated 
that institutional investors would like to target about 4 
percent of their portfolio to infrastructure, higher than their 
current levels of 2 percent. If achieved, this would provide an 
estimated $200 billion in additional global infrastructure 
funding each year--nearly $3.2 trillion by 2030.
    The Chairman. Can you just, on that number, give your 
analysis of what it would provide for investing in American 
infrastructure?
    Mr. Dhru. I do not have that breakdown, but I can get that 
for you.
    The Chairman. Would you?
    Mr. Dhru. Yes, absolutely.
    The Chairman. Thank you.
    Mr. Dhru. We believe two important steps can be taken 
towards unlocking this investment. First, standardize project 
finance and enhance transparency, information, market 
visibility, and predictability. The success of P3s in the 
United Kingdom, Canada, and within certain U.S. States has 
grown in recent years due to just these types of reforms. 
Second, minimize political and regulatory risk. Institutional 
investment thrives on certainty, and having a clear vision of 
how expenditures are recovered is vital to increased investor 
participation.
    P3s allow investors to design, build, and operate public 
infrastructure, lending their expertise and sharing in the risk 
of delivering transportation projects on time and within 
budget. As an example, take the I-595 expansion project in 
Florida, the State's first P3. It was completed in 5 years, 15 
years ahead of the State schedule, and at a cost of $1.8 
billion, $275 million lower than estimated.
    As for the public benefits of P3, governments are able to 
replace or build new infrastructure while shifting substantial 
risks over to private investors, including cost overruns and 
penalties.
    While in the U.S. P3s are still relatively new, elsewhere 
in the world they are being used more extensively to build 
public transit, airports, schools, and hospitals. According to 
the European Public-Private Partnership Expertise Center, 80 
European P3 transactions closed in 2013, totaling $16.3 
billion. The challenge in the U.S. is how to increase P3 
accessibility. We put forward the following steps that could 
encourage P3 growth.
    First, establish mechanisms for the Federal Government to 
help States adopt best practices and innovation standards. 
Although 33 States and Puerto Rico have enabled P3, only a 
handful of States--notably, Virginia, Texas, Florida, Indiana, 
and Colorado--have used them in a significant way. 
Standardization of the P3 procurement and documentation process 
has been a driver of activity in Canada, where contract forms 
are consistent across provinces.
    Second, expand the use of Federal ``magnet'' and bond 
programs such as the TIFIA program and the private activity 
bonds. These funding sources attract private capital by 
lowering overall project costs, and TIFIA offers favorable 
repayment terms.
    Third, provide near-term funding certainty and 
predictability. The current surface transportation and transit 
funding program is often seen as an insufficient time horizon 
for the planning, design, and construction of large-scale 
projects and programs that often take years to plan, build, and 
manage.
    And finally, increase the transparency and availability of 
construction and performance data. This will enable the public 
and private sector to gain a better understanding of the costs 
and benefits to private investment.
    In summary, we believe the actions outlined here would 
greatly reduce the funding gap through incentivizing and 
strengthening private investment. And, in the spirit of just-
in-time, the U.S. estimate is about half of the $200-billion 
shortfall, about $100 billion.
    Thank you very much for the opportunity to speak before you 
today on this important topic, and I look forward to answering 
any questions you may have.
    [The prepared statement of Mr. Dhru appears in the 
appendix.]
    The Chairman. Thank you. We will have some questions in a 
moment.
    Ms. Samara Barend, thank you.

   STATEMENT OF SAMARA BAREND, SENIOR VICE PRESIDENT, AECOM 
                     CAPITAL, NEW YORK, NY

    Ms. Barend. Chairman Wyden, Ranking Member Hatch, and 
members of the committee, it is a real pleasure to be with all 
of you today.
    I am Sam Barend, and I serve as development director for 
AECOM Capital, the investment arm of AECOM, and AECOM is a 
global engineering and construction firm. We have about 45,000 
employees around the world, many of them in your States. AECOM 
has participated in about 60 percent of all the P3 projects 
that have been delivered in the country, and we also serve as 
an investor. And a few of those projects include the Port of 
Miami Tunnel project in Senator Nelson's State, the I-595 
project, the Long Beach Courthouse, and others.
    Mr. Chairman, the topic you have selected for this hearing 
is pivotal. I would like to recognize the leadership of your 
State, Oregon, in spearheading the creation of the West Coast 
Infrastructure Exchange, which has been connecting private 
investors with much-needed public infrastructure projects.
    For the past 7 years, I have approached public-private 
partnerships, or P3s, from both the public and private sectors, 
so I come before you with considerable passion on this topic 
and an understanding of the significant role that the Federal 
Government must play in catalyzing private investment in public 
infrastructure.
    With that said, my goal today is to leave you with three 
thoughts. First, we must expand performance-based 
infrastructure delivery opportunities, such as public-private 
partnerships. It is essential that we stretch the limited 
Federal and State funds we have to deliver projects faster, 
cheaper, and with greater accountability and performance over 
the long term. Second, Federal and State funding has played and 
continues to play an essential role in advancing P3 projects. 
And finally, but most important, we must level the landscape 
between low-cost tax-exempt financing and higher-cost taxable 
financing to catalyze private investment in public 
infrastructure.
    Since 2008, the use of performance-based P3s has fast-
tracked the delivery of 16 projects, worth $18 billion, across 
the country. For example, Florida's I-4 Managed Lanes project, 
which actually is in the process of reaching a financial close 
right now, is going to be delivered 20 years sooner through a 
public-private partnership than if the State had utilized 
traditional methods of financing and delivery.
    Now, for Florida, this P3 approach has enabled the State to 
leverage future revenue streams while eliminating the need for 
multiple procurements and full up-front funding. P3s have also 
allowed the States to transfer key risks to the private sector, 
as Mr. Dhru mentioned, which has ensured complex projects are 
delivered on time and on budget with greater performance over 
the long term.
    Even more, cities and States, and really all of us 
taxpayers and the Federal Government, are the beneficiaries of 
these public-
private partnerships because we are saving a significant amount 
of money. The Denver FasTracks P3 has saved $300 million. The 
Port of Miami Tunnel project has saved the State of Florida 
$750 million in one project--50 percent below the original 
engineer's estimate. And the Goethals Bridge project saved the 
State of New York $150 million. These are real savings. This is 
real money back to taxpayers.
    That said, private finance can never replace State and 
Federal funding; rather, it serves as a means of stretching the 
very limited but essential public funding. U.S. P3 projects 
have combined numerous sources of public and private capital, 
such as State highway funds, TEA-21 dollars, low-cost TIFIA 
loans, and private activity bonds, alongside private debt and 
equity. The combination of such Federal funding has been 
utilized for high-profile new-toll-
revenue projects such as Texas's North Tarrant Expressway and 
Virginia's I-495 Managed Lanes projects, where public 
investment has been effective in capping tolls and future toll 
increases.
    The role for Congress in advancing P3 projects, however, 
does not end with funding highways and transit. In 2005, 
Congress authorized a pilot program that created $15 billion in 
new transportation exempt facility bonds. This program is so 
significant because it truly leveled the playing field between 
private investment and tax-exempt financing. It truly served as 
a catalyst for opening the doors for private investment in 
public infrastructure.
    Since 2008, exempt facility bonds or private activity 
bonds, as they are otherwise called, have facilitated at least 
$12 billion, if not more, in transportation P3 projects in the 
country. And of note, every U.S. P3 project that has moved 
forward has been undertaken and utilized with either these 
exempt facility bonds or TIFIA, or a combination of both.
    Just to close, I really believe this is an opportunity in 
the upcoming reauthorization for the Senate Finance Committee 
to continue this trend of public-private partnerships and 
performance-based P3s, to open the doors to private finance, 
and to not allow this authorization for private activity bonds 
to expire as it is expected to in the next year.
    Thank you very much for the opportunity to testify.
    [The prepared statement of Ms. Barend appears in the 
appendix.]
    The Chairman. Thank you very much.
    Colleagues, here is what we will do. We will have a vote at 
11 o'clock. We will hear from Mr. Edwards, and then we will 
take hopefully about a 10-minute break, and we will come right 
back to questions.
    So, Mr. Edwards, welcome, and I know about our history 
working on tax reform, so we welcome your remarks.

  STATEMENT OF CHRIS EDWARDS, DIRECTOR OF TAX POLICY STUDIES, 
                 CATO INSTITUTE, WASHINGTON, DC

    Mr. Edwards. Thank you very much, Chairman Wyden and 
members of the committee. The Nation certainly faces challenges 
in upgrading its highways, bridges, and other infrastructure. 
Nonetheless, I am skeptical of some of the doom and gloom 
coming from some of the groups that are pushing for large 
increases in Federal infrastructure spending.
    There is some data showing that our infrastructure has been 
gradually getting better. The share of Federal bridges that are 
structurally deficient has actually plunged over the last 
couple decades. The quality, the surface quality of our 
interstate highway system, has actually improved over the last 
couple decades. So there is some good news with infrastructure.
    It is true that congestion is a big problem in many parts 
of the country, and I share the chairman's concern that America 
have the best infrastructure in the world. I do not think that 
more Federal aid is the right answer for infrastructure, 
though.
    For one thing, Federal aid is often misallocated. It is 
certainly not allocated as efficiently as it could be. The 
Highway Trust Fund creates winners and losers. Some of the 
long-time loser States in the Highway Trust Fund are actually 
some of the States with more need. So, for example, Texas and 
Florida, fast-growing States, have long gotten the short end of 
the stick from the Highway Trust Fund. Academic studies have 
shown that the Highway Trust Fund actually distributes money 
from lower-income States to higher-
income States, which makes no sense to me either.
    I think Federal aid distorts State and local decision-
making. So, for example, with transit, for many decades the 
Federal Government has subsidized the capital costs of urban 
transit systems but not the operating costs. So I think that 
has biased many cities to go toward expensive rail systems with 
high capital costs, because they can get the Federal subsidies, 
rather than more efficient bus systems. So I think Federal aid 
does create some distortions to be concerned about.
    So what should we do about the Highway Trust Fund? Well, a 
straightforward solution would be to phase down spending over a 
period of time to match the lower level of revenues. I think 
State governments should be free to respond to that void in any 
way that they would like--raising fuel taxes, adding electronic 
tolling to highways, and more privatization and P3s. I think 
Congress can reduce some of the costly mandates that Senator 
Hatch mentioned, such as the Davis-Bacon rules. And I also 
think Congress--and I agree with President Obama here--should 
lift the ban on tolling of the interstates. For me it is a 
federalism issue. The interstate highway system is owned by 
State governments. I think we ought to free up State 
governments' ability to be able to respond to infrastructure 
needs in any way they can, such as electronic tolling on some 
of the interstate system.
    I think a good way to cut the Highway Trust Fund--and I 
know it is not going to be popular with some Senators--would be 
to reduce Federal spending on transit. Do you know that before 
the 1960s, the great majority of urban transit in America was 
provided by private, for-profit companies in the Nation's 
cities? That ended with one fell swoop with the introduction of 
Federal aid to local government-operated transit systems. That 
eliminated within a couple of years a century of investment by 
private companies in urban transit systems. So that is an 
example of the way Federal aid can create distortions, in my 
view.
    So I think the answer to America's infrastructure 
challenges is not more Federal aid, but more innovation by the 
States. I am a big fan of P3s. And also, where we can, full 
privatization is also possible for some infrastructure 
projects. If you look around the world, seaports are private in 
Britain, private and unsubsidized. All the major airports in 
Canada are private, nonprofit corporations, unsubsidized. Air 
traffic control in Britain and Canada is run by private, 
nonprofit corporations, unsubsidized by governments. I think 
those are good models we need to look at.
    You can even privatize highways and bridges in some cases, 
and there are examples, even in the United States. The Dulles 
Greenway in Virginia, for example, was privately built, 
unsubsidized, a 14-mile toll highway. I know some people, such 
as Representative Frank Wolf, grumbled about the Greenway, but 
I think it is a good project.
    Elsewhere in Virginia, last year a private company financed 
and built a $140-million bridge over the Elizabeth River in 
Norfolk, again, completely unsubsidized by government. That 
company, FIGG Engineering, is actually expected to start 
construction this year on a $200-million bridge, called the 
Cline Avenue Bridge, in East Chicago--again, completely 
unsubsidized by government.
    So hopefully we can bring more entrepreneurial efforts like 
that into America's infrastructure. We have big challenges, and 
we need both the public and more private-sector participation.
    A last note, I think relevant to this committee, is that it 
is interesting if you look at Department of Commerce data, the 
vast majority of infrastructure in America is actually provided 
by the private sector. If you add up the total amount of annual 
investment in things like, you know, refineries and pipelines 
and cell-phone towers, private investment in infrastructure in 
the United States is 4 times larger than all Federal, State, 
and local investment combined. So a simple way to increase 
infrastructure investment in the United States would be to 
slash the corporate income tax. And I know that is something 
the committee is working on.
    With that, I will end my comments. Thank you very much.
    [The prepared statement of Mr. Edwards appears in the 
appendix.]
    The Chairman. Thank you very much, Mr. Edwards.
    So we have a 15-minute reprieve here, so we will start, 
colleagues, and just see if we can keep it going.
    Here is my question for the panel: Mr. Dhru provided us 
with a bit of good news this morning. Mr. Dhru said that, in 
his view, there was potentially available significant private-
sector funding for transportation, which could be up to $100 
billion per year, to help meet our Nation's infrastructure 
needs. So that clearly is a constructive step, but yet it only 
meets a portion of the country's infrastructure needs. So what 
is needed, what our challenge is, is to come up with a complete 
solution, and certainly that means that there has to be an 
innovative Federal role here as well.
    What I would like to do--we will spare you today, Dr. Kile, 
from the Congressional Budget Office--is kind of have a little 
bit of a lightning round on transportation. I would like each 
one of you to give me your best idea for the short term and 
your best idea for the long term. We will just take you four 
for purposes of my opening round. We have lots of colleagues 
who would like to get into this, so let us start with you, Mr. 
Layne--best idea short-term, best idea long-term.
    Mr. Layne. Best idea short-term is to fund the trust fund. 
Our State has relied on those obligations in putting forth 
contracts, so to let that go insolvent would have a significant 
impact to the State of Virginia for the short term.
    Long-term, it needs to be multimodal in focus and not just 
deal with simply the current situation, but be able to grow, 
have a sustainable revenue source that is tied to the future. I 
recognize the current Federal fuel tax is regressive and it is 
static. CAFE standards are getting higher. But some type of 
percentage of economic activity--for instance, we tied it to 
the motor fuels wholesale tax that allows for increases as 
economic activity goes up.
    So those are a couple of ideas. But to think that it is 
going to be one, the answer, I think it is going to take a 
pragmatic approach of a lot of different tools to be used. All 
the things mentioned I would agree with today except for 
cutting the government input into transportation revenues. But 
I think it is going----
    The Chairman. Very good. Mr. Dhru, one of each--short-term, 
long-term.
    Mr. Dhru. I would say, actually, short- and long-term would 
be the same thing, which is to take the uncertainty out of the 
market. You know, every 2 years renewing it actually adds to a 
significant amount of uncertainty. So I think that is an 
opportunity.
    The Chairman. And I gather that, with respect to the 
private side, you do think that streamlining in some of the 
areas that reduce uncertainty would help to boost that private 
side.
    Mr. Dhru. Absolutely.
    The Chairman. All right, very good. Let us hear from Ms. 
Samara Barend. Two ideas--short-term, long-term.
    Ms. Barend. Short-term, as I mentioned, just particularly 
speaking on performance-based P3s, the authorization for exempt 
facility bonds is likely to expire very soon, so that will 
really put a wrench in all of the private development and 
private investment we have seen. It is fundamental for this 
committee to expand that, at least expand it temporarily. If 
not, in the long term you should really provide a sustainable 
mechanism through long-term funding of private activity bonds 
and potentially TIFIA that does incentivize States and cities 
to utilize P3s, because currently the option of just tax-exempt 
financing makes it very difficult to move forward a project 
with private finance.
    And you know, also, another option, in terms of the long 
term, is equipping States with the tools necessary to 
understand how to advance a public-private partnership project. 
As Mr. Dhru mentioned, only about eight to ten States are 
really in the process of moving forward these projects.
    The Chairman. Good. Staff also, colleagues, gave me a note 
that, according to the estimates, we know that more than a 
quarter of transportation projects were financed with Build 
America Bonds during the program between 2009 and 2010, so your 
point, Ms. Barend, that certainly the role of bonding can be a 
factor, is a good one.
    We will wrap up with you this round, Mr. Edwards.
    Mr. Edwards. In the short term, I think the reality is that 
Congress is going to fill the hole in the Highway Trust Fund 
with general fund revenue. I mean, I do not see any other 
option. President Obama's corporate tax proposal is not going 
anywhere this year, and few people seem to favor raising the 
gas tax.
    In the longer term, I think, again, Congress ought to free 
up the hands of States. States can raise gas taxes anytime they 
want. But I think a lot of transportation economists are kind 
of gelling around the idea of using new modern electronic 
tolling on more highways. It makes a lot of sense. You can 
raise a lot of revenue and you can reduce congestion, so you 
can kill two birds with one stone.
    I encourage the States to experiment with electronic 
tolling. It is much lower-cost than the old-fashioned tolling 
with toll booths, and it makes a lot of sense, again, to reduce 
congestion.
    The Chairman. So, as a little bit of a libertarian, I am 
concerned about those privacy issues in some of those things, 
so we will talk about that.
    Senator Hatch?
    Senator Hatch. Well, thank you, Mr. Chairman.
    Dr. Kile, can you tell me that some Federal highway account 
spending is for non-highway purposes?
    Dr. Kile. Yes, a share of the spending from the Highway 
Trust Fund is for transit projects and for other projects 
related to safety.
    Senator Hatch. What percentage is that?
    Dr. Kile. The spending in 2014 for the transit account is 
about $8 billion.
    Senator Hatch. All right. Assuming a Federal role in 
highway financing is maintained, could we not decide to spend 
highway account dollars on highways alone, thereby funding more 
road work than occurs currently?
    Dr. Kile. That would obviously be a choice for you and your 
colleagues, but that is one possibility, and that would address 
part of the shortfall in the trust fund.
    Senator Hatch. How would eliminating the Federal role in 
the funding of highways lead to more efficiency in highway 
spending?
    Dr. Kile. If the Federal Government were to be less 
involved with highway funding, there would probably be fewer 
highways built in the United States. How much less would depend 
on how States offset that, and I think beyond that, State and 
local governments would make the decisions that they felt in 
their best interest.
    Senator Hatch. Well, as I understand it, a 6-year 
reauthorization proposal maintaining current spending levels 
plus inflation would require new offsets totaling $94 billion 
over the 6-year period. CBO's website indicates that every cent 
of motor fuels tax increase yields about $1.5 billion per year. 
We have heard that testimony here today.
    Now, as I read your testimony, if the new funding were 
offset with a motor fuels tax increase, it would amount to more 
than 10 cents per gallon, likely 10 to 15 cents per gallon by 
2015. Now, to a lot of people, that is a serious motor fuels 
tax increase.
    Now, would it not be the largest Federal motor fuels tax 
increase in modern times if we did that?
    Dr. Kile. I do not have in front of me the history of 
increases in the tax for the gas tax. But, yes, those numbers 
that you cited, which were produced by the Joint Committee on 
Taxation, are correct.
    Senator Hatch. Well, some people think we should pause 
here, and before you accept the notion of a 6-year funding 
proposal, I am trying to find out what we can do and what is 
reasonable with the current Congress.
    Mr. Dhru and Mr. Edwards, what I often hear when the word 
``infrastructure'' is used, is how many jobs a given project 
will create. Now, how trustworthy do either of you believe are 
the estimates of how many jobs will follow from a given amount 
of spending on a road or a bridge or a bike path? Do you think 
the estimates are scientific, precise, and reliable?
    Mr. Dhru. We just published a report yesterday, in fact, 
where we said a $1.3-billion investment in real terms in 2015 
could create up to 29,000 jobs in the construction sector. When 
you are commenting on the future, obviously you make some 
assumptions, but I think the fundamental point remains. There 
is a significant opportunity for jobs growth.
    Senator Hatch. Mr. Edwards?
    Mr. Edwards. I do not think we ought to look at the 
infrastructure issue with respect to jobs. If private companies 
with P3s can do infrastructure more efficiently, they can build 
highways and bridges more efficiently, it means that they are 
going to use less labor, not more. So, you know, what society 
wants in general is a net return. They want to have a minimal 
cost for the maximum amount of benefit, so the issue is 
investment efficiency, I think, and not jobs.
    Senator Hatch. All right. Dr. Kile, as I understand it, the 
6-year reauthorization proposal maintaining current spending 
levels plus inflation would require new offsets totaling $94 
billion over the 6-year period. Now, your testimony indicates 
that, even if the 6-year reauthorization proposal were enacted 
and offset, Congress would find itself facing the same problem 
in just a few years.
    It looks to me like we have a permanent structural deficit 
problem in the Highway Trust Fund. Now, do you disagree? And, 
if we want the Highway Trust Fund to have an identity as a 
trust fund, do we not need to have a permanent solution to 
these various problems?
    Dr. Kile. It is correct that spending is outpacing revenues 
for the foreseeable future--for the period of our projection 
through 2024.
    Senator Hatch. All right. My time is up, Mr. Chairman.
    The Chairman. Thank you, Senator Hatch.
    Senator Stabenow?
    Senator Stabenow. Thank you, Mr. Chairman, very much. 
First, I want to join you in sending condolences to Jim 
Oberstar's family. I worked with him extensively in the House. 
He was a wonderful man and truly a champion for transportation 
infrastructure for our country.
    Welcome to all of you. This is a critically important 
discussion. I have a couple of comments first, and I just have 
to say, coming from Michigan where it has been very difficult 
to get the legislature, despite the Governor's actions, to try 
to take action in terms of what needs to be done in Michigan, 
Mr. Edwards, when you say things are getting better, come to 
Michigan. We have several missing persons reports of people who 
found the potholes, and we have yet to find them. So we 
certainly would say, at least on our end, that things are not 
getting better. They are actually getting worse.
    At this point, one of the things, I guess, Mr. Chairman, 
that is concerning to me is the big picture in a global 
economy. I spoke 2 years ago in Beijing at a global auto 
leaders summit, and they were talking about building 20 new 
airports, state-of-the-art airports, as we are struggling to 
try to make sure we have infrastructure in place. And now back 
closer to home in Michigan, we have the largest, the busiest 
northern border crossing in the country between Detroit and 
Windsor into Canada. We desperately need a second bridge--the 
Homeland Security Secretary was with us on Friday at the 
bridge--both for commerce, with over $1 billion a day back and 
forth, but also from a homeland security standpoint.
    Canada has stepped up to fully finance the bridge because 
the United States of America, the greatest country in the 
world, cannot do its part. And we are trying to just come up 
with the money for a Customs plaza on our side of the bridge. I 
think this is embarrassing to us as a country.
    Build America Bonds have been extraordinary. I strongly 
support them going forward. But when we look at, right now, 
$357 a person in auto repairs and costs for everybody in 
Michigan with what is happening right now, Lord knows we ought 
to be able to do better than this.
    So I guess the first question I would ask is to Dr. Kile. 
When we look long-term, the State highway transportation 
officials have said, spend a dollar to keep a road in good 
condition or $6 to $14 a person to rebuild the same road. Most 
people would say that is kind of crazy and that we ought to 
talk about efficiency, we ought to be on the front end of that.
    I wonder if you could talk a little bit more about the 
long-term cost if we pass a transportation bill just at current 
levels or levels limited to the trust fund revenues.
    Dr. Kile. Senator, there is general agreement among 
economists that there would be benefits to additional 
infrastructure spending. I am sorry I do not have any 
additional information as to what that would be at this time, 
but there is general agreement on that point, despite general 
improvement in the quality of roads and highways and bridges.
    Senator Stabenow. All right. Thank you.
    On P3s, I wanted to hear a little bit more, Ms. Barend. 
And, Mr. Dhru, Secretary Layne, you mentioned P3s as well. And 
I am wondering, in your experience, starting with Ms. Barend, 
what types of projects are the best choice for P3s? How do you 
think we could design programs better, with TIFIA or 
infrastructure banks, to encourage more partnerships?
    Ms. Barend. Senator Stabenow, it is a pleasure to be with 
you. I actually testified twice in Michigan on the new 
international trade crossing, and I am a huge proponent of that 
project and the way that the Governor is actually moving it 
forward. I think that project is a perfect project for a P3 
because, you know, it is a tricky, sticky, complex, challenging 
project--you know, international. Those are the types of 
projects that are very suited to P3s, not, you know, your 
typical $50-million road repair, widening projects. It is for 
really large, complex projects that, but for a 
public-private partnership, probably would not move forward, 
like the Port of Miami Tunnel project in Florida that, you 
know, the Florida State DOT says there is no way they would 
have been able to finance given the amount of risks that are 
involved in it.
    So this is essentially allowing the State of Michigan and 
Canada, really Ontario, to know for a certainty that the 
project will be delivered on time, on budget, and over the 
course of probably about 35 years, that the performance will be 
maintained. So, you know, those are the best types of projects 
for P3s.
    And in addition, what you all can do from the Senate 
Finance Committee--I mentioned the private activity bonds, and 
those have been just really fundamental. And TIFIA has also 
been truly fundamental, the two of those combined. The key to 
improving them is, as Mr. Dhru said, increasing the certainty. 
You know, as the private activity bonds dwindle down, there is 
less certainty in financing. So a number of projects are 
probably going to be put on the sideline as this expires in the 
next year. So that means, for the private sector, all the 
financing that they are interested in investing in States that 
are lining up to do all the due diligence that goes into these 
projects will be put on the sideline.
    So I think we need more predictability, less political 
input in terms of the decision-making on which projects go 
forward. I think there has been a huge amount of advancement at 
USDOT in this regard. But there could still be more improvement 
on the TIFIA side. But private activity bonds continue to be 
really useful.
    Senator Stabenow. Well, I would also mention Port Huron is 
another very important project for us to look at.
    And, Mr. Chairman, I know we are out of time. I do not know 
if we have time to hear from others on this question.
    The Chairman. I am calling more audibles. We are just going 
to keep going.
    Senator Stabenow. Yes, thank you.
    The Chairman. Senator Carper is next, and, colleagues, I 
think with a little luck, depending on when the vote starts, we 
can go, we can come back. But I know this is a subject that 
interests lots of Senators. Senator Carper?
    Senator Carper. Thanks, Mr. Chairman. Thanks to all of you 
for joining us today and for your thoughtful comments and your 
willingness to respond to our questions. I spent a lot of my 
life in Virginia as a kid, growing up in Danville and Roanoke. 
Our son went to William and Mary, my youngest son, so, Mr. 
Layne, I am going to pick on you, going back to my roots.
    You described in your testimony how Virginia has recently 
overhauled its entire transportation funding system, and your 
State has also been a leader in developing innovative financing 
tools and public-private partnerships. In your opinion, can we 
replace Federal formula grant funding for transportation with 
financing tools and public-private partnerships?
    Mr. Layne. No. In the State of Virginia, about 15 percent 
of our projects would qualify as P3s. It is basically a 
procurement method. It is about sharing risk with our private 
partners, and that risk is over a continuum. And, of course, 
the private partners want to be paid for that risk.
    So you have to take into account public policy in addition 
to determining what is a P3--as I said, about 15 percent, the 
larger projects. But I would point out that in every one of 
those projects, besides private equity and expertise, there was 
a host of not only State but Federal additional funds put in. 
Only about 10 percent of the project really was private equity 
and expertise.
    So these projects would not come forward without TIFIA 
loans, low-cost financing, and State participation. So it is 
not a substitute. It is a powerful procurement tool, though, 
when the project meets those criteria.
    One other point on that is, to think that these private 
partners do not come back time and time again once the deal is 
done, when things do not go well, is just not accurate. It is a 
partnership, and so it is a continuing--because these are 
complex projects, their negotiations go on and on. So, when you 
look at the risk, you have to make sure you are considering 
what the public policy is and what the risk is to the taxpayers 
ultimately in the transaction.
    Senator Carper. Good. Thank you.
    Let me just ask for a show of hands. Do any of you on our 
panel think that financing tools are a substitute for program 
funding? If you do, would you raise your hand? [Mr. Edwards 
raised his hand.] Thank you.
    I am going to continue to pick on you, Mr. Layne, if you do 
not mind, but would you just take a moment and tell us how the 
Federal Government can best support Virginia in achieving the 
mix of transportation modes that you have prioritized in your 
State.
    Mr. Layne. Well, there are two things that the Federal 
Government can do. Number one is to be a reliable funding 
partner. I agree with Mr. Dhru that the uncertainty in this 
process makes transportation funding more difficult. We work 
closely with the private industry in the Commonwealth of 
Virginia about letting contracts, and not having certainty 
costs us additional monies as we have to stop and start 
projects. So being a reliable partner would be number one.
    And then, number two, certainly the BRIDGE Act, those 
financing tools, those innovative things, are very helpful to 
help us leverage our money. So we would encourage the passage 
of things like that in order to be able to continue to leverage 
monies from all sources.
    Senator Carper. What about freight investments?
    Mr. Layne. Yes, sir, freight----
    Senator Carper. When it comes to freight, what are 
Virginia's priorities? Are they mainly on the highways? Or are 
there other projects that would offer shared benefits for 
freight travel on the highway system?
    Mr. Layne. Certainly, particularly in the Port of Virginia, 
freight is very important to us, the efficient movement into 
and out of our port to other parts of the Commonwealth and the 
east coast. We use State rail enhancement funds to help private 
parties dealing with more efficient movement of freight. 
Obviously we have programs to help get freight off the roads to 
reduce congestion. We have barges that go between the Port of 
Virginia and the Port of Richmond.
    So we look closely, and the major component of whether or 
not we decide to help with freight is if we get the freight off 
the highways to help reduce congestion. That is the highest 
scoring in there.
    Senator Carper. In my State, if Congress does not act to 
stabilize the Highway Trust Fund, we would see about half of 
our transportation budget disappear. What would be the impact 
in Virginia if we failed to find revenues to support the 
program through the next several years?
    Mr. Layne. Senator, it would be very similar. Over half of 
our construction budget comes from the Federal Government. 
Projects like 149 bridges, 44 smaller transit systems, more 
than 300 projects--just mainly bread-and-butter construction--
175 transit vehicles would not be bought, and 2,000 lane miles 
of pavement would not be done.
    And I would like to point out here that Virginia is 
continually recognized as one of the top places to do business, 
and CNBC traditionally ranks us there. But several years ago, 
we dropped, and they specifically pointed out that our 
inability to fund our transportation was the reason why we 
dropped. And that was a very big impetus on why this funding of 
transportation got done last year, because, if we are going to 
be open for business, we have to have an efficient 
transportation system.
    Senator Carper. Thank you.
    The Chairman. Colleagues, if we are lucky, we can get 
Senator Warner and Senator Casey in before the vote. I am going 
to run over and vote, and you two, if you both take your 5 
minutes, I will try to get right back.
    Senator Warner [presiding]. Thank you, Mr. Chairman. I 
would note for the record that Virginia was still ranked number 
one for business when a certain Governor was there. [Laughter.]
    Senator Carper, I would be happy to go into great detail 
about Virginia's innovative transportation system.
    I just want to make a couple comments very briefly. Since a 
lot of members are not here, maybe staff could listen up. I 
think concerning the BRIDGE Act, which is a financing tool, I 
would agree with what Senator Carper and Secretary Layne have 
said. This does not replace our permanent funding source. You 
have to have dollars to leverage, and private dollars have to 
be paid back. But let me make a couple comments.
    One, the U.S. Treasury Department right now has an office 
to advise pension funds how to invest in European 
infrastructure, but there is no such office to advise American 
pension funds how to invest in America. That makes no sense at 
all.
    We actually have restrictions in FIRPTA, the Foreign 
Investment in Real Property Tax Act, that prevent foreign 
pension funds from doing the kind of dramatic investing in 
American infrastructure that is needed. And I would simply make 
the case for members, there are three reasons why we need to 
use this financing tool.
    One is, you need long-term capital, the assuredness that 
comes with 25- to 35-year money, that you cannot find even with 
a fully funded highway transportation fund.
    Secondly, you do need some ability through Build America 
Bonds, TIFIA, or through a financing authority, to have that 
government backstop that can lower by up to 200 basis points 
the interest costs, and that can save hundreds of millions of 
dollars over a long-term project.
    Third is, smaller States--Virginia is doing this, Florida, 
Texas. Smaller States do not have the capacity right now to 
figure out how to do these P3s. You need to have that expertise 
in a single place, and, as Secretary Layne has mentioned, if 
you do not have that expertise to go toe-to-toe with Wall 
Street, you get snookered at times.
    We have highlighted the projects in Virginia that we have 
done well. We have not highlighted the projects that we might 
say ``oops'' on. And, if you do not have the expertise--and as 
good as State infrastructure banks may be, if you do not have 
that kind of ability to have project financing expertise at a 
national level to leverage States' ability, I think you are not 
going to come out always a winner.
    So I completely concur that we have to have a permanent 
funding source, that P3s are not free, they are going to expect 
to be paid back, and they are going to expect to be paid back 
with an ability to make a profit. As some of the witnesses have 
said, the ability to perhaps leverage faster approval processes 
and more innovative ways to finance projects can drive down 
cost, but if you do not have that expertise, you cannot go in 
eyes wide open.
    So I thank the chair in absentia for letting me do this, 
Secretary Layne, for your good work, and I look forward to 
working with all of my colleagues on trying to get this done.
    There are 2 minutes left.
    Senator Casey. Thank you, Senator Warner, especially for 
that first commercial that you gave us. It was nice. We are 
grateful for your leadership on these issues in the State of 
Virginia and here in the Senate.
    I wanted to ask, Secretary Layne, in Pennsylvania, in 
fiscal year 2014, we received roughly the same number that 
Virginia received, and I know it is difficult to precisely 
extrapolate the job impact, but to the extent that you can, in 
maybe even a broad framework, if the trust fund were to become 
insolvent, what would that mean to Virginia in terms of the job 
loss? Do you have a job impact----
    Mr. Layne. We have done some preliminary work looking 
globally across the country. We think it is upwards of 60,000 
or 70,000 jobs. That is just talking about if we----
    Senator Casey. Nationally?
    Mr. Layne. Nationally. And in Virginia, it looks like it 
would be somewhere around 10 percent of that, and that is just 
a back-of-the-envelope calculation based on projects that we 
have going. We have some very large projects going that are 
dependent upon Federal reimbursement.
    Senator Casey. So certainly thousands of jobs, maybe not in 
the double figures.
    Mr. Layne. Yes, sir.
    Senator Casey. So I would assume that, in our State, it 
would be a similar number, just at a time when in a lot of 
States, including Pennsylvania, the unemployment numbers have 
been going down. So that is not a place that we want to get to.
    I wanted to ask you as well about kind of a related issue. 
We hear a lot about uncertainty. We heard about it on a pretty 
frequent basis, especially from folks in the business 
community, and I think it is a real threat, and I think it is 
kind of a clear and present danger to a lot of businesses.
    The biggest uncertainty sometimes is what does not happen 
here. It is not some piece of legislation that is out there or 
action that is taken. Sometimes it is the inaction of 
Washington, the gridlock, the partisanship, however you 
describe it.
    But I do think that when I talk to folks in Pennsylvania, 
that particular kind of uncertainty and, therefore, the holding 
back that takes place, can have an adverse economic impact. Is 
there any way for you to comment on that in terms of this case, 
the particular kind of uncertainty that results from our 
holding back--not the failure to enact a transportation bill at 
the Federal level, but doing what we did recently, which is a 
short-term extension, which will expire September 30th. So can 
you comment on that in terms of the business folks whom you 
encounter?
    Mr. Layne. Yes, sir. As I mentioned, we have a great 
relationship with the private business partners in Virginia, 
and these projects take a long time to develop, many of them 
do, particularly a major bridge project that we talked about 
here today.
    When you have uncertainty and you enter into a long-term 
project and you do not know if the money is coming, you will 
sometimes make other decisions to counteract what may be coming 
down there. For instance, we will look at, we have certainly 
looked at, what happens if the Federal Government does not give 
us the money, and it is pretty dire.
    But the real problem is that, when you go back to talk with 
that partner about another project, you have lost some 
credibility. There is a reputational risk in that regard.
    So certainly--and I know Mr. Dhru mentioned this in his 
comments--putting in a sustainable level that we could depend 
upon will certainly help our confidence in moving forward, and 
hopefully--Senator Warner mentioned some of the projects that 
potentially did not go as we planned, and that was a result of 
trying to make a P3 process work somewhere where it did not, 
when we had insufficient funds to do so.
    So I think the uncertainty just puts into the process a 
greater risk that is not necessary.
    Senator Casey. I appreciate that. I now have to go to vote, 
and I know for this time the committee will be in a short 
recess.
    [Whereupon, at 11:31 a.m., the hearing was recessed, 
reconvening at 11:41 a.m.]
    The Chairman. The Finance Committee will come to order, and 
our patient and thoughtful friend, Senator Isakson, is at his 
post, and let us recognize him.
    Senator Isakson. Thank you, Mr. Chairman.
    Dr. Kile, you made reference in your testimony to vehicle 
miles traveled, I think, as one source of potential future 
revenue. Is that correct?
    Dr. Kile. Yes.
    Senator Isakson. Was there not a test--and I believe it was 
the State of Oregon. Did they not do a test on vehicle miles 
traveled?
    Dr. Kile. Yes, that is my understanding, that Oregon does 
have an experiment.
    Senator Isakson. Do you know whether there has been a 
determination as to whether it is going to be successful or 
not?
    Dr. Kile. I am not terribly knowledgeable about the 
specifics of that program or whether it has been a success. But 
that is an alternative to the gasoline tax that fits with the 
user-pays principle of financing highway use.
    Senator Isakson. And as we expand miles-per-gallon in terms 
of our vehicles and the Federal CAFE standards, we are buying 
less gasoline, but we are using more highways, and we have to 
find ways to fill that gap.
    Dr. Kile. That is correct.
    Senator Isakson. And that is one of the ways to do it.
    Dr. Kile. That is an option, yes.
    Senator Isakson. Mr. Layne, I want to make sure I 
understand your wholesale sales tax. You converted this year to 
a wholesale sales tax on gasoline and diesel fuel.
    Mr. Layne. Yes, sir.
    Senator Isakson. Is that a certain number of cents per 
gallon, or is it a percent per gallon?
    Mr. Layne. It is a percent per gallon. We used to be on a 
cents per gallon tax, and the point, Senator, is that that was 
a declining revenue source because it was based simply on the 
number of gallons being purchased, not on the wholesale value. 
So it is now a 3.5-percent tax at the wholesale level with the 
caveat that there is also a floor. And thankfully that floor is 
in place, because gasoline today is 60 cents less per wholesale 
gallon than it was when the legislation went in.
    Senator Isakson. Well, that was going to be part of my 
question. How did you protect yourself on the downside? And how 
did you protect the consumer on the upside?
    Mr. Layne. On the downside, there was a floor. But the 
theory on the upside was that gas prices would rise with the 
economy, and, therefore, this particular vehicle would 
participate on that upside. We would change from being a static 
or declining revenue source to one that would expand with 
economic activity.
    Senator Isakson. So you have a 3.5-percent sales tax on 
wholesale sales of diesel and gasoline.
    Mr. Layne. Yes, sir--not diesel. Diesel I believe is----
    Senator Isakson. On gasoline.
    Mr. Layne [continuing]. Six percent. Yes, sir.
    Senator Isakson. What was the percent--what was the cents 
per gallon tax that you used to have?
    Mr. Layne. It was 17.5 cents per gallon.
    Senator Isakson. So you substituted 17.5 cents per gallon 
for 3.5 percent of the retail--or the wholesale----
    Mr. Layne. Wholesale price, yes, sir. And it is still 
collected the same way it was before, so there was no more 
additional administrative burden put on the system.
    Senator Isakson. Are you the one who pulled that off?
    Mr. Layne. No, sir. I was an advocate for it, but it was 
actually the McDonnell administration and working across with 
the other side, the Democrats. I would say, Senator, it was a 
compromise in which a lot of people did not like certain 
particular provisions, but in total, two-thirds of both the 
Houses passed it. So it got very good bipartisan support.
    Senator Isakson. It really solved some big problems. It was 
a good solution.
    Mr. Layne. Yes, sir.
    Senator Isakson. Mr. Edwards, I take it from your testimony 
you were pointing out the losers and the winners in terms of 
redistribution of the Federal gas tax to donor States versus 
recipient States. There was a proposal when I was on the House 
Transportation Committee about 10 years ago that was talked 
about, where the Federal Government would let the States keep 
the Federal tax that was levied and administer all of it at the 
State level. Are you a proponent of something like that?
    Mr. Edwards. There is actually a proposal now, I think by 
Senator Lee on the Senate side, to reduce the Federal gas tax 
and Federal spending, the idea being that States could fill 
that gap however they want with their own gas tax increases. I 
mean, there is nothing preventing any State now from raising 
the gas taxes or doing something different and innovative like 
Virginia has done, and I think that makes sense.
    I think to the layman out there, you know, they pay their 
gas tax at the pump. It goes to Washington, and some of it then 
comes sprinkling back to the State. Why not just keep the money 
in the State? Yes, the Federal Government has some roles like 
with the interstate highway system, obviously, but generally I 
think it makes sense to a lot of people, when they think about 
it, why not just keep the gas tax money within the State where 
it is raised? States that are fast-growing like Texas and 
Florida and Georgia can raise money, spend it locally, and they 
know where the money should go efficiently.
    Senator Isakson. You know, one of my favorite things to do 
at hearings is to watch body language of other witnesses while 
one of them is testifying. I just have to ask Mr. Layne if he 
would like to comment on that. [Laughter.]
    Mr. Layne. I guess my body language gave me away, but, no, 
I do not agree with that. That is an unfunded mandate back to 
the States, and with devolution comes less dollars. We 
experience it when we look from the State back to the cities. I 
do believe it is an integrated network. Commerce does not stop, 
whether it is local or State or federally supplied 
transportation infrastructure. It supports our economy, and I 
think all government levels need to participate.
    Senator Isakson. Thank you all for your testimony.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Isakson.
    We are joined by the chairman of the Commerce Committee.
    Senator Rockefeller. Thank you, Mr. Chairman.
    This is to me one of the wonderments of the post-Egyptian 
pharaoh world, our sort of national illiterate, bipartisan 
commitment and lack of will to keep ourselves from dropping 
into rivers and rolling over bridges that no longer are there, 
blowing up our cars in potholes--you know, this kind of thing. 
And it is an American characteristic that you do not do 
anything which displeases the voters because you always have to 
get re-elected here. And if you have it in your head that you 
cannot do anything that would displease the voters, then by 
definition you are an anathema to every single one of you 
sitting there.
    And I do not understand why that is. I understand part of 
it. It has to do with--for some it is just we do not want 
anything good to happen under this President because he is the 
wrong color. For some it is the Tea Party. For some it is just 
a fear of their own re-election prospects. There is nothing 
sadder to me than a Republican or a Democrat who does not dare 
do something or vote for something that he or she believes in, 
and we know that he or she believes in it, but they are afraid 
of what it might do to their close election. And so you get 
that kind of deer in the headlights of a car. You know they 
know they are not doing what they should be doing. They know 
that they are not doing what they should be doing. But they do 
not have the guts to overcome it.
    So I am just going to ask one of those particularly dumb 
questions which will elicit hopefully furious answers from some 
of you.
    Some have said--and this may have been asked, Mr. Chairman, 
and I apologize for that--that what we ought to do is just go 
ahead--you know, this chart on the gas tax and the Highway 
Trust Fund is just absolutely astounding. It is astounding. I 
mean, I am just trying to figure what happens on August 29th 
and 30th when we are scattered all over the world. You know, it 
will be the ultimate in misrepresenting our people if they are 
then dealing with a cessation of Federal projects--and there is 
always a Federal match of the States. They both interact, and 
so they start shutting stuff down. Hundreds of thousands of 
people get laid off if we do not take action on it. And it 
infuriates me at myself--at myself--why I have not been more 
up-front about this in previous sessions. We have all seen this 
coming.
    So to me, things like a gas tax and, frankly, a whole range 
of revenue raisers are not a matter of getting elected or not 
getting elected, because in the long run--this is an awful 
thing to say--somebody getting elected or re-elected is less 
important than the country surviving in a structural sense. And 
if you have--what is it?--60 percent of our bridges----
    Mr. Layne. Sixty-three thousand in the country----
    Senator Rockefeller. Yes, 63,000 are in jeopardy. I come 
from West Virginia, and I know every one of those bridges. Some 
of them are still one lane, if you can believe it. Then you 
have these 200,000-pound water trucks going over them so they 
can go help build a platform for natural gas drilling, and they 
cannot make a right or a left turn because they are so huge, so 
they just go right through people's yards. It is a study in a 
slow-motion spiral downwards on something so basic.
    And so I am just going to ask you: some people say, well, 
you know, the Highway Trust Fund is a big deal, and we will 
find some way to do something. But let us suppose we do not. We 
are going to be gone during August. It is now May. That sort of 
equals June, getting close to July, getting close to August. 
The place is not going to do much legislating because of the 
politics of this year.
    What would be the result--and I have used up all my time in 
asking my question and making my speech, but I feel very good 
about it--if, in fact, the Highway Trust Fund simply did run 
out of money? And how long would it take for--it is like when 
you have a certain kind of disease, your body just begins to 
shut down organ by organ. And that is what I think about when I 
think of the Highway Trust Fund with no money and us with no 
will.
    So can you give me, just from your own points of view, what 
the consequences of this would be for our future in this 
country? I am going to start with you, Mr. Layne, because you 
and I are looking right at each other eye to eye.
    Mr. Layne. Yes, sir, and I have mentioned this before. It 
would be easy and politically convenient to say that it would 
not be a big deal, but that is just not accurate. The 
consequences would be dire in the State of Virginia. We would 
have to redirect State money off of other projects to fulfill 
obligations that have already been made to us by the Federal 
Government. I quoted earlier that if this persisted in the next 
year, we would have 149 bridges that would not be replaced, 44 
smaller transit systems would cease to operate, 300 projects, 
just bread and butter, would be stopped across the State, 170 
transit vehicles would not be replaced, and more than 2,000 
lane miles of pavement would not be repaired.
    You know, I was in Stanton at a public hearing, and we 
actually had two of your residents, Senator, from West Virginia 
come over and petition our hearing for a road that connects our 
two States, a road, exactly as you said, that did not really 
meet the criteria for either State to really put a lot of 
attention to. But for those individuals living there, it was a 
dangerous and an unacceptable situation. So public policy would 
really take a significant back seat.
    I used to be in the real estate business, and what I 
learned in that was that--as you say it is with politics, it is 
the same with real estate--everything is local. That is the 
same way with transportation. People's lives would be impacted, 
and that is not to overstate the obvious, but the consequences 
would be dire. Our transportation program would be cut in half, 
and that would disrupt our economy and the quality of life for 
our citizens.
    Senator Rockefeller. And the Federal funds that you are 
referring to--and, Mr. Chairman, I apologize. All you have to 
do is turn off my red button, and then you will be in good 
shape. These Federal funds you are talking about have already 
been clobbered by the sequester. You know, in West Virginia we 
had a situation where our Governor cut eight children's 
programs and then used part of that money to give the 
Greenbrier Hotel a gigantic tax cut. That kind of mentality 
scares me terribly about the future of our country. And I think 
I had better stop talking.
    The Chairman. Well, I very much share Chairman 
Rockefeller's view, so I am glad that he made that point.
    Senator Menendez is next.
    Senator Menendez. Thank you, Mr. Chairman. This is an 
incredibly important hearing, and I view our Nation's 
infrastructure as a significant sense of economic strength and 
a quality-of-life issue for citizens of this country. And the 
world-class network that we have built comes from decades of 
sound investment, bipartisan political leadership, and 
recognition that infrastructure is the backbone of our economy.
    Yet for too long stagnant Federal funding has made it 
difficult to maintain this competitive edge. In recent years we 
have allowed our roads and bridges to crumble, our transit 
systems to deteriorate. MAP-21 maintained a flat level of 
funding, and certainly it appears that that funding level will 
not be good enough to keep the trust fund solvent even through 
the end of this bill.
    So my plea here as a member of this committee, Mr. 
Chairman, and as the chairman of the Transit Subcommittee over 
in the Banking Committee, is that we look to be more aggressive 
and more long-term.
    You know, until the Internet can deliver product to your 
home, even it needs the ability to have an infrastructure in 
the country that can ultimately provide the transportation 
system that allows product to get to market. And so I think we 
overlook that. And in a post-September 11th world, I can tell 
you from my experiences of that fateful day, multiple modes of 
transportation, are critical in a post-September 11th world. 
When the bridges were closed, when the tunnels were closed, 
ferry systems ultimately got people out of Lower Manhattan into 
New Jersey to be triaged at hospitals.
    So inter-city travel, multiple modes of transportation, is 
not only a question of economy and quality of life, it is also, 
in the new paradigm in which we live, a security question as 
well.
    So I have only seen the state of good repair backlog for 
our transits grow from $80 billion to $86 billion since 2010. 
And I know that there has been some discussion, there always is 
some discussion, about whether transit should be part of the 
highway bill. Well, the national transit systems of this 
country generate 10 billion--billion--trips per year. That is 
critical. That is critical.
    And so I look forward to working with you, Mr. Chairman, 
and other members to get to a funding solution that is far 
better than what we have right now. And, as you think about 
innovative opportunities, I want to highlight a quote from a 
recent Deloitte study which examined the growing use and 
potential of real estate investment trusts as a funding 
mechanism for infrastructure projects. They noted that REITs 
represent a well-understood vehicle to access capital markets 
and allow the public to participate in owning qualifying 
infrastructure assets, aspects which may be attractive to both 
the public and private sector.
    So, in addition to the critical need to reform FIRPTA rules 
to bolster commercial real estate in America, I think we can 
look at it as an aggregate investment in U.S. infrastructure.
    So with that as a preface--and I am feeling just as good as 
Senator Rockefeller was about giving my preface--let me ask Dr. 
Kile two questions--actually, I am sorry, Secretary Layne. Do 
you believe that continuing the flat funding model that 
Congress used for MAP-21 is sufficient to bring roads, bridges, 
and transit systems up to a state of good repair?
    Mr. Layne. No, sir. Just continuing the current investment 
without significantly more investment from the States or other 
sources will not remedy the problem. We in the State of 
Virginia go through a prioritization process each year. We are 
trying to be good stewards, obvious fiduciaries with our 
monies, and prioritize those projects that require the most 
need and return the best results to the taxpayers of Virginia, 
not just financially but in their quality of life and how we 
rank.
    We have significant unmet needs, and even with this 
funding, with P3 projects--and I am a very, very big supporter 
of P3 projects--there continues to be a very big unmet need.
    Senator Menendez. And that is also a challenge to economic 
competitiveness, is it not?
    Mr. Layne. Yes, sir. As I testified before, we believe it 
is the underpinning of our economy. The thing we look at is how 
we are supporting economic activity in addition to the things 
you mentioned, Senator.
    Senator Menendez. Now, let me ask you: many Virginians rely 
on WMATA, which is one of the transit agencies with a 
significant state of good repair backlog that makes up the $86 
billion in need. Do you believe an increase in Federal transit 
capital investment would help mobility and safety in your 
State?
    Mr. Layne. Yes, sir, I do. The PRIIA, or the Passenger Rail 
Investment and Improvement Act funds, are very critical to the 
State. We partner with the Federal Government, particularly 
with WMATA. We put up 50 percent, and the Federal Government 
puts up 50 percent. If, in fact, those monies were not there, 
it would be a significant impact to that transportation system.
    Senator Menendez. Mr. Chairman, I have a final question for 
Dr. Kile here.
    The Chairman. Yes.
    Senator Menendez. Dr. Kile, since 2008, the trust fund has 
been dependent on $54 billion in general fund transfers, 
creating uncertainty about the Federal commitment to 
infrastructure investment. It now appears that the funding 
level of MAP-21 was insufficient to even get us, as I 
previously said, to the 2-year window that was envisioned by 
Congress.
    What is the impact of continued Highway Trust Fund 
instability on the ability of States and local communities to 
deliver transportation projects?
    Dr. Kile. Going forward, the funding levels are $13 billion 
less than commitments for next year from the trust fund, and 
that is an amount that grows to $18 billion by the end of 2024. 
That would limit the ability of the Department of 
Transportation to pay funds to State and local governments. I 
cannot particularly speak to the impact on the State since I do 
not represent that perspective.
    Senator Menendez. But it would be easy to extrapolate from 
your statement that if you do not have the monies flowing to 
the States, either one of two things will have to happen: 
either they will have to make it up on their own or, in the 
absence of that, some of those projects might simply not 
proceed.
    Dr. Kile. That is correct. If there was less spending, 
there would be less in total, and perhaps some of that would be 
made up by State and local governments.
    Senator Menendez. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Menendez. And we will 
certainly be working closely with you, as you and I have talked 
about. New Jersey was one of the significant users of the Build 
America Bonds program, so there are plenty of ideas to follow 
up on.
    I want to pick up on Chairman Rockefeller's question, 
because I think it highlighted an important point. Essentially, 
Chairman Rockefeller, in discussing what happens, what are the 
consequences of inaction, Mr. Layne said that the consequences 
would be dire. Those are your words, not mine.
    Mr. Layne. Yes, sir.
    The Chairman. Dr. Kile, I think the number you gave us is 
that inaction would result in a cut of 30 percent in terms of 
the Federal highway program, in terms of spending. That, I 
think, would result in no new starts at all in 2015.
    So my question is then to you, Mr. Dhru, so we can compare 
what our government witnesses are saying to what our private-
sector witnesses are saying. It sounds to me like what we have 
heard from the government witnesses in terms of the real 
consequences of the inaction would be--to really use the 
parlance of the private sector, it would be a significant drag 
on the private economy. Is that generally accurate?
    Mr. Dhru. Absolutely.
    The Chairman. All right. Very good. Any----
    Mr. Dhru. If I can just----
    The Chairman. Go ahead, please. Yes, please.
    Mr. Dhru. If I can just add to that, we were talking 
earlier about jobs creation, and I mentioned the $1.3 billion 
number. That was the $1.3 billion creating 29,000 jobs, 
approximately. But the impact of that also, because of the 
multiplier effect, is that the investment would likely add $2 
billion to real economic growth per year and about $200 million 
in Federal deficit reduction. So the impact of these 
investments will be substantial.
    To the earlier question that Senator Menendez had, if the 
status quo were maintained, we already see a $200-billion 
annual gap. So with the status quo, there is a $200-billion 
annual gap. So it is absolutely a fair way to say that this is 
a significant issue.
    The Chairman. I very much share your view. I do think, in 
the interest of fairness, Mr. Edwards, did you want to say 
anything with respect to these kinds of assessments? You are 
not required by law to do it.
    Mr. Edwards. It would be very disruptive, absolutely no 
doubt about it. I mean, from my point of view, it is part of 
the problem of everyone being too dependent on Federal aid, and 
we saw a similar problem with our air traffic control system 
during sequester. Because the air traffic control system is 
dependent on the Federal subsidies, you get disruptions when 
you folks up here cannot get together on bipartisan bills.
    So, again, part of the solution, I think--Canada has a 
private, nonprofit corporation that runs its air traffic 
control, which is not dependent on the Federal budget. It runs 
independently, separate from the government budget. So I think 
those sorts of solutions are the way to go.
    The Chairman. And I think, as much as anybody over the 
years, I have been one who has championed a significant role 
for the private sector around here. We have made it bipartisan. 
Mr. Dhru gave us some very good ideas today with respect to the 
private sector. The chair of the Environment and Public Works 
Committee, Senator Boxer, has taken a lot of flak for being 
willing to streamline efforts in the private sector. I just 
feel very strongly--and this is something we can respectfully 
disagree on--you also need a very significant Federal role 
here. You need a Federal partner, and I have heard that from 
Virginia, I have heard it from Oregon, we have heard it from 
West Virginia, we have heard it across the country.
    So I want to see if my colleagues--because I asked an 
additional question--if Senator Hatch or Senator Carper or 
Senator Rockefeller want to ask an additional question, they 
are welcome to do so, and then we will wrap up. Do any of my 
colleagues want to ask anything else? Senator Hatch? Senator 
Carper?
    Senator Carper. I want to come back to a couple of things 
you mentioned and Senator Menendez just mentioned, about 
multiple modes. This is one of the questions I gave to 
Secretary Layne. I have been pushing hard as an authorizer on 
the Environment and Public Works Committee, chair of the 
Transportation Infrastructure Subcommittee, pushing hard for us 
to include in our authorization bill a freight title. And one 
of the things I have heard repeatedly is--I do not care if it 
was from UPS or FedEx, I do not care whether it was from 
railroads, I do not care if it was from other major players in 
our economy--almost everybody says it is not enough just to 
fund highways. You have to find a way to help us move goods. 
And it is not just by moving them on the highways, because a 
lot of the goods that need to be moved do need to move on 
highways, but then they need to be on a barge or they need to 
be on a boat or they need to be on a train. And the important 
part is that, as we fund a transportation bill, that we also 
provide for the funding of these multi-modal approaches. Could 
somebody just elaborate on that just a little bit? I just think 
it is something we need to underline and put an exclamation 
point after. Does anybody want to speak to it?
    Mr. Layne. I would be happy to. Again, we devote State 
dollars to rail enhancement funds to that very fact, to try to 
make this intermodal, particularly, again, around our port or 
around our airports. To the extent we can cut out--for 
instance, if we can go ship to rail, that takes trucks off the 
highway. But you have to have an infrastructure around it, 
because not everything can go on rail. Some has to go by truck, 
the bulk of goods. And so you have to have the infrastructure 
to get those trucks out of the port. And that is where the road 
networks come in. That is why we have made significant 
investments in the Hampton Roads region around the Port of 
Virginia.
    So we do see them as related, Senator, not only from an 
economic standpoint but in terms of helping mitigate some of 
the traffic congestion and other delays that we face, 
particularly around these large economic generators, like 
airports and ports.
    Senator Carper. Ms. Barend?
    Ms. Barend. I would also just add, the Port of Miami Tunnel 
project, which is opening in Miami, has been a significant 
economic boon for that area. I had alluded to it earlier. This 
is a project that, but for the private sector and the 
innovation brought through a performance-based delivery 
approach, would not have moved forward. It is generating 
billions and billions in economic activity, and it has actually 
saved the State quite an amount of money in using the delivery 
approach.
    Senator Carper. Thanks.
    Mr. Chairman, I would just like to mention in closing, a 
number of years ago I was trying to get to Mackinac Island in 
the northern part of Michigan, out in the middle of one of the 
Great Lakes. I left my house. I walked out to my car. I drove 
to the train station, the Wilmington train station. I took a 
train to BWI, and I walked off the train, got onto a shuttle, 
which took us into the terminal. I took a people mover to our 
gate and got on an airplane that flew to Traverse City, MI; got 
off there, rode a bus to a ferry, took a ferry across the 
water, landed in Mackinac Island, and got in a horse-drawn 
carriage which took us to our hotel. [Laughter.]
    It worked, and it was cost-effective.
    The Chairman. Trains, planes, automobiles, and horse-drawn 
carriages.
    Senator Carper. All of the above.
    The Chairman. Wonderful. Thank you.
    Senator Rockefeller had an additional question.
    Senator Rockefeller. Two.
    The Chairman. Two.
    Senator Rockefeller. I just have to respond, Mr. Edwards, 
to this idea of, not privatizing the FAA but, you know, getting 
in outside groups--and I chair the committee that oversees 
that, and we have to fight desperately to get bills, 
reauthorization bills, desperately. They are growing so fast in 
passenger use: 700 million people went on airplanes this year; 
1 billion Americans will do so in 5 to 8 years. They are filled 
with people who--we are not talking about pilots. We are 
talking about people who are mechanics, people who do 
logistics, people who coordinate activities, people who look 
out into the future, people who simply are up in the air 
control towers, they see two planes, both trying to land, and, 
you know, we have not built our modern landing system, which we 
have pledged that we would do, which is actually law that we 
do, but we have not done it.
    And then I think about the situation in Virginia where--and 
Mark Warner was on Commerce, and I made him chairman of the 
Transportation Subcommittee, and I said, ``But there is only 
one condition. You have to solve the Loudoun County problem.'' 
And he immediately appeared on the Finance Committee and was 
not on the Commerce Committee anymore.
    But, I mean, that is so typical. In other words, you have a 
line, a beautiful train line that goes right on out. We have 
the same thing in West Virginia with roads, 4-lane roads which 
go, and then they stop, and then there is 15 miles of grass, 
and then they pick up again, because the Federal money was not 
there, the matching money was not there.
    It is the same thing in Loudoun County. People do not want 
to pay in any way to support that, putting the train through 
the county, and Dulles is probably one of two or three of the 
most important airports in the entire country.
    And all I am saying is that it makes people feel good to 
say, if we could just get the Federal Government out of this, 
we could do it better. The only thing is that the Federal 
Government can raise the revenue, which the private sector 
cannot do and will not do and would not do and should not do. 
To cooperate, yes, to partner, yes, but to be responsible for, 
no. The Federal Government has its role. I agree with the 
chairman. And there are so many examples. Corridor H is 
something we are very familiar with in West Virginia. That is 
an Appalachian regional highway thing which has been going on 
for 30 years. If it finished and we hooked up--Frank Wolf is no 
longer there, so we could probably hook up with I-66. And that 
would change two-thirds of the economy of the State of West 
Virginia, two-thirds of the State of West Virginia's land mass 
would be changed for the better by the economy. But, no, we do 
about 2 or 3 miles every 2 or 3 years, and it is just--I am 
sorry. And I have the ease of the fact that I am not running 
again. And I was just telling the chairman it makes me even 
madder at myself that I was not screaming and yelling earlier. 
When I was Governor, West Virginians were the heaviest smokers 
in the entire country. We pay a terrible price for it, along 
with black lung. And I raised the tax on cigarettes to the 
point where there were no more cigarettes to buy in West 
Virginia. Everybody was just going to Ohio and Virginia and 
Kentucky and Maryland to get their cigarettes. And, you know, 
that was all right with me, because we got a lot of money out 
of that and they could not, you know, decide to kill themselves 
on our behalf.
    So I am sort of militant about this subject, and I want to 
see something break loose, Mr. Chairman, either here or--we 
have Secretary Foxx coming in tomorrow at the Commerce 
Committee. Barbara and I are going to work all of this stuff 
together with you. And we have just got to have the money to do 
something, or else we are going to fade away.
    The Chairman. Well said, and we are going to be doing this 
in a bipartisan way and in all three of those committees, and I 
look forward to it.
    Senator Nelson has joined us.
    Senator Nelson. Thank you. I am quite intrigued, Mr. Layne, 
by what you all did in Virginia in replacing the gas tax, and 
so I would like to ask Dr. Kile, if the Federal gas tax were 
replaced with a sales tax, do you know what approximately that 
would have to be to bring in the same amount of revenue? And 
how would you adjust that sales tax for the future so that you 
could have additional revenue in the future?
    Dr. Kile. Senator, I am sorry, but that is not a proposal 
that we have yet analyzed, and I believe that the estimate 
would actually come from the Joint Committee on Taxation. We 
would be happy to work with you and your staff to explore that.
    Senator Nelson. All right. I would like to do that because, 
you know, anything that has anything to do with taxes, makes 
people get apoplectic around here. And yet, what we have seen 
is, the gas tax was set way back in the 1990s, and those 
sources of revenue are just not meeting the transportation 
needs of the country. So I think it is very interesting that 
the Commonwealth of Virginia got very visionary and decided 
they were going to start shifting.
    Would either one of you comment about the viability of a 
sales tax in supplying the revenue for transportation needs as 
opposed to the gas tax?
    Mr. Layne. Virginia's experience is that we looked at--our 
gas tax was 17\1/2\ cents a gallon, and a computation was made, 
what would be relatively the same level of sales tax, a 
wholesale-level sales tax, to make that revenue-neutral in the 
first year, with the thought being, as gas prices increased or 
usage increased, economic activity increased, that that would 
no longer be a static tax; it would be one that would rise with 
economic activity.
    Senator, you mentioned, and you are right, that on strictly 
a cents-per-gallon basis, CAFE standards are getting higher, so 
that is a regressive or a declining type of tax.
    The one thing we did do was put a floor in to make sure it 
did not fall below the level that we were already getting from 
the 17\1/2\ cents a gallon tax, and it was good that we did 
that because, right now, the wholesale price of gasoline is 60 
cents below where it was when the legislation went in.
    So what we think we have done is put in place something 
that will rise with economic activity in the future, whether it 
is for the price of gasoline or the usage of more gasoline, so 
that it would be a little more indexed to inflation or economic 
activity.
    It does not meet all our needs. In addition to that, we did 
raise monies in the general fund through additional sales taxes 
that were transferred to transportation. But the combination of 
those helped fill a significant gap in the Commonwealth of 
Virginia's funding.
    But also, Senator, we continue to be big proponents of P3 
projects, alternative financings like the BRIDGE Act, trying to 
leverage those monies into more uses for transportation across 
the Commonwealth. So we believe that could be the basis, but it 
needs to be part of a package that, when you add all the 
elements up--and some of them, Senator, are grants; some of 
them are very competitive. But we do also believe in being good 
stewards and making sure these projects are well-vetted.
    So we understand that there is a need to be good 
fiduciaries, but even with that, we have a lot of unmet needs. 
So that has been our experience, Senator.
    Senator Nelson. All right. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Nelson.
    Senator Rockefeller?
    Senator Rockefeller. Just a quickie. In preparing for this, 
which I did 2 days ago, I think I read that the American 
Academy of Civil Engineers said that it is going to take $2.3 
trillion over the next couple of decades to bring us, in terms 
of general infrastructure--that is not just roads and bridges, 
but the general situation--back to where we need to be. Do we 
not have to look at all of this with that as a prospect? 
Anybody. Why don't you answer that, Ms. Barend?
    Ms. Barend. Sure. To your point, this is why, you know, the 
Federal funds that are available continue to be quite scarce, 
and the need for Congress to act and to increase the funding is 
of the utmost importance given the need. But also I think the 
onus of responsibility is also on Congress and the States to 
figure out how we maximize this funding to the best extent 
possible.
    The time for cost overruns and schedule delays in projects, 
big dig projects, we cannot afford that anymore in this 
country. We just simply do not have the money. So we need to 
maximize every dollar that is spent and make sure that we are 
incentivizing States and cities to use delivery approaches that 
really push performance. And that is really, you know, figuring 
out how to use the best of the private sector together with the 
public sector to generate these cost savings that a number of 
States are realizing.
    Senator Rockefeller. So I think it is safe for me to say 
then, other than Mr. Edwards--and I respect you greatly, sir--
that none of you would quit your positions or run off to Canada 
or Nova Scotia or something in a fury if we were to raise some 
taxes to pay for what this country has to do? Do you think you 
could survive that emotional trauma and we would actually have 
a train that went out to Dulles airport? Because what we have 
now is a train that goes nowhere. It is a wonderful train, but 
until the Loudoun County issue is solved, it has no use. That 
may be an overstatement, but it is not to me.
    Mr. Layne. Well, the intention is, as you know, the TIFIA 
loan was approved, the largest in the Nation's history, to fund 
the extension of the Silver Line out to the airport.
    Senator Rockefeller. Yes.
    Mr. Layne. Yes, sir.
    Senator Rockefeller. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Rockefeller.
    I am going to give you one question for the record, Ms. 
Barend, particularly on the balance and interaction between 
tax-exempt financing and the private-sector issue, because you 
clearly were raising questions about how that relationship 
would work, particularly for the private sector. So we will get 
that in writing.
    [The information from Ms. Barend appears in the appendix on 
p. 50.]
    The Chairman. Here is where we are, and we are going to 
conscript you all into this debate in terms of how we move 
forward. This strikes me as a position almost akin to what 
Winston Churchill said many years ago about our country, and 
the great phrase he used is, ``Americans always get it right.'' 
And then he paused in that inimitable way, and he said, ``After 
they have tried everything else.''
    And my sense is, we are sort of at that position now, and 
we are going to be talking to you about the steps ahead, and my 
sense is that we are going to need something akin to an all-in 
strategy. We are going to need an effective government/private 
sector approach. We have explored some ideas about that. I am 
very pleased about Chairman Rockefeller's question, which I 
tried to build on. Mr. Layne, you have said the situation for 
your State would be dire. Mr. Dhru, representing the private 
sector--and I quote here--said that this would be a 
``significant drag'' on the private economy. So we have gotten 
a strong message today from the government and from the private 
sector about the consequences of inaction. And I think Senator 
Boxer, the chair of the Environment and Public Works Committee, 
summed it all up, which is, failure is simply unacceptable.
    So we are going to operate on that kind of theory. We will 
be calling on you, taking some of your nights and weekends 
here, as we try to deal with this promptly.
    We thank you for your patience, and with that, the Finance 
Committee is adjourned.
    [Whereupon, at 12:22 p.m., the hearing was concluded.]
                            
                            A P P E N D I X

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