[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE ROAD AHEAD: SMALL BUSINESSES AND THE NEED FOR A LONG-TERM SURFACE
TRANSPORTATION REAUTHORIZATION
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
JUNE 3, 2015
__________
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Small Business Committee Document Number 114-013
Available via the GPO Website: www.fdsys.gov
U.S. GOVERNMENT PUBLISHING OFFICE
94-803 PDF WASHINGTON : 2015
_________________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800
Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001
HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
TOM RICE, South Carolina
CHRIS GIBSON, New York
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
CARLOS CURBELO, Florida
MIKE BOST, Illinois
CRESENT HARDY, Nevada
NYDIA VELAZQUEZ, New York, Ranking Member
YVETTE CLARK, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRENDA LAWRENCE, Michigan
ALMA ADAMS, North Carolina
SETH MOULTON, Massachusetts
MARK TAKAI, Hawaii
Kevin Fitzpatrick, Staff Director
Stephen Dennis, Deputy Staff Director for Policy
Jan Oliver, Deputy Staff Director for Operation
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
(II)
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Steve Chabot................................................ 1
Hon. Nydia Velazquez............................................. 2
WITNESSES
Mr. William Schmitz, Vice President, Sales and Quality Control,
Gernatt Asphalt Company, Collins, NY, testifying on behalf of
the National Stone, Sand and Gravel Association................ 5
Mr. Don Shilling, President, General Equipment and Supplies,
Fargo, ND, testifying on behalf of the Associated Equipment
Distributors................................................... 6
Mr. Matt Davis, Director, Build Our New Bridge Now Coalition,
Cincinnati, OH................................................. 8
Dr. Jonathan Gifford, Professor and Director, Center for
Transportation Public-Private Policy, George Mason University
School of Public Policy, Arlington, VA......................... 10
APPENDIX
Prepared Statements:
Mr. William Schmitz, Vice President, Sales and Quality
Control, Gernatt Asphalt Company, Collins, NY, testifying
on behalf of the National Stone, Sand and Gravel
Association................................................ 29
Mr. Don Shilling, President, General Equipment and Supplies,
Fargo, ND, testifying on behalf of the Associated Equipment
Distributors............................................... 38
Mr. Matt Davis, Director, Build Our New Bridge Now Coalition,
Cincinnati, OH............................................. 44
Dr. Jonathan Gifford, Professor and Director, Center for
Transportation Public-Private Policy, George Mason
University School of Public Policy, Arlington, VA.......... 47
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Statement of Congressman Blaine Luetkemeyer.................. 51
THE ROAD AHEAD: SMALL BUSINESSES AND THE NEED FOR A LONG-TERM SURFACE
TRANSPORTATION REAUTHORIZATION
----------
WEDNESDAY, JUNE 3, 2015
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 11:07 a.m., in Room
2360, Rayburn House Office Building, Hon. Steve Chabot
[Chairman of the Committee] presiding.
Present: Representatives Chabot, Hanna, Rice, Radewagen,
Knight, Curbelo, Hardy, Velazquez, Chu, Hahn, Meng, Moulton and
Takai.
Chairman Chabot. Good morning. The Committee will come to
order. We want to thank everyone for being here as we discuss
the importance of our Nation's surface transportation
infrastructure, with a focus on the small firms that help build
it and those that depend on it. I want to thank each of our
witnesses here this morning who have agreed to provide
testimony this morning.
There are lots of projects throughout our Nation that I
could cite as examples of why our infrastructure is important,
but none that is closer to home for me than the Brent Spence
Bridge. This is a bridge that connects Ohio to Kentucky, the
Midwest to the South. It carries 172,000 cars and $1 billion in
commerce every day, it is considered to be functionally
obsolete. It takes about twice the amount of traffic every day
that it was built for.
I have actually worked with a lot of my colleagues in a
bipartisan fashion from the region over the years, both
Republicans and Democrats, from Rob Portman, to Jean Schmidt,
to Brad Wenstrup, to Ken Lucas, to Tom Massie, and to Sherrod
Brown, to Jim Bunning and Steve Driehaus and others at the
Federal level and many at the State level, in both Ohio and
Kentucky and in the Cincinnati area itself to try to find a
solution to this. I am pleased that the Committee is able today
to examine how our communities and small businesses suffer from
the outdated infrastructure that is existent in this country
and certainly in our area.
America has always been a place where citizens are free to
follow their dreams and pursue happiness. Well, infrastructure
gets us there, it makes commerce possible, and the Brent Spence
Bridge is the perfect example of why we need a long-term
transportation bill that will keep America moving forward.
When you speak to folks back home about infrastructure, the
first thing they generally bring up is traffic, or the fact
that they are sitting in traffic far too long. It probably is
the case that my esteemed colleague, Ms. Velazquez, our ranking
member, probably has a horror story or two about crossing the
Brooklyn Bridge in her district during rush hour.
Time spent in traffic causes more than just a headache; it
costs Americans real money. If you are a florist, getting stuck
in traffic means your deliveries aren't as fresh or as fast as
they should be. If you are an HVAC repairman, it means you
can't make as many house calls in a day as you otherwise would,
which directly impacts your bottom line. If you are a
manufacturer, it means a longer time for your products to get
from one place to another, which is money out of your pocket.
Improving our infrastructure is about making American
businesses more competitive and making sure we have, as
consumers, the best access to goods and services every day that
we can, and that it keeps things as affordable as possible for
American families. And it is about jobs, not just construction
jobs, but jobs across the economy, from manufacturing to retail
and just about everywhere in between.
Small businesses play an important role in all of this. On
the construction side, small producers provide the stone and
sand to build the new highways, small equipment distributors
rent and maintain heavy equipment that is used on construction
sites, and in the end, the small business that needs to ship an
order of their goods across the river will be able to do so
quicker and cheaper with a new and modern bridge, for example,
in place.
Our country needs a long-term surface transportation bill
to provide States and localities the certainty they need to
tackle large, multi-year projects that fit the needs of their
growing communities. Just last month Congress passed a short-
term extension to keep the Highway Trust Fund operational
through the end of July. While that was necessary to ensure
things didn't come to a grinding halt, we must find bipartisan
solutions that lead to a long-term plan to improve the
infrastructure that keeps our country moving forward.
I want to thank all our witnesses again for being with us
today. I have personally testified several times about the
national significance of the Brent Spence Bridge, but since I
am on the dais today, I asked a fellow Cincinnatian to come
here and to share the Brent Spence Bridge story, Mr. Davis, and
also its importance to our Nation.
If we want to do something positive for the millions of
Americans that rely on small businesses to put food on the
table, we have to get to projects just like the Brent Spence
Bridge and get them done. We owe it to the American people to
invest in those projects that produce long-term savings, keep
us competitive, and most importantly, create American jobs. I
keep saying that, because it really, really is important.
And, again, I want to thank the witnesses. And I would now
like to yield to our ranking member, Ms. Velazquez, with her
horror stories about infrastructure.
Ms. Velazquez. Thank you, Mr. Chairman.
I just want to take this opportunity to thank all of you,
the witnesses, for taking time to be here with us this morning.
This is a very important issue.
As we all know, congressional action on a long-term
reauthorization of transportation infrastructure programs is
greatly overdue. It is my hope that this hearing will call
badly needed attention to this matter. And I hope, Mr.
Chairman, that the Republican leadership listens to you. It
would be of a great help to the Nation.
The small business sector is actively affected by
transportation policy. Roads, bridges, and highways are there
for the use of American commerce, and small firms depend on
them to move goods to market. As such, traffic congestion and
delays stemming from outdated infrastructure directly affect
small firms' bottom line. Traffic congestion deprived the U.S.
economy of $124 billion in 2013 alone. It is estimated that the
costs could rise to as much as $186 billion if steps are not
taken to address these delays.
Beyond being users of our roadways, small businesses have a
key role to play in upgrading our transportation and
infrastructure system. The construction industry is dominated
by smaller firms, with 90 percent of companies defined as
small. Almost seven and a half million Americans are employed
by companies in this sector, making it a key driver for the
broader economy. Other industries, like equipment operators,
manufacturers, material producers, and engineers benefit from
these investments. That is why each dollar of federal highway
grants received by a state raises that state's gross product by
$2.
Conversely, delays and uncertainty in federal
transportation policy hold back our economy. To plan and hire
employees, it is important small businesses are able to predict
future government infrastructure projects. Unfortunately,
Congress has sidestepped the hard work of a long-term
reauthorization, opting instead to kick the can down the road
with short-term extensions. Last July, the House passed a 10-
month extension, failing to adopt a longer term
reauthorization. In May, we extended these programs until July,
pulling the expiration date yet again.
This piecemeal approach has a very real impact on the
American economy. The uncertainty it creates slows economic
development and hampers job creation. One trade group has
suggested that this has cost the U.S. over 900,000 jobs, 97,000
of them in the manufacturing sector. That is why business group
after business group has called for a long-term solution for
the Highway Trust Fund.
Congress' failure to lead on this issue is evident in our
transit system condition. Once viewed as an infrastructure
leader, the U.S. now ranks 16th. Nearly one-third of our roads
are considered to be in poor or bad condition. Twenty five
percent of U.S. bridges require significant repair or cannot
handle today's traffic.
Mr. Chairman, I have spent a lot of time trying to cross
bridges to make it into other parts of my district. I have to
cross four bridges that will connect me from either Queens or
Brooklyn into Manhattan. It is just unacceptable.
Mr. Chairman, it is critical Congress pass legislation to
maintain our roads and infrastructure for the long-term. It is
my hope that today's hearing will move us toward that goal.
With that, I would like to thank again the witnesses and
the chairman for holding this important hearing. Thank you.
Chairman Chabot. Thank you very much.
And I will--before introducing our panel, I will go ahead
and inform you of our timing rules, which you are probably
already familiar with. We have what we call the 5-minute rule.
You have 5 minutes to testify. We will ask questions for 5
minutes also. A yellow light will come on to let you know when
you have got 1 minute to wrap up. When the red light comes on,
we ask that you cease talking at the end of that sentence,
maybe, or a little bit beyond that if you need a little more
time, but we would ask to you stay within those constraints if
at all possible.
And introducing the panel, we will begin with William
Schmitz, who is vice-president of quality control and sales at
Gernatt Asphalt Products in Collins, New York. Gernatt has been
in business since 1946 and serves all of western New York and
northwest Pennsylvania. The company has provided crushed stone,
gravel, and other products to several major projects in New
York, such as construction of Ralph Wilson Stadium, the First
Niagara Center in downtown Buffalo, and the New York State
thruway. He is testifying on behalf of the National Stone, Sand
and Gravel Association. We thank you for being here, Mr.
Schmitz.
Our next witness will be Don Shilling, who is president of
General Equipment and Supplies, headquartered in Fargo, North
Dakota. Don has been an owner and in the company's management
since 1984, serving as president since 2000. During that time,
the company has grown from one with three locations in North
Dakota to one with nine facilities in three States. He
currently serves as chairman of the Associated Equipment
Distributors and he is representing that organization today. We
want to thank you for your testimony, Mr. Shilling.
Our next witness will be Matt Davis, who is director of the
Build Our New Bridge Now Coalition, and advocacy organization
made up of nearly 200 businesses, labor organizations, and
community leaders advocating to build a new Brent Spence Bridge
Corridor in Cincinnati. In addition to his work at the
coalition, he serves as president of DSD Advisors, a full
service government relations firm that partners with public,
private, and non-profit clients to achieve their public policy
goals at the local, State, and Federal levels. We are looking
forward to your testimony as well, Mr. Davis.
And I will now yield to the ranking member to introduce our
other witness.
Ms. Velazquez. Thank you, Mr. Chairman. It is my pleasure
to welcome Dr. Jonathan Gifford, professor in the School of
Public Policy at George Mason University, and the director of
its Center for Transportation Public-Private Partnership
Policy. His primary area of expertise is transportation and
public policy, with a particular focus on infrastructure
finance. His book, ``Flexible Urban Transportation'', examines
policies to improve urban transportation systems, and he has
twice chaired committees of the National Academy of Sciences
that review U.S. Department of Transportation programs.
Professor Gifford received his Ph.D. in civil engineering
from the University of California Berkeley, where his research
focused on the history and development of the interstate
highway system.
Welcome, and thank you for being here.
Chairman Chabot. Thank you very much.
Mr. Schmitz, you are recognized for 5 minutes.
STATEMENTS OF WILLIAM SCHMITZ, VICE PRESIDENT, SALES AND
QUALITY CONTROL, GERNATT ASPHALT COMPANY, COLLINS, NY,
TESTIFYING ON BEHALF OF THE NATIONAL STONE, SAND AND GRAVEL
ASSOCIATION; DON SHILLING, PRESIDENT, GENERAL EQUIPMENT AND
SUPPLIES, FARGO, ND, TESTIFYING ON BEHALF OF THE ASSOCIATED
EQUIPMENT DISTRIBUTORS; MATT DAVIS, DIRECTOR, BUILD OUR NEW
BRIDGE NOW COALITION CINCINNATI, OH; AND DR. JONATHAN GIFFORD,
PROFESSOR AND DIRECTOR, CENTER FOR TRANSPORTATION PUBLIC-
PRIVATE POLICY, GEORGE MASON UNIVERSITY SCHOOL OF PUBLIC
POLICY, ARLINGTON, VA
STATEMENT OF WILLIAM SCHMITZ
Mr. Schmitz. Thank you, Chairman Chabot and Ranking Member
Velazquez for the opportunity to testify today on behalf of the
National Stone, Sand and Gravel Association, the NNSGA, about
the importance of the Nation's surface transportation system to
small businesses and particularly small aggregate companies. I
am Bill Schmitz, vice-president of Dan Gernatt Gravel Products,
a small business.
Since 1946, the Gernatt family and their companies have
been proud to serve all of western New York and northwestern
Pennsylvania. Comprised of Gernatt Asphalt Products, Dan
Gernatt Gravel Products and Countryside Sand and Gravel, our
company provides sand, gravel, stone, hot mix asphalt, and
trucking.
NNSGA is a leading voice and advocate for the aggregates
industry. Its members, the stone, sand and gravel producers,
equipment manufacturers, and their service providers, produce
the essential raw materials found in homes, buildings, roads,
bridges, and public works projects. There are more than 10,000
aggregate operations across the country, at least one in nearly
every congressional district. During 2014, NNSGA member
companies represented more than 90 percent of the crushed stone
and 70 percent of the sand and gravel consumed in the U.S.
Our locations are spread over three rural western New York
counties, where people struggle to find good paying jobs. The
Gernatt companies consider our 175 loyal employees as family,
and we want to provide them the well paying, stable employment
they deserve. We share the same faith-based values, and are
strong supporters of local businesses and community efforts
where we operate. It is important to us that these local
businesses and communities benefit from our success.
Aggregates are the foundation of our business in a key
industry that serves as a barometer for the rest the U.S.
economy. Stone, sand and gravel are essential to any
construction project. When the demand for our products is high,
jobs are being created and critical national assets are being
built. If the aggregates industry is doing well, so is America
and the Gernatt companies.
Sales of aggregate generate over $40 billion annually for
the U.S. economy. When combined with related industries, such
as cement, concrete, asphalt, and construction equipment, they
generate more than $200 billion in economic activity every year
and employ more than 2 million people.
Due to high transportation costs, proximity to a market is
critical. Unlike many other businesses, we cannot simply choose
where we operate. Because so much of our material is used in
public projects, any cost increases are ultimately borne by the
taxpayer. Congress needs to do what they were elected to do.
Stop kicking the can down the road, and address the long-term
funding of our Nation's surface transportation infrastructure.
No more short-term extensions. Seventy percent of NNSGA members
are small businesses. Reauthorization is critical to us.
Multi-year highway bills are important for funding for the
confidence they provide State transportation departments. When
they know the Federal Government will apportion their funding
year after year, they have the confidence that they will be
reimbursed. The process of building and maintaining our
infrastructure then can proceed as planned. Stability of the
program is a critical factor, particularly for small
businesses.
Improved safety is another important reason to pass a
multi-year highway reauthorization bill now. Safety must come
first, to ensure that all Americans get to and from their daily
activities safely. The Gernatt companies are committed to the
safety of our employees, our most precious resource. We pride
ourselves on our safety record. Our small company devotes
numerous resources to maintaining our safety program.
Mr. Chairman, again, thank you for the opportunity to
testify today. Congressional action on a long-term highway
bill, one that increases investment in the Nation's
infrastructure, is vital to the aggregates industry and all
small businesses. We require certainty to make sound capital
investment decisions. Reverting to short-term extensions will
only create havoc in resource development decisions and
construction projects.
Attached to my statements are two infographics that NNSGA
put together. Small Change calculates the real costs to the
average American of the Corker-Murphy proposal to increase the
fuel user fee 12 cents. The second infographic shows virtually
the cost of doing nothing.
We look forward to continuing to work with you in what is
right for America. If we ignore the maintenance and improvement
of our Nation's road and highway network, it is at our own
peril. We risk the loss of economic growth, improved safety,
cleaner air, and jeopardize the freedom of mobility that we all
take for granted. Thank you.
Chairman Chabot. Thank you very much.
Mr. Shilling, you are recognized for 5 minutes.
STATEMENT OF DON SHILLING
Mr. Shilling. Chairman Chabot and Ranking Member Velazquez,
and other distinguished members of the House Small Business
Committee, my name is Don Shilling, and it is my pleasure to
appear before you as executive of a construction equipment
company impacted by uncertainty surrounding the Federal Surface
Transportation Program, and my capacity as chairman of the
Associated Equipment Distributors.
AED is the trade association representing distributors of
construction, mining, energy, forestry, industrial, and
agricultural equipment. AED members, the overwhelming majority
of which are small family businesses, supply equipment that
builds America's highways, bridges, airports, sewer, and
drinking water systems.
I am president of General Equipment and Supplies. The
authorized Komatsu construction equipment dealer for North
Dakota and western Minnesota. We have four North Dakota
locations, two facilities in Minnesota, one in South Dakota,
and employ 235 American workers.
General Equipment and Supplies and AED members across the
Nation are ready to supply the heavy equipment needs to rebuild
America.
The Highway Trust Fund consistently flirts with bankruptcy,
as gas taxes and other user fee revenues are insufficient to
support even the current inadequate levels of investment. This
is creating enormous uncertainty for the entire construction
sector.
My company is fortunate. The energy boom in North Dakota
has allowed General Equipment and Supplies to stay in business
despite sufficient decreases in equipment sales to road
contractors, which account for about 50 percent of our customer
base. However, in Minnesota locations, the most prominently--
which we most prominently service highway--the market, we see
dramatic reductions in sales due to uncertainty surrounding the
Federal investment. In fact, between 2013 and 2014, we saw a 34
percent reduction in equipment whole good retail sales. Even in
North Dakota, the State is reluctant to bid long-term equipment
extensive jobs, and recently pulled 30 contracts due to the
lack of confidence in the highway Federal program.
Historically, General Equipment and Supplies and most AED
members primarily sold heavy construction equipment. However,
we have increased rentals by 26 percent between 2013 and 2014
due to the uncertainty surrounding the Federal investments.
While we are grateful for the business, the drop in sales has
broad implications, including forcing dealers to continue to
carry rental equipment on our balance sheets along with
associated financial risks, tying up cash that could be used to
hire more workers and invest in our companies.
Federal highway fund's precarious situation is also
impacting business decisions. My company has considered opening
a new location in North Dakota, which means purchasing a
20,000-square-foot building and hiring 12 to 20 new employees.
We have been reluctant to expand, because of a lack of
confidence in the highway market since the new facility would
primarily serve road building and agricultural sectors.
Additionally, it should be noted that AED members' interest
in resolving the uncertainty surrounding the Federal Surface
Transportation Program isn't solely to increase sales. My
company services customers in a territory of over 100,000
square miles and we rely heavily on interstate highway systems.
We deliver parts nightly from Minneapolis to western North
Dakota. We also--a majority of our equipment is serviced and
repaired in the field, where our service trucks are dispatched
daily to remote locations.
As a small business, delays and costs associated with
inadequate highways and congestion sufficiently increases
operating expenses and hinders investment in the company.
The detrimental impact of the Highway Trust Fund certainly
isn't unique to General Equipment and Supplies. In August, in
fact--the fact by August, without action, economic shock waves
will reverberate throughout the country as the Federal program
is unable to support the transportation spending, jeopardizing
more than $50 billion annual investment and threatening $2.4
billion in equipment market activity, and close to 4,000
equipment dealership jobs.
Chairman Chabot. Did you want to wrap up?
Mr. Shilling. I just had one more comment here.
Chairman Chabot. Sure. Okay.
Mr. Shilling. Sorry. I turned my page too soon.
We did do a survey amongst our dealers and, an example; 91
percent of the respondents said that they would add employees
if Congress would pass a highway bill, 78 percent would
purchase new service trucks, and 91 percent would invest in
additional inventories if--to help in the manufacturing sector.
And we have additional information in our packet----
Chairman Chabot. Okay.
Mr. Shilling. --that describes that. Thank you.
Chairman Chabot. Thank you very much.
Mr. Davis, you are recognized for 5 minutes.
STATEMENT OF MATT DAVIS
Mr. Davis. Chairman Chabot, Ranking Member Velazquez, and
members of the House Committee on Small Business, thank you for
the opportunity to meet with you today to offer testimony on
the importance of transportation infrastructure to business
growth. Thank you for dedicating the time of this Committee on
this important issue too. Thanks for spending your time on
this. This is important.
My name is Matt Davis and I am president of DSD Advisors,
an advocacy and consulting firm and small business in
Cincinnati, Ohio. In addition to that, I am also the director
of the Build Our New Bridge Now Coalition.
Created in 2012, the Build Our New Bridge Now Coalition is
a diverse group of small, medium, and large businesses,
community, government, and labor leaders who have come together
to advocate for the rebuilding and rehabbing of the I75/71
Brent Spence Bridge Corridor. These leaders joined to focus
their efforts to rebuild the corridor because it is
inextricably linked to our region's current and future economic
opportunities, quality of life, and safety.
If you don't already know, the Brent Spence Bridge is a 52-
year-old span that carries Interstates 75 and 71 across the
Ohio River locally. It also serves as a major artery in our
national highway system, carrying the equivalent of 4 percent
of our Nation's GDP every year, and connecting Michigan to
Miami, servicing many communities and companies, both large and
small, along the way.
Locally, the Cincinnati region has a distinct geographic
advantage which has supported our economy, being within just a
90-minute flight or one-day drive of 25 of the top U.S. metros
and 41 percent of the Nation's purchasing power. Couple those
numbers with the amount of the Nation's GDP I referenced
before, you can see that our geography has served our region's
residents and small, medium, and large businesses very well.
Unfortunately, our roads and bridges have not.
The Brent Spence Bridge was built more than 50 years ago to
create jobs and spur our economy. Now it is failing our region.
The Brent Spence carries more than twice the amount of vehicles
per day that it was designed to accommodate, it is considered
functionally obsolete, and was given a grade of C minus in 2014
by Kentucky transportation officials, down from a B plus grade
in 2006. Congestion on this crumbling, decaying and out of date
span continues to increase, stifling productivity, slowing the
flow of goods and commuters, raising safety concerns and
lowering our quality.
According to our NPO, the Ohio, Kentucky and Interregional
Council of Governments, approximately 60 percent of our local
population and 75 percent of our local jobs are within 5 miles
of I-75. This data shows us that the interstate corridor and
the Brent Spence Bridge that supports it are critical to our
region's present and future. Businesses chose the Cincinnati
region because of its economic climate, and infrastructure,
particularly the Brent Spence Bridge Corridor, is a key
component of that climate, so we must care for it to ensure our
economic future.
Another statistic you should know, you are three to five
times more likely to be in an accident in the Brent Spence
Bridge Corridor than you are in any other portion of the
interstate system in Ohio, Kentucky or Indiana. That stat leads
to wonder what the future holds for the safety of our commuters
and businesses.
If we do nothing, will conditions improve? Probably not.
And if we don't, then we fear that existing businesses will
relocate and prospective businesses will look elsewhere. The
corridor's future can either create a roadmap to our region's
future or hold us back if we do not develop a strategy to
modernize it.
Businesses, particularly small ones, operate on very thin
margins. As the old saying goes, time is money, and that rings
true for every small businesses in Cincinnati and in the
country. In order for those businesses to stay afloat, they
need reliable roads, bridges, waterways, airports, and railways
to move employees and goods from place to place as safely as
possible. If a delivery or an employee is late, it can cause
major disruptions for that business, with a multiplied effect
on our region.
The Build Our New Bridge Now Coalition is one of many
groups that believe in developing strategies and infrastructure
at the State and national levels with a set of priorities will
be a springboard to significant job gains, particularly for
small, homegrown businesses.
So I said what we asked what would happen if a we did
nothing. Let's ask what happens if we do do something on the
Brent Spence Bridge project. Northern Kentucky University
completed a study that looked at the economic impact of
building the Brent Spence Bridge Corridor, and found that
24,488 jobs would be created in Ohio and Kentucky, generating
$1.9 billion in labor income and $193 million in State and
local government revenues. Keep in mind, those are real jobs
with real income just from the construction of this one
project. I know most of you in Congress have not traveled the
Brent Spence Bridge and many of you never will, but you all
have projects like these in your district that if completed can
make a huge difference.
Providing reliable and safe infrastructure is one place
where Washington and the States can play a major role in
supplying the tools for success for America's small business.
The sky is the limit for the future of small businesses, but
not if employees can't get to the office or a delivery truck is
constantly late. If that happens, the sky won't be the limit.
They won't be able to get off the ground.
Thank you for your time today and attention to this
important issue, and I look forward to answering any questions
you may have.
Chairman Chabot. Thank you very much.
Now, one kind of interesting historical fact is that the
Brent Spence Bridge was slated to be dedicated, but it had to
be delayed until the following week. It was supposed to be
dedicated the week of John F. Kennedy's assassination, and so
they did it the following week instead. So that tells you also
how old the bridge is.
So Dr. Gifford, you are recognized for 5 minutes.
STATEMENT OF JONATHAN GIFFORD
Mr. Gifford. Thank you, Chairman Chabot, Ranking Member
Velazquez, and distinguished members of the Committee for the
opportunity to speak today.
I am a professor at George Mason University, where I direct
the Center for Transportation Public-Private Partnership
Policy. The center provides objective analysis of
transportation public-private partnerships through research,
education, and outreach. We believe that a better understanding
of P3s will lead to their more appropriate use.
I would like to make three points today. First, public-
private partnerships for transportation projects offer
significant opportunities for small business. P3s generally
involve design, construction, and long-term operation and
maintenance of transportation projects. P3s usually last 35
years, in some cases up to 75 years. These long-term agreements
support small business. Business needs include engineering
materials, construction, public affairs, community relations,
architects, attorneys, security, and appraisers. These business
needs are not just for the construction of the project, but
also for the long-term operation and maintenance, which goes on
for decades. Such long-term agreements foster the creation and
sustenance of local businesses.
Moreover, such opportunities are not just discretionary on
the part of the concessionaire. States participating in P3s
typically establish goals for participation by small woman-
owned and minority-owned businesses and disadvantaged business
enterprises.
For example, Virginia's goals from three of its major
projects total more than $1 billion for the design and
construction phase alone. The recently completed 495 and 95
express lane P3 projects in Virginia supported more than 28,000
jobs during construction and employed hundreds of DBE/SWaM
firms during that time, 184 firms for the 95 express lanes and
250 firms for the 495 express lanes.
A long-term surface transportation reauthorization can
support small business by removing barriers to P3s and by
continuing and possibly increasing Federal support for P3s.
Without long-term reauthorization, agencies do not have the
budget to let in and continue meaningful contracts. Large firms
can often absorb this uncertainty, but small businesses are not
well equipped to deal with the off-on nature of the current
Federal process.
A major barrier for P3s in many States is the Federal ban
on tolling and reconstructed interstates. Congress may wish to
reconsider that ban since so much of the interstate will
require reconstruction in coming decades. Significantly
relaxing or removing this ban can be done at no cost to the
Federal budget and it would allow States to decide whether and
how much to explore tolls as a means of renewing and expanding
their highway systems.
Congress may also wish to extend or expand current programs
that support P3s, notably TIFIA and PABs. TIFIA provides loans
and credit support to most P3 projects. PABs, or Private
Activity Bonds, level the playing field between bonds for P3
projects and municipal bonds by exempting PABs from most
Federal income taxes. President Obama's proposed qualified
public investment bonds would expand the dollar amount
available for.P3s by eliminating the current $15 billion cap on
PABs.
My second point relates to the Federal gas tax. The gas tax
and the Highway Trust Fund have played important roles since
1956 in the construction of the interstate system and support
for the Federal Aid Highway Program. The current gas tax rate
doesn't support the program's ongoing expenditures. Congress
has filled this gap in recent years from the general fund.
Continued reliance on the gas tax as the primary source of
program funds is problematic. As cars get more fuel efficient
and the numbers of hybrids and electric vehicles increase, a
flat per gallon tax on gasoline generates less and less for
each mile driven on our highway system.
In the long term, Congress will decide how much financial
support it wishes to provide the program and how to pay for it.
An increase in the gas tax could support an ongoing program at
current spending levels. However, in the longer term, other
sources of State, local, and Federal revenue, such as tolls,
may provide a more stable and suitable financial foundation for
addressing the Nation's transportation needs and opportunities.
Global capital markets appear to have a significant
appetite for infrastructure investment. Investment in the U.S.,
however, is limited, due in part to a lack of bankable
projects. Removing barriers to tolling could enable more
private capital investment.
My third and last point relates to the University
Transportation Center's program. This program has supported
many universities, including my own, to research our Nation's
transportation system and educate generations of students who
go on to design, construct, operate, finance, and maintain it.
As an active participant in the UTC program for most of my
career, I would like to assure the Committee that the program
has generated considerable value in research, education, and
professional development.
Our Nation appears to be on the cusp of major changes in
its transportation systems. Important innovations include
autonomous vehicles, GPS, mobile devices, advanced materials,
companies like Uber and Lift, and public-private partnerships.
These innovations are transforming the movement of people and
freight. They are also disrupting industries and institutions
that make up our transportation system. Continued support for
the UTC program will allow research and education to continue
to contribute to expanding the development of such innovations
and our understanding of how they affect society.
That concludes my statement. I look forward to your
questions. Thank you.
Chairman Chabot. Thank you very much.
And we want to thank all the panel members for their
testimony this morning. I think they were all excellent.
And we will start the questioning, and I will begin with
myself. I am recognized for 5 minutes.
Mr. Davis, I will start with you. Downtown Cincinnati, as
you know, has gone through pretty significant urban renewal
over recent years, for the better. It seems to be looking a lot
better downtown, more people coming down, and just the general,
I think, attitude of the city about itself. Could you discuss
what the new bridge, the Brent Spence Bridge, if we can finally
get it done, what impact that would have on the overall urban
renewal of the city, and also what--this is the Small Business
Committee. What impact would you see this having amongst small
businesses in, not only downtown Cincinnati, but throughout the
region?
Mr. Davis. Thank you, Mr. Chairman. I will take your first
question first about urban renewal, how it could affect
Cincinnati. As I mentioned earlier, you know, our statistic
that 75 percent of the jobs in our region are within 5 miles of
I-75. And as you know, Mr. Chairman, I-75 runs right next to
downtown, right through the urban core, and also goes into
northern Kentucky. So it is really--the Brent Spence Bridge,
the corridor, is really at the center of our--is at the center
of our--of our central business district.
Expanding that, unlocking that, you know, decreasing the
congestion, in our view, will lead to greater investment. There
is--the CBO reported in 2014 that every dollar spent on
infrastructure can lead to anywhere between $1.15 and $1.25 on
return, so there is the numbers right there that show that it
is a good bet that infrastructure investment will bring a
higher return.
On the small business side, we have many members of our
coalitiion who work on both sides of the Ohio River, that work
in northern Kentucky or work in Cincinnati, and, you know, take
that bridge every day or take any of the--any other number of
six bridges that we have in the region to cross the Ohio River,
and timing is important to them. We have a lot of professional
services companies, IT service, for example, who are often late
because they are unable to--often late and waste time and gas
and money by--because they are stuck in traffic. So we think
that unlocking that, making it easier for businesses to access
the urban core by widening the highway, by adding--rebuilding
the Brent Spence Bridge and rebuilding the corridor will be
helpful.
Chairman Chabot. Thank you very much.
Mr. Gifford, you--or Dr. Gifford, you already talked about
the gas tax, so let me maybe turn to your colleague, one of the
three of you, if you wouldn't mind answering this question.
With people driving more fuel-efficient vehicles, do you have
any suggestions outside the raise-the-gas-tax box that we ought
to look into? Are there other ways besides that that you could
see us coming up with additional funds to move forward on
transportation?
And whoever wants to handle it. Mr. Shilling, you look like
you might want to----
Mr. Shilling. Yes. I would like to state a couple things.
Number one is even--even if the gas tax--if we looked at
indexing the gas tax based on inflation would help increase the
revenues, but also I think a lot of talk has been centered
around actual miles driven, because you have a lot of vehicles
using the highways that do not burn fuel or very much fuel
anymore, so a mileage seem to be more appropriate mechanism for
paying for the user fees.
Chairman Chabot. Okay. Thank you.
Mr. Schmitz, let me ask you this one. In your written
testimony, you talked a little bit about the negative impact
that the Waters of the United States regulatory action coming
from the EPA will have on your industry. Could you elaborate a
little bit? What are you concerned about there?
Mr. Schmitz. That is a very ominous decree looking at us.
We operate several operations which dredge sand and gravel from
underwater. Ponds that we have created that are not connected
are now being considered as Waters of the United States. One of
our dredging operations, which has been in existence since
1964, has now fallen under this jurisdiction, and we have spent
hundreds of thousands of dollars on studies proving our point,
but the ominous overreach that the Waters of the United States
has us concerned at all of our locations, because even the mud
puddles along the side of the road in front of our operations
are now considered under this jurisdiction.
Chairman Chabot. Thank you very much. My time has expired.
Gentlelady from New York, the ranking member, Ms.
Velazquez, is recognized for 5 minutes.
Ms. Velazquez. Thank you.
Dr. Gifford, I want to go back to the highway vehicle miles
traveled, which have decreased since 2003. Now we also have
increasing fuel standards and the rise of alternative-energy
vehicles, so this made the gas tax even less of an indicator of
highway usage. Given that reality, what sort of funding
structure is most appropriate to fund our highways in the long-
term?
Mr. Gifford. In the long-term, I think the viability, as I
stated, of the traditional per-gallon gas tax is limited. There
are a lot of alternatives that have been placed on the table by
many of constituencies surrounding this issue, looking at a VMT
or miles-traveled tax that is under consideration now in
experiment in Oregon, it looks technically viable and it looks
manageable in ways that can protect the privacy of motorists so
that they don't have government tracking their everyday
movements, that I think that is quite viable.
I mentioned tolls in my statement. And I think, like gas
taxes, tolls are a user fee. And from a public policy
standpoint, I think looking at ways to, you know, charge users
for their use of a system has a lot to commend it. The gas tax
was a loose proxy for usage, but tolls, I think, are more
direct and may be, as I mentioned, something where, at no cost
to the budget, the Federal Government could enable.
Ms. Velazquez. So let me ask you: From a small business
perspective, user perspective, such as those involved in
trucking or delivery or related companies, what is the least
burdensome alternative?
Mr. Gifford. I think it depends. That is not a very clear
answer, but, you know, the tolls are usually higher for heavier
vehicles, so step vans or delivery trucks are going to pay
higher tolls than a--you know, than a light duty vehicle like a
pickup truck or a car.
On the other hand, gas taxes are also heavier. Those are
more gas-dependent or diesel-fuel-dependent vehicles, so
raising the gas tax also has a disproportionate impact on them
from that perspective; appropriately so. They are heavier,
larger vehicles.
Ms. Velazquez. Yes. And with large general funds
transferred occurring since 2008, all states now receive more
funds that they contribute to the Highway Trust Fund. If
Congress acted to tie the trust fund more closely to highway
use, some states could again end up in a net loss position.
What is your view on that issue?
Mr. Gifford. The issue of donor-donee and now all donee
States to a certain extent is a difficult one. If--I think
every State would like 100 percent of the money it sends to
Washington to come back to that State, where someone else takes
the political heat for the tax, and they are able to have the
spending money, but of course that--it doesn't work that way.
Where a--you know, our Constitution gives two votes in the
Senate to every State, we built the interstate system, and not
every State was able to pay its costs. So I think some regional
equity always emerges in a Federal system, and rightly so.
Those are the terms of the deal in which the Union was created.
Ms. Velazquez. I would like to ask you a question about one
of the programs in DOD, and that is the DBE program. It has
been operating since 1985, but recently the DOT's inspector
general found that the program had limited success, mainly
because there were little incentives for companies to grow
beyond the DBE program itself. What are your views on the DBE,
and should it be overhauled, reformed?
Mr. Gifford. I am not familiar with the Federal DBE
program. In my State, I mentioned the targets that States
attached to public-private partnerships for as goals, and I
think the results there are compelling, that many small
businesses, disadvantaged businesses, women-owned and minority
businesses, are recipients of contracts. I have data from
Virginia Department of Transportation sent to me yesterday that
more than 50 percent of the funds in public-private
partnerships are spent locally.
Ms. Velazquez. Okay. Thank you, Mr. Chairman.
Chairman Chabot. Thank you very much. Thank you. The
gentlelady yields back.
The gentleman from New York, Mr. Hanna, who is the chairman
of the Subcommittee on Contracting and Workforce, is recognized
for 5 minutes.
Mr. Hanna. I am also the guy who has owned lots of Komatsus
and was in heavy construction for years. Used tens of thousands
of yards of gravel. But to get to the point, though, we are on
our 33rd extension. I mean, to say that I agree with all of you
is--you know, I do, and I think most members here do. The
question is what are we doing about it, and we are not doing a
whole hell of a lot, are we?
But to respond to the talk about the gas tax, in many ways
it has become a more regressive tax. We know that mass transit
doesn't pay in, and yet we can understand the value of mass
transit. We also know that 34--ages 18 to 34 year olds, they
are not driving, yet they enjoy the full benefit of the highway
system through all the things they order online and all the
other things, and we know that people who drive cars that don't
necessarily pay in, which is, you know, roughly 2 or 3 percent
now.
So there are a lot of things about how we fund this that
are problematic and lead us to believe that there is some--we
need an overhaul. And Oregon's experiment is just that, an
experiment, it is not going to happen in any kind of time limit
that is going to help us solve our problem that we are talking
about today. I think we can all admit that.
So my point is that all of this builds a case--and triple
P's are nice, but they are not happening, either, and that is
something else we need to talk about, but all of this builds a
case for me to take the money out of the general fund and find
it someplace other than this, you know, kind of pretense we
have about dealing with it some other place.
And that is what we have had to do, that is how we were
short, and I think that that is what Congress is, you know,
trying to do at the moment, is find it someplace else, but
the--I want to know what you think about that in terms of 18 to
34-year-olds who aren't driving, why is it that mass transit
isn't paying in. I can appreciate both sides of that argument,
but--Mr. Gifford.
Mr. Gifford. Well, as to the question of why mass transit
isn't paying in, I think back in the 1950s when we created the
Highway Trust Fund, the interests of the mass transit industry
was being exempted from the gas tax. That was really the only
thing they wanted out of the 1956 bill, and they got it. And
that has been carried forward. Starting in the 1970s, as you
know, we began to fund mass transit from the Highway Trust
Fund. And, you know, there are debates about whether that is
justifiable or whether that should be paid from the general
fund.
Mr. Hanna. But the point, who is contributing more to whom
and how that distribution is fair or unfair is interesting to
me, and I wonder about your opinion on that?
Mr. Gifford. Let me understand your question. You--you are
looking at the equity impacts----
Mr. Hanna. Yes.
Mr. Gifford. --of the gas tax, who is paying, who is
benefiting.
Mr. Hanna. Right. I live in the district. I go buy a loaf
of bread, it costs me a couple bucks. I go across Manhattan, it
costs a couple bucks, three bucks, whatever it is. So why isn't
that--what can you make of that argument? And I value mass
transit. It is not that. And the notion of 18-year-olds to 34-
year-olds not driving and yet we see the depletion, and we talk
about the gas tax obsessively, which I get, you know, and I
have worked to find a way to solve this problem, but there is
kind of a confluence of issues here that people are not talking
about, I think, appropriately in this Congress and around the
country, and always pointing to the gas tax, I think, doesn't
give us the kind of long-term solution we need.
Mr. Gifford. Well, I mentioned tolls. I don't know if you
are--you know, referring to tolls, but with respect to the gas
tax itself, certainly there are some, you know, leakage that
occurs. You know, all of the benefits of using the highway
system do not redound only to the vehicle that is operating,
the vehicle driver for personal vehicle or a delivery truck for
a commercial vehicle. The whole economy benefits, as I think my
colleagues on the panel have mentioned, when we have a well-
functioning transportation system, but there is no perfect
taxing mechanism, either.
And so you could certainly take the money out of general
funds, but I think you know only too well how difficult it is
to find pay-fors in the current general fund environment. And I
agree that there are general benefits that redound to the
economy from a good functioning transportation system.
Mr. Hanna. Would you agree in the time I have left that
there are broad sections of our economy and people therein who
benefit from the highway system but don't pay proportionately?
Mr. Gifford. I would say they don't pay directly, but when
I order from Amazon, I pay a delivery fee, and that delivery
fee goes in part to a delivery company that is paying gas taxes
or other fees.
Mr. Hanna. That is fair. Thank you.
Chairman Chabot. Thank you. The gentleman's time has
expired.
The gentlelady from California, Ms. Hahn, is recognized for
5 minutes.
Ms. Hahn. Thank you, Mr. Chairman, and thank you for
holding this hearing. I really appreciated the testimony from
all of our witnesses today. And I sit on the House
Transportation and Infrastructure Committee, very proud member,
so I love it that we are bringing this incredibly important
issue to how it impacts our local small businesses. I think
that is extremely important. And certainly I am happy we sort
of got into the discussion about how do we fund going forward
our incredible needs in transportation.
Certainly our infrastructure is crumbling around us, it is
in--we have something like 70,000 bridges in this country that
are deficient. That is--you know, that is really troubling to
me.
And I drive an electric vehicle, so I haven't been to a gas
station for 4 years, and I think that is part of what we are
discussing this morning. Our gas tax shouldn't be the only way
going forward that we are going to try to attempt to fund this
incredible need in the country. I am one of those that would
like to look at alternatives.
No one mentioned yet, but I even think a flat fee when
folks register their cars annually with the DMV might be an
interesting alternative, but I do think we need--apparently the
gas tax still only brings in something like $34 billion
annually, and yet we need about $50 billion annually to keep up
with our infrastructure issues, so clearly that is not the way
forward, so I am glad we are talking about this.
I do have one idea that would help to fund our freight
corridor in this country. I have come with an idea that doesn't
raise the tax, doesn't call for a new fee, and it would work by
diverting 5 percent of our incoming import fees at our ports.
If we divert that, it would be about $2 billion a year that we
could fund our freight projects in this country so that they
wouldn't have to compete on an ongoing basis with the Highway
Trust Fund.
And I think that would solve a lot of our issues in this
country in terms of congestion, in terms of moving goods, in
terms of making us competitive globally, so I am hoping that
bill will get some traction. I have a couple of Republican
cosponsors so far, but I could use more.
But, you know, I was going to--I am very concerned that we
have had this short-term fix, and I was going to ask Don
Shilling this question. We were told by some construction folks
that construction jobs are for the most part seasonal, and we
were told that because of what Congress--our inaction recently,
that we have missed the summer construction season by not
allowing for projects to be put on the books. Can you explain
that to me? Is that correct, or what impact do you think this
short-term fix has on our summer construction jobs?
Mr. Shilling. Yes, it very much impacts us. As I mentioned,
in North Dakota for the May letting, they pulled 30 jobs
because of the no funding secured. Basically by the time they
get those jobs back on the docket and bid them, we will--our
work season will be done. So if you look at our bidding cycle,
most of the bidding is done November, December, January,
February for projects that start then in March and work through
the end of October. And we are, of course, as far north as you
can get, but most of the other states around us are the same.
They are very seasonal. There are a lot of things that can't be
done in the winter months.
Ms. Hahn. I appreciate that.
And, Mr. Schmitz, I was going to--in your testimony, you
talked about how the cost of the materials increase because of
transportation cost, and I was wondering if you could elaborate
on what are transportation costs that then get passed on to the
consumer in materials like sand and gravel?
Mr. Schmitz. Yeah. That--transportation is a huge part of
our cost of doing business. Our products are heavy, we are
generally within 25 miles of the market, but if it is an area
devoid of aggregate, we ship via rail and trek the trailer over
longer distances. The cost of the material over 25 miles to
transportation actually outweighs the cost of the materials.
What we can put on our costs is we can put on our tolls and
our Federal excise taxes, but when the truck is sitting in
traffic or has to detour 10 or 15 miles to avoid the bridge
that can no longer take the weight limit, the public is bearing
these costs. It is tough for us as a small business to even
quantify it, but we have to build that in. Instead of our
trucks doing 45 miles on hour, they are down to 35 miles an
hour or taking an extra 10 miles. So ultimately the traveling
public is the one who is bearing the cost, the taxpayers are,
for the conditions of the highways.
Ms. Hahn. Thank you. My time is up, but I really appreciate
all of you making the case again for why Congress needs to pass
a long-term surface transportation bill.
Chairman Chabot. Thank you very much. The gentlelady's time
has expired.
The gentleman from South Carolina, Mr. Rice, who is
chairman of the Subcommittee on Economic Growth, Tax and
Capital Access is recognized for 5 minutes.
Mr. Rice. Thank you, Mr. Chairman.
We are in the midst of the weakest recovery from a
recession since the Depression. Average household income has
declined 8.7 percent since the President took office, consumer
spending is rising at a very anemic rate of 1.4 percent. Forty
four percent, the most recent numbers I have seen, of recent
college graduates are underemployed or unemployed. And I think
a lot of that comes from this very fact that, you know, we are
talking about uncertainty. Uncertainty doesn't allow our
States, our counties or the Federal Government to invest.
Complete lack of a long-term plan, bandaid solutions that
are applied on a short-term basis; we have got to have a long-
term plan and we have got to have long-term solutions, and it
is shocking to me that we don't have these things.
This funding issue, we can resolve it. It is not a matter
that we don't have enough revenue. I mean, we are collecting
more revenue, the Federal Government is, that--it is above the
40-year average, the amount of revenue we are collecting. We
are spending far too much, and particularly on entitlements.
Entitlements are two-thirds of our total spending.
So we have got to find a solution for the Highway Trust
Fund. I am going to propose one myself. I am going to propose
increasing the gas tax and a simultaneous decrease in the
income tax, because the Highway Trust Fund has got to be self-
sustaining, the Social Security Trust Fund needs to be self-
sustaining. All this uncertainty we are heaping on the economy
holds back job creation, holding back GDP.
We shouldn't be surprised that GDP has been--the forecast
from CBO has dropped from 3 percent to 2.7 percent to 2.3
percent. We had negative growth last quarter. It requires
leadership, and we are not getting it. So I am going to put out
my own solution to this.
One of the worst calls I have had in Congress was from my
State secretary of transportation last summer, I think it was
in June, she called me and asked to meet with me, and I went
and sat down with her and she said, I understand the Highway
Trust Fund's supposed to expire in August. What am I supposed
to do? Am I supposed to cancel my contracts? Am I supposed to
not take anymore contracts?
You know, you can't turn these things on a dime. It
requires years to plan and execute.
And in addition to the funding issue, we have got--the
regulatory structure is incredibly burdensome and amok and it
stifles progress on every front. It is not just in highway
construction, it is across the board. It is so hard to get
anything done in this country anymore. We used to be a can do
country, and now we are a you can't do that country.
I-73 in my district, I live in Myrtle Beach, South
Carolina, 16 million visitors a year, one of the top ten
tourist destinations in the country, and the only one in the
top ten that does not have an interstate connection. I have
been working on trying to get a permit for that road to connect
really from the North Carolina line down to I-73--I mean, down
to Myrtle Beach since I have been in Congress, 2 years and 4
months, and it was--they were working on it for years before
that, and we are still involved in wetlands mitigation. It is
a--we are being held hostage by the environmentalists. They
propose that in order to mitigate for the 270 acres of wetlands
they say we are destroying in that 80-mile stretch, that we
purchase 6,800 acres. The system is completely amok.
The Port of Miami, they have been trying to get permission
to dredge that port. There is not a port in the southeast that
can take the post-Panamax ships today until we get dredged. The
Port of Miami has been trying to get permission for 16 years,
trying to get a permit. Port of Charleston, one of the most
efficient ports in the country, been working on trying to get
an environmental permit for 4 years and they have still got
years to go.
We are tying our own hands. We are making our own selves
uncompetitive. We cannot point at anybody else. The only people
holding us back is us. We have got to have leadership.
Thank you very much.
Chairman Chabot. Thank you. Does the gentleman yield back?
Mr. Rice. I yield.
Chairman Chabot. The gentleman yields back.
I now recognize the gentleman from Florida, Mr. Curbelo,
who is chairman of the Subcommittee on Agricultural, Energy and
Trade.
And before you get started, I would like to note the fact
that we had the opportunity to do a wonderful event in his
district last week during our district work period, several
events, but one in particular at a college that I now realize
is actually the most populous college in the world, if I am not
mistaken, Miami Dade County, 165,000 students at the various
campuses. Its 10,000 Small Businesses Program is just an
incredibly impressive program that they do at 20 different
places around the country. And so if you are interested, I
would encourage you to perhaps seek out Mr. Curbelo. I am
certainly going to do that for my district and see if we can
spread this growth. Incredibly good program, and thank you for
sharing it with us.
So I will now yield, not on his time, but at this point his
time. Mr. Curbelo is recognized for 5 minutes.
Mr. Curbelo. Mr. Chairman, thank you for your leadership on
this issue and thank you for visiting South Florida last week.
We did have a wonderful visit to Miami Dade College, which is
home to one of the 10,000 Small Businesses Programs. And Miami
Dade College is one of those places where people go to find
hope, opportunity, knowledge, and they certainly find it, and a
lot of successful entrepreneurs graduate from that critical
university.
Chairman Chabot. Just for the record, I was down there for
parts of 2 days, and during that entire time, I did not see a
beach, so it was strictly business.
Mr. Curbelo. Neither did I, Chairman, so--well, as the
chairman has indicated, I hail from South Florida, Florida's
26th Congressional District, southwestern Miami and the Florida
Keys, at one point home to the Overseas Railroad. So we are all
about transportation and infrastructure in South Florida. It is
absolutely critical to our quality of life. So I certainly
appreciate this opportunity, not only as a member of this
distinguished Committee, but also as a member of the Committee
on Transportation and Infrastructure.
I wanted to ask, Mr. Davis, are there any reforms you see
that we could implement in a potential highway bill, which, by
the way, is one of my top priorities as a Member of Congress,
that could empower state and local officials to give them more
control over what projects take precedence?
Mr. Davis. Thank you, sir, for that question. I think
broadly, one reform that--you know, that--and it has been--Mr.
Rice mentioned this before, there is a real need for general
across-the-board regulatory reform and how we deliver these
projects. The years and years that it takes to, you know,
complete environmental documents, things of that nature, we
believe that those should really be cut down.
And I will use my project as an example of the cost of
delay. And I can cite Kentucky Governor Steve Beshear for this
number. For the Brent Spence Bridge, every month that we delay,
the added cost is approximately $7 million a month. So every
year that we are waiting, we are getting right around $100
million that we wait to delay. So let's say we even--you know,
let's start--say, okay, we are going to start moving forward
with this with that $7 million, you know, ticker running, then
we lump on top of that the time that it takes to wade through
the regulatory process. I mean, I think really sharpening the
pencils and looking at what the process is, what the needs for
the regulatory--for the regs--what the needs for the regs are
and how we might shorten the time and shorten the turnaround
would be helpful.
And your point about States, I think finding ways for
States to--giving them more flexibility on things such as how
they use public-private partnerships, how they look at
different user fee models, what--when they can use user fees, I
think those are all things that, you know, should be
contemplated. So I would start there: just more flexibility,
allowing them to prioritize as well, not so many boxes for
States that they are stuck in that they can only spend this on
this, I think, would be helpful.
Mr. Curbelo. Thank you, Mr. Davis.
Mr. Gifford, I understand that while I had to step out,
UTCs came up. And just last month I led a bipartisan letter
with 68 colleagues here in the House advocating on behalf of
these university transportation centers and the upcoming
highway bill. My district is home to one of these, Florida
International University, which hosts the UTC Accelerated
Bridge Program, and that program is doing cutting-edge research
on repairing our Nation's aging bridges, which is clearly a
chief priority.
Can you talk about any partnerships or any of your
experiences with universities to repair, not just our aging
bridges, but infrastructure in general, especially as it
applies to our Nation's urban areas?
Mr. Gifford. Thank you for that question. I actually know
the FIU program well and have worked with them on some small
projects myself.
I think the UTC program really does support a very broad
array of university programs, not only in the engineering,
material, sort of the hard side, and I say that as a civil
engineer myself, but also on the soft side, the institutional
policy, financial matters for delivering programs. So I think
it is very important, not only the research that comes out of
these programs, but the workforce that emerges from these
programs. I think UTC program plays a critical role. About 4
years ago I attended one of the national UTC meetings, and
generations of transportation professionals have been
beneficiaries of this program.
So the workforce in universities as well as in our
companies and government agencies, I think, have, you know,
benefited from this program, so it is tremendously useful and I
think something that we, you know, urgently need to continue to
support.
Mr. Curbelo. Thank you, Mr. Gifford. Thank you to all the
witnesses. It is good to see you.
And thank you, Mr. Chairman, for this opportunity. I yield
back.
Chairman Chabot. Thank you. The gentleman yields back.
The gentleman from Nevada, Mr. Hardy, who is chairman of
the Subcommittee on Investigations, Oversight and Regulations,
is recognized for 5 minutes.
Mr. Hardy. Thank you, Mr. Chairman.
Just a little background about myself. I happen to have
been a director of public works in my past life. I have been a
business owner in the construction industry for over 20 years,
heavy highway, roads, bridges, dams, treatment facilities, and
other.
So with that background, would you agree that for--and also
on the RTC for about 14 years, Regional Transportation
Commission, Regional Flood Control Commission.
Would you agree that it takes long-term funding to be able
to come up with long-term goals and solutions for these
entities to be able to function properly? Anybody care to--Mr.
Gifford, do you----
Mr. Gifford. Yes. I think it is critical. The large, you
know, multi-hundred million or multi-billion dollar projects
are very difficult to start and stop on an annual funding
basis. And it increases the expense, it reduces the amount of
competition that is able to participate in such projects, and
it raises the price to the--to the public of delivering these
assets.
Mr. Hardy. The reason I ask the question, I have got a
little different line of questioning going here. You know, I
found out--I am new to this place. I have been here about less
than 5 months, and there is a lot of finger pointing goes on
every direction, responsibility.
I would like to go back to about 2008. You know, we had
close to a trillion dollar stimulus program that went
everywhere. Do you think that if that--some of that funding,
say, to the tune of, for a 6-year program, about $333 billion
of that, that would have gone to a long-term focus on our
highway infrastructure and rail system infrastructure, that
that might have been a better opportunity to stabilize an
economy rather than going to a rental-type programs that
equipment companies are going to, because the contractor cannot
see the future, he can't tell what is going on, so he is not
going to buy that equipment like we did in the past, he is
going to rent. Do you think that might have been a better
avenue to go if we are going to step down that road? Mr.
Shilling, Mr. Schmitz?
Mr. Shilling. Yes, I would agree with that. I--we noticed
when we did the stimulus package, that a lot of the projects
that got moved up and took immediate action on were--I wouldn't
call them totally frivolous, but pretty frivolous, more
patching, whatever, and they were not real investments in our
infrastructure, so----
Mr. Schmitz. I would echo that sentiment also. The projects
that were done, it was a rush to get them done. In New York, we
did a study. It takes 13 years, because of the regulatory
environment and such, for a project to come to fruition. That
shot in the dark did nothing to help the long-term plan. It was
a quick fix, overlay some roads. It was not money well spent.
Mr. Hardy. Thank you. Seen the same thing myself. It was a
quick fix for certain things that didn't need to be fixed lots
of times that were just on the mediocre end. Things like the
bridge could have been done, and done right and been done and
over with, and it would have been--wouldn't have been a problem
anymore.
Do you believe that maybe you have some of the same--do you
have any of the same frustrations I have with the way the
funding is done within this place where fuel tax takes care of
all sorts of things, rather than a focussed targets. You know,
I believe that fuel tax should maybe go for highway projects,
interesting enough, and maybe light rail projects should have
another source of funding. Targeted funding. I believe in
targeted funding would be better for us. And I don't call it
taxes, I call it fees. Anybody comment on that? Short time
here.
Mr. Schmitz. I believe the user fee is the way to go, in
that the revenue that is collected from highways should stay in
the highways, the revenues collected from other things should
stay in those. The fact that the people using the highways are
subsidizing all other forms of transportation--it is not good
for business.
Mr. Hardy. I guess I will stop there, I am running out of
time, but I really believe that we need to focus on those type
of issues for fees, we need to make sure that we provide long-
term, because I am the type of individual that truly believes
that when the engineers are busy, I know I am about to get
busy, and when they are not doing anything, I know I am about
to get really slow. And so we need to look for the future, stop
looking for the immediate fix, but to look for the long-term
and make sure we are out there.
So with that being said, you--you all support the taxing
fuels, do you support the--or what do you call it? The indexing
of fuels. Are there any other avenues that you think are out
there that you believe might be a good fix? Mr. Gifford on
that? Tolling?
Mr. Gifford. Well, I mentioned tolling, and not so much to
impose tolling, but to allow States to decide if they wish to
consider tolling for reconstruction and renewal of their
systems.
Mr. Hardy. Thank you. My time is expired.
Thank you, Mr. Chairman.
Chairman Chabot. Thank you. The gentleman's time is
expired.
The gentleman from Nevada mentioned he had been here for
about 5 months, and I have been here almost 20 years now. When
I was first elected another Member told me that when you first
get here, you are kind of starry-eyed and you are thinking, how
did I ever get to this place, and within about 5 months, you
are wondering, how did these other Members get here? So it
doesn't take too long for that to occur.
The gentleman--and that has nothing to do with the next
gentleman from California. Mr. Knight is recognized for 5
minutes.
Mr. Knight. How did that guy get here?
You know, my comments will be very simple. I think we are
going down the road to maybe increase gas tax. In California,
we are at about $0.63. We are talking about raising it another
$0.20 by January 1, so we will be the number one, as in
California, we like to be number one in many tax categories, so
us being number three right now doesn't sit real well, but that
$0.20 is going to be upwards of a dollar. For every time you
fill a gallon of gasoline, you are going to be paying almost a
dollar in tax, and you could be more. With our global climate
change issues, we could be paying well over a dollar in taxes.
So I guess my question is, is if we are going to go down
this road of more gas tax or higher gas tax, is there a point
where the consumer is not going to take it, we are not going to
be able to drive as much. Every week that I am home in the
district, I average 850 miles on my personal car. At some point
it is going to be transferred into, well, it already is, into a
gallon of milk, into the groceries we buy, into all of the
products that we buy.
Do you see at some point that we just can't go down that
road, that we have to make the commitment from the general
fund, that we have to make the commitment from what the
taxpayers believe, that this is one of the highest commitments
from government that we have on infrastructure where people can
rely on? Anyone want to take that question that we are getting
to that point? Sir.
Mr. Davis. Thank you, sir. It is hard for me to speak on
behalf of, you know, consumers about what is or is not the
tipping point. You know, $0.63 is a lot for some, it is not a
lot for others. So it--you know, the pocketbook issues are
tough, but I would say, though, as it relates to the work of
this Committee and the work of the Congress is that if those
investments don't happen right now and the priorities aren't
made right now, and the strategies aren't put in place--aren't
set forward right now, that that number is only going to go up.
So the $0.63 only goes up.
It is like at home, you have a leaky roof and you don't pay
attention to it and you say, oh, I am going to let it go, and
then the next thing you know, you are ripping your whole roof
down because you have got to redo the whole deal. So it is a
pocketbook issue on the $0.63 and whatever the tipping point
is, you know, and that is something that businesses and
consumers, a decision they will make by themselves, but, you
know, one of the things I am excited about this conversation is
hopefully it kick starts a real prioritization within the
Congress about making and taking some steps right now so that
those dollars don't go up in the future.
Mr. Knight. Well, and I firmly agree with you. I think that
prioritizing this is what Congress should be talking about. You
know, outside of maybe defense of this Nation, one of the
things an average taxpayer is looking for is a solid
infrastructure. I need to get from point A to point B to go to
work or church or wherever we are going to go, I need to be
able to get there, and so infrastructure is always going to be
one of those top priorities.
Yes, sir.
Mr. Gifford. I would add that it is not only the revenue
side that we need to look at, but the spending side and how
efficiently we deliver infrastructure. And I mentioned P3s in
my statement, public-private partnerships, and I think the
record is pretty solid that in terms of minimizing the life
cycle cost for the delivery of assets, public-private
partnerships have a lot of benefits compared to traditional
delivery through design-bid-build or design-build projects,
because of a focus on operations and maintenance and minimizing
those life cycle costs. So we may be able to enhance the value
we derive from funds that we are raising.
Mr. Knight. I agree. I have been part of an author of
design-build bills in California, several of them. They do save
money. They are a faster way. All those things are helpful, but
in the end, we are going to have to have a funding source that
is going to be reliable. I think that a reliable funding source
has got to be a big portion of the general fund. It just has
to. If we have a user fee or if we have a mileage fee, like
many States, and my State is talking about that, how many miles
you drive, so if I drove 850 this week and you drove 12, you
know, is that going to be the most effective way? Is that going
to be the most useful way?
And that--that is going to be several studies, that is
going to be several ways down the line, but we are going to
have to make that commitment. I think the biggest commitment is
going to have to be a bigger commitment from the general fund.
And I yield back the balance of my time. Thank you, Mr.
Chairman.
Chairman Chabot. Thank you. The gentleman yields back.
The gentlelady from American Samoa, Ms. Radewagen, who is
the chair of the Subcommittee on Health and Technology, is
recognized for 5 minutes.
Ms. Radewagen. Thank you, Mr. Chairman.
I want to thank the panel for appearing today.
Dr. Gifford, back in my home district of American Samoa,
almost every business qualifies as a small business. At the
same time, American Samoa has some of the worst surface
transportation infrastructure in the Nation. This lack of
quality surface transportation infrastructure has a lasting and
profound negative effect on those businesses, and it is safe to
say that the American Society of Civil Engineers would grade
American Samoa's infrastructure with an F.
Knowing of the benefits of the P3 approach, has the Center
for Transportation Public-Private Partnership Policy included
such territories as American Samoa in its research and
outreach? Also, what challenges do you see in incorporating the
P3 approach in the territories?
Mr. Gifford. I have not had the privilege of visiting
American Samoa and I am not very knowledgeable about it. I will
say I am more familiar with Puerto Rico, which is a different
case, of course, but they have been aggressive in the use of
public-private partnerships, with some success in their airport
and highway projects. And I lived briefly in high school in
Puerto Rico as well, so I am a little more familiar with that
territory.
So I think in speaking generally, the statutory framework
for public-private partnerships is something that redounds to
the States and localities. The Federal policy has a few
important provisions, like TIFIA, PABs that I mentioned in my
statement, but primarily it is a function of the States, who
own the assets, the transportation assets. I don't know if that
is the case in American Samoa, but I think in general, delivery
of reliable, low cost transportation can be done in most
environments with consideration of--of the P3 model.
Ms. Radewagen. Thank you very much.
That is all I have. Mr. Chairman, I yield back.
Chairman Chabot. Thank you very much. The gentlelady yields
back.
We will go into a second round here. I am not sure if Mr.
Rice has any questions, but I am going to yield to the
gentlelady.
Ms. Velazquez. Thank you. Thank you, Mr. Chairman.
Mr. Schmitz, you testified that the easiest way to not
waste fuel and to improve air quality is to increase the
capacity of roads and bridges. However, mass transit also plays
a key role in this area, and it is especially important when it
comes to commuting to and from work.
What are your views on the role that mass transit should
play in our transportation system?
Mr. Schmitz. My view is mass transit is very important in
the metropolitan areas and certainly has to be looked at in a
logical sense. I am from the Buffalo area, a small city. They
spent a lot of money on an underground transit system, which to
me was a waste, when surface transportation is the most logical
way to do it. I think that the mass transit systems have to
look beyond building subways and spending a lot of money, and
what is the most efficient system. Buses may very well be the
most efficient to use the existing highways, but the highway
infrastructure has to have the capabilities of handling the
buses. So mass transit is very important and it certainly does
need to be funded, but I think that highways play a key
component in the mass transit system.
Ms. Velazquez. Dr. Gifford, do you have any views on that?
Mr. Gifford. Well, I think public transit plays important
economic and also social roles in providing access to jobs, but
also essential services, medical, healthcare, you know,
shopping, education, plays, you know, a broad range of roles.
And the users of many mass transit systems tend to be from
lower income groups, and so it has a particularly important
impact on--on the social well-being of those groups.
The method of delivering that in the most cost-effective
manner, I think, is something where we could see improvement.
We have had for the last 50 years a model of generally public
agencies delivering transportation services, and we are now
beginning to see, for example, in Denver, the Eagle P3 project
going from downtown Denver to Denver International Airport is
being delivered through a long-term concession, saving
considerable amount of money over the original cost estimates.
Those can be paid for with something called availability
payments from the government. So the government is still paying
for the service, but delivering the product, the service in a
more efficient way.
Ms. Velazquez. Thank you.
Mr. Shilling, contracting requirements, such as Buy America
provisions, can help U.S. small businesses by ensuring demand
for their products. However, it can create compliance
difficulties even if a tiny portion of a larger product has a
foreign component in it. In this regard, MAP-21 expanded the
Buy America requirements on federal aid highway projects by
applying these requirements to an entire project, not just the
portion that receives federal funds.
Have these provisions affected small companies like yours?
Are they a good thing or a bad thing, from your perspective?
Mr. Shilling. Well, we do represent a foreign manufacturer,
and it does impact us. We have not had a tremendous amount of
impact as our business, because some of our foreign-owned
manufacturers that do have U.S. factories and they do produce
the materials in the U.S., but I know that other components,
steel and other goods, cements that are being shipped in from
overseas, most of the people that I deal with in the
construction industry are in favor of the Buy American side of
things for that--for those type of products. The sand and
gravels and whatever should be produced locally, so----
Ms. Velazquez. Okay. Thank you, Mr. Chairman.
Chairman Chabot. Thank you very much. The gentlelady yields
back.
I just have one question, and I am going to give it to you,
Mr. Davis, and it is actually probably an unfair question, a
little bit complicated, and--but I am going to let you see what
you can do with it. And you have got up to 4 minutes and 47
seconds right now, but it shouldn't take you that long.
All right. The Brent Spence Bridge, we have talked about it
in our community, as you know, for quite a few years now. Let's
say we left it up to an equity court judge to decide, knowing
the cost-benefit analysis, the realities that we all live in,
how would you divvy up the bill, say, percentage-wise, for lack
of a better way of doing it? We know it is going to cost two
and a half, $3 billion, approximately, and the longer it takes
us to get this done, the more expensive it is going to be.
And here are the entities you have got to work with. You
have got the Federal Government, which I think has at this
point, I think, funded something in the neighborhood of $63
million, I think, and most of that has gone for the planning
and things like that. You have got the State of Kentucky, you
have got the State of Ohio. You have got the local
jurisdictions, the City of Cincinnati, the City of Covington,
et cetera, on both sides of the river. So you have got the
local folks other than the State in Ohio and the other local
entities on--at Kentucky. So that is, I think, about five that
I have mentioned so far.
And then you have also got--well, let's say the private
sector, if there are some local businesses that want to be part
of this solution that are willing to have a special fund that
they are going to help out. You can put them in. And then you
have got a category called--we will call it tolls, and you can
either include that as something over and above the categories
that we have talked about here or not include it at all.
That is why I say you have got to work at the--kind of the
political realities that we are dealing with. And then if there
is some other entity that you can think of that should be
helpful to this or could be helpful, you are welcome to do
that.
So you have got--and everybody else is welcome to leave if
they want to. This probably isn't particularly interesting to
everybody else, but it is really interesting to me, and you
have got 2 minutes and 40 seconds or so. And you can think out
loud too, so we can decide how you have come to this process
and----
Mr. Davis. Think out loud on the record.
Chairman Chabot. The floor is yours.
Mr. Davis. Thank you, Mr. Chairman. Did I get this question
because we went to rival high schools? Is that----
Chairman Chabot. Yes.
Mr. Davis. You know, how do you divvy it up.
Chairman Chabot. Back in our community, by the way,
everywhere else, people ask, where did you go to school, and
they are talking about college; back in Cincinnati, we are
talking about what high school you went to.
Mr. Davis. St. Xavier and LaSalle.
Chairman Chabot. And I went to LaSalle. And you went to?
Mr. Davis. St. Xavier.
Chairman Chabot. St. Xavier.
Mr. Davis. Yeah.
Chairman Chabot. And my son went to Xavier too.
Mr. Davis. Well, how do you divvy it up, you know, and that
is a--and I think that is a really--and I am not filibustering
here, but this is really a question, I think, that comes up in
every community across the country, right: Who is on the hook
for the cost of delivering this public good. We have that
discussion locally.
You know, it is a Federal Government project and it is a
Federal interstate. The Federal Government should pick up the
tab for this. Well, you know, then other heads come in and they
say, well, you know, maybe, but Federal Government is not
paying 80 percent in the former 80/20 mix that we used to have
before. There needs to be more State and local involvement as
well.
So while I don't know, and I don't know if you will let me
get away with this as an answer, but----
Chairman Chabot. Well, come on.
Mr. Davis.--I don't know that--I don't know that I could
put a specific percentage within all five, but I think that
what we need--one thing that become very clear in the
discussion today and the discussion that has led up to today is
that everybody has to play--every level of government has to
play a role in this. The Federal Government must play a leading
role in the development of public good. The State governments
need--they receive dollars, their gas tax dollars back. They
need to find a way to program those behind a set of priorities.
User fees, whether that be gas tax or tolls or however you--
whatever kind of type of user fee you would like to categorize,
I think that needs to be part of it too.
As Ms. Hahn referenced before, you know, you have got
people who maybe are not--who get the benefit from--who get the
benefit but maybe aren't paying, you know, the same amount. You
know, there is a discussion--there is probably something there
that if everybody benefits, then maybe everybody should have
some skin in the game on that issue.
So I don't know that I could put it down into specific
percentages, but I think a discussion needs to happen between
Federal Governments and State governments to say, you know, we
are all in this together. Infrastructure is not just important
from, you know, the--you know, everybody getting to, you know,
go to a ribbon cutting, but it affects--it has a tremendous
effect on our quality of life, it has a tremendous effect on
economic development.
To your point, Chairman, from the beginning, you know, what
is the point of building out these cities and communities if we
can't get to and from them? From a small business perspective,
what is the point of opening--having a florist, and to use your
example from the beginning, in downtown Cincinnati in an urban
area, if his or her, you know, customers can't get to and from
there.
So I think it is a shared cost, but I do think that there
is a leading role that the Federal Government needs to play.
Chairman Chabot. Okay. I am going to let you get away with
that.
Mr. Davis. Thank you.
Chairman Chabot. I want to thank you, both you, Mr. Davis
and all the other witnesses. I think you have all done an
excellent job here this morning, so thank you for taking your
time to help us.
Members will have 5 days to extend their remarks or to file
extraneous materials. If there is no further business to come
before the Committee, we are adjourned. Thank you.
[Whereupon, at 12:40 p.m., the Committee was adjourned.]
A P P E N D I X
STATEMENT OF
WILLIAM SCHMITZ
VICE PRESIDENT, QC AND SALES
GERNATT ASPHALT PRODUCTS, INC.
ON BEHALF OF
THE NATIONAL STONE, SAND & GRAVEL
ASSOCIATION
BEFORE THE HOUSE SMALL BUSINESS COMMITTEE
HEARING ON
``THE ROAD AHEAD: SMALL BUSINESSES AND THE NEED
FOR A LONG-TERM SURFACE TRANSPORTATION
REAUTHORIZATION''
June 3, 2015
Thank you, Chairman Chabot and Ranking Member Velazquez,
for the opportunity to testify today on behalf of the National
Stone, Sand and Gravel Association (NSSGA) about the importance
of the nation's surface transportation system to small
businesses, and particularly small aggregates companies. I am
Bill Schmitz, Vice President of Dan Gernatt Gravel Products,
Inc.
Since 1946, the Gernatt family and their companies have
been proud to serve all of western New York. Comprised of
Gernatt Asphalt Products; Dan Gernatt Gravel Products, Inc.;
and Country Side Sand and Gravel, Inc., our companies provide
sand, gravel, stone, landscape aggregate, hot mix asphalt
products and trucking to Buffalo, N.Y., western New York and
northwest Pennsylvania.
NSSGA is the leading voice and advocate for the aggregates
industry. Its members--stone, sand and gravel producers and the
equipment manufacturers and service providers who support
them--produce the essential raw materials found in homes,
buildings, roads, bridges and public works projects. During
2014, NSSGA member companies represented more than 90 percent
of the crushed stone and 70 percent of the sand and gravel
consumed annually in the U.S., and there are more than 10,000
aggregates operations across the United States. Nearly every
congressional district is home to an aggregate facility.
Production of aggregate in the U.S. in 2014 totaled 2.39
billion tons at a value of $20.3 billion.
Seventy percent of NSSGA members are small businesses.
Failure of Congress to enact a highway bill, changes in the
regulatory environment governing aggregates extraction or their
use have huge impacts on small business. I know, because I come
from a small business.
The first of our sites was in Collins, N.Y., on the Gernatt
family dairy farm. In 1955 Dan Gernatt mortgaged his farm to
put up a sand and gravel plant when Interstate 90 was first
constructed 12 miles from the farm. The dairy herd was milked
daily while the gravel plant ran in the barnyard. This first
operation was fun by Dan Sr., Dan Jr. and two employees. The
cows were eventually sold as they added a concrete plant and an
asphalt plant to the Collins location. Since our founding, we
have expanded to have eight sand and gravel processing plants,
six hot mix asphalt plants, one contractor supply outlet, a
rock salt terminal and numerous sand and gravel excavation
sites.
Our locations are spread over three western N.Y. counties
in rural areas where people struggle to find good paying jobs.
The Gernatt organization considers its 175 loyal employees as
family and we want to provide them the well-paying, stable
employment they deserve. The business has grown because of the
hard work by the Gernatts and their employees. We are an open
shop operation where everyone works together for the common
goal of making the company's successful. The Gernatts share
their faith-based values and are strong supporters of the local
businesses and community efforts where we operate. It is
important to us that the local repair shops, auto dealers, tire
shops, welders, painters and all other support businesses
benefit from our success. We are an integral part of the
western New York community and we do this because it is the
right thing to do.
Aggregates are the foundation of our business and an
essential American industry that serves as a barometer for the
rest of the U.S. economy. Without it we cannot make hot mix
asphalt, concrete, landscape stone or winder road sand. Stone,
sand and gravel are essential to any construction project--
public and private. When the demand for our products is high,
the nation is growing, jobs are being created and essential
national assets are being built. If the aggregates industry is
doing well, America is doing well and so are Gernatt companies.
Aggregates are used in nearly all residential, commercial,
and industrial building construction. They are also used for
many environmental purposes, including pervious pavements and
other LEED building practices, the treatment of drinking water
and sewage, erosion control on construction sites, and the
treatment of air emissions from power plants. While Americans
take for granted this essential natural material, it is
imperative for the construction of our infrastructure and homes
and for positive growth in our communities.
We in the aggregates industry remove materials from the
ground, then crush and process them for various uses. Hazardous
chemicals are not used or discharged during removal or
processing of aggregates. When aggregates producers are
finished excavating the stone, sand or gravel in an area, they
pay to return the land to other productive uses, such as
residential and business communities, farm land, parks, lakes
or nature preserves.
While stone, sand and gravel resources may seem to be
ubiquitous, construction materials must meet strict quality and
technical guidelines to make durable roads and other public
works projects. There is no shortage of aggregates; however the
availability of future sources of high quality aggregates could
become a significant problem in many areas of the country if
proposed regulatory changes, like the recently issued EPA
waters of the U.S. rule, are implemented.
Sales of natural aggregates generate over $40 billion
annually for the U.S. economy. When combined with related
industries, such as cement, concrete, asphalt and construction
equipment and supplies, the transportation construction
industry generates more than $200 billion in economic activity
every year and employs more than two million people.
Through its economic, social and environmental
contributions, aggregates production helps to create
sustainable communities and is essential to the quality of life
Americans enjoy. Aggregates are a high-volume, low-cost
product. Due to high product transportation costs, proximity to
market is critical; unlike many other businesses, we cannot
simply choose where we operate. We are limited to where natural
forces have deposited the materials we mine. There are also
competing land uses that can affect the feasibility of any
project. Generally, once aggregates are transported outside a
25-mile limit, the cost of the material can increase 30 to 100
percent. Because so much of our material is used in public
projects, any cost increases are ultimately borne by the
taxpayer. Since we operate near areas of limited quality
reserves we ship up to 200 miles via truck and rail to meet the
demand where quality aggregates are not locally available. This
is only possible using adequately maintained highways and
railways.
Over the past eight years, the aggregates industry, like
many others, has experienced the most severe recession in its
history with the federal regulatory tsunami causing further
harm to an industry that has seen production drop by 39 percent
since 2006. During that time, when the commercial and
residential construction markets slowed to a crawl, we were
forced to scuttle expansions, lay off employees and alter our
business plans.
Our highway system infrastructure continues to deteriorate
at a rate much faster than we are making repairs. Our local
towns, counties and New York State DOT struggle to maintain
adequate conditions, say nothing of reconstructing roads that
have exceeded design life or design capacity. With federal
funding in a continual state of limbo, states are unable to
adequately plan for long term infrastructure repair and
maintenance. With all this uncertainty small businesses, like
ours, struggle to plan our futures. Our equipment is extremely
expensive, so making huge capital equipment investments without
a clear vision is difficult at best. Many things need to fall
into place to do a project in the shortened construction
seasons of the northern U.S. While it may not seem like long
time, a four-week delay in funding or awarding contracts will
cause a project to lose a complete construction season and add
to its cost. This causes a ripple effect, affecting many
businesses along the supply chain resulting in a great deal of
economic distress.
The business of successfully building and maintaining our
national surface transportation infrastructure depends in large
measure on funding stability and year-over-year predictability
provided by the surface transportation authorization. The
extension of the current law, MAP-21, expired on May 31.
Congress passed a two-month extension of the program to
July 31, which continues authorization of the program and
allows continued expenditures from the Highway Trust Fund. It
was the 33rd short-term extension of the program over the past
six years. At the end of July, the Highway Trust Fund is
expected have a balance of $3.5 billion.
Congress needs to do what they were elected to do and stop
kicking the can down the road by addressing the long-term
funding of our nation's surface transportation infrastructure.
No more short-term extensions. Reauthorization is critical to
NSSGA's many small aggregates producers like us.
We are active in our community organizations, within our
state trade associations and with other national trade
associations including the National Asphalt Pavement
Association. Regardless of which organization I am
participating in, the conversation is the same. When are we
going to fix our highways and infrastructure? Elected officials
on every level recognize the need for sustainable, stable,
adequate funding to maintain AND improve our highway system.
Our employees ask, ``When are we fixing the roads and bridges
we drive on every day?'' New York State DOT personnel open each
meeting with a plea for us to call our congressmen and get the
state DOT a stable program so they can plan for our future
needs. We can no longer ignore the elephant in the room.
In the absence of a long-term plan, my customers are
telling me they are not sure what the next years are going to
bring to them, thereby causing me to withhold investment in
plants and new machinery for the foreseeable future. It is
increasingly difficult to do long range workforce planning due
to uncertain demand.
Last increased in 1993, the transportation user fee has
outgrown its current buying power. The cost of materials and
labor has gone up dramatically since then, as well as increased
fuel efficiency. In order to keep up with the twenty-first
century, two commissions, created by the last multi-year
surface transportation reauthorization law, recommended a
simple, straightforward, effective solution--to increase the
fuel user fee coupled with indexing it to inflation. The
commissions' reports suggested other potential revenue sources;
so too, have reports from a host of organizations. Revenue
options are not the problem.
Continued patches and temporary fixes hurt future and
existing projects as states and localities are hesitant to move
forward out of fear the federal government will not meet its
funding obligations.
Multi-year surface transportation reauthorizations are
particularly vital for the funding confidence they instill in
state departments of transportation. When they know that the
Federal Highway Administration will apportion their funding
year after year, in the amount authorized, they have confidence
that their state expenditures will be reimbursed. The states
then award contracts, and the process of building and
maintaining our transportation infrastructure can proceed
smoothly. Confidence in the stability of the program is a
critical factor in ensuring success, particularly for small
businesses.
When there are doubts, as there are today, awards for
construction slow. Already Arkansas, Georgia, Tennessee,
Wyoming, Montana, Nevada, Utah, Colorado, Nebraska,
Mississippi, Pennsylvania, West Virginia, Connecticut, Vermont
and Maryland have either delayed or cancelled highway, bridge
or transit capital projects this year or are considering doing
so because of uncertainty over future federal funding.
Congressional highway program extensions have affected $1.3
billion in transportation improvement projects.
The aggregates industry alone employs approximately 100,000
highly-skilled men and women. Nearly 700,000 jobs relay on
federal transportation spending. At its core, surface
transportation reauthorization is a jobs bill that results in
long-term national assets.
A recent Transit Labs report on the best and worst bridges
found that 430 of 435 congressional districts have at least one
structurally deficient bridge. What makes a bridge structurally
deficient? Federal law requires states to inspect their 20+ ft.
bridges every two years. Bridges are rated from 0-9 with 9
being the best. Federal guidelines classify bridges as
``structurally deficient'' if one of the three components
holding up the bridge (deck, superstructure or substructure) is
given a 4 or less.
According to the report, 11 percent of congressional
districts account for over half of our nation's deficient
bridges. If you break it down, there are more than 300
deficient bridges per district and more than 32,000
structurally deficient bridges in total. In many states--Iowa,
Illinois, Indiana, Kansas, Missouri, Mississippi, New York,
Oklahoma, and Pennsylvania there are at least 3 districts with
more than 300 deficient bridges. The Memorial Bridge that links
Arlington National Cemetery with the nation's Capital City was
deemed structurally deficient and restricted to a single lane
of passenger vehicles in each direction. The crisis is
nationwide.
We recognize the difficulty in finding long-term funding
for the highway program. NSSGA supports an all-the-above
approach to fund our nation's infrastructure projects. We also
understand that no one funding mechanism is a panacea. In the
absence of action, the costs to maintain and improve our
nation's vascular system only increase. Meanwhile, Americans
are becoming more and more frustrated with the growing number
of potholes, cracked roads and traffic jams plaguing our roads,
highways, and bridges. According to the Texas Transportation
Institute Americans spend 38 hours and $121 billion in wasted
fuel sitting in the congestion plague our urban areas. Extra
vehicle repairs and operating costs are costing $94 billion a
year billion--$444 per motorist.
President Eisenhower signed the law creating the National
Interstate Highway System nearly sixty years ago. It was
designed to last 25 years. We are 34 years beyond is useful
life. Is it any wonder that it is deteriorating?
The least expensive way not to waste fuel and to improve
air quality is to increase the capacity of our roads and
bridges and alleviate congestion. The Federal Highway
Administration estimates that each dollar spent on road,
highway and bridge improvements results in an average benefit
of $5.20 in the form of reduced vehicle maintenance costs,
reduced delays, reduced fuel consumption, improved safety,
reduced road and bridge maintenance costs and reduced emissions
as a result of improved traffic flow.
Improved safety is another important reason to pass a
multiyear highway reauthorization bill now. There were 32,719
traffic fatalities in 2013 in the U.S. A total of 165,340
people died on U.S. highways from 2009 through 2013. The
fatality rate on the nation's rural roads in disproportionately
higher than that on all other roads. There were 1,199 traffic
fatalities in 2013 in New York. Motor vehicle crashes cost New
York $19.5 billion per year, $1,027 for each resident, in
medical costs, lost productivity, travel delays, workplace
costs, insurance costs and legal costs.
We can do better. Safety must come first to ensure that you
and I and our families, friends, and employees get to and from
their daily activities safely. Gernatt Companies are committed
to the safety of its most precious resource--our employees. The
company uses all possible means, be they administrative or
engineering controls--to protect employees. While our industry
is based around large equipment, conveyors, crushers, off road
equipment and lots of dump trucks, we pride ourselves on our
safety record. Our small company devotes numerous personal and
monetary resources to maintaining our safety program. While we
all must comply with the federal regulations enforced by Mine
Safety and Health Administration and Occupational Safety and
Health Administration, we are part of a captive self-insured
group that requires safety programs to exceed any federal
regulations. We hold annual safety refresher courses, maintain
our own safety committee and send a cross-section of employees
to our captive safety meetings. We also utilize an employee
wellness program through our health insurance captive as
commercial health insurance has become cost prohibitive.
There are those that say we should devolve the program to
the states in order to return maximum discretionary authority
and fiscal responsibility to them for all elements of the
national surface transportation systems. It is critical to
remember that the federal government's role in maintaining the
national road network, which carries more than 73 percent of
the 48 million tons of goods transportation across the country
daily, is a constitutional one. Article 1, Section 8, directs
the federal government ``To establish Post Offices and post
Roads,'' or the forerunner of our national highway system.
Devolution of the program would saddle the states with 90
percent of the fiscal responsibility for supporting highways
that the federal government has an obligation to establish. In
order to make up lost federal monies, New York would have to
raise the gas user fee 20.7 cents and the diesel fuel user fee
19.3 cents.
A better approach is to reform the system, not risk the
nation's economic future by disinvesting in a highway system
that is already under-funded.
Mr. Chairman, again thank you for the opportunity to
testify today. Let me reiterate the importance to the
aggregates industry and all small businesses of Congressional
action on a multi-year surface transportation reauthorization,
one that increases investment in the nation's roads, bridges,
and highways. Our industry, like most businesses, requires
certainty to make sound capital investment decisions. Reverting
to short-term extensions will only create havoc in resource
development decisions and construction projects.
Attached to my statement are two infographics that NSSGA
put together. ``Small Change'' calculates the real costs to the
average American of the Corker-Murphy proposal to increase the
fuel user fee $12 cents. The second infographic shows visually
the costs of doing nothing.
We look forward to continuing to work with you in doing
what is right for America. If we ignore the maintenance and
improvement of our nation's road and highway network--the
circulatory system of America, it is at our own peril, we risk
the loss of economic growth, improved safety, cleaner air, and
jeopardize the freedom of mobility we all take for granted.
Attachments
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Chabot, Ranking Member Velazquez, and other
distinguished members of the House Small Business Committee, my
name is Don Shilling, and it is my pleasure to appear before
you today both as an executive at a construction equipment
company directly impacted by the uncertainty surrounding
federal surface transportation programs and in my capacity as
chairman of Associated Equipment Distributors (AED).
I am the president of General Equipment & Supplies, the
authorized Komatsu construction equipment dealer for North
Dakota and Western Minnesota. In addition to our four North
Dakota locations, we have two facilities in Minnesota and one
in South Dakota. We also have two Canadian locations. General
Equipment & Supplies employs 235 American workers.
AED is the trade association representing distributors of
construction, mining, energy, forestry, industrial, and
agricultural equipment. AED members supply the equipment that
builds America's highways, bridges, airports, sewer, and
drinking water systems and the association has a longstanding
commitment to strong federal infrastructure programs. AED's
members range in size from small dealerships with one location
and a handful of employees to larger companies with thousands
of employees and dozens of locations across several states.
However, the overwhelming majority of AED's members are small,
family businesses: AED's average member achieves about $40
million per year in revenues and employs 80 people.
I appreciate the opportunity to come before the Committee
to discuss the nation's infrastructure crisis; the impact the
federal highway program's uncertainty has on my company and the
broader industry; and what needs to be done immediately to
restore confidence in construction markets.
Confronting the Nation's Infrastructure Crisis
America's surface transportation needs are well documented
and negatively impact the country's economy, national security,
combativeness, productivity, and environment. In fact, the
World Economic Forum ranks the United States quality of roads
16th in the world, behind the likes of China, Japan, Oman, and
the United Arab Emirates.
According to the Transportation Road Information Program
(TRIP), a nonpartisan organization that researches, evaluates,
and distributes economic and technical data on surface
transportation issues, nineteen percent of America's major
roads are in poor condition and twenty-four percent of the
nation's bridges are structurally deficient or functionally
obsolete. Road and highway needs aren't limited to heavily
populated areas. TRIP recently released a report concluding
America's rural roads and bridges have significant
deficiencies. In 2013, 15 percent of the nation's major rural
roads were rated in poor condition and another 39 percent were
rated in mediocre or fair condition. In 2014, 11 percent of the
nation's rural bridges were rated as structurally deficient and
10 percent were functionally obsolete, impacting U.S.
agricultural sectors and hampering farmers from delivering
goods from farm to market in a timely manner.
As Congress delays addressing the country's drastic needs,
the public is paying the price in lost productivity and vehicle
repairs. TRIP found that inadequate roads cost U.S. drivers
$109 billion a year in extra vehicle repairs and operating
costs. According to the Texas Transportation Institute, traffic
congestion (resulting in large part from inadequate capacity)
detracts more than $121 billion per year in wasted fuel and
lost productivity from the U.S. economy and costs the average
American commuter approximately $818 annually, threatening the
environment and public health.
Few will argue that the time for substantial investment in
our nation's surface transportation infrastructure is long
overdue. Nonetheless, lawmakers continue to punt the tough
decisions about how to pay for robustly funded, long-term
surface transportation legislation to restore certainty to the
Highway Trust Fund (HTF) and provide certainty to construction
markets.
Impact of Highway Investment Uncertainty on General
Equipment & Supplies
General Equipment & Supplies and AED members across the
nation, operating in every state and congressional district,
are ready to supply the heavy equipment needed to rebuild
America. The HTF consistently flirts with bankruptcy as gas
taxes and other highway user fee revenues are insufficient to
support even the current inadequate levels of transportation
investment. This is creating enormous uncertainty for
transportation planners, contractors, and equipment
distributors.
My company is fortunate. The energy boom in North Dakota
has allowed General Equipment & Supplies to stay in business
despite significant decreases in our equipment sales to road
contractors, which account for about 50 percent of our customer
base. However, our Minnesota locations, which almost
predominately services highway markets, have seen dramatic
reductions in sales, due to the uncertainty surrounding federal
investment. In fact, between 2013 and 2014 we saw a 34 percent
reduction in equipment whole goods retail sales. Even in North
Dakota, the state is reluctant to bid long-term, equipment
intensive jobs, and recently pulled 30 contracts due to lack of
confidence in the HTF.
Historically, General Equipment & Supplies (and most AED
members) primarily sold heavy construction equipment. However,
we increased rentals by 26 percent between 2013 and 2014 due to
the uncertainty surrounding federal investments. While we're
grateful for the business, the drop in sales has broad
implications, including forcing dealers to continue to carry
rental equipment on our balance sheets (along with the
associated financial risk) and typing up cash that could be
used to hire more workers and investment in the company.
The HTF's precarious situation is also impacting business
decisions. My company has considered opening a new location in
North Dakota, which means purchasing a 20,000 square foot
building and hiring between 12 and 20 new employees. I've been
reluctant to expand because of lack of confidence in highway
markets, since the new facility would primarily service the
road building and agriculture sectors.
Additionally, it should be noted that AED members' interest
in resolving the uncertainty surrounding federal surface
transportation programs isn't solely to increase sales. My
company services customers in a territory over 100,000 square
miles and we are heavily reliant on the interstate highway
system. We deliver parts nightly from Minneapolis to Western
North Dakota. Also, a majority of our equipment servicing and
repairs happen in the field where our service trucks are
dispatched daily to remote job site locations. As a small
business, delays and costs associated with inadequate highways
and congestion significantly increase operating expenses,
hindering investment in the company.
The Impact of Highway Investment Uncertainty on Equipment
Markets
The detrimental impact of the uncertainty surrounding the
HTF isn't unique to General Equipment & Supplies. In fact, by
August, without action, economic shockwaves will reverberate
throughout the country as the HTF will be unable to support any
highway or transit spending, jeopardizing more than $50 billion
in annual investment and threatening $2.4 billion in equipment
market activity (i.e., dealer revenue from sales, rental, and
product support) and close to four thousand equipment
dealership jobs.
In preparation for this hearing, AED conducted a quick
survey of its membership to gage the federal highway program's
impact. Ninety-one percent of respondents said that surface
transportation construction either had a significant impact on
demand for their companies' products or that it was their most
important market. Not surprisingly, the effects of the
uncertainty are the same nationwide as they are in my
territory. Here's a sampling of some of what our members said
about how they and their customers are impacted:
Uncertainty is forcing dealers to cut jobs. ``Our company
has 25% less employees than we did in 2008m with a $10 million
smaller payroll,'' said an AED member in Tennessee.
Dealers must carry more risk and divert resources due to
the uncertainty. ``Contractors have less certainty about their
long term future, thus they tend to rent equipment rather than
buying. That means we have to borrow more money to have
equipment on hand to meet our customer's needs,'' writes an AED
member in Texas.
Congressional inaction is hindering economic growth. An AED
member in Connecticut said, ``Without a long term plan,
contractors are not willing to invest in equipment for future
work, thus restricting growth in our business.
Uncertainty is causing contractors to delay investments in
heavy equipment. An AED member in New York said, ``It has
negatively impacted our company due to the lack of longer term
planning of projects/programs. The larger, more impactful
projects tend to be delay and postponed--contractors are less
likely to invest in equipment due to the uncertainty of future
projects.'' A California-based equipment distributor wrote,
``The short-term extensions do not allow construction
contractors to make decisions regarding fleet equipment
purchases.''
While the economic harm being caused by the uncertainty is
clear, so is the fact that enacting a new fully-funded, long-
term highway bill would have broad economic benefits for our
industry and beyond. For example, ninety-one percent of our
survey respondents said they would likely add employees if
Congress passed a highway bill. Seventy-eight percent would
purchase new service trucks and 91 percent would increase
inventory levels, all of which would help the manufacturing
sector.
A new, long-term highway bill would also create new
business activity for construction contractors, even those who
don't build roads as evidenced by the fact that 47 percent of
our survey respondents, similar to my company, are likely to
expand or improve existing facilities and more than a third
would open new locations if Congress restores certainty to the
program.
The Solution
What's needed is bold, decisive action to restore long-term
certainty to the federal highway program. A 2013 study
conducted by researchers at William & Mary's Thomas Jefferson
Program in Public Policy found that the HTF deficit will amount
to $365.5 billion by 2035. The AED report also proposed bold
solutions: increasing the gas tax to 25 cents per gallon and
indexing it for future inflation would raise $167 billion more
than current baseline spending requirements over the next two
decades.
AED strongly supports a user fee increase in the near-term
as Congress develops a more sustainable revenue model (e.g.,
vehicle miles travelled fee). Nonetheless, all options should
be on the table to fully fund the federal highway program well
into the future and ensure a strong federal role in surface
transportation investment.
Finally, Congress must also keep in mind that funding
surface transportation infrastructure isn't government
``spending''. It's an investment that pays for itself. A 2012
AED study found that as with capital assets bought by a
business, over 20 years, each dollar invested in highways and
streets returns approximately $0.35 in tax revenue and for each
dollar invested in highways and streets, $0.23 of tax revenue
accrues at the federal level.
Conclusion
In sum, our nation faces an unparalleled infrastructure
crisis. Congress can't keep kicking the can down the proverbial
road because the road is deteriorating and full of potholes. We
need immediate and aggressive congressional action to ensure
that our transportation system does not degrade further and
that state and federal governments have the resources they need
to address the crisis. The small business-dominated
construction equipment industry is directly impacted by federal
infrastructure spending and thousands of jobs are affected by
this federal program.
The current uncertainty surrounding federal infrastructure
programs is contributing to volatility in equipment markets. At
the same time, equipment distributors and their employees
suffer the consequences of under-investment in infrastructure
along with other businesses and the general public.
AED therefore urges Congress to quickly resolve the near-
term uncertainty surrounding the HTF and to enact a long-term
highway reauthorization bill that creates new revenue streams
to support infrastructure investment. Further delay is
inexcusable; the American people deserve bold, decisive
leadership. Now is the time for Congress to step up to the
plate.
If Congress seizes this historic opportunity to the act,
the benefits of new infrastructure investment will be felt
immediately and for years to come as America positions itself
to compete globally with a stronger economic backbone.
[GRAPHIC] [TIFF OMITTED] T4803.004
Chairman Chabot, Ranking Member Velazquez, and members of
the House Committee on Small Business, thank you for the
opportunity to meet with you today to offer testimony on the
importance of transportation and infrastructure to business
growth.
My name is Matt Davis and I am president of DSD Advisors,
LLC, a government affairs consulting firm based in Cincinnati,
Ohio. I am here today in my capacity as Director of the Build
Our New Bridge Now Coalition. Created in 2012, the Build Our
New Bridge Now Coalition is a diverse group of small, medium,
and large businesses, and community, government, and labor
leaders who have come together to advocate for rebuilding and
rehabbing the 1-75/71 Brent Spence Bridge Corridor. These
leaders joined to focus their efforts to rebuild the Corridor
because it is inextricably linked to our region's current and
future economic opportunities, quality of life, and safety.
If you do not already know, the Brent Spence Bridge is a 52
year-old span that carries Interstates 75 and 71 across the
Ohio River, locally. It also serves as a major artery in our
national highway system, carrying the equivalent of 4% of the
nation's GDP every year and connecting Michigan to Miami,
servicing many companies, both large and small.
Locally, Southwest Ohio, Southeast Indiana, and Northern
Kentucky have a distinct economic advantage, being within just
a 90 minute flight or a one-day drive of the 25 top U.S. metros
and 41% of the nation's purchasing power. Couple those numbers
with the amount of the nation's GDP that the Brent Spence
Bridge carries alone, you can see that the geography serves our
region's residents and businesses well.
Unfortunately, our roads and bridges have not. The Brent
Spence Bridge was built more than 50 years ago to create jobs
and spur economic opportunity. Now, it is failing our region.
The Brent Spence Bridge carries more than twice the amount of
vehicles per day that it was designed to accommodate, is
considered ``functionally obsolete'', and was recently given a
grade of ``C-'' by Kentucky transportation.
Congestion on this crumbling, decaying, and out-of-date
span continues to increase, stifling productivity, slowing the
flow of goods and commuters, raising safety concerns, and
lowering air quality.
According to our MPO, the Ohio-Kentucky-Indiana-Regional
Council of Governments, approximately 60% of the local
population and 75% of the local jobs live within 5 miles of
Interstate 75. The Interstate corridor and Brent Spence Bridge
that supports it are critical to our region's present and
future. Businesses chose the Cincinnati region because of its
economic climate, and infrastructure, particularly the Brent
Spence Bridge Corridor, is a key component of that climate. So
we must care for it to ensure our economic future.
Another statistic you should know: You are 3-5 times more
likely to be in an accident on the Brent Spence Bridge Corridor
than you are on any other portion of the interstate system in
Ohio, Kentucky, or Indiana. That stat leads one to wonder what
the future holds. If we do nothing, will conditions improve?
Probably not. If not, then we fear that existing businesses
will relocate and prospective businesses will look elsewhere.
This corridor, a great benefit to our region, could hold us
back if we do not develop a strategy to modernize it.
Businesses, particularly small ones, operate on very thin
margins. As the old saying goes, ``time is money'' and that
rings true for every small business in Cincinnati and the
country. In order for their businesses to stay afloat, these
small businesses need reliable roads, bridges, waterways,
airports and railways to move employees and goods from place to
place as safely as possible. If a delivery or an employee is
late, it can cause major disruptions for that business, with a
multiplied effect on our region.
The Build Our New Bridge Coalition is one of many groups
that believe developing strategies on infrastructure at the
state and national levels with a set of priorities will be a
springboard to significant job gains, particularly for small,
homegrown businesses.
Northern Kentucky University completed a study that looked
at the economic impact of rebuilding the $2.7 billion Brent
Spence Bridge Corridor. It found that 24,488 jobs would be
created in Ohio and Kentucky, generating $1.9 billion in labor
income and $193.1 million in state and local government
revenue. Keep in mind, those numbers are just those directly
associated with rebuilding the corridor. Providing reliable and
safe infrastructure is one place where Washington and the
states can play a major role by supplying the tools for the
success of America's small businesses, but it requires
significant resources and focus. The sky is the limit for the
future of small businesses, but not if employees cannot get to
the office or a delivery truck is constantly late.
Thank you for your time today and attention to this
important topic. I am happy to answer any questions you may
have.
The Road Ahead: Small Businesses and the Need for a Long-Term
Surface
Transportation Reauthorization
Hearing
June 3, 2015, 11 a.m.
Committee on Small Business
U.S. House of Representatives
Statement of Dr. Jonathan L. Gifford \1\
---------------------------------------------------------------------------
\1\ [email protected]; 703-993-2275; p3policy.gmu.edu;@p3policy
Professor and Director, Center for Transportation Public-
---------------------------------------------------------------------------
Private Partnership Policy
School of Policy, Government, and International Affairs
George Mason University
3351 Fairfax Drive, MS3B1, Arlington, Virginia
Chairman Chabot, Ranking Member Velazquez, and
distinguished members of the committee, thank you for the
opportunity to speak to you today about the reauthorization of
the nation's surface transportation legislation.
I am a professor at George Mason University, where I direct
the Center for Transportation Public-Private Partnership Policy
in Arlington, Virginia. The Center's objectives are to provide
objective analysis of transportation public-private
partnerships (P3s) through research, education, and outreach in
order to facilitate their application in the most effective
situations. The Center's program focuses on building the
evidence base to evaluate P3s, advancing the capacity of public
entities to asses and utilize the approach, educating
researchers and professionals, and reaching out to business,
government and the community at large to improve their
understanding of the P3 approach to infrastructure development.
We believe that a better understanding of P3s will lead to
their most appropriate utilization.
I would like to make three points about the subject of
today's hearing on small business and the need for a long-term
surface transportation reauthorization.
My first point is that public-private partnerships (P3s)
for transportation projects offer significant opportunities to
small businesses. P3s generally involve design, construction
and long-term operation and maintenance of a transportation
project. P3 contracts usually have a term of 35 or more years,
in some cases 75 years.
These long-term agreements create a favorable environment
for the small businesses in the communities surrounding the
projects. Business needs include engineering, materials,
construction, public affairs, community relations, architects,
attorneys, security, and appraisers. Many of these business
needs last not just for the duration of the construction but
for the life of the concession agreement--many decades. Such
long-term agreements foster the creation and sustenance of
local businesses.
Moreover, such opportunities are more than discretionary on
the part of the concessionaire. States participating in P3s
typically establish goals for participation by small, woman-
owned and minority-owned businesses and disadvantaged business
enterprises (SWaM/DBE). For example, Virginia's goals for three
of its major projects total more than $1 billion for the design
and construction phase alone.\2\ The recently completed 495 and
95 Express Lanes P3 projects in Virginia supported more than
28,000 jobs during construction, and employed hundreds of DBE/
SWaM firms, 184 firms for the 95 Express Lanes and 250 firms
for the 495 Express Lanes.\3\
---------------------------------------------------------------------------
\2\ Virginia Office of Public-Private Partnerships, ``PPTA DBE/SWaM
Programs: Achieving Historic Results,'' n.d., http://
www.p3virginia.org/wp-content/uploads/2014/07/FACT-
SHEET--PPTA-DBESWaM.pdf.
\3\ Transurban, personal communication, June 2, 2015.
A long-term surface transportation reauthorization can
support small business by removing barriers in federal law
regarding P3s, and by continuing and possibly increasing
federal support for P3s. Without long-term reauthorization,
agencies are experiencing difficulty in letting and continuing
meaningful projects because they do not have the requisite
budget authority. Large firs may be able to absorb this
uncertainty, but small businesses are not well-equipped to deal
---------------------------------------------------------------------------
with the off/on nature of the current federal process.
A major barrier for P3s in many states is the federal
prohibition against charging tolls on reconstructed
Interstates. Congress may wish to reconsider that prohibition
since so much of the Interstate system will require
reconstruction in coming decades. Significantly, relaxing or
removing this prohibition can be done at no cost to the federal
budget. And it would allow states to decide whether and how
much to explore tolls as a means of renewing and expanding
their highway systems.
Congress may also wish to extend or expand current programs
that support P3s, notably TIFIA and PABs. The TIFIA program
(for Transportation Infrastructure Finance and Innovation Act)
provides loans and credit support to most P3 projects. PABs, or
private activity bonds, level the playing field between bonds
for P3 projects and municipal bonds by exempting PABs from most
federal income taxes.
President Obama's proposed QPIBs (Qualified Public
Investment Bonds) would expand the dollar amount available for
P3s by eliminating the current $15 billion cap on PABs.
My second point relates to the federal gas tax. The federal
gas tax and the Highway Trust Fund have played important roles
since their establishment in 1956 in the construction of the
Interstate Highway System and supporting the Federal-Aid
Highway Program. The current gas tax rate is not sufficient to
support the ongoing expenditures of the existing surface
transportation program. Congress has filled the gap in recent
years with contributions from the general fund.
Continued reliance on the gas tax as the primary source of
funds to support the federal surface transportation program is
problematic. As cars get more fuel efficient and the number of
hybrids and electric vehicles increase, a flat per-gallon tax
on gasoline generates less and less for each mile driven on our
highway system.
In the long term, Congress must decide how much financial
support it wishes to provide the surface transportation
program, and how to pay for it. An increase in the gas tax
could support an ongoing program at current spending levels.
However, in the longer term, other sources of state, local and
federal revenue such as tolls may provide a more suitable
financial foundation for addressing the nation's transportation
needs and opportunities.
There appears to be significant appetite for infrastructure
investment in the global capital markets. Investment in the
U.S., however, is limited due in part to a lack of bankable
projects. Removing barriers to tolling could enable more
private capital investment.
My third point relates to the future of the University
Transportation Centers program. This program has supported a
number of universities, including my own, in conducting
research on our nation's transportation system and educating
generations of students who go on to design, construct,
operate, finance and maintain that system.
As an active participant in the UTC program for most of my
career, I would like to assure the Committee that the program
has generated considerable value in research, education and
professional development.
Our nation appears to be on the cusp of major changes in
its transportation systems. Important innovations include
autonomous vehicles, GPS, mobile devices, advanced materials,
shared use of cars and bicycles, transportation network
companies like Uber and Lyft, and public-private partnerships.
These innovations have the potential to transform the movement
of people and freight. They also have the potential to disrupt
the industries and institutions that make up our transportation
system.
Continued support of the University Transportation Centers
program will allow research and education to continue to
contribute to expanding development of such innovations and
understanding their implications for society.
That concludes my formal statement. I would be happy to
answer your questions.
Thank you.
Small Business Committee Hearing: ``The Road Ahead: Small
Business and the Need for a Long-Term Surface Transportation
Reauthorization''
Congressman Blaine Luetkemeyer - Statement for the Record
Coming from a state that has the seventh largest highway
system, I know just how crucial America's roads and
infrastructure are to our state's and our nation's economy. The
route from point A to point B can determine how many deliveries
or repairs are made in a given day by a small business owner
simply trying to make ends meet. Failure to pass a
comprehensive long-term surface transportation bill will have
drastic implications on the economic health of our great state.
The unfortunate truth is this--the American Society of Civil
Engineers (ASCE) assessed the roads and transit infrastructure
in Missouri and gave the Show-Me State an embarrassing ``D''
letter grade, while our bridges merely received a ``C+.'' In
Missouri, we fund maintenance, improvements, and desperately
needed projects from the state gas tax, just as the federal
Highway Trust Funds is funded. With increases in fuel
efficiency mandated by the EPA and less total miles being
driven, the revenue collected by the gas tax is not sufficient
to adequately fund desperate maintenance and improvements to
our state's highways and transit system.
On May 21st, the House and Senate passed a short-term
Highway Bill reauthorization, which will extend current
programs and spending levels until July 31, 2015. While this
will allow some construction to continue during the peak
season, it leaves long-term projects and contracts with little
certainty. This by no means answers our long-term highway and
infrastructure troubles. It is imperative that a bipartisan
solution be reached to benefit all Missourians on the road.
During the next few months, Congress will craft a new long-term
highway bill. The top priority will be to consider methods to
fund the nearly $12 billion dollar Highway Trust Fund shortfall
that is exceedingly unsustainable. If we stay on the current
path, it is estimated that the Highway Trust Fund outlays will
exceed incoming revenue by $167 billion over the 2015-2024
period. As a nation we can no longer take the approach of
simply maintaining our failing infrastructure.
I am confident that with a proactive approach and exploring
viable alternatives to the status quo, we can make real changes
that yield positive and long-term benefits for all. This is an
issue that has not received satisfactory attention in decades
and definitely needs to be readdressed with fresh ideas.