[Senate Hearing 114-20]
[From the U.S. Government Publishing Office]
S. Hrg. 114-20
THE IMPORTANCE OF MAP_21 REAUTHORIZATION:
PERSPECTIVES FROM OWNERS, OPERATORS,
AND USERS OF THE SYSTEM
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HEARING
BEFORE THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 25, 2015
__________
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COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
JAMES M. INHOFE, Oklahoma, Chairman
DAVID VITTER, Louisiana BARBARA BOXER, California
JOHN BARRASSO, Wyoming THOMAS R. CARPER, Delaware
SHELLEY MOORE CAPITO, West Virginia BENJAMIN L. CARDIN, Maryland
MIKE CRAPO, Idaho BERNARD SANDERS, Vermont
JOHN BOOZMAN, Arkansas SHELDON WHITEHOUSE, Rhode Island
JEFF SESSIONS, Alabama JEFF MERKLEY, Oregon
ROGER WICKER, Mississippi KIRSTEN GILLIBRAND, New York
DEB FISCHER, Nebraska CORY A. BOOKER, New Jersey
MIKE ROUNDS, South Dakota EDWARD J. MARKEY, Massachusetts
DAN SULLIVAN, Alaska
Ryan Jackson, Majority Staff Director
Bettina Poirier, Democratic Staff Director
C O N T E N T S
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Page
FEBRUARY 25, 2015
OPENING STATEMENTS
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 1
Boxer, Hon. Barbara, U.S. Senator from the State of California... 2
WITNESSES
Braceras, Hon. Carlos, Executive Director, Utah Department of
Transportation................................................. 4
Prepared statement........................................... 7
Heminger, Steve, Executive Director, Metropolitan Transportation
Commission..................................................... 14
Prepared statement........................................... 16
Riordan, Thomas J., President and CEO, Neenah Enterprises, Inc... 20
Prepared statement........................................... 22
Gardner, David, Vice President, Supply Chain and Customer
Experience, Ingredion Incorporated............................. 30
Prepared statement........................................... 32
Rowen, Walt, President, Susquehanna Glass Company................ 36
Prepared statement........................................... 38
ADDITIONAL MATERIAL
HTF Revenue Options.............................................. 66
THE IMPORTANCE OF MAP-21 REAUTHORIZATION: PERSPECTIVES FROM OWNERS,
OPERATORS, AND USERS OF THE SYSTEM
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WEDNESDAY, FEBRUARY 25, 2015
U.S. Senate,
Committee on Environment and Public Works,
Washington, DC.
The committee met, pursuant to notice, at 9:30 a.m. in room
406, Dirksen Senate Building, Hon. James Inhofe (chairman of
the committee) presiding.
Present: Senators Inhofe, Boxer, Boozman, Crapo, Vitter,
Rounds, Capito, Wicker, Carper, Whitehouse, Gillibrand.
OPENING STATEMENT OF HON. JAMES INHOFE,
U.S. SENATOR FROM THE STATE OF OKLAHOMA
Senator Inhofe. The hearing will be open.
Let me thank the five of you who have come from far
corners. We appreciate very much your being here. Our feeling,
and I know I speak for Senator Boxer, we kind of need to get an
outside the Beltway perspective. So this is the opportunity
that we have for it. We appreciate very much the witnesses
being here.
Unfortunately, what used to be the best transportation
system in the world is now deteriorating, and our global
competitors are greatly outpacing us in infrastructure
investment. We hear this, and we see this as we go around, we
see what is happening in China, we see what is happening in the
other countries. The American businesses rely on an efficient,
reliable transportation network. More than 250 million vehicles
traverse the highway system each year and businesses require a
reliable transportation system.
Now, I think anything I would say for members of this panel
and for the five of you who have come in here to testify, it
would be redundant. You are all familiar with the crisis that
we are facing right now. We have Gary Ridley, whom Senator
Boxer and I know very well, from Oklahoma, who has testified
probably than anyone else has before this committee over the
past 20 years or so. And the rest of you, we appreciate very
much your being here.
I am not going to use my time, because in case that Senator
Vitter comes, who is the chairman of the subcommittee, I want
him to have that opportunity. So with that, I will retain the
balance of my time.
[The prepared statement of Senator Inhofe follows:]
Statement of Hon. James M. Inhofe, U.S. Senator
from the State of Oklahoma
Welcome to today's hearing. This is the second highways
hearing we have held this year. As I have said many times, my
top priority this year is to pass a fiscally responsible, long-
term highway bill. I am confident that we will be successful in
passing a bill, and I thank the witnesses for being here today
to help us achieve that goal.
Unfortunately, what used to be the best transportation
system in the world is now deteriorating, and our global
competitors are greatly outpacing us in their infrastructure
investment. I am glad that we have manufacturers before us
today to discuss how important transportation is to their
businesses and the jobs they support.
American businesses rely on an efficient and reliable
transportation network. More than 250 million vehicles traverse
the highway system each year and businesses require a reliable
transportation network to operate.
But every day, 20,000 miles of our highways slow below
posted speed limits or experience stop-and-go conditions. This
type of congestion has a huge negative impact on America's
businesses.
Unfortunately, congestion is becoming more and more of a
problem for American businesses. In its 2013 Report Card for
America's Infrastructure, the American Society of Civil
Engineers gave America a ``D'' grade on the condition of the
Nation's roads and a ``C+'' on the condition of the Nation's
bridges.
As we are all aware, the Federal highway program is
operating on a short-term extension that expires at the end of
May.
My staff has been working with Senator Boxer's staff on a
long-term bill that will give our partners the certainty they
need to plan and construct important transportation projects.
Our infrastructure investments are a partnership between
the Federal Government and the States. We need to keep up our
end of the bargain and pass a fully funded, long-term bill.
OPENING STATEMENT OF HON. BARBARA BOXER,
U.S. SENATOR FROM THE STATE OF CALIFORNIA
Senator Boxer. Senator, is it my turn?
Senator Inhofe. Yes.
Senator Boxer. Thank you.
Mr. Chairman, you and I don't agree on a lot, we know that.
But we do agree on the absolute importance of having a Class A
transportation system. I think that this partnership that we
have shown over the years is more critical now than perhaps
ever, because we are just a few months away from a shutdown of
the Highway Trust Fund. And I am going to ask unanimous consent
to put my statement into the record, if I might.
Senator Inhofe. Without objection. I will also put mine
into the record.
Senator Boxer. OK. I am going to summarize it in 2 minutes.
Here is the thing. We are going to hear today from this
diverse panel. I am so proud, Steve, you are here. We are
hearing it from every stripe, from red States, from blue
States, from purple States, from conservatives and liberals
alike. We need a bill and we need it now.
I want to say that last Congress, this committee, to the
shame of the Senate and the House, and I say that knowing
Democrats controlled the Senate, Republicans controlled the
House, to the shame of the Senate and the House, this committee
was the only committee to do anything on this matter. We passed
a really good bill. We are working on another bill now.
I had thought once we had acted, we would see all the other
committees in both the House and Senate fall into line. They
didn't do it. And I am very worried. Very worried, that I see
that same kind of lackadaisical attitude about what we are
facing.
Look, we just averted a port strike in our great State. We
have taken 40 percent of the imports. And what happened, and
thanks to the Obama administration, really, they helped a lot
on this. We all worked together, Republicans and Democrats, to
stop that strike. And we averted it.
But what happens to those goods? They go on trucks, mostly,
and they go across our great Nation. They stop in Oklahoma,
they stop all over. And if our Nation's roads are in disrepair,
and 50 percent of them are, and our Nation's bridges are in
danger of collapsing, and more than 60,000 of them are, we are
in a dire circumstance.
So I will stop at this point. I will retain my time in case
there is an opportunity to give it to someone else later. But
let me be clear. I don't think, Mr. Chairman, with your great
leadership, we need a lot more hearings. I think we need to
continue our good work our staffs have started.
And I think we need to take the lead and get this going.
Because what I see coming is another extension. My chairman
knows how expensive that is, and how absurd that is. And I will
say, if you went to the bank to get a mortgage and the banker
looks at you and says, oh, you are great, you get the mortgage,
but it is only for 6 months, you are not going to buy the
house.
Well, if we can't tell our people that they have a
guarantee of several years at least, they are not going to
build those roads. They are just not going to do it.
So with that, I would retain the balance of my time.
[The prepared statement of Senator Boxer follow:]
Statement of Hon. Barbara Boxer, U.S. Senator
from the State of California
Today a diverse panel of witnesses will explain to this
Committee how important a modern surface transportation system
is for a strong economy and why Congress must act quickly to
address our nation's infrastructure needs.
The continued inaction by Congress to enact a long-term
transportation bill is a disgrace. An efficient transportation
system is key to our economic security. The U.S. economy relies
on an interconnected transportation system--for example, we
move goods out of major ports of entry onto congested urban
roads and out to the rural highways that span our Nation.
Federal funding is crucial to keeping our roads, bridges,
and transit systems functioning so that we can move goods and
people safely and efficiently. Unfortunately, investment in our
country's infrastructure has not kept pace with growing needs
at the State and metropolitan level. nationwide there are
63,500 bridges that are structurally deficient and 50 percent
of our nation's roads are in less than good condition.
The Federal Government provides over 50 percent of the
capital expenditures for State highway projects nationwide,
which means that states and local governments rely heavily on
Federal funding to maintain and improve their transportation
systems.
A robust, multi-year surface transportation bill will
sustain millions of jobs for American workers and help the
construction industry, which was hit hard by the Great
Recession. There are still approximately 1.4 million fewer
construction workers today compared to 2006.
It is critical for our nation to continue investing in our
aging infrastructure. The Highway Trust Fund is an integral
part of how the Federal Government provides predictable, multi-
year funding to states so they can plan and construct long-term
highway, bridge, and transit projects. Therefore, preserving
the Highway Trust Fund needs to be our No. 1 priority.
We must move quickly to pass a bipartisan transportation
bill, because without action we are facing a transportation
funding shutdown in just a few short months. The law that
currently authorizes our surface transportation programs is set
to expire on May 31st--right as the critical summer
construction season is beginning--and the Highway Trust Fund is
projected to face cash-flow problems shortly thereafter.
Secretary Foxx recently stated that U.S. DOT would likely
begin warning states in June of ``cash management'' procedures
which would take effect in July, when fund balances fall below
a prudent balance. Make no mistake--this would result in the
rationing of billions of dollars in payments to states.
I'd like to enter into the record a recent statement from
Pete Ruane, the President and CEO of the American Road and
Transportation Builders Association, and read a portion of the
statement:
``In just 100 days, authorization for the Federal highway
and transit program will end, absent action by the Congress.
Close observers know, however, that the Senate and House are
only scheduled to be in session 55 and 36 days, respectively,
before that legislative deadline occurs. Where is the sense of
urgency? The uncertainty caused by congressional action is
already--again--having real world, negative economic
consequences as states begin cutting back work plans because
they don't know if the funding will be there to pay the bills
several months from now.''
Transportation should be a nonpartisan issue. Taking action
to save the Highway Trust Fund and invest in our aging
infrastructure is strongly supported by businesses, labor, and
transportation organizations.
Last May, the EPW Committee unanimously approved a 6-year
reauthorization of MAP-21 that provided long-term funding
certainty for highway and bridge programs. I am hopeful we will
have similar success in our Committee this year, but the clock
is ticking. Failure is not an option, there are no excuses for
further delay or extensions, and I look forward to working with
all of you to get the job done.
Senator Inhofe. And I will do the same.
I would only say this. What you are witnessing here is
unusual in Washington, because you have a proud, outspoken
liberal and a proud, outspoken conservative in total agreement
on what we should be doing. We do have that old outdated
document out there called the Constitution that kind of tells
us what we are supposed to be doing here. This is what we are
supposed to be doing here.
With that, let's start with Mr. Braceras. Mr. Braceras, we
will start with you and we will kind of go across for your
opening statements. Then we will open up for questions.
STATEMENT OF HON. CARLOS BRACERAS, EXECUTIVE DIRECTOR, UTAH
DEPARTMENT OF TRANSPORTATION
Mr. Braceras. Thank you, Chairman Inhofe, Ranking Member
Boxer and members of the committee.
Thank you for the opportunity to provide input on the need
to reauthorize MAP-21. My name is Carlos Braceras, and I serve
as the Executive Director of the Utah Department of
Transportation. Today it is my honor to testify on behalf of
the State of Utah and AASHTO.
Throughout the history of our Country, transportation has
played an integral role in the success of our economy. While
States have done an admirable job of addressing transportation
within their boundaries, there is clearly a need for a cohesive
national transportation system. Our Federal highway program is
a federally funded Stated-administered program based on the
100-year old partnership between the Federal Government and
State DOTs. Nearly half of all the capital funding for highway
and bridge projects comes from the Federal Government.
Eliminating the Federal participation in this partnership will
leave too big a hole for the States to be able to make up on
their own.
State DOTs have a strong partnership with their local
governments and their respective States. The transportation
planning process requires State DOTs to work extensively with
local planning agencies and the public in developing multi-
modal transportation plans and identifying projects that are
supported by the Highway Trust Fund. This process works well,
and is the foundation of the performance-based programs
established under MAP-21.
Rather than drastically altering the federally funded,
State-administered nature of the Federal Highway Program, and
facing consequences of such disruption, we should highlight
examples were State DOTs have strong, productive partnerships
with local governments, and where the transportation planning
process is working well.
In Utah, as with all of our sister States, the success of
our communities, both large and small, is critical. As such, we
have developed what we refer to as the unified plan, in which
all our metropolitan planning organizations, cities, counties
and transit authorities, have come together to develop a
unified plan of projects that will address the goals of the
State and individual communities for the next 30 years. In
Utah, we speak with one voice toward an agreed-upon set of
goals.
As Congress considers policy changes in the next
reauthorization bill, it should build on the successful reforms
of MAP-21. We all share the goal of utilizing the resources
invested in our transportation system as effectively and
efficiently as possible. We can accomplish this by streamlining
the project delivery process, such as clarifying that States
participating in the NEPA delegation may make project-level
conformity determinations, give the States the ability to
approve designs and right-of-way acquisitions, allow State DOT
modal administrators to use categorical exclusions determined
by other modal administrators.
Furthermore, Congress should consider authorizing a
consolidated funding pilot program. This would build on the
program consolidation efforts made in MAP-21 by treating all
core funding programs as a single, consolidated apportionment.
States would only be eligible to participate in the program
once they have established performance management systems that
ensure accountability and transparency.
Utah is ready to step forward and pilot such a program. I
am convinced that we will be able to demonstrate that we will
be able to better meet both the transportation goals of this
Country and those of Utah.
I encourage Congress to seek additional opportunities to
continue moving the Federal highway and safety programs toward
performance and outcome-based programs that emphasize results
as opposed to process.
In conclusion, AASHTO remains committed to helping Congress
pass a robust, long-term surface transportation authorizing
bill as soon as possible. The current extension expires in the
middle of the spring construction season. Already, several
State DOTs are postponing needed projects that are scheduled to
go out to bid.
The sooner Congress acts, there is a greater likelihood
that these projects will be built this year as opposed to being
pushed back another year. This week, hundreds of State DOT
leaders from nearly every State in the Country are just a
couple of blocks away, attending AASHTO's 2015 Washington
Briefing. Over the next couple of days, most of them will be up
here on the Hill, meeting with their congressional delegations,
advocating for a long-term surface transportation bill that
addresses our surface transportation investment needs.
I would like to thank you once again for the opportunity to
testify today. I will be more than happy to answer any
questions the committee has.
[The prepared statement of Mr. Braceras follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Inhofe. Thank you very much, Mr. Braceras. I should
have mentioned, Mr. Braceras is the Executive Director of the
Utah Department of Transportation.
Next, the guy who gets the prize for coming the farthest,
Steve Heminger, from the California Transportation Commission.
STATEMENT OF STEVE HEMINGER, EXECUTIVE DIRECTOR, METROPOLITAN
TRANSPORTATION COMMISSION
Mr. Heminger. Thank you, Chairman Inhofe, Senator Boxer and
members of the committee. Good morning.
Just for the record, again, my name is Steve Heminger and I
am Executive Director of the Metropolitan Transportation
Commission, which is the metropolitan planning organization, or
MPO, for the San Francisco Bay Area. A few years ago, I also
was privileged to serve on one of the two congressionally
chartered commissions, the National Surface Transportation
Policy and Revenue Study Commission. I very much appreciate
this opportunity to testify today on the still-relevant title
subject of that commission's report: Transportation for
Tomorrow.
United States Senators have a lot on their plates. So let
me make three brief points. First, I want to thank this
committee for the considerable progress you have made in
reforming the Nation's surface transportation program. The
emphases in MAP-21 on program consolidation, performance-based
outcomes, freight policy and permit streamlining are all
welcome developments. Your bipartisan leadership is helping
States and MPOs make better investment decisions and deliver
those projects faster to our constituents.
Second, despite these advances, Federal policy, in my
opinion, still lacks sufficient focus on the investment needs
of the Nation's economic engines: the metropolitan areas that
more and more Americans call home. The fact is, the U.S.
economy will rise or fall based on how well our metro economies
compete in the global marketplace.
For example, Bay Area residents contribute almost 60
percent more to our gross domestic product than the average
American, 60 percent more. In regions as diverse as Houston and
Boston, this metro dividend is nearly 40 percent above the
national average.
Now, the Federal-State relationship is the cornerstone of
American federalism, and the transportation arena is no
exception to that. But that should not preclude a new
performance partnership with dedicated funding between the U.S.
DOT and the Nation's MPOs. We need to keep those economic
engines primed.
Finally, if we want better conditions and performance from
our roads, bridges and public transit systems, we are going to
have to figure out a way to pay for it. So how deep is the hole
we have dug? Let me start with that, and just give you one
snapshot of the San Francisco Bay Area. Our long-range plan
devotes nearly 90 percent of all the money we have available,
90 percent over the next 25 years, just to operate and maintain
the existing transportation network.
The Federal program is 13 percent of our total funding. One
way of looking at that is, you are getting eight to one
leverage off of your investment in California, which is a very
good return. It also means that we are not here asking you for
a handout. We are asking you for a little help, because we are
doing most of it.
But when you spend nearly 90 percent of your budget on
maintenance, over the next 25 years, in the face of the growth
we are seeing, we are leaving a lot of expansion projects on
the table, because we simply can't afford to pay for them. Even
after spending 90 percent of all of our money on maintenance,
we still have $10 billion plus shortfalls for State highway
repair, for local road repair and for the public transit system
State of good repair.
That is the situation we are in. That is how deep the hole
is. And that is why I say, and I think it is no surprise to
this committee, that level funding just won't cut it.
Now, the members of this committee probably have forgotten
more about politics than I will ever know. But I do know this.
Since the Federal gas tax was last adjusted in 1993, 42 States,
42 States, have raised their rates, some by a little, others by
a lot; some by indexing, others by voting. These States range
from the brightest red to the deepest blue. Somehow, all those
Governors and State legislators figured out a way to pay for
needed transportation improvements.
Moreover, the math is pretty compelling. As an example,
doubling the current Federal user fees on gasoline and diesel
fuel would generate over $30 billion per year and create more
than 300,000 jobs, yet it would cost the average motorist less
than 30 cents per day.
Now, a recent American president confronted a similar
predicament to the one we are in today. I would like to read a
quotation from him about how he fought his way through it.
``Common sense tells us it will cost a lot less to keep the
system we have in good repair than to let it crumble and then
have it start all over again. Good tax policy decrees that
wherever possible, a fee for a service should be assessed
against those who directly benefit from that service. Our
highways were built largely with such a user fee, the gasoline
tax. I think it makes sense to follow that principle in
restoring them to the condition we all want them to be in.''
That was President Ronald Reagan in 1982. I think the words
are still true today.
So let me end where I began. Your reform agenda is working.
But there is no free lunch when it comes to infrastructure.
Indeed, the only question is whether we want to pay now to
improve our roads and rail lines, or whether we want to pay
later in crumbling facilities that will curtail our economic
potential.
I remain optimistic that this Congress will make the right
choice. And in light of the quotation I have just read, perhaps
I should conclude by saying, let's just win one more for the
Gipper.
Thank you very much.
[The prepared statement of Mr. Heminger follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Inhofe. That has a great impact on me, anyway.
Thank you very much.
Mr. Riordan is the President and CEO of Neenah Enterprises.
We recognize you to tell us about Neenah Enterprises, we will
give you a few seconds to go over.
STATEMENT OF THOMAS J. RIORDAN, PRESIDENT AND CEO, NEENAH
ENTERPRISES, INC.
Mr. Riordan. Thank you, Mr. Chairman. Chairman Inhofe,
Ranking Member Boxer, and members of the Senate Committee, on
behalf of my company, Neenah Enterprises, and the National
Association of Manufacturers, that I also represent, thank you
for the opportunity to testify about the importance of Federal
investments in our transportation infrastructure.
With its headquarters and largest foundry in Neenah,
Wisconsin, Neenah Enterprises consists of two business
operating entities. Our best-known business is Neenah Foundry,
which is one of the top suppliers of municipal castings
including manhole frames, lids, covers, grates, trench castings
and decorative tree grates. Since 1872, Neenah Foundry has been
a consistent leader in producing durable castings that are used
in every State across our Country, and we proudly make all of
our products here in the U.S.
Our other business, Neenah's industrial division,
represents about 70 percent of our revenue and is a key
component provider to many of the world's leading manufacturing
companies, designing and building cast iron and forged parts
for the heavy truck, agriculture, construction, HVAC, energy
and other industries. We are one of the largest independent
manufacturers of castings in the U.S. and part of the largest
recycling industry in the Nation, turning scrap steel into
useful products in an environmentally friend manner.
As Chair of the NAM's Small and Medium Manufacturers Group,
I often hear about the business challenges that my peers face,
from escalating costs of healthcare to the increasing burdens
of regulation. The health and condition of our Nation's
infrastructure on the transportation network is also of
significant concern to manufacturers. Our transportation
infrastructure underpins the movement of goods within our
economy. It is vital for our day-to-day business and our long-
term economic prosperity.
Neenah is hugely dependent upon the transportation
infrastructure, ports, rail and highways. As an example, our
largest facility has over 15,000 truck visits each year. The
logistics planning that goes into each of these visits is very
involved, and delays based on traffic congestion often drive
significant expense overruns on a daily basis. The cost of
scheduling, rescheduling, paying overtime, customer and vendor
disruptions, production delays and lost business all add cost
and challenge our competitiveness by raising our total cost of
doing business by about 1 percent each year.
These excess costs are diverted away from other business
activities such as product development, new capital projects
and investments in our work force. Congestion is really a
hidden tax and an increasing drag on American competitiveness.
As congestion continues to challenge the Nation's highway
network, especially in metropolitan regions, capital spending
on highways, roads and bridges fell 3.5 percent between 2003
and 2012, according to a recent NAM study. The study, entitled
Catching Up, also revealed that spending on public
infrastructure dropped 10.5 percent between 2003 and 2012 in
the same time period.
A more sustained and focused effort is going to be needed
in the long term to help reverse these troubling trends. We can
and should do better than allow our Nation's infrastructure
base to continue to erode.
In the short term, manufacturers are counting on Congress
to help facilitate commerce by moving a well-funded, multi-year
surface transportation authorization that secures the financial
health of the Highway Trust Fund. Manufacturers support this
committee's efforts to ensure our transportation system is on
more solid and robust footing.
I very much appreciate and thank you for the opportunity to
testify this morning.
[The prepared statement of Mr. Riordan follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Inhofe. Thank you very much.
Mr. Gardner is the Vice President of Supply Chain and
Customer Experience for Ingredion Incorporated. Why don't you
tell us about it?
STATEMENT OF DAVID GARDNER, VICE PRESIDENT, SUPPLY CHAIN AND
CUSTOMER EXPERIENCE, INGREDION INCORPORATED
Mr. Gardner. Good morning, Chairman Inhofe, Ranking Member
Boxer, and distinguished members of the committee. Thank you
for the opportunity to testify today.
My name is Dave Gardner and I am Vice President of Supply
Chain and Customer Experience for Ingredion Incorporated. In my
role I am responsible for operations, including raw material
sourcing, logistics, and customer service. I am testifying here
today on behalf of the U.S. Chamber of Commerce.
First, let me first tell you a little bit about Ingredion.
We produce hundreds of value-added ingredients from plant
sources, including corn, tapioca and rice. We manufacture our
products for the food industry, beverage, pharmaceutical,
corrugating, paper, and animal feed industries. Our ingredients
add crunch to crackers and fiber to cereal bars. They can make
a soft drink sweet with calories or sugar free, plastics
biodegradable, body lotions silkier, and tissues stronger and
softer.
In fact, our products appear in roughly 80 percent of all
the products that you would find on a grocery store shelf,
either in the product, in the package or in the packing itself.
We are a multinational, FORTUNE 500 company headquartered in
the Chicago suburb of Westchester, IL. We have a global R&D
facility in Bridgewater, New Jersey. We employ roughly 11,000
people globally and have 2,000 employees in the United States.
Our supply chain is a worldwide network of 35 manufacturing
plants and 24 R&D centers around the globe. In North America we
operate 13 manufacturing plants, with seven of those in the
United States. Our largest plant is in the Chicago area.
Our primary raw material is corn, which we ship to our
plants from the Farm Belt via rail and truck. Our finished
products are distributed to customers across the Country by a
network of rail, truck, warehouses, and break stations.
Needless to say, a smooth-functioning surface transportation
system is not only essential to Ingredion's business, it
impacts the bottom line of our business and of our customers.
Logistics costs represent a significant portion of our
inbound corn costs and delivered finished product costs. In
2014 alone, our transportation costs, excluding the cost of
fuel increased by 3.6 percent, far outstripping the rate of
inflation.
An outdated transportation system leads to increased
freight costs, variability in delivery times, higher
inventories, poor customer service, and an overall
uncompetitive situation for us and for all other industries.
Let me just touch on few examples to illustrate how a neglected
infrastructure impacts us.
Last year, it took longer to transport corn from the
farmers and storage elevators to our facilities. This resulted
in millions of dollars in increased freight costs, higher
manufacturing costs due to plant downtime, and curtailed
production.
The transportation industry is struggling. In 2014, the
average train speed decreased by over 6 percent and delay times
increased by 10 percent. As a result, we had to increase
product inventories and address a shortage of rail cars to
transport our products, leaving us to struggle to meet customer
demand.
As the network moves slower, we are forced to increase our
rail fleet and to make suboptimal sourcing decisions. Chicago
is a primary transportation hub and the location of our largest
plant. The increased rail volume through Chicago is causing
unprecedented delays. For example, it can take up to 3 days to
just get a rail car of product out of the Chicago area. A
customer is a mere 7-hour drive away, it can take up to 5 days
to deliver them product by rail.
Because we cannot consistently rely on rail to deliver
products to our customers on time, we are often required to
revert to trucks, at a more costly position than rail. However,
the trucking industry is also severely challenged. Available
truck capacity compared to truck demand is at an historic
imbalance. This has been amplified by tightening regulation on
driver hours and deteriorating highway infrastructure.
Our ability to respond to our customer needs is directly
impacted by the availability of trucking capacity. As truck
capacity tightens, our on-time delivery rate suffers.
Ingredion's incidence of late deliveries over the last 2 years
has almost doubled since 2012.
But our story is really just a small pixel of the bigger
picture. Increased transportation costs are impacting the
broader American business community. According to the Council
of Supply Chain Management Professionals, U.S. business
logistics costs was $1.4 trillion in 2013, and this equates to
8 percent of the GDP
Today marks the first time that Ingredion has testified
before Members of Congress, but we can no longer afford to
remain silent. We came here today to add our voice to the
growing concern by businesses calling for improvements to the
Nation's infrastructure systems.
I would like to thank the committee for their continued
work and attention on the reauthorization of our surface
transportation programs. MAP-21 ended years of short-term
extensions that created a great deal of uncertainty for
businesses such as ours. We are eager to see a long-term
solution come out of Congress this year, and we know that you
agree.
Thank you very much for the opportunity to be here today,
and I look forward to answering your questions.
[The prepared statement of Mr. Gardner follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Inhofe. Yes, we do agree.
Mr. Rowen is the President of Susquehanna Glass Company.
You are recognized.
STATEMENT OF WALT ROWEN, PRESIDENT, SUSQUEHANNA GLASS COMPANY
Mr. Rowen. Good morning, Chairman Inhofe, Ranking Member
Boxer and other members of the Committee. My name is Walt
Rowen. I am the owner of Susquehanna Glass Company. We are a
small, 100-year old glass decorating company based in Columbia,
Pennsylvania.
Our products don't make body lotions creamier, but I can
guarantee you, California wine tastes wonderful in our wine
glasses.
[Laughter.]
Mr. Rowen. Thank you for allowing me to testify before you
today and share my comments about the importance to us of
reauthorizing the funding for the Highway Trust Fund.
My company provides decorated glasses and barware to major
retailers, internet flash sites, small retailers and other
tabletop companies around the Country. We rely on the freight
and trucking industry to ship our finished products all over
the Country to retailers and directly to their customers. Last
year, my business shipped over 57,000 small packages via UPS
and FedEx and we generated more than a million dollars in
freight charges. So clearly, our success as a company relies
very heavily on our ability to deliver products efficiently and
cost-effectively to our customers.
One of our business models has been to gradually shift from
shipping large shipments to retailers and their DCs, or their
distribution centers, shifting to more of a direct-to-customer
package delivery system, relying more on UPS and FedEx. So
today, we really balance both of those areas, both trucking
shipments and small UPS packaging.
Investment in our Nation's infrastructure is an investment
in America, pure and simple. Not only would this benefit
businesses like mine that rely on the shipping industry and
well-maintained roads, it would create new opportunities for
small businesses. About 147,000 of our Country's 650,000
bridges are failing. This is especially apparent in
Pennsylvania, where I live. We have the third-largest number of
bridges in the U.S., over 25,000, but we lead the Nation in the
number of bridges classified as structurally deficient. And a
mere 30 percent of Pennsylvania's roads have been labeled in
good condition, only 30 percent in good condition.
What is more, one-third of America's major roads are in
poor or mediocre condition. There are 4,000 dams in need of
repair and 36 percent of our urban highways are congested.
Rebuilding America's roads, bridges and schools offers
tremendous opportunities to small businesses. Not only do they
participate in the building projects and their supply chain,
they run the hotels, coffee shops, restaurants and other
businesses that serve people working on those projects. The
economic impact to the American economy is unfathomable when
you devote these funds to these kinds of construction projects.
In fact, Small Business Majority's polling found 69 percent
of small business owners favor investing $50 billion in
infrastructure projects that would create jobs. If the cost of
freight continues to rise while our roads deteriorate, it will
become harder and harder to move my products and make a profit.
This would seriously be detrimental to my bottom line. UPS and
FedEx have just started to price small packages differently.
Instead of just paying for weight, we are paying for the size
of the package. That is going to increase my cost of shipping
dramatically.
Investing in our Nation's roads, bridges and other physical
infrastructure supports access to customers and vendors, while
at the same time creating demand for the goods and services
small businesses have to sell. We need infrastructure
investments that will be beneficial for business and the
economy. I hope you will strongly consider small business
support for reauthorizing funding for the Highway Trust Fund.
Thank you sincerely for the opportunity to comment on this
important issue.
[The prepared statement of Mr. Rowen follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Inhofe. Thank you, Mr. Rowen, and thank all of you
for your opening statements.
What we are going to do is have 5-minute rounds, and have
two rounds. This is to accommodate members who are going to
have to come late and maybe leave early. So there will be
plenty of time.
I will go ahead and begin with the most unpopular of the
subjects and that is, I have been very frustrated over how we
pay for a multi-year reauthorization. Some of my colleagues
have talked about supporting a concept of shifting the Federal
program back to the States by cutting the Federal user fees,
some of them 15 cents, some of them, whatever the amounts. And
then letting the States pick up the tab.
Now, if such a thing were to become a reality, Idaho would
have to raise its State gas tax by 25 cents, West Virginia by
32 cents. Your State, Mr. Braceras, of Utah, would be 19 cents
that you would have to increase this. And in Montana, 44 cents.
So there was a reason for this. I often say one of the few
things that really does work in government is this system. And
this is coming from a conservative.
So I have often said, and I remember on the Senate floor
when we had our 27-month bill that the conservative position is
to go ahead and do an authorization bill. No. 1, you get all
the reforms, streamlining and all that stuff, and No. 2, if you
don't do that, it is going to cost about 30 percent off the
top. And that is not the conservative position.
Now, when you talk about devolution, as several are
suggesting, I am probably the right one to talk about this.
Because, and my colleagues don't know this, but 25 years ago,
Connie Mack from Florida and Jim Inhofe from Oklahoma were the
fathers of devolution. We thought then that oh, that was so
much fun on the stump to talk about how, go back to Oklahoma,
why make an unnecessary trip of our dollars in Oklahoma to
Washington and back, until we realized how it didn't work.
Obviously, it was more fun to be for it than against it. But
nonetheless, that is happening.
[Laughter.]
Senator Inhofe. But anyway, interState commerce doesn't
stop at State boundaries. No State is an island. I have read
extensively on Eisenhower, I have always been a great admirer
of his. My other committee is Armed Services Committee. He used
to say, it is just as much about national defense as it is
interState commerce. InterState connectivity and national
defense access are equally important.
So I would just say, that my position, and what I am going
to do is have only one question. One question. We will start
with you, Mr. Braceras, and we are going to work down. Now, in
5 minutes, we will cut me off and go to the rest of them, then
we will continue. So that will give you more time to think
about this. All right, Mr. Braceras, do you agree with me? What
do you think?
Mr. Braceras. Mr. Chairman, I would say the answer of
whether or not to devolve the Federal program is if you believe
there is no Federal purpose in transportation. I believe that
there is a strong purpose in our Nation's transportation in
having a strong Federal role. Companies such as, based in
Oklahoma, Advance Pierre Food Services, they produce their
products but they depend on a vibrant, well-functioning, safe
transportation system in every State of this Country. For our
Country to continue to be successful and be an economic leader,
we need a strong Federal transportation system.
Senator Inhofe. That is good. One followup question on
that. What if a State, if you went through this concept and a
State decided that they were not going to increase their taxes?
Your State of Utah, for example, what would happen to the
national system?
Mr. Braceras. We depend on the Federal program to maintain
and operate our transportation system. We have a strong State
system. Our Federal program constitutes just under 25 percent
of our program. But the Federal program is what we maintain and
preserve the State's transportation system on. So you would see
roads continue to deteriorate, bridges to continue to
deteriorate. So that Federal role is critical to the State of
Utah.
Senator Inhofe. Thank you, Mr. Braceras. Mr. Heminger.
Mr. Heminger. Mr. Chairman, I certainly do agree with you.
And there is another quotation I am recalling from President
Eisenhower when he submitted his interState highway bill to the
Congress. He noted that activities like transportation and
communication are things that knit our Country together. I
think he said without that, we would be a mere alliance of many
separate parts.
I think we are called the United States of America for a
reason. If you think the Federal Government is done with
transportation, I suppose you could devolve the program. I come
from a State that has probably the best chance of standing on
its own two feet. We are a nation State by any stretch of
measure. But there are jobs that even we can't do. And Senator
Boxer mentioned the import of goods and the flow of commerce
coming into our ports. That is not just a California issue,
that is a national issue.
I would finally mention one thing that doesn't often get
talked about in devolution. If you were to head down that path,
the last time I checked, I think it is something like 30 or
more States have restrictions in their State constitutions that
would prohibit them from using gas tax money on public transit.
And that is a pretty big pill to swallow in States around the
Country where we rely on Federal aid to public transit.
Senator Inhofe. Thank you very much. I am going to cut my
time off now and we will come back for the three of you on the
same issue.
Senator Boxer.
Senator Boxer. Mr. Chairman, thank you very much. You are a
leader on national defense. And you are a leader on the Highway
Trust Fund. The last person that brought that together was Ike,
Eisenhower. He was President in the 1950's when you and I were
just really little kids.
Senator Inhofe. You were littler than I was.
Senator Boxer. Not by that much, unfortunately. But here's
the deal. It was Ike who started the interState highway system.
And he did it because of national defense. Because he said, as
you said, this is one Nation under God. He may have said under
God. And the bottom line is, we have to move these goods. This
is essential for our national defense, for our national
security. And of course, for our economic security.
So we are on the high ground here. I couldn't agree with
you more that this is one place where Republicans and Democrats
should come together. And we have proven we can do it in this
particular committee.
Now, this panel is just terrific. And I guess I have a
political question to ask Mr. Braceras. Have you spoken this
passionately to your Senator Hatch? Does he know your feelings
about the impact of this?
Mr. Braceras. I believe you might mean Senator Lee. Yes,
Senator Hatch believes in a strong Federal role.
Senator Boxer. No, I mean Senator Hatch. I am talking about
Senator Hatch for a reason. Senator Hatch is the one with
Senator Wyden is going to figure out how to fund the trust
fund. And so far, we have seen nothing come out of that
committee, either when Senator Wyden was in charge, frankly, or
when Senator Hatch was in charge. Lots of ideas.
And if I could just say, for myself, I am open to all of
them. And the reason is, I am open to all of them, because I
think this is so critical to our economy. If you just look at
construction workers, and I want to say to my private sector
people here, thank you for being here. We, at the height of the
Great Recession, we had more than 2 million workers, is that
right, Bettina? Two million construction workers out of work.
Today, we have 600,000 construction workers out of work. It is
such a long, difficult task to get everything back to where it
was before the Great Recession.
If we fail to act, and Senator Hatch and Senator Wyden
together don't figure out a funding mechanism, I mean, I have
been talking to other colleagues on the other side of the
aisle, Mr. Chairman, and we are thinking about teaming up and
offering some things like repatriation and other things, on the
floor itself, just to get moving. Because we are headed into
very, very dark waters here.
So I would just like to ask each of you the consequences,
and put it as tightly as you can in my remaining time, the
consequences of our not acting, and maybe at the last minute,
throwing together a 6-month or a 5-month extension. What are
the consequences on the ground? I think we are going to start
with you, Mr. Braceras.
Mr. Braceras. Thank you, Senator. The consequences would be
significant. If you believe that the projects that we work on
are important to safety, for preservation, to save this
Nation's money, we could lose a construction season if we wait
too long. For us, when we get the go-ahead from Congress, we
are ready to go on those projects that still need to be
appropriated. It takes a month to advertise, it takes a month
for WRDA contracting. In cold weather States, we could
potentially lose an entire construction season.
Senator Boxer. And that means lost jobs and businesses
really hurting.
Mr. Braceras. And projects costing more money next year
than they do today.
Senator Boxer. OK. Mr. Heminger, do you agree with that?
Mr. Heminger. Yes, I do, and I want to emphasize that last
point. In life, time is money. But especially in construction.
And when you are ready, you are ready. Then you have to let it
go and some other job gets in the way. And then you're three or
four down the pecking order.
California has better weather, we have more local money. So
in a sense we are a little bit better able to deal with this
uncertainty. But it is frustrating for all of us, as I know it
is frustrating for you, not to have the predictable funding
that you need for long-term infrastructure investment.
Senator Boxer. Mr. Riordan.
Mr. Riordan. Senator, we absolutely agree. On behalf of
National Association of Manufacturers and my company as well, I
have been personally involved in a construction equipment
company in the past. I have seen first-hand the delays, cost
overruns, confusion that go with the start and stop nature of
this process. I would urge the committee to consider the
fiduciary responsibility from the standpoint of making sure we
spend money in an intelligent, well thought-out basis.
As manufacturers would say, planning is best done in
advance. It is extremely difficult and extremely disruptive to
have a start and stop nature, not only for private
manufacturers who depend on this lifeline all the time, but
frankly, for everybody else involved in the process.
Senator Boxer. Would you write us a letter? I think NAM is
very influential.
Mr. Riordan. We would certainly be happy to do that.
Senator Boxer. OK. Mr. Gardner? And I won't ask Mr. Rowen
that question, because he sits here as a consumer of the roads.
I understand. But I am talking about what happens on the ground
if we have another one of these extensions.
Mr. Gardner. My comments really support Mr. Riordan, where
I think a long-term commitment allows us to do better planning,
better execution of capital investments. But more specifically
for our business, we are on a 3-year to 5-year planning
horizon. We are making decisions today on where we locate our
plants and how we move our products based on what we see today.
With the uncertainty in what the investment strategy is going
to be, we may be making decisions that really aren't in our
long-term best interests or the best interests of our
customers.
Senator Boxer. Thank you.
Senator Inhofe. Thank you, Senator Boxer. Senator Boozman.
Senator Boozman. Thank you, Mr. Chairman. And thank all of
you for being here. Your testimony is really very helpful as we
go forward.
The good news is that there is tremendous congressional
support in getting this done, on both sides of the aisle.
In Arkansas, and I will just kind of throw this open for
whoever wants to jump in. In Arkansas we have seen some
accelerated project delivery as a result of the common sense
reforms in MAP-21. The reforms improved the Department of
Transportation process.
However, I have also heard in Arkansas and other areas from
folks who believe that the reforms have done little to expedite
work required by other agencies, such as the EPA, Fish and
Wildlife and the Corps of Engineers. Can you comment about
this? I think this is so important. I agree, we have to figure
out a funding process and make this thing work. This is one of
the things, though, that if you look back, we haven't increased
the gas tax in decades. Yet we have increased the regulation
tremendously.
If you look and see the project that was done in Oklahoma,
when you had your bridge collapse, the project in Minnesota
where the bridge collapsed and was literally rebuilt in a year,
not shot-cutting the things that we needed to have in place,
but the agencies working together in a timely fashion without
the gotcha attitude.
Can you comment about that? And also, now or at some other
point, what we would like, I think, on the committee, very,
very much, you all are on the ground. It needs to come from the
ground up. Give us some ideas, some real life situations that
we can help cut through. Mr. Braceras, we can start with you.
Mr. Braceras. Thank you, Mr. Boozman. First of all, I would
like to really applaud Congress for the reforms in MAP-21. It
allowed for good decisionmaking to be made in a very
responsible way, a transparent way. Really it is about
delivering your product to the market as quickly as possible.
Those products that we deliver, those transportation projects,
they save lives and they save the taxpayers' money by
delivering them quicker.
I would say that the reforms have helped the Federal
Highway Administration and USDOT accelerate those projects. But
their sister agencies in the resource areas, they are in a very
difficult position. They have a mission to uphold the
regulations that Congress has passed. I would say that they
don't necessarily always share the same understanding in the
need to move those projects forward as quickly as possible.
So any attempts or efforts that Congress could make to help
clarify your intent with some of those resource agencies would
help them make their decisions quicker. It certainly doesn't
steamroll the process, but we can certainly streamline the
process.
Senator Boozman. Thank you. Mr. Heminger.
Mr. Heminger. Senator, I would first of all urge your
committee to study the example you cited, which is the
Minneapolis bridge collapse. My recollection, it was put back
into service in 13 months. Probably if they had done that
regular order, it would have taken 13 years. A lot of it has to
do with concurrency. I know Secretary Foxx was before you not
to long ago, and he was using that phrase over and over again.
The more we can do things in parallel and not sequence, where
we are waiting for one whole activity to stop before we start
the next one.
Second, our State of California has accepted delegation of
the National Environmental Policy Act. We have a strong statute
called CEQA, so I think we are in a good position to do that.
But I think other States could consider that as well.
Third, I do think you are right to identify the permitting
process. In my experience, it is not so much the environmental
review process, it is trying to get all of this alphabet soup
of both State and Federal permitting agencies on the same page.
In California, we have started to pay for staff at some of
these agencies. When you all fund a bill for highways, you
think you have the highways funded. But if we don't fund EPA
and Fish and Wildlife, those guys can stop a highway project
just as much as your not funding it can stop a highway project.
So I think focusing on those permitting agencies and trying
to get them staffed up, putting clocks on reviews and things
like that, that in my opinion is where you can really gain some
time.
Senator Boozman. Very good. Thank you, Mr. Chairman.
Senator Inhofe. Did you want the other three to respond?
That is an excellent line of questioning. I could just deduct
that from your second 5 minutes.
Senator Boozman. If you don't mind.
Senator Inhofe. Yes.
Mr. Riordan. Senator, we agree as well, the National
Manufacturers Association. Part of the challenge, I think, any
project has is certainty around timing and cost. The more there
is regulatory uncertainty that will not only disparage and kind
of slow down development, but frankly, will also increase the
cost and time that is required.
One of the key concerns that my company has is recognizing
we need to be responsive and respectful of the environment. On
the other hand, as Mr. Heminger has just said, I think the time
clock and the requirements for quick, prompt, certain review is
just absolutely critical in the life blood of our Country in
terms of commerce here. Frankly, one of our concerns is that if
this does not happen, and it frankly turns into one of the most
public, challenging works project there is in terms of the
Keystone Pipeline and all the delays and all the drama that has
gone with this, our Country will come to a halt in terms of any
development from the standpoint of infrastructure and highways.
Mr. Gardner. Senator Boozman, we have a company that is
really built on continuous improvement. It has been core to our
manufacturing operations, and over the last year we have really
brought that into all of our business processes. What we have
demonstrated to ourselves is that really, by leaning or
simplifying our processes, we can really deliver the desired
result without compromising the intent of the objectives of the
program.
So we are really supportive of anything that we can do to
simplify the processes, allow the use of funds to be done more
cost effectively. Certainly the permitting area would be the
area that we need to focus on the most, because our company
deals with permitting. From an environmental perspective, on a
regular basis, we see some of the challenge and we can
certainly recognize how that would impact all of the
infrastructure investment as well.
Mr. Rowen. Senator Boozman, I am not going to answer your
question from a detailed standpoint, because I am not in the
industry, construction or transportation industry. But I am an
owner of a company and I make business decisions every day
about investments.
I will give you two examples. They seem a little crazy, but
they are, I think, to the heart of the matter. I had to just
make a decision about buying a new tow motor and a new furnace
for my glass decorating business. I spent probably about
$50,000 in those two investments. I realized that over the last
2 years, I was spending a lot more repairing my tow motor than
it would cost me to build a new one. The same was true of the
dryer. I had some defective product because the dryer wasn't
working. It cost my business money. And when I sat down and
looked at the numbers, I realized that I was making a much
smarter investment spending $50,000 today so that I could save
a lot of money down the road.
I think that is what government needs to do more of.
Senator Boozman. Thank you, Mr. Chairman.
Senator Inhofe. Thank you, Senator Boozman. Senator
Whitehouse.
Senator Whitehouse. Thank you very much, Chairman, and
thank you for your energetic leadership on this public works
bill.
Following up very directly on Mr. Rowen's point, we have
information out of my home State of Rhode Island that Rhode
Island motorists pay nearly $500 million every year in car
repairs for whacking into potholes and dealing with the crummy
road infrastructure that we have to live with. So if you want
to talk about saving money to real people and putting real
money in their pockets, it is $662 per year per motorist in
Rhode Island, if you divide out 496 by the number of motorists.
That is twice as much, more than twice as much, as the
Highway Trust Fund spends in Rhode Island every year. So we
have the situation in which, perhaps in theory, to protect
taxpayers, we are letting our roads crumble and become really
lousy. And the actual effect on the pocketbook of the average
homemaker is that they lose money. They pay $662 fixing the car
instead of a little bit more in the gas tanks and heading
smoothly down a safe and proper road.
So if any of you have observations that are similar to that
from your trucking companies you work with or anybody else, I
think it is important to help us build that story of how it
doesn't save money to save money on infrastructure. All it does
is move costs to the private sector and people have to write
the check out of their own checkbook for the realignment of
their front axle, because they whacked into a pothole that
nobody took care of in time.
So I would urge you, if you don't mind, if you have stories
that could help us with that case, to submit them for the
record.
The second thing we have begun to see, particularly from
our dear friends on the House side of the building, is a
penchant for taking a piece of legislation that ought to pass,
is ready to pass, has broad bipartisan support, and then adding
to it something controversial that they couldn't pass through
regular order but now, by virtue of attaching it to the piece
of regular and by and large non-controversial legislation, they
get to take a whack at it. Sort of the drug mule theory of
legislation. You try to get your contraband through by putting
it on something else that is traveling legitimately rather than
trying to get it through regular order, which in most cases you
probably couldn't get it through regular order, which is why
they are using this strategy.
So the reason I bring that up is that this is an important
bill. It has a deadline in May. There is always the prospect
that somebody is going to think, oh, this would be a really
clever thing to attach something really controversial to really
stick it to somebody.
What would your advice me if we are faced with the prospect
of having unrelated measures attached to the Highway Bill? Go
ahead, Director Braceras.
Mr. Braceras. Thank you, Senator. We would obviously
encourage a clean Highway Bill to come through, recognizing the
importance of the work that needs to be done by all
transportation agencies in this Country.
You mentioned earlier about those costs of repairing
vehicles. Think about the loss of work time when they are
taking care of and making those repairs. We have a saying in
Utah: good roads cost less. If you invest and do the right
treatment at the right time on a pavement, on a bridge, you can
save over 20 times the cost of if you wait and let it
deteriorate even further. So it is critical for the economic
foundation of this Country that not only the transportation
system function well from a congestion and a safety
perspective, but that we preserve it in a proper condition. So
we would encourage that the reauthorization of this bill be a
long-term, clean Highway Bill.
Senator Whitehouse. Thank you. I assume that is a unanimous
sentiment from the panel?
Mr. Heminger. I would also say, Senator, that we actually
confronted that situation with MAP-21. I think the fact that
Senator Boxer, who was then chairman, and Senator Inhofe were
working so closely together, and you got that large bipartisan
vote on the floor, I think that is the best defense you have
against those kinds of riders trying to attach themselves to
the bill. Because when folk see that kind of support, they know
they are climbing up a pretty tall hill.
Senator Whitehouse. I couldn't agree with you more. I think
there is an issue or two where Senator Inhofe and Senator Boxer
might disagree. But when they get together, as they do on these
public works and highways bills, they are a formidable pair.
They have done a very good job at defending against that kind
of behavior.
But I think it always helps to make a record that supports
the fact that industry folks and folks who depend on this
infrastructure would also like to see these bills go forward
clean and through regular order.
Thank you, Chairman.
Senator Inhofe. Thank you, Senator Whitehouse. I would only
comment that I don't think you are going to see that. I was
with Congressman Shuster last night, and we talked about that
very thing. He is going to make a real effort to make sure that
doesn't happen.
Thank you, and Senator Rounds.
Senator Rounds. Thank you, Mr. Chairman. Thank you for your
leadership. Thank you for your history.
I am still kind of stuck on the thought that no State is an
island. It seems like maybe we will get back to that one in a
while, sir.
In the meantime, thank you for being here. I come from
South Dakota, which is as far away from the ocean as you are
going to get. But as a very large State with a very low
population, we still sit right in the middle of the Country and
we have two interstates that run through the State, one north
and south, I-29, and one east and west, I-90. Four hundred
miles east and west and 200 miles north and south. We rely on
the Federal Highway program to maintain our economic
competitiveness and ensure the safe and reliable transportation
system on which not only my constituents, but constituents
across the United States rely on to get back and forth across
the Country.
Businesses rely on it. We are an ag State. We have to be
able to get our products to market, just like your folks do in
your States. We want that.
Now, if we were to take advantage of, or take a serious
look at devolution, our State would have to increase its share
of the gas tax from 22 cents to 58 cents per gallon simply to
stay on par. I would like to hear from you what your thoughts
are about the economic perspective of this issue, the viability
of this type of a plan and why or if we should be discussing
this at the Federal level as a viable opportunity.
I would like to just go through very quickly, and I know
the chairman was looking at doing that, but if I could, just a
real quick one, because I do have one more question and it is
one that I would like to get into as well. Can we start right
here with you, sir?
Mr. Rowen. Thank you. I never like to consistently be at
the end of the line.
[Laughter.]
Mr. Rowen. Pennsylvania is called the Keystone State for a
lot of reasons. But when you look at the transportation system
and the geography and movement of goods back and forth between
where goods are produced and where they need to go, one of the
largest areas of the Country population-wise and economically
is the northeast. Any product that has to come into the
northeast or be shipped out of the northeast to the rest of the
Country goes through Pennsylvania.
If you look at the geography of Pennsylvania in terms of
the health of the road systems, Pennsylvania roads are some of
the worst in the Country for one very specific reason. Well,
two reasons, there is a lot of traffic. The second is that its
north-south location is the worst possible for roads, because
it is not cold enough and not warm enough. Roads deteriorate
because it gets cold and warm and cold and warm. That freezing
and thawing breaks roads up.
So Pennsylvania has to take a huge amount of traffic to
service the Country and yet we have an enormous repair bill
every year because of our geography. If there is not a better
reason to spread funding out as a national infrastructure, I
can't think of one.
Senator Rounds. Thank you.
Mr. Gardner. Senator Rounds, we operate our business on a
North American basis. So we are very reliant on the complete
network across the Country and through Canada and Mexico. We
really are supportive of a Federal program, because we need
that integrated solution. There is probably not one State where
we are not moving either product or raw material from and to
our facilities, or to. So as a result, we really do need an
integrated solution. We recognize that each State should pay
their fair share as well. But having the integrated solution is
really the only option for us.
Mr. Riordan. Senator, having been involved in global
manufacturing for about 35 years of my career, what I find
interesting is the State of our broad union is so
interconnected with the rest of the world these days, compared
to 15, 20, 25 years ago. But the most preeminent example of
that is, as you suggested earlier, no State is an island by
itself. Here in the U.S., what is very difficult to get your
hands around is how truly interconnected, in many cases whether
it is pass-through freight from Pennsylvania through the
heartland, out to the east coast, west coast, wherever it
happens to be, it is very difficult for people not directly
involved in this process to truly understand what the impact is
of not having a federally functioning process for allocating
resources in order to support the infrastructure. It is just
crucial.
Senator Rounds. Thank you. Mr. Chairman, my time is about
up. I will yield back and we can proceed.
Senator Inhofe. Thank you.
Senator Vitter is here, who is the chair of the
Subcommittee on Transportation and Infrastructure, we should
have gotten to him earlier. Senator Vitter.
Senator Vitter. No, I am fine to be here and listen to more
of the discussion. Thanks, Mr. Chair, for holding this
important hearing. Thanks to all of you for all of your
testimony. Certainly, count me in, count me in as the Chair of
the Infrastructure Subcommittee. Also count me in coming from
Louisiana. We face absolutely these same challenges and needs.
Actually, Louisiana is one of five States where the
proportion of bridges that are structurally deficient is in
double digits. Our figure is 14 percent. Another 15 percent are
functionally obsolete. We rank 19th in the Nation for urban
interState congestion, about 32 percent of the miles on our
urban interstates are congested.
In Louisiana, this is a critical economic development
issue. I really think we have moved into a second stage of
economic development. The first stage, I think, was dominated
by a focus on incentives, getting industry to our State, which
has been real successful.
But I think we are in a second stage where the critical
factors are not those incentives, it is capacity,
infrastructure and work force capacity. Those are the two
limiting factors that business leaders talk to me about all the
time. We need capacity in terms of infrastructure, roads,
bridges, also ports, waterways. And they need the capacity in
terms of skilled work force, work force training. So I am very,
very interested in this.
I am going to repeat a comment I made at the last hearing
we had in this committee on the subject. I want to encourage us
to all sort of cut to the chase on the financing side. We tend
to spend months around here talking about pie in the sky,
financing ideas and having this broad debate that is pretty
irrelevant in the real world. I would like to encourage us, May
isn't that far away, right? So I think it is time to cut to the
chase.
In my opinion, and I am open to other ideas, in my opinion,
that real world cut to the chase reality includes three big
options. Maybe there are others, and I would love to hear them.
But it includes three big options. First of all, the
traditional gasoline tax, increasing that. In my opinion, that
need to include a tax offset for middle class families, so that
at least everyone except the very wealthy don't pay more
Federal taxes, either on the income tax side or the withholding
side. I think as a practical matter, there needs to be that
sort of hold harmless if we increase the gas tax. I think that
is a political reality, particularly on the House side.
No. 2, a concept Senator Boxer mentioned a few minutes ago,
which I am certainly open to if we do it right, which is
repatriation of foreign income and elements of business tax
reform. And No. 3, increased domestic energy production with
that royalty and that revenue dedicated to infrastructure. I
think that is the short list of real world, practical, doable
solutions. But again, I am open to other ideas.
So my question is, do you have a reaction to those three
categories of ideas, and would you add anything to that shot
list of doable, realistic financing ideas?
Mr. Heminger. Senator, I will go first. I mentioned in my
testimony I served on one of the national commissions that was
created a couple of bills ago. We spent the better part of 2
years looking for an alternative to the gas tax, and we
couldn't' find one.
Now, the general fund, obviously, is large enough to
support an infrastructure program. But I think we have seen
recently with all of these extensions the peril of relying on
the general fund. The general fund has a lot of other things to
do. In our State of California, we have had very bad experience
being in the general fund and competing with other general fund
priorities. So having a dedicated user fee I think is far
superior. I really don't think there is any other revenue
source large enough and consistent enough to support the
program.
Senator Vitter. Any other thoughts?
Mr. Braceras. Yes, Senator, I think there are some key
principles that Congress should consider when they take up this
challenge. And that is the one of sustainability, one that will
allow it to grow, one that is user-based and one that is
transparent to the users. The users need to understand what
they are paying for and what they are getting.
So I agree with Mr. Heminger, a gas tax is a very direct
way to do it. People understand where it is coming from, where
it is going. In the State of Utah, we are addressing our
growth. We are growing very fast. We are addressing our growth
in terms of the mobility needs with the sales tax. The
legislature has determined that 17 percent of the statewide
economic activity is coming through the transportation sector.
So they have decided that 17 percent of that statewide sales
tax will be dedicated just to the mobility portion and the gas
tax is being used to preserve, maintain and operate that
transportation system.
So Mr. Chairman, user base, one that is not a one-time
funding source, but an ongoing funding source, provide
sustainability and start to address some of the inflationary
issues that we are dealing with as well.
Senator Vitter. Any other thoughts?
Mr. Gardner. Yes, Senator Vitter. I think we are supportive
also of the gas tax. We think it is really the simplest way to
put a user fee in place. It really does also encourage
sustainability and energy conservation, so anything we can do
to use less gasoline will be promoted by the additional tax.
We also think it is affordable. We have seen that big
correction in the cost of fuel in the last year, and we think
to the most extent that is going to continue for some time to
come.
Mr. Rowen. To the affordability of the middle class, almost
my entire work force is definitely middle class. We think about
their incomes, because they get it from us. We think about
their expenses. But the other thing we have to realize is that
over the last 15 years there has been a significant economic
advantage to gas efficiencies of most automobiles.
So if you think about the impact of the tax, because it is
paid on a per gallon basis, it can be somewhat mitigated
because of increased efficiencies of gasoline.
Mr. Riordan. One last comment, if I may, Senator.
Manufacturers in general are very supportive of user fees in
order to pay for infrastructure, pay for maintenance, pay for
repair. One of the key concerns that we have is making sure it
is sustainable, which I believe that a user fee would be.
Concern on repatriation is that it may not be sustainable.
It is not so visible, and it may be an easy solution from the
standpoint of having a perception of something else paid for,
but back to the comments that were made before, we believe it
is critical that the costs line up with development and that it
is a transparent basis for everybody.
Senator Vitter. Thank you all very much. I appreciate all
of your testimony and all of your work.
Senator Inhofe. Thank you, Senator Vitter. Senator Boxer.
Senator Boxer. Thank you, Mr. Chairman. When Senator Vitter
and I worked together on funding ideas, I want to pick up on
his point. That was the reason I asked you, Mr. Braceras. I
know that Senator Lee believes in devolving. And I know Senator
Hatch believes in the trust fund. But he and Senator Wyden need
to come up with a plan.
Now, I would ask unanimous consent, Mr. Chairman, I just
want to put into the record a memo that I put together with
various funding sources. Could we put that into the record?
Senator Inhofe. Yes, without objection.
[The referenced information follows:]
Senator Boxer. OK. And I want to make it clear that Senator
Vitter and I totally agree that there ought to be an offset if
we go with a higher gas tax for middle class and working poor.
We have put it out here in this paper. If the option chosen is
a 6 cent gas tax increase, the average household drives 15,000
miles a year, then the average household will pay an additional
$36 in gas costs. Therefore, the household would receive a
refundable tax credit of $36.
So it is pretty straightforward. Because we all don't want
our middle class to be paying more. This makes sense.
I also want to point out, Mr. Chairman, something that I
fail to mention as often as I should, which is the cost to the
automobile owner of roads that are in disrepair. You keep going
over those roads, and you know what that does to your car. I am
trying to get the average cost. But it is significant.
So when we do repair our roads, we are saving costs. It is
true, it is sort of hidden. But it is there, and it is very
important.
So in this paper that I put out, I sent it over to
Congressman Ryan and Congressman Levin over there. I never
heard back from them. Everyone just seems to be hiding
underground here. So I never heard back from them. Finally I
heard from Congressman Levin, he said thank you for your ideas.
I was hoping for a little more.
But what we did is we said, one way to go is the Chamber of
Commerce way, which is an increase in the gas tax and with an
offset. That was one way to go. Another way to go was following
the Virginia model, which is replace all existing highway trust
fund fees with one fee on the wholesale price of fuel. That is
the way they went.
Another is adjusting existing fuel fees, and that is all
going to be in the record for you to see. Another is the
repatriation, plus a smaller increase in the gas tax. And then
another is a new fee on the sale of new and used vehicles,
which if you put a 4 percent fee on the sale price of new and
used vehicles, you get $89 billion over 6 years, which is
enough to fill the hole. And another is an honor-based fee on
vehicle miles traveled. We also felt, and I know this is
controversial, that we ought to look at different bonding
authorities. Because the Build America bonds have been very,
very successful.
So here is the thing. I will put this in the record, and it
doesn't reflect anybody's opinion but mine. But it shows that I
am willing to go to all of these and give an offset to the
middle class and working poor for that.
Reports show that crumbling roads cost $750 per vehicle
each year. Can you imagine? That is wear and tear. So all this
talk about $36 pales in comparison to the benefit of this. So I
am going to close and say this. I am working with the
construction industry to get us all together in April,
Republicans, Democrats, business, labor, everybody in between,
State, I met with the National Association of Counties
yesterday. And I think frankly, I am a person that used to
organize around issues. I still organize around issues. If I
don't see anything moving forward, if there is just a lot of
ho-hum, I think we need to get together and stand together and
show the desperate situation we are in. I know no one hates
these short extensions more than my chairman. He hates it
because of how expensive it is.
So can I ask each of you if you would be willing, if we do
put together such a bipartisan event, would you be willing to
either come or send a statement? I am seeing everybody nodding
yes. Well, that means a lot to me. Because I think you are such
compelling witnesses, and I thank the Majority and the Minority
side for bringing together such a wonderful, astute group. I am
just saying now, I am very calm on the outside. But on the
inside, I am not calm.
Senator Inhofe. You are a tiger.
[Laughter.]
Senator Boxer. I am not calm. Because I don't like where we
are headed now. I don't see it. The only action I see is from
this committee. And it is great. But where is everybody else?
So I want all of you who are here today and in the
audience, please these other committees and the House people.
They all say they want to do something. But they all said that
the last time and we got stuck with this little extension which
is really dangerous for our economy. It is dangerous for our
citizens. It is costly, it is bad.
So on the inside, I am absolutely desperate to get this
done. As Steve said, it is not so much about my State--it is.
We need the Federal help. But honestly, it is about most of the
other States. Because we do have that long construction season.
With climate change, we don't even have rain any more, it is
the saddest thing. For whatever reason it is, we do have a
drought. And we do have a longer construction season than
anyone else. So we have fewer problems in this regard. And we
can advance funds, because we are a nation State, we are I
think the seventh or eighth largest nation, considering our
GDP.
This is about the Country, one Country under God. That is
what this is about. So Mr. Chairman, I just am so grateful for
your leadership and look forward to continuing our working
together.
Senator Inhofe. The one thing you didn't mention, the
reforms that come. I have to say this in a complimentary way
about Senator Boxer, because there are some things that we did
in our reforms, and this goes back to 2005, it goes to the 27-
month bill, that I didn't really think we were going to be able
to get those two. That is a huge thing from a conservative
perspective and advantage.
By the way, I might mention I am visiting with the ACU this
afternoon on this very subject, which I will cover in just a
minute.
We are joined now by Senator Capito.
Senator Capito. Thank you, Mr. Chairman. I would like to
thank the ranking member, because I was on the conference
committee for MAP-21 and we just had our West Virginia
transportation folks in yesterday. Some of the reforms that
were in that bill, we are reaping the benefits, they were very
complimentary on how it is working State to Federal. Hopefully
we can continue to do that.
One of the things I wanted to ask about, and I apologize
for not being here for the initial testimony, is the public-
private partnerships. That is another thing that I heard my
State DOT, is we are really maxing this out in West Virginia,
going in a cautious way. But it is incredible to me the amount
of savings that these three Ps can do for a State and really
stretch our dollars. Route 35 in my old congressional district
is a great example. We are about ready to let a contract, or
they have a request for bids right now.
So I would just ask one question, and I have two questions.
So whoever wants to answer this, maybe Mr. Braceras. What
experiences have you had with the experience of PPPs, and do
you have any suggestions for the next generation of PPPs?
Mr. Braceras. Thank you, Senator, for that question. I
think first of all you have to look at what you would define as
a P3, a public-private partnership. It is really a spectrum of
how you do your work. We outsource almost all of our design
engineering, most of our construction engineering and obviously
all the construction. We were the first State to utilize
design-build on a highway infrastructure, one of the first
States to use construction manager general contractor.
Basically, the more we can define outcomes that we want to
achieve and leave the means and methods to those who are doing
the work, the better we are going to see better outcomes, we
are going to see better value and return to the taxpayers. So I
encourage further any expansion, any abilities to help bring
the private sector in as partners in delivering our program. We
are a relatively small State, and some people look at P3s as
maybe under a tolling arrangement. We have done some analysis
on that. We have also looked at availability payments in doing
this as well.
So all of these are tools. I don't believe they are a
financial answer to our transportation system. But I think they
are important components that we need to keep available.
Senator Capito. I think they add predictability, too. And
at this point, when we have low interest rates, this is really
where we should be maximizing this opportunity.
I am going to pivot here to Mr. Riordan and ask a question
on ground level ozone. Ozone in a highway hearing, yes, we
wonder about that, but they are very linked, as you know. EPA
recently proposed a change to the national standard for ground
level ozone that will most likely end up between 60 and 70
parts per billion. We don't know exactly where they are going
to set that standard. But my entire State would be out of
compliance, the State of West Virginia, meaning significant
highway projects that are vital to West Virginia could be
delayed or compromised. And those jobs would be lost.
Let me just give you an example. If you have ever been to
the Greenbrier, which I hope you all go and please visit, it is
a very rural part of West Virginia. That county is Greenbrier
County. That would be out of compliance with the new ozone
limits that are being talked about.
So I would ask you a question. What difficulties could
States face in implementing these new measures to meet a more
stringent ozone standard?
Mr. Riordan. It is a very significant concern on the part
of manufacturers, Senator. I think the challenge that we see as
manufacturers and again, based on my role as the chairman of
the Small Medium Manufacturing Group which represents 12
million of the 13 million manufacturing folks that are working
here in the U.S., a key concern is will it only defer or delay
increased costs from a highway standpoint, but the broader
concern that we have as it relates to, as you move closer to
the effectively background level of ozone, costs go up
exponentially and the benefits go down dramatically. Our
concern is very, very significant as it relates to, back to
your point of the entire State of West Virginia. Our analysis
shows that about 97 percent of the U.S. potentially would be in
a non-attainment zone, which would de facto freeze development
from a manufacturing standpoint. So this is a huge concern, not
only as it relates to our quest in terms of moving the Highway
Bill forward and continued infrastructure development, but the
broader manufacturing industry at hand.
Senator Capito. Right, and then that obviously is
transportation projects as well, particularly larger ones.
So Mr. Chairman, I would like to say that I know this is an
area where you have great concern as well. It is amazing to me
that we are going to put new standards on ozone regulations
when the compliance hasn't even been achieved to a significant
amount in the former standards that were placed upon the rest
of the Country. So I want to join with you and shed a light on
this and see how we can do this better. I think there are lots
of ways we can.
Thank you all very much.
Senator Inhofe. Thank you, Senator Capito. Senator Wicker.
Senator Wicker. Thank you, Mr. Chairman.
I want to thank Senator Capito for bringing up the question
of ozone. There are two things I find frustrating about this
new rule. Jurisdictions that have made progress in actually
lowering the ozone level are now being rewarded with the back
of the hand and being found in non-attainment, after having
made progress. Also so many areas, including perhaps, you are
familiar with DeSoto County in Mississippi, which is a suburban
county of Memphis. There is nothing that the activities in
DeSoto County have done to raise the ozone level. It comes from
the west and it comes from the metropolitan area. And yet
development and job creation are being stifled in this suburban
county, through no fault of their own. And there is really very
little they can do to prevent it, since the ozone comes from
someplace else. So thank you, Senator Capito, for mentioning
that.
Mr. Braceras, let me preface my question with a fairly
lengthy beginning. The President recently issued an executive
order. It exposed the area where Federal agencies will be
required to follow floodplain management, expands it from the
100-year floodplain to the 500-year floodplain. Currently there
are projects to raise roads to above the 100-year floodplain to
address the risks. Now that will not be enough.
There will be increased costs because of limitations on
building in the floodplain. There will also be costs for
mitigating any impacts to the floodplain and complying with
``zero rise'' policies that say a project cannot have the
effect of increasing flooding. The rule would be used by
Federal agencies overseeing new infrastructure projects in
transportation, energy, housing and water supply. Agencies will
be required to choose one of three approaches when building or
completing maintenance to infrastructure. One, use the best
available climate science, or two, build two feet above the
100-year flood elevation as a 1 percent annual chance of
flooding that instance, or three, build to the 500-year flood
elevation. There is a .2 percent annual chance of flooding in
that instance.
The rule could have significant impacts to the distribution
of Federal highway aid, USDOT TIGER grants, HUD CDBG grants,
Federal loan guarantees, FEMA flood insurance and flood plain
management and disaster response programs. What impacts related
to cost would your member agencies face, Mr. Braceras, if they
were required to build or repair Federal highways two feet
above the current 100-year flood elevation?
Mr. Braceras. Senator, I always struggle with specific
answers being given to States in terms of how to solve issues.
Everything that we do we need to evaluate the risks, the
benefits and the costs associated with that and make strategic
decisions on what is best for the taxpayers, their safety and
bring that all together.
Now, Utah is a relatively dry State. But believe it or not,
we have areas that are dry washes that have been defined as
navigable waterways and require extensive permitting in order
to make decisions. I would be concerned about the ability for
States to make the proper decisions for infrastructure
preservation. So if we are going to have to touch a piece of
roadway or bridge, and as soon as we touch it we are going to
need to bring it up to a new standard, that keeps States and
municipalities from doing the right treatment at the right time
and thereby costs taxpayers more in the long run and maybe
creates unsafe conditions.
So every time we make a decision, we should evaluate it in
the context of the benefit cost in the larger picture, not just
regarding a specific resource.
Senator Wicker. And when you mention cost, that is cost for
mitigation, for change design or change location, or for
different or more expensive materials. Would anyone else on the
panel like to jump in and help us understand this issue better?
Mr. Riordan?
Mr. Riordan. Senator, we have significant concerns on the
broader context of obviously this, along with the waters of the
U.S. regulations that are being promulgated. In our mind,
frankly, it is similar to discussion we just had on ozone,
where NAM has put together a study that shows the ozone
regulation would be the most expensive rule ever promulgated
within the Federal Government, costing a potential $2 trillion.
A key concern is, I don't have the facts behind what this
proposed regulation would cost in terms of floodplain. But
again, it is a question of, as I would call it from a
manufacturing standpoint, what problem is it we are trying to
solve here, and is this the most cost-effective way of doing
it.
Senator Wicker. Thank you. Thank you, Mr. Chairman.
Senator Inhofe. Thank you, Senator Wicker.
We are going to recognize Senator Rounds, but let me kind
of announce this, so that my two members who were not here at
the opening of this meeting. I commented that confession is
good for the soul, and I confess that 25 years ago, Connie Mack
from Florida and I were the two fathers of devolution, until we
realized why it wouldn't work. The reason that Senator Boxer
brought up my concern as it affects our defense system is that
I was the ranking member on the Senate Armed Services Committee
in addition to working on this committee.
So after everyone is all through and gone, I am going to
ask you to go ahead and continue down to respond to the
questions that I first asked. You have done a pretty good, and
Senator Rounds brought it up, but I want to talk about it in a
little more detail. Senator Rounds?
Senator Rounds. Thank you, Mr. Chairman.
I would like to followup on the line in terms of the
streamlining that could be done to save dollars. I think that
is one of the most important things we have to do, in order to
maintain credibility when it comes to how we spend tax dollars,
whether they be at the State level, local level or at the
Federal level.
Sometimes I am not so sure that we are seen as looking at
saving dollars here at this level. In fact, every time we seem
to get involved in a project, it gets more expensive. A lot of
that has to do with a regulatory process that creates expense.
I understand there are good people who have good desires to
have things work appropriately and to protect natural resources
and so forth. But it comes at a cost. And part of the cost is
that people who are paying those taxes wonder why it costs more
to get projects done.
If we are going to ask States to increase gas taxes or if
we are going to ask people to pay a higher gas tax or any other
type of a tax, I think we ought to be able to show them that we
are doing the best we can to be efficient in the delivery of
those services. Could you help us a little bit with any
suggestions you may have in terms of how we streamline the
process, save dollars, and for lack of a better term in the
business community, talk about getting more bang for our buck?
Mr. Heminger. Senator, I would like to return to the word
that Carlos used. It is risk. I think we have designed a system
now that tries to suck every little bit of risk out of a
project development process, and in doing so, we have
guaranteed that everything will take too long and cost too
much. I think we need to be candid with the American people
that if you want it to go faster, we might have to take a
little risk, and something might go wrong and we might have to
start over and do it again.
But we have been doing that to a considerable extent in our
region, in our State, where we have begun design activity
before we have an environmental clearance. And we are taking a
risk that the environmental process won't surprise is with
something. And sometimes we are surprised. But more often than
not, and we have gained that time on the schedule by taking
that risk.
I think the more the Federal Government can formalize that
process and be a partner in taking some risk, I think risk-
taking and entrepreneurship is rewarded very often. But
sometimes you fail. I think we have to be willing to fail a
little bit more to make our system work better.
Mr. Braceras. Senator, following on Steve's comments, the
only one who doesn't make a mistake is somebody who doesn't do
anything. What I try to encourage our Staff in the Utah
Department of Transportation is to be innovative and to try new
things.
What I talked about in my testimony is anything we can do
to move toward an outcome-based program as opposed to one that
has been for many, many years focused on process, and that is
true with State level agencies as well as with Federal
agencies. We have almost gotten to the point where people are
afraid to make a mistake. And the best way not to make a
mistake is not to make a decision. So during the process, we
can pull that process out and draw that process out longer.
There is no real reward for getting to that outcome, to that
final decision point.
So anything Congress can do to identify what the goals are
and that all Federal agencies and State agencies understand
what those goals are, as few restrictions on that process,
because that allows innovation to come into play and allows us
to be able to focus on how we are going to achieve. Once people
own the how, once those people doing the work have the ability
to determine how they are going to accomplish that goal, they
become accountable and you find innovation taking place.
So outcome-based, less process-based.
Senator Rounds. Anyone else?
Mr. Riordan. Senator, in my testimony I mentioned that our
costs of transportation delays, poor productivity, customer
frustration adds about 1 percent to our costs. Several Senators
earlier today mentioned the cost of car repairs. Mind you, that
is only the tip of the iceberg on the consumer side.
I think the business community clearly understands and can
quantify the impact to it. But eventually a lot of that gets
passed on to consumers, one way or another. I think what the
broader concern is the visibility behind what does this really
cost the average middle class person, in terms of car repairs,
delays in their own personal life, being late for work and
getting docked against that, and all the other drama that goes
with the poor and deteriorating infrastructure we have.
I think we talked about $36 gas tax increase compared to a
lot more than that. How do we make what I would describe as the
business case to the broader U.S. consumer of understanding
that and recognizing this gas tax increase is a bargain? Any
business person would take this deal in a second with a five to
ten to 20 times payback.
Mr. Gardner. I think we talked about before really any
opportunities to simplify processes and challenge the status
quo is well supported by us. We are seeing some of the intents
of that in the programs. We talked about environmental
permitting is really probably the biggest bottleneck. So
anything we can do in that area is going to be helpful.
I think the most important thing is just to make sure that
we are making the right investments and that the investments
are focused on congestion and road quality. Because we can
directly correlate congestion to additional costs for our
industry.
Mr. Rowen. Leadership. It is all about leadership. Get the
message out. We have all heard today, and every one of us
sitting in this room today understands that raising the gas tax
is going to save virtually every American money, if not a lot
of money, in other areas. So you simply have to, the American
public will buy something that is a good deal. They are great
at recognizing deals.
I think that the fear that comes out of the political
process of the concept of raising taxes is, can be mitigated by
leadership, by a clear, concise message that you are doing this
to make things better for all Americans, and in the end, it is
money well spent.
Senator Rounds. Mr. Chairman, I think the group here that
has answered the question tells us, No. 1, they are prepared to
make an investment, but they expect us, with leadership, to
provide that it is done as transparently as possible, and the
delivery, if we are going to expect people to put more dollars
into the system, we are going to make a commitment that we will
see that they are spent as efficiently as possible. I think
that means we have a big job ahead of us.
Senator Inhofe. Thank you very much, Senator Rounds. We are
going to recognize Senator Carper, but I want to make a comment
here about this. A lot of people don't understand what we are
talking about. First of all, I would like to have us not really
talk about a gas tax increase. It is a user fee. Now, user fees
are popular. Look at the inland waterway user fee, the
stakeholders, those who are paying for it are the ones who want
to have it. So I think that is a good way of putting it.
Second, keeping in mind, as I said in my opening statement,
that this is what we are supposed to be doing here. Read the
Constitution. In fact, I will quote something if you will bear
with me a second, Senator Carper.
Senator Carper. Take all the time you want.
Senator Inhofe. The American Conservative Union, in their
document that they helped us get this passed on the 27-month
bill, they are saying, ``Not passing a bill will hurt our
already suffering economy.'' And then the two elements, quoting
the Constitution, the two elements that are the most basic
responsibilities of the Federal Government are national defense
and the development of a national transportation
infrastructure.
I say this, and we have to keep saying it, because somehow,
people forget what we are supposed to be doing here in
Washington. This is what our founding fathers said, it was
their idea. It was put forth. The reason I mention that Senator
Boxer talked about my concern over defense is that I had that
job as ranking member on Armed Services. So I made quite a
study, I say to my good friend, Senator Carper, of Eisenhower
and the statements that he made back when he first gave birth
to this concept.
The last one I will leave with you, he said, ``InterState
commerce doesn't stop at the State boundaries. No State is an
island,'' as you repeated from my statement before. It is just
as much about national defense as it is interState commerce.
That is what we are talking about here.
Senator Carper.
Senator Carper. I am Tom Carper, and I approved this
message.
[Laughter.]
Senator Carper. As the senior Senator from first State to
ratify the Constitution, I applaud your use and reference to
the Constitution here this morning.
Welcome, everybody. It is great to see you. Thank you so
much for joining us and trying to help us find our way through
an important issue. Colleagues hear me talk a lot about our
jobs. Our job is not to create jobs. My job as Governor was not
to create jobs. Our job is to help create a nurturing
environment for job creation. And you can't do that without a
great transportation infrastructure.
Since 1993, as you know, when we set the Federal gas tax at
18.4 cents, 42 States have increased their State gas tax rates.
Twenty States have taken action to increase revenues for
transportation in just the last 5 years. Eight of these were
either in 2013 or 2014. I understand that 12 more, another
dozen, are considering action this year or next.
How many of these States have said, we are ready to go it
alone and we don't need a Federal partner? How many of those
States have said that? Let's go down the list. Mr. Braceras?
Mr. Braceras. Thank you, Senator. The State of Utah has
made an amazing commitment to transportation. Utah recognizes
that it is the backbone and one of the foundational elements
for our economy. So we have made a large commitment, almost 20
percent of our statewide sales tax goes to transportation, 24.5
cent gas tax goes to transportation. But we rely on a Federal
transportation system, and it is very important to us.
Senator Carper. Thank you.
Mr. Heminger, how many States have said, well, we are ready
to do this by ourselves, we don't need that Federal money?
Mr. Heminger. Certainly not California. In 1993, the
statistics you are quoting, Senator, our gas tax was 16 cents.
It is 46 cents today. So we are certainly willing to do our
share. But we are looking for a Federal partner to come along
with us.
Senator Carper. Thank you. Same question, Mr. Riordan.
Mr. Riordan. Senator, I am not familiar with the specific
facts in the State of Wisconsin, but I don't believe they are
willing to go it alone.
Senator Carper. All right, thank you.
Mr. Gardner.
Mr. Gardner. I am also not familiar with the State of
Illinois, but I can say that we are supportive of a federally
directed program, because our business relies on the complete
transportation network to deliver our products.
Senator Carper. Thanks. And finally, Mr. Rowen.
Mr. Rowen. Senator Carper, earlier I was talking about the
geographical significance of Pennsylvania, the fact that so
much traffic going into the northeast goes across Pennsylvania,
and then the geographical impact of the weather on the
Pennsylvania roads. So there is just no way Pennsylvania could
be forced to pay for all the maintenance of the roads in
Pennsylvania.
Senator Carper. Thank you. My staff, at my request, did
some analysis. They found in States that have raised revenues
for transportation, 90 percent of legislators who voted for a
revenue increase won their primary, won their general election.
They were re-elected. But so, over 90 percent of them were
Republicans, just under 90 percent of them were Democrats. What
lessons can we take from that information, from action at the
State level? Mr. Rowen?
Mr. Rowen. Pennsylvania just elected a new Governor. And he
was elected on the idea that he was going to tax natural gas
coming out of the State. So the idea that, and I understand it
is a different kind of a tax, but Pennsylvania looked at the
need for infrastructure and said, we need to get more revenue.
And Governor Wolf was honestly willing to put on the table that
process. So he clearly did exactly what you are recommending.
Senator Carper. Thank you. Mr. Gardner.
Mr. Gardner. I think it demonstrates that the general
public is willing to support this additional tax. As we have
talked about already this morning, it just makes good business
sense. A small increase in your annual costs has payback in
terms of reduced repair costs to cars and certainly for
businesses, it has a great payback in terms of reducing
congestion.
Senator Carper. Thank you. Mr. Riordan, any lessons learned
you think we could take from those statistics I just cited?
Mr. Riordan. Good question, Senator. I believe that the
American public clearly believes in the fairness principle of
user fees make sense for people who are using the roads and
infrastructure that goes with that. That said, I think
manufacturers in general support all the above discussion in
terms of how to fund this as it relates to recognizing, back to
the chairman's comments earlier, about the criticality of the
infrastructure, whether it is public-private partnerships or
other mechanisms here. But this issue is much, much too
important to leave languish. Because frankly, we continue to
lose ground against our major competitive countries, China in
particular. And frankly, our long-term best interests are best
served by getting off of this and developing a coherent, long-
term approach.
Senator Carper. Thank you. Mr. Chairman, my time is about
to expire. Can I just have one more minute?
Senator Inhofe. We actually had two rounds.
Senator Carper. Thanks so much.
I want to touch again on what you just said about all of
the above. Because we have an all of the above energy policy,
which I think is good. For many years, and we talk about our
baseload for electricity generation, for many years it was
coal, it was nuclear, 40 percent coal, 20 percent nuclear. Coal
is still, close to 30 percent, is going to be significant for,
I think, a long time. Natural gas is close to 30 percent now I
am told. But those were basic, the baseload.
I think for transportation funding, we need a baseload. And
I believe maybe most appropriately it is the user fee. The
baseload could include things like, we are going to open up
some new lands off of Virginia or North or South Carolina or
Georgia, there would be leased income from that, there would
be, if there is oil and gas out there, there would be some
revenues generated. That could be part of the all of the above
approach. Then we could actually find ways to save money. The
Department of Transportation has a bunch of ideas.
When the last 2-year transportation bill was put into
effect, I think they looked hard to find ways, how to rebuild
roads, highways, bridges in a more cost-effective way. So that
could be, if you will, part of the all of the above approach.
But I have been thinking a lot about it, and I think the
President has a proposal. I am not a big fan of repatriation,
but the President has an interesting proposal and that could be
part of an all of the above approach as well. So thank you for
mentioning that term.
Back to you, Mr. Heminger, if I could. Again, my question
was, what kind of lessons should we take away from the fact
that over 90 percent of the Republican State legislators got
re-elected after voting for user fee increases and almost 90
percent of the Democrats got re-elected? What should we take
from that?
Mr. Heminger. I think the simple answer is that most
Americans do understand the user fee concept. It is sort of the
PR genius of our profession that we have labeled a user fee the
gas tax. And I don't know when we started doing that. But that
was our original sin.
But the public understands that they are paying a fee that
will be used to fix their roads and transit systems. They get
that connection and they support it.
Senator Carper. I like that, original sin. That is good.
Mr. Braceras. Senator, I agree with Mr. Heminger on the
need, that it needs to be linked to the user. That is an
important concept. But I also believe that the public needs to
know what they are going to get for their investment. They need
to know what those outcomes are going to be, and we as
government officials need to be absolutely transparent on how
their money is used and what we achieve with their money. I
think if you can demonstrate that, the public can recognize a
good business deal.
Senator Carper. Good, thank you. We often talk about the
jobs that could be created from a full-funded transportation
bill. I have heard 600,000 jobs, 700,000 jobs. A lot of jobs
for people, frankly, who have been looking for work for quite
some time. We also need to think about the investments we could
make in our transportation infrastructure that could have
broader economic impacts.
A recent report by McKinsey Global Institute found that the
U.S. must spend at least, get this, $150 billion more a year on
infrastructure through 2020 to meet our Country's needs and to
maintain global economic competitiveness, $150 billion. The up
side of this was that in doing so, it would add 1.5 percent to
our annual economic growth and create at least 1.5 million
jobs. So that is 1.5 percent addition to economic growth and
about, almost 2 million jobs. From your perspective as owners
and users of this system, does any of this sound even close to
being true and accurate? Mr. Braceras?
Mr. Braceras. I don't have the numbers off the top of my
head, Senator, but yes, absolutely. I think we talk sometimes
too quickly about the benefits of a transportation bill and
what they have on the construction industry. And those are
important jobs. But really what is important is how well the
transportation system works for the business owners who we have
here today. They will make different and more effective
decisions if they have a transportation system that is safe,
reliable and has the lowest cost of ownership for them.
So I think that is the important part of our transportation
system.
Senator Carper. Thank you. Mr. Heminger.
Mr. Heminger. Senator, I don't think it is an accident that
what we regard as the golden age of the American economy in the
last century coincided with when we were building the
interState system, any more that I think that it is an accident
that when you see the economies in Asia and to some extent in
Europe taking off because of infrastructure investment, that is
not a coincidence, either. We need to get back to that business
here in America.
Senator Carper. Thank you. Mr. Riordan.
Mr. Riordan. Senator, manufacturers in general absolutely
agree with the points you made. Frankly, the National
Association of Manufacturers has developed a similar study that
shows the same kind of comprehensive benefits available to us
if we are smart and move this forward.
Senator Carper. Good, thanks.
Mr. Gardner. Senator, we also agree. I think what we have
seen in manufacturing is that for every job we create, there
are probably another two and a half jobs that are spinoffs as
well. So it is quite probable, what you are seeing there. From
our company's perspective, we are making investment decisions
based on what we see in terms of infrastructure today. So any
commitment we can make to that infrastructure will help us make
better decisions.
Senator Carper. Good. And last, but not least, Mr. Rowen.
Mr. Rowen. It is incomprehensible, as a business owner, for
an entity or organization not to invest in infrastructure, if
all the economic numbers say that the amount of money you
invest will pay dividends tenfold over in the future. It is
incomprehensible that could happen. And this is a Country that
we talk about capitalism. Capitalism is the root of our
economy. This is a capitalistic concept. It is a business
decision, pure and simple. As leadership, you simply have to
sell it. You have to sell it first to the people who make the
decisions, so it is your Congress that authorizes this. Then
you have to simply sell what is an absolutely obvious decision,
a business decision, to the American public.
Senator Carper. Good. I think it was Andrew Jackson who
used to say, one man with courage makes a majority. Mrs.
Jackson said, one woman with courage makes a majority.
[Laughter.]
Senator Carper. But we need some men and women around here
with courage, political courage, to do what I think most of us
know needs to be done. And I am encouraged that some folks on
this committee, a number of my folks in the Democrat and
Republican party here in the Senate and hopefully in the House
will be willing to show that kind of leadership and courage. If
we do, people will join us.
I think at the end of the day, we will be rewarded for
that. Leadership has been defined as the courage to stay out of
step when everyone else is marching to the wrong tune. I think
people want us to make the right decisions. My hope is that we
will. Thank you.
Senator Inhofe. Very good, very good, Senator Carper.
As I said, I want to give the last three an opportunity to
respond to the question that I opened up with. I say to my
friend, Senator Carper, who is one, a lot of people are not
aware that our old friend from Florida, Connie Mack and I, 25
years ago, were the fathers of devolution until we realized
that it wouldn't work. So they are responding, and we had just
gotten through two of them.
But before doing that, we have our Secretary of
Transportation here, Mike Patterson. Hold your hand up, Mike.
And of course, everybody knows Gary Ridley.
Let me ask one question to you, Mr. Rowen. You said
something I didn't know. Did you say, did I understand there is
some dedication of part of the revenue that is derived in the,
either from natural gas or oil in Pennsylvania under your new
Governor? Is that correct?
Mr. Rowen. Under the previous administration, it was my
understanding that they were charging an impact fee at
extraction. But I believe that amounted to something like 1 or
2 percent.
Senator Inhofe. But it was something, a recognition. See,
most people think when you are talking about oil and gas
production that we are talking about the western United States.
That is not true anymore.
Mr. Rowen. No, absolutely not.
Senator Inhofe. With the Marcellus in Pennsylvania and New
York, I have heard arguments, pretty persuasive arguments in
Pennsylvania, that it could be your second largest employer
right now. So it is a major thing.
And that is a source. And that source was one of the three
that Senator Vitter brought up. No one responded to that, the
other two but not that. Would anyone want to respond to that in
terms of a partial source that is out there? If we can get to
the point in this Country when we start, and we will get to
this point, start really having the Federal land give us the
benefits that we are currently getting from State and private
land, while we have gone, increased by 61 percent in State and
private, we have actually decreased by 6 percent in Federal. I
see that as an opportunity to go out and develop a new,
consistent source to supplement any changes that might be made
in the user fee.
Does anyone want to refer, make any comments about that
portion of his suggestion?
Mr. Heminger. I guess, Mr. Chairman, just in one respect,
as you know, the Federal gas tax is not levied on consumers. It
is really levied at the refinery, and everybody down the chain
just reimburses the one ahead of them. So to the extent that
you already have the tax at the refinery, it is not too much
farther to take it back to the place where you are digging it
out of the ground.
Senator Inhofe. Very good point.
Mr. Heminger. So it seems to me from the user fee
perspective, it would be consistent. One thing I would be
concerned about is, I know oil and gas exploration can be a
pretty risky business and it can go through cycles. I think one
thing we always look for, and you have been emphasizing, is
predictability and reliability of the revenue stream.
Senator Inhofe. Any other comments?
Mr. Riordan. Mr. Chairman, I would agree with Mr.
Heminger's comments. And one other additional point is the
transparency that goes with that, whether it is the wholesale
level or extraction level.
Senator Inhofe. Sure.
Mr. Riordan. But I think it is important to be clear and
transparent in general as well as with the American public
relative to where this is coming from, and again I would echo
the comments of the hit and miss concern that the extraction
level, the faucet can turn on real hard and it can't turn off
real hard, as you know.
Senator Inhofe. I understand that. Also, I might suggest
there is a way of doing this in a more consistent basis. I come
from an oil and gas State, and we know how to do those things.
Any comment on that, Mr. Gardner?
Mr. Gardner. Yes. I was going to say that I think the
Federal leadership is absolutely critical. We need a complete,
integrated solution across the United States. I think the gas
tax, or a user fee, is a very simple concept that can be sold,
and we see it supported at the State level.
I would also say that the States and all the companies that
use the systems also need to demonstrate they are making
investments. I can say from an Ingredion perspective, we are
investing in transportation management systems so we can be
smarter with the use of trucks. We are maximizing payloads so
we can use less trucks and we are redesigning our distribution
network to minimize the number of miles.
So we are making our effort. I think we need a complete,
integrated solution to beat this problem.
Senator Inhofe. We have actually gone over our time, but
since I initiated a question to be responded to by all five, I
think Mr. Heminger was as far as I got. Any comments for the
last three having to do with devolution?
Mr. Riordan. Mr. Chairman, I think you, as they say, hit
the nail right on the head. This is one of the fundamental legs
of the service and the contribution from the national or the
Federal Government. I find it hard pressed, and frankly,
manufacturers in general find it hard pressed on how the
Federal Government can walk away and pass the problem of
funding or not back to the States. The criticality of the
interState highway system, as you alluded to earlier, was very
much dependent upon planning and vision at the Federal level. I
think we would strongly encourage that to continue.
Senator Inhofe. Yes, thank you. Agreed?
All right. Let me thank our panelists. You have been very
helpful. We have held you longer than we had said we would. But
the intensity of this issue is so significant. As you have
witnessed, it is one that is bipartisan. It is one that we all
know. I think one of my jobs is to kind of explain the
Constitutional requirements that we are talking about when we
talk about a system.
So we are going to try to make this work this time. I
remember, I have been at this for so long, I remember back when
I was in the House T&I Committee, we had one problem with the
Highway Trust Fund. We had too much surplus. Are you guys old
enough to remember that? Well, we did. And we all know what
happened to that, and that is why we need to get back and start
doing the job that the Constitution says that we should be
doing.
With that, we will adjourn.
[Whereupon, at 11:30 a.m., the hearing was adjourned.]
[Additional material submitted for the record follows.]
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