[Senate Hearing 115-114]
[From the U.S. Government Publishing Office]









                                                        S. Hrg. 115-114

                      LEVERAGING FEDERAL FUNDING; 
                INNOVATIVE SOLUTIONS FOR INFRASTRUCTURE

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON TRANSPORTATION 
                           AND INFRASTRUCTURE

                                 of the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 16, 2017

                               __________

  Printed for the use of the Committee on Environment and Public Works





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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                     ONE HUNDRED FIFTEENTH CONGRESS
                             FIRST SESSION

                    JOHN BARRASSO, Wyoming, Chairman
JAMES M. INHOFE, Oklahoma            THOMAS R. CARPER, Delaware
SHELLEY MOORE CAPITO, West Virginia  BENJAMIN L. CARDIN, Maryland
JOHN BOOZMAN, Arkansas               BERNARD SANDERS, Vermont
ROGER WICKER, Mississippi            SHELDON WHITEHOUSE, Rhode Island
DEB FISCHER, Nebraska                JEFF MERKLEY, Oregon
JERRY MORAN, Kansas                  KIRSTEN GILLIBRAND, New York
MIKE ROUNDS, South Dakota            CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     EDWARD J. MARKEY, Massachusetts
DAN SULLIVAN, Alaska                 TAMMY DUCKWORTH, Illinois
RICHARD SHELBY, Alabama              KAMALA HARRIS, California

              Richard M. Russell, Majority Staff Director
               Gabrielle Batkin, Minority Staff Director
                              ----------                              

           Subcommittee on Transportation and Infrastructure

                  JAMES M. INHOFE, Oklahoma, Chairman
SHELLEY MOORE CAPITO, West Virginia  BENJAMIN L. CARDIN, Maryland
JOHN BOOZMAN, Arkansas               BERNARD SANDERS, Vermont
ROGER WICKER, Mississippi            SHELDON WHITEHOUSE, Rhode Island
DEB FISCHER, Nebraska                JEFF MERKLEY, Oregon
JERRY MORAN, Kansas                  KIRSTEN GILLIBRAND, New York
JONI ERNST, Iowa                     EDWARD J. MARKEY, Massachusetts
DAN SULLIVAN, Alaska                 TAMMY DUCKWORTH, Illinois
RICHARD SHELBY, Alabama              KAMALA HARRIS, California
JOHN BARRASSO, Wyoming (ex officio)  THOMAS R. CARPER, Delaware (ex 
                                         officio)
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                                         
                            C O N T E N T S

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                                                                   Page

                              MAY 16, 2017
                           OPENING STATEMENTS

Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     1
Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland     2
Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..     5

                               WITNESSES

Garcetti, Hon. Eric, Mayor, City of Los Angeles, California, and 
  Chair, U.S. Conference of Mayors Infrastructure Task Force.....    11
    Prepared statement...........................................    14
    Responses to additional questions from Senator Carper........    19
Gatz, Tim J., Executive Director, Oklahoma Turnpike Authority....    20
    Prepared statement...........................................    22
    Responses to additional questions from Senator Carper........    28
Yarema, Geoffrey S., Partner, Nossaman LLP.......................    29
    Prepared statement...........................................    31
    Responses to additional questions from Senator Carper........    36
    Response to an additional question from Senator Boozman......    37
DeGood, Kevin, Director, Infrastructure Policy, Center for 
  American Progress..............................................    39
    Prepared statement...........................................    41
Layne, Aubrey L., Jr., Secretary of Transportation, Commonwealth 
  of Virginia....................................................    46
    Prepared statement...........................................    49
    Responses to additional questions from Senator Carper........    64

                          ADDITIONAL MATERIAL

Testimony of Aubrey L. Layne, Jr., regarding New Routes for 
  Funding and Financing Highways and Transit, before the U.S. 
  Senate Finance Committee, May 6, 2014..........................    81
 
  LEVERAGING FEDERAL FUNDING; INNOVATIVE SOLUTIONS FOR INFRASTRUCTURE

                              ----------                              


                         TUESDAY, MAY 16, 2017

                               U.S. Senate,
         Committee on Environment and Public Works,
         Subcommittee on Transportation and Infrastructure,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 3:17 p.m. in 
room 406, Dirksen Senate Building, Hon. James M. Inhofe 
(Chairman of the Subcommittee) presiding.
    Present: Senators Inhofe, Fischer, Ernst, Sullivan, Cardin, 
Whitehouse, Gillibrand, Duckworth, Harris, and Carper.

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. The hearing will come to order.
    I want to thank all of you for being here today. I thank my 
friend, Ranking Member Cardin, and his staff for the 
flexibility with the scheduling of today's hearing.
    It is kind of interesting because Ben Cardin and I are 
maybe three of the last remaining of the class of--what was 
that?
    Senator Cardin. The 100th Congress in 1987.
    Senator Inhofe. Yes, 1987. No, we have Lamar Smith and a 
couple more.
    It is funny. We are on opposite sides on a lot of issues, 
but we are always together in friendship as well as in 
infrastructure.
    As this week is Infrastructure Week, it is a great 
opportunity for us to highlight the critical needs we have in 
this country. Tomorrow the full Committee will have the chance 
to question Secretary Chao on the Administration's priorities. 
It is my hope today's hearing will be a productive lead in to 
her visit.
    Last Congress the EPW Committee led the charge to pass the 
FAST Act and the sixth highway reauthorization bill that I 
personally worked on. This was the largest one since 1998. 
Nobody believed we would get it done, and others thought we 
would only get an 18-month bill.
    However, Senator Boxer and I, as the Chairman and the 
Ranking Member, insisted on 5 years. It shows that people of 
opposite and different philosophies can get along and make 
wonderful things happen.
    However, the current investment is not enough to fully 
address our maintenance and the new capacity needs. The FAST 
Act authorization is about $305 billion over 5 years. Yet 
according to the United States DOT report from this year, the 
backlog of highway and bridge work in the United States stands 
close to $836 billion.
    As the Administration and Congress consider a potential 
trillion dollar infrastructure package, we must keep in mind 
that the package will include more than just roads and bridges, 
but also our port system waterways, airports, and energy needs 
as well. While the Federal Government will and should continue 
to be a leading partner in maintaining and building out our 
infrastructure, the current and proposed Federal investment 
will not meet all of our needs.
    Whatever action we take on infrastructure, our State and 
local partners have to be a part of the solution and prioritize 
transportation. Some States and local areas are doing this. 
Unfortunately, this weekend, in my State of Oklahoma, I learned 
about the effect of proposed budget cuts to the Department of 
Transportation.
    My State of Oklahoma did not properly prioritize the need 
for transportation. Oklahoma and other States have to meet 
their modest match. We are talking about matches of either 10 
and 90 or 20 and 80. It occurred to me, and I was not aware, 
that they were not prioritizing that.
    Ben, I took my plane and loaded it up with media and went 
around to all the construction sites saying that if we do not 
do our portion of the match, we are going to be stopping some 
of the construction. I think you know what happens when that 
does happen.
    In addition to States and locals prioritizing 
infrastructure, we also need to find responsible and meaningful 
ways to attract and leverage additional private investment to 
help close the gap.
    Today's hearing will examine all these possibilities and 
what the Federal Government can do to help make it easier for 
our partners to leverage the Federal investment with other 
opportunities. Though not all ideas will work everywhere, all 
options should be on the table. We should incentive our non-
Federal partners to pursue them.
    I look forward to hearing from our witnesses.
    Senator Cardin.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 
            U.S. SENATOR FROM THE STATE OF MARYLAND

    Senator Cardin. Mr. Chairman, once again, thank you very 
much for your leadership in regard to infrastructure in our 
country. It is a real pleasure to be the Ranking Democrat on 
the Subcommittee to work with you on a bipartisan 
infrastructure bill.
    We have never had a problem in bipartisan infrastructure. I 
expect that will be the same, and I really do look forward to 
working with you to figuring out a way we can get this done.
    Up front, let me put on the record my conflict with today's 
hearing. I commute back and forth from Baltimore to Washington 
every day. I know firsthand the problems of traffic and 
congestion. When I started in 1987, Mr. Chairman, when we were 
both elected, the roundtrip commute between Baltimore and 
Washington took me about 2 hours. Today, that exact same 
commute at the exact same time today takes 3 hours and 15 
minutes.
    My transportation people are telling me to expect 1 million 
more people in Maryland over the next 25 years. Twenty-five 
years from now when we are celebrating whatever anniversary 
that is together in Congress, that commute is going to take 4 
hours and 15 minutes. We have to do something about it.
    Mayor Garcetti, I am glad you are here because the 
congestion in Los Angeles is worse than our congestion. I have 
someone I can point to who has an even more difficult commute 
than we do.
    We really need to address this. The congestion is very 
costly to our economy; it is costly to our public health. It is 
a circumstance that the public demands that we modernize our 
infrastructure.
    We have neglected it. Yes, I agree with the Chairman, we 
can always do things more efficiently and always find more 
creative ways for partnership, but the bottom line is the 
public investment must keep up with the need. We have not kept 
up with the need. We are here today to figure out how we can do 
this.
    The Washington district has ranked anywhere from one to 
four to fifth as the most congested region in the country. That 
is why we work on ways to get people out of cars. The transit 
programs are important.
    WMATA, which has 700,000 riders a day, one-third of whom 
are Federal employees trying to get to work, is an old system. 
It also needs help. It takes resources to rebuild our stations, 
to improve our lines, and to deal with the needs of additional 
lines. Some of this is extremely expensive. We have to figure 
out a proper way in order to finance our infrastructure.
    We also need to deal with the flexibility issues. I 
appreciate that.
    Senator Carper is now here. Senator Carper is the Ranking 
Member of the full Committee and a real champion on 
infrastructure.
    He is very bold, by the way, in saying he is ready to pay 
for it. Senator Carper is very much in the leadership of 
saying, we have to pay for what we need, and let us find a way 
to do it. I appreciate his leadership on this.
    One of the things we try to do is give flexibility to local 
governments, which I think is very important. Baltimore was 
designed by Olmsted. Olmsted connected all neighborhoods 
together through green space. Over the years, that green space 
got developed, and communities got isolated. Literally, people 
were trapped in their neighborhoods. The only way they could 
get around was if they had a car. Some had cars, and some did 
not have cars, but it put more traffic on the road.
    We have given Baltimore the flexibility of using 
transportation money to reconnect neighborhoods so that people 
can literally walk and bike between neighborhoods without using 
their cars, which takes cars off the roads; that preserves our 
roads for longer periods of time and improves the quality of 
life. That is what we did together, giving the flexibility in 
our transportation programs so local governments can make their 
own decisions rather than us trying to dictate from Washington 
how things should be done.
    I would hope we would continue those types of efforts as we 
look at additional tools we can give our mayors and local 
officials so that they can do what is best for their community 
in order to restore their communities.
    This is an area we should be able to get done, Mr. 
Chairman. We have a President of the United States making 
transportation one of his top priorities. We have had 
bipartisan proposals come out of Congress on revenues to deal 
with transportation. This Committee is dedicated to working 
together, listening to every member of this Committee. We come 
from different areas. Oklahoma and Maryland have different 
transportation needs, but we agree that we need additional 
help.
    Working together, I think we can get this done. I very much 
look forward to our hearing and to working with the Chairman.
    Senator Inhofe. Thank you very much, Senator Cardin.
    Let me suggest we will go ahead and make some 
introductions. I want to get into the record all five important 
people we have here to testify.
    Senator Harris, why don't you start off by introducing the 
Mayor?
    Senator Harris. I appreciate that, Chairman. As you know, I 
am also on the Senate Intelligence Committee which is meeting 
at the exact same time. Thank you for that.
    I would like to introduce and welcome Los Angeles Mayor 
Eric Garcetti, a longstanding friend and a great leader in 
California. He is here to talk about our nation's 
transportation needs.
    Los Angeles freeways are infamous. The intersection between 
the 10 and the 405 is known affectionately as the biggest 
parking lot in America.
    It is not just our roads that are overstretched. In 2015, 
45.5 million visitors traveled to Los Angeles, and 6.7 million 
arrived from other countries. Los Angeles International Airport 
is the second busiest airport in the country. L.A. County has 
the top two biggest container ports in the country.
    Having quality infrastructure in Los Angeles is not just 
important for those who call it home, as do I, but it is 
important for the entire country. When Los Angeles is moving 
efficiently, that means it is easier for the products, goods, 
and people that we all need to move around the country and the 
world, that they are able to move in an easier way.
    Mayor Garcetti has a front row seat to the transportation 
challenges and needs of southern California while also running 
a city that is looking at new ways to address urban mobility 
and challenges and hopefully, a city that will also host the 
Olympics.
    Los Angeles is investing in new highway and surface street 
infrastructure while it is expanding rail transit and looking 
at how to impact dedicated bus and bike lanes. Los Angeles 
residents just approved a measure to invest their own money in 
the infrastructure that helps keep Los Angeles and its region 
growing and moving. It is time for the Federal Government to do 
its part.
    Residents are steadily seeing new options to get around 
their city, but they need Federal resources in order to provide 
businesses and tourists the experience they deserve. The City 
and County of Los Angeles have always had a history of working 
with the Federal Government to build bipartisan support in an 
effort to accelerate infrastructure improvement projects.
    The work underway to address Los Angeles' urban mobility 
challenges requires innovation, combined with support from 
local, State, and Federal Government. I look forward to hearing 
my Mayor's testimony today.
    Welcome, Eric Garcetti.
    Senator Inhofe. Thank you, Senator Harris.
    Before we continue with the introductions, I would like to 
ask Senator Carper if he has any statement to make as he is the 
Ranking Member of the entire Committee.

          OPENING STATEMENT OF HON. THOMAS R. CARPER, 
            U.S. SENATOR FROM THE STATE OF DELAWARE

    Senator Carper. Welcome, one and all.
    I am proud to be a member of this Committee. I have been on 
it for about 16 years now. I am also a recovering Governor and 
served for 8 years as Governor of Delaware from 1993 to 2001. I 
care about these issues and have thought about them as well.
    I want to thank the leadership of this Subcommittee for 
holding the hearing today. I want to thank all of you for 
coming and sharing with us your perspectives on an issue on 
which we hope we can find some bipartisan agreement and make 
progress. We pretty much need to.
    I like to say one of the major roles of government is to 
provide a nurturing environment for job creation and job 
preservation. I say that several times a day. That is one of my 
guiding principles.
    It is hard to have a nurturing environment if you do not 
have good transportation systems. You folks know that from the 
work that you do. I support measures to enable public agencies 
to partner with private investors. I want to ensure that these 
agencies have the capacity and the support they need to be 
successful.
    In Delaware, we have an interest in using public-private 
partnerships. Right now, our State is working on one agreement 
with a private developer to build a mixed use parking garage 
and transit center in Wilmington, Delaware, where my family and 
I live. We would do that in order to try to facilitate access 
an increasingly vibrant retail district downtown.
    If we are successful in this one endeavor, it will be the 
first transportation related P3 for Delaware--the first. 
Although our State has bid projects on public-private 
partnerships in the past, they have never proceeded ultimately 
because of a lack of investor interest, I suspect because the 
investor figured out they could not make the kind of return on 
the investment they wanted to make.
    In Congress, we have done important work to support 
agencies interested in partnering with private firms to 
transfer project risks and potentially to build projects more 
quickly. In the FAST Act, we restructured the Department of 
Transportation's credit and innovation finance programs into a 
single, one stop show to streamline and improve the process for 
agencies and for investors.
    We also reduced the minimum project cost for the 
Transportation Infrastructure Financing Innovation Act, TIFIA, 
in order to expand access to TIFIA loans. I believe the private 
sector can play an important role in stimulating investment in 
our critical infrastructure.
    However, I also know public-private partnerships and other 
financing tools are not the complete solution to our funding 
shortage even though sometimes we imply they would be. We need 
to be clear that leveraging public funding with private 
finances is not a replacement for public funding and will not 
solve either our Highway Transportation Fund insolvency crisis 
or the maintenance backlog for our roads, our bridges, and for 
transit.
    In just over 3 years we will face an insolvency crisis for 
the Highway Trust Fund yet again. We will be facing a $115 
billion shortfall for our next 5-year transportation bill. That 
funding crisis will also be a crisis for private investors who 
similarly rely on certainty of public funding from the Highway 
Trust Fund.
    Partnering with private investors can help public agencies 
complete large, complex problems more quickly. That is an 
important value, particularly with the number of major 
bottlenecks in transportation regional projects that need to be 
completed today where I live, and frankly, where we all live.
    On the other hand, there are only a small number of large, 
complex, and transformative transportation projects where 
financiers are interested in investing. For example, in 2014 
just four transportation projects were closed with a public-
private partnership contract. They were all several hundred 
million dollar projects.
    The hard truth is that public-private partnerships have not 
been as useful for routine maintenance and critical safety 
projects. This was a shock to me. Moreover, a total of a third 
of all States do not allow the use of public-private 
partnerships.
    In Texas, a State that has allowed them in the past, the 
legislature recently voted not to use P3s because their 
constituents did not want to pay higher tolls. There are a 
number of questions that should be asked about when public-
private partnerships are a useful tool, how we can ensure they 
are making good use of scarce Federal dollars.
    I use this analogy, and my colleagues have heard we say it 
before. Usually when we come to funding transportation across 
the country, there is no silver bullet. There are a lot of 
silver BBs, some are bigger than others. I have said the 
biggest silver BB is one that calls for those who use roads, 
highways, bridges, businesses and people should pay for them.
    There are other ways we can use that money to help leverage 
other money, including public-private partnerships and we 
should do that.
    Thank you so much.
    Senator Inhofe. Thank you, Senator Carper.
    Let me introduce the next witness, Tim Gatz, the Executive 
Director of the Oklahoma Turnpike Authority. Before his current 
role, he worked for the Oklahoma Department of Transportation 
for over 25 years, starting as a drafting technician and 
working his way up to serving as the director of the 
department.
    At the Oklahoma Department of Transportation, he was 
actively involved in developing their project management 
methodologies, as well as construction work plan which guides 
the department's project development and delivery strategies.
    With his new role as the Executive Director of the Turnpike 
Authority, Tim will oversee the continued development and 
implementation of the nearly $900 million driving forward plan 
which he will be sharing with us.
    Tim, it is great to have you here.
    Let me say we have so many people right now really into 
this issue. I often sometimes say, these guys have heard me say 
it, there is an old, worn out document nobody ever reads 
anymore called the Constitution which talks about what we are 
really supposed to be doing here, defending America, and they 
called it post roads then, but highways and construction.
    We have a new President who has made this commitment a long 
time ago. People say, wait a minute, a trillion dollars; that 
is not going to work. It is time to think about what happened 8 
years ago. Eight years ago we had another person elected as the 
President of the United States. He came out with an $800 
billion+ program that was supposed to stimulate, and it did not 
stimulate anything.
    I can remember Barbara Boxer and I trying to put amendments 
on there to use that for that very reason.
    Also, I was visited this morning by the Business 
Roundtable. I ask unanimous consent that their statement of 
support for what we are doing today be made a part of the 
record. Without objection, so ordered.
    [The referenced information follows:]
    
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    Senator Inhofe. Mayor Garcetti, do you have to leave early? 
Does this alter your testimony?
    Mr. Garcetti. I do have to leave early, but I am ready to 
go whenever you say.
    Senator Inhofe. Let me introduce the rest of the witnesses. 
We will start with you, and when you have to leave, let us 
know. I appreciate your presence here very much.
    Geoffrey S. Yarema is a partner at Nossaman LLP in Los 
Angeles, California. Kevin DeGood is Director of Infrastructure 
Policy, Center for American Progress, Washington, DC. Welcome. 
Aubrey L. Layne is Secretary of Transportation for the 
Commonwealth of Virginia.
    Senator Cardin. I should explain I asked my Maryland folks 
who would be the best person to testify in regards to our 
problems in this region, and they recommended Secretary Layne.
    It is a pleasure to have you here, Mr. Secretary. Virginia, 
Maryland, and Delaware get along very well together.
    Senator Inhofe. Your Honor, you are on.
    I am going to try to encourage you folks to limit your 
statement to 5 minutes or a bit more maybe, but your entire 
statement will be made a part of the record, as is always the 
case.

 STATEMENT OF HON. ERIC GARCETTI, MAYOR, CITY OF LOS ANGELES, 
CALIFORNIA, AND CHAIR, U.S. CONFERENCE OF MAYORS INFRASTRUCTURE 
                           TASK FORCE

    Mr. Garcetti. Thank you so much, Chairman Inhofe. Thank you 
for your friendship.
    For the times we have met in the past, Ranking Member 
Cardin, thank you.
    Senator Inhofe. What is it I always tell you when we meet? 
I say, I had a hard job once.
    Mr. Garcetti. Yes, you did. I think we bonded over that, 
and I appreciate the perspectives you have brought.
    Ranking Member Cardin and Senator Carper, as well, thank 
you for your leadership, and also Senators Ernst and Fischer.
    I am Eric Garcetti, Mayor of Los Angeles. I want to give a 
special thanks to my Senator, Senator Harris, for the 
introduction.
    I am honored to appear before you, not only as Mayor of a 
great American city, but also as the Chair of the Task Force on 
Infrastructure for the U.S. Conference of Mayors.
    When I heard folks talking about infrastructure a few 
months ago in the presidential election, as Mayor of the city 
that has the biggest port in America, the largest municipal 
utility in America, the No. 1 airport of origin and 
destination, the most miles of road, and as stated, the worst 
traffic, I got very excited. Contrary to what you might have 
seen in LaLa Land, no, we do not dance in traffic. We just sit 
there and stew.
    I am here today to get you excited. Do not let this get out 
because 99 percent of the coverage tonight is not going to be 
about how we are all getting along; it is going to be about how 
we disagree. Right here, we truly do have bipartisanship and 
agreement on what this country needs. That is the space Mayors 
occupy every single day.
    For all of us in the municipalities who have heard the 
words ``a trillion dollars,'' in the election in November when 
everyone was focused on the national elections, throughout 
cities in America, $230 billion of infrastructure initiatives 
were approved by voters, a quarter of that down payment people 
are talking about happening over a decade.
    My message from America's cities is loud and clear. We can 
do this. We should be excited to do this. I want to share our 
lessons in Los Angeles about how we did this. Republicans and 
Democrats agree, as well as Independents, on the need for this. 
We looked at this in Los Angeles, not just as an infrastructure 
need, but really as a jobs and quality of life initiative.
    We get excited about the word ``infrastructure,'' but 
normal Americans want more time with their kids to tuck them 
in. They know the billions of dollars in our local economy that 
were taken from us, millions of hours taken away from us 
through the traffic that chokes our cities.
    We started crisscrossing a 4,700 square mile county with 10 
million people, bringing in Republicans and Democrats. My 
wingman on this was somebody you may know, Supervisor Mike 
Antonovich, the most conservative member of the Board of 
Supervisors in L.A. County, and we crossed over to say, this is 
something we have to figure out a way.
    In California, you need a two-thirds vote to raise a tax. 
It is an incredibly high threshold. A long story short, we had 
a 71 percent vote for a $120 billion package, the largest in 
American history times two at the local level, to fix our 
roads, 15 rapid transit lines, repair our freeways, and give 
local money back to our cities and the county for the road 
repairs they need.
    What led to that success? I think we each gave up a little 
something of who we were. As a Democrat, I came in skeptical as 
a Mayor about public-private partnerships and the role of 
leverage and banks. Today, I am a convert. Somewhere the fiscal 
conservative in me did not feel great about grants that come in 
with little accountability, but I see how critical and how 
crucial they are.
    The days of cities coming or States coming to this esteemed 
Senate or the House of Representatives saying, look, I have an 
empty hat in hand and a great project, please fill it up are 
long gone. We know that.
    We have been immensely successful in Los Angeles in coming 
to you with a hat that is half filled saying, can we have our 
Federal tax dollars along with our local tax dollars to make 
this happen?
    I spent 3 days last week with the International Olympic 
Committee members who came to Los Angeles. I do want to bring 
the Olympics back home to America. They were blown away by what 
we are doing with infrastructure: $14 billion in our airport; 
$120 billion, as I said, in public transportation and roads; 
and another $2.6 billion at our port.
    However, the jobs piece of making sure these are American 
jobs, because there is no port equipment manufacturer in the 
United States, there is no railcar manufacturer in the United 
States, we have real opportunities in passing this not just to 
talk about the needs of infrastructure, but the need for middle 
class jobs in America.
    What leads to success policy-wise? I hope to lay that out 
in my last minute here. There are three things. We are calling 
this the I3. You have heard of P3; this is the Infrastructure 
Incentives Initiative.
    One is leverage. Two is to think about the life of 
projects. Three is innovation and technology. Leverage, I 
think, is clear. I just came from a discussion with Members of 
the House and Senate, leaders in industry and a few of us 
mayors. They were talking the same language.
    You need to leverage localities; reward those that step up, 
but also put out there that if you do have local money, you 
have a better chance of getting Federal money. Similarly do 
that between public and private partnerships, knowing the 
advantages and the shortcomings that P3s have.
    We have seen this in Denver where in 75 percent of the time 
and 7 years less, they got a transit line from downtown to the 
airport. Leverage has to be the central principle of what we 
write.
    Two is to think about life of projects. I am glad you 
brought up WMATA. We have seen this not just in Washington 
where people were killed, where yesterday you saw the line shut 
down, but in Boston where people kicked out windows of the 
railcar because it was smoking and places like the Bay Area in 
my State where folks are trying to get on the ballot something 
for maintenance. Make sure you reward those places that are not 
just thinking about the construction, because we all love 
ribbon cuttings, but think about the maintenance and the long 
term.
    The third is innovation and technology both in the process 
as well as the technology itself. We are looking at changing 
American tunneling technology. Elon Musk, who you all know, in 
my city is looking at changing boring machines. I know this 
sounds like a boring topic, but it is actually quite exciting. 
Boring machines have not changed in 50 years, and he thinks he 
can get SpaceX engineers to increase the speed that they drill 
by as much as 10 times.
    We do not know what we do not know, but you need to put 
aside some funds, as we did in our initiative, for new, 
innovative technologies because we could be getting around in a 
very different way in 5, 10, we for sure will be in 20 years 
from now.
    Those three concepts of leverage, the full life of 
projects, and innovation technology is what the U.S. Conference 
of Mayors is putting forward as our plan to help assist you.
    I will close with this. I will work off my tail to help you 
get Republican and Democratic mayors from every single town and 
city in this nation to help get this passed. There is no better 
thing we could be doing for jobs, for the quality of life of 
all Americans, and it is the one thing that unites all of us.
    I will say, on behalf of America's cities, we have stepped 
up; we cannot wait for you to join us, too.
    Thank you for all your support.
    [The prepared statement of Mr. Garcetti follows:]
    
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    Senator Inhofe. Thank you, Mayor.
    Tim Gatz.

STATEMENT OF TIM J. GATZ, EXECUTIVE DIRECTOR, OKLAHOMA TURNPIKE 
                           AUTHORITY

    Mr. Gatz. Mr. Chairman, Ranking Member Cardin and members 
of the Committee, for the opportunity to come and testify this 
afternoon.
    My name is Tim Gatz, and I serve as the Executive Director 
for the Oklahoma Turnpike Authority. Today, I want to emphasize 
several points.
    The conditional deficiencies of a long underfunded national 
transportation system cannot be resolved by the States alone 
and will require an increasing and congressionally influenced 
Federal investment, combined with a long term national 
transportation strategy.
    The focused investment of Federal resources is necessary, 
but should in no way be restricted from use as leverage for 
financing opportunities and private sector partnerships. The 
advancements in tolling technologies and equipment, along with 
toll tag interoperability efforts by tolling authorities across 
the country, indicates that tolling should be clearly 
recognized as a viable, long term, and sustainable 
transportation revenue mechanism.
    The Oklahoma Turnpike Authority was legislatively created 
in 1947 to construct a modern transportation link between 
Oklahoma City and Tulsa. Today the more than 270 miles of the 
Turner, the Will Rogers, and the H.E. Bailey Turnpikes carry 
the Interstate 44 shield and are part of a combined toll 
network of 605 miles.
    Oklahoma has utilized a balanced and responsible investment 
strategy, including tax supported and toll supported highways 
to meet the transportation needs of our citizens. To be clear, 
long term, consistent Federal funding remains vitally important 
to the development and delivery of transportation improvement 
projects.
    States must be able to anticipate the availability of 
resources in order to properly plan, design, and construct 
projects. Recognized and documented critical needs and our 
clear understanding of long term resource availability factors 
heavily into our investment decisionmaking.
    In 1956 the Federal Highway Act included a general 
prohibition on tolling that remains largely in effect with 
tolling allowed only under very specific circumstances. 
However, public-private partnerships and other debt financing 
options requiring long term revenues are encouraged.
    Simple tolling can be a very flexible and effective revenue 
component in a bold, new national transportation strategy and 
is the purest representation of an equitable user fee. That 
being said, 3Ps, innovative financing, and tolling options will 
not work in every case and should not be held as the Federal 
Government's best or only solution to stemming the further 
deterioration and operational deficiency of our national 
transportation system.
    Recognizing that a 3P project must have sufficient 
liquidity to provide an adequate return to investors, we 
believe carefully vetting potential projects, selecting the 
appropriate risk sharing model, and preparing a structured 
financial plan is paramount to project success.
    In Oklahoma, the Gilcrease Expressway was part of the 
original Tulsa region expressway master plan created more than 
50 years ago, including a segment to serve west and north 
Tulsa. Some development work has progressed over the years 
funded with very limited traditional Federal, State, and local 
revenue streams.
    Completing this $300 million, 5 mile leg of the Expressway 
between Interstate 44 and US Highway 412 with a bridge over the 
Arkansas River is vital to providing access for businesses and 
economic activity in the region and to provide a reliever route 
for growing congestion concerns for travel into downtown Tulsa.
    After many years of discussion, the Oklahoma Turnpike 
Authority, the city of Tulsa, Tulsa County, the Indian Nations 
Council of Governments, the Oklahoma Department of 
Transportation, and the Federal Highway Administration have 
crafted an innovative partnership.
    The Oklahoma Turnpike Authority will leverage the 
investment and work that has been accomplished to construct the 
Gilcrease Expressway segment as a federalized toll facility. It 
is anticipated that OTA will develop a process to solicit 
interest from potential third party contractors and investors 
in a delimited public-private partnership.
    The proposed partnership will share only in the cost of 
construction which will be partially offset with a defined cash 
contribution from the OTA and from the sale of GARVEE bonds.
    While many variables with the Gilcrease project are yet to 
be solved, it is evident that a variety of funding and 
financing methodologies can be combined and leveraged to 
successfully and quickly deliver transportation improvement 
projects that might not be financially viable otherwise.
    Innovation to address well defined transportation system 
needs, and in turn generate a user specific revenue stream in 
order to finance or partially finance construction, operation, 
and maintenance should be enhanced in the Federal program and 
should not be unnecessarily restricted.
    In conclusion, any proposed Federal infrastructure 
initiative seeking to attract private sector investment must be 
flexible enough to equitably accommodate potential projects in 
all stages of completion and in all types and sizes, not just 
mega-projects. Likewise, State and national tolling strategies 
should be supported and enhanced for the future.
    Mr. Chairman and members, thank you again for the 
opportunity to visit with you today, and I will be happy to try 
and answer any questions you may have.
    [The prepared statement of Mr. Gatz follows:]
    
    
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    Senator Inhofe. Thank you, Mr. Gatz.
    Mr. Yarema, I appreciate your being here today. You are 
recognized.

               STATEMENT OF GEOFFREY S. YAREMA, 
                     PARTNER, NOSSAMAN LLP

    Mr. Yarema. Chairman Inhofe, Ranking Member Cardin, Ranking 
Member Carper, and members of the Committee, thank you for 
inviting me to testify today.
    My name is Geoff Yarema. I am a lawyer and partner at the 
Nossaman law firm.
    My testimony today reflects a long career advising State 
and regional governments across the country in more than $40 
billion of infrastructure projects and in my service on the 
bipartisan congressionally mandated National Surface 
Transportation Infrastructure Financing Commission.
    As our commission reported, the nation faces a crisis. Our 
surface transportation system has deteriorated to such a degree 
that our safety, economic competitiveness, and quality of life 
are at risk. That view remains true today.
    Thanks largely to this Committee's action, and Mr. 
Chairman, to your leadership in particular, the last two 
authorization bills represent real progress. There is still 
much work to do, however, which is why we are all here today 
collectively determined to seize the opportunity.
    If we are to remain the leader of the global economy, we 
must have, as Chairman Barrasso has repeatedly called for, a 
significant supplement to existing Federal infrastructure 
spending.
    Today, I would like to focus on the important question of 
how to spend any newly secured discretionary funds in the most 
impactful way possible. By working together, Congress and the 
Administration can achieve this paradigm shift through what 
Mayor Garcetti has called the Infrastructure Incentives 
Initiative or I3.
    I3 would expend new discretionary resources expressly to 
serve four outcomes. First would be creating significant 
leverage by incentivizing government infrastructure owners to 
secure and commit their own revenue measures and project 
revenues beyond historical Federal-State funding splits.
    Second is assuring long term performance of new capital 
improvements by incentivizing owners to achieve life cycle cost 
efficiencies and avoiding any further deferred maintenance.
    Third is modernizing business practices by incentivizing 
owners to update procurement policies to better capture the 
best of private sector capabilities.
    Finally would be incorporating rapidly evolving technology 
by incentivizing infrastructure owners to design their spending 
programs to maximize innovation.
    Applying these principles to the allocation of new Federal 
funds would move the Federal Government away from selecting 
what it deems to be the most worthy projects and move it toward 
spurring its non-Federal partners to achieve better, long term 
infrastructure outcomes and permanent program-wide 
enhancements.
    I3 can be scaled to match whatever size funding program is 
created, can be adapted to all government owner infrastructure 
classes, and can be designed to benefit rural as well as urban 
areas.
    The recent State gas tax increases in Wyoming, Iowa, Idaho, 
Nebraska, Georgia, Vermont, Tennessee, and Indiana stand 
alongside Measure M in Los Angeles, Proposition 1 in Austin, 
Texas and Sound Transit 3 in Seattle to demonstrate how rural 
and urban regions alike can generate billions of self-help 
dollars as supplemental transportation investment. These 
results are entirely replicable around the country with the 
right Federal incentives. Funding is only part of the solution, 
however. We need better outcomes from long term maintenance 
technology and procurement practices.
    In conclusion, I3 would have our nation be more ambitious 
for the outcome of its hard fought infrastructure investment 
than just to fund a federally selected basket of shiny new 
projects or add more to highway apportionment.
    It would expressly urge every State and city with major 
infrastructure challenges to partner more aggressively in 
exchange for new funding. That partnership would result in 
outsized program responses with each area around the country 
selecting for itself what kind of self-help leverage to commit, 
what projects are most worthy of completion, and the types of 
procurement models to use.
    The result would be a lasting paradigm shift in the 
Federal, State, local, and private infrastructure partnership.
    Thank you for your attention. I stand ready to assist the 
Committee as it pursues its legislative efforts.
    [The prepared statement of Mr. Yarema follows:]
    
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       Senator Inhofe. Thank you, Mr. Yarema.
    Mr. DeGood.

  STATEMENT OF KEVIN DEGOOD, DIRECTOR, INFRASTRUCTURE POLICY, 
                  CENTER FOR AMERICAN PROGRESS

    Mr. DeGood. Thank you, Chairman Inhofe, Ranking Member 
Cardin, and members of the Committee, for inviting me to 
testify. It is an honor to contribute to this Committee's work.
    Transportation infrastructure is essential to our economy 
and local communities. Unfortunately, public investment has not 
kept pace with overall needs. As a result, the United States 
faces a well documented infrastructure backlog.
    Throughout the presidential campaign, Donald Trump 
repeatedly vowed to spend $1 trillion to rebuild America's 
infrastructure. Unfortunately, this promise has given way to a 
call for State and local governments to ``maximize leverage'' 
through public-private partnerships, or P3s.
    At their core, public-private partnerships are an 
alternative method of procurement. Importantly, P3s are not a 
means of closing the infrastructure gap. The binding constraint 
facing State and local governments is insufficient tax revenue, 
not a lack of access to financing. Let me say that again. The 
binding constraint facing State and local governments is 
insufficient tax revenue. Public-private partnerships and tax 
credits do not solve this problem.
    Instead, the true value of P3s is risk transference. Unlike 
traditional procurement models, P3 allow the State to draft a 
contract that shifts the responsibility for delivering a large, 
complex project on time and on budget to a private entity.
    This transference does not come cheaply as the private 
companies rightly demand a premium price for assuming the 
project risks. Proponents of P3s talk about the need to get 
private capital ``off the sidelines.'' This assumes project 
sponsors face capital scarcity. This is simply wrong.
    The municipal bond market is robust with more than $3.8 
trillion in outstanding issuances and a strong appetite for new 
offerings. Additionally, the TIFIA Loan Program, run by USDOT, 
offers flexible, low cost financing to project sponsors.
    The current interest rate on municipal bonds with an AAA 
rating over 30 years is only 3 percent. By comparison, equity 
investors look for annual returns of between 10 and 15 percent. 
This raises costs significantly.
    For instance, the financing charge on $100 million of 
municipal debt at 3 percent over 30 years is just $90 million. 
Over the same period, $100 million in private equity capital at 
15 percent has a finance charge of $450 million.
    Even factoring in the Trump administration's plan to offer 
investors tax credits, equity capital is still vastly more 
expensive than municipal debt.
    Additionally, P3s have very limited applicability. The 
average cost of highway P3s with a TIFIA loan and equity 
capital is $1.28 billion. However, maintenance and incremental 
expansion projects represent the majority of the infrastructure 
needed across the country.
    For example, for the 1,657 highway projects included in the 
State of Ohio's transportation program, only two have a cost of 
over $1 billion and another six a cost of more than $200 
million. The average project cost in Ohio is just $9 million.
    The lesson is that outside of urban mega-projects, public-
private partnerships have little value. For rural communities, 
small towns, and economically struggling urban areas, an 
infrastructure plan based on tax credits is the same as no plan 
at all.
    Wall Street is eager to see more P3s. A 2015 report by UBS 
sums up the attraction. ``The high barriers to entry and the 
monopoly like characteristics of typical infrastructure assets 
mean their financial performance should not be as sensitive to 
the economic cycle as many other asset classes.''
    In other words, highways behave like a utility but without 
price regulations. Even this is often not sufficient to defend 
against future competition; many private firms push for non-
compete clauses. These contractual provisions are intended to 
keep the private firm financially whole.
    A non-compete clause often includes a specific list of 
parallel facilities that the State may not expand or otherwise 
improve. If the State chooses to make improvements to a listed 
facility, it must provide a payment to compensate the private 
firm for their estimated loss revenue.
    These provisions are deeply problematic as they offer 
private firms a degree of guaranteed profitability that does 
not exist anywhere else in the marketplace.
    Finally, in recent weeks, the Trump administration has 
pushed for ``asset recycling.'' This is a new term of art for 
brownfield lease transactions. In a typical lease deal, a State 
or local government receives an up front payment from a private 
firm. In return, that firm has the right to collect a stream of 
user fee revenues over the life of the agreement.
    These deals are presented as a source of new revenue. In 
reality, they are an expensive loan that comes with contract 
terms often harmful to the public. For example, in 2008 the 
city of Chicago leased its parking meters for 75 years in 
exchange for an up front payment of $1.15 billion or 20 percent 
of its 2008 budget.
    As result, the city is substantially constrained in how it 
may manage its roadways, including making it more difficult to 
make improvements to public transportation service. If the city 
had simply issued municipal debt to generate these funds, 
residents would face lower parking fees, and the city would 
have the freedom to grow and change without the contractual 
limitations.
    This deal, like other asset leases, was a cash grab under 
the guise of innovation that the public must live with for many 
decades to come.
    In conclusion, there are no shortcuts to rebuilding 
America's infrastructure. The Federal Government needs to 
provide direct funding to State and local project sponsors. 
Furthermore, these funds should be targeted to those 
communities facing the greatest need and the highest level of 
economic hardship.
    Thank you again for the opportunity to address this 
Committee.
    [The prepared statement of Mr. DeGood follows:]
    
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    Senator Inhofe. Thank you, Mr. DeGood.
    Secretary Layne, you are recognized.

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

    Mr. Layne. Thank you very much, Chairman Inhofe, Ranking 
Member Cardin, and other members of the Subcommittee. Thank you 
for the opportunity to testify today.
    My name is Aubrey Layne. I am the Secretary of 
Transportation for the Commonwealth of Virginia. My testimony 
today will focus on my personal experience with public-private 
partnerships, or P3s, throughout my professional career.
    These deals have been praised in some circles as the 
solution to all our transportation problems and condemned in 
others as a corporate giveaway. The truth is much more complex 
and ultimately dependent on the nature of the project and the 
degree to which the government officials understand how these 
deals work and how to protect taxpayers.
    I have had a 30 year business career of running large 
operational companies. I have a degree in accounting and a 
Master's in Business Administration. I began my career as an 
auditor in the CPA for KPMG and finished as the president of a 
large real estate company.
    As Secretary of Transportation, I oversee seven 
transportation agencies that employ more than 10,000 staff and 
have a combined annual budget of over $6 billion.
    The toughest issues I face today involve funding projects, 
not engineering or environmental problems. That means I spend 
most of my time on resource allocation, financing, risk 
assessment, and operations.
    Fortunately, my past experience provides me with a 
foundation and knowledge for financing large scale construction 
deals.
    Public-private partnerships are complex transactions that 
can have significant implications for the public. It is 
important that we all understand them. Before I get into that, 
I, first, want to be clear that financing, whether public or 
private, helps leverage resources, but it is not a replacement 
for sustainable and stable public funding.
    The priority for Congress should be addressing the long 
term solvency of the Federal Highway Trust Program, fund growth 
in the program, and helping States fund our transportation 
needs regardless of mode.
    In Virginia, we have relied on several guiding principles 
regarding public-private partnerships. Our fiduciary 
responsibility is to the taxpayers. We need to deliver the best 
results for them.
    P3s are a helpful procurement tool where appropriate and 
when negotiated well. Government officials should consider all 
options, including public finance, before making decisions. We 
must ensure competition throughout the process. We must be 
transparent and accountable to the public and elected 
officials.
    I am an unabashed capitalist and a big believer in private 
industry. This belief is premised on true free market 
competition. Both parties entering a P3 must have a full 
understanding of the issues being negotiated. Unfortunately, 
that is not always the case.
    Our Commonwealth has long been recognized as a leader in 
P3s. Since 2007 we have closed five concession deals that 
transfer risk to the private sector. Collectively, these deals 
are worth more than $9 billion, more than $2.5 billion coming 
from private equity and approximately, $1 billion in public 
funds and the remaining from privately backed debt.
    In addition, we are currently negotiating a P3 contract for 
$1 billion in improvements right here in the I-95/I-395 
corridor.
    As I stated before, P3s are complex business transactions 
that are unlike any transaction in which a State DOT is 
typically involved. First, P3s are typically long in nature, 
long contracts. Normal transportation contracts expire when 
construction is done after a limited number of years.
    This provides the opportunity to evaluate outcomes, and if 
necessary, officials can make changes. This is not true with a 
50 year P3 concession contract with a private partner. Changes 
can often result in compensation to the private party. Getting 
these deals wrong can be very costly.
    These deals also can be some of the largest projects, as we 
have heard in previous testimony. The average P3 deal in 
Virginia is $1.8 billion compared with an average contract 
value of less than $3 million.
    For these reasons, it is imperative that decisionmakers 
understand the fiduciary responsibility of each party involved. 
The private sector is responsible to its shareholders and its 
investors. The public sector needs to make sure the public's 
interest is protected and advanced. The hard part is to see 
where these interests lie.
    In 2015 Governor McAuliffe asked me to evaluate our P3 
program. We were not getting the results we wanted. In fact, we 
had some pretty tough deals that were negotiated. I found out 
that these deals were not made with transparency and 
accountability, so we decided to start from scratch.
    What we found is the best way to protect the taxpayer is to 
make sure the private sector has to compete. We do not want to 
give anything away which means they need to beat our bottom 
line.
    We lay out our major business terms, what we want to 
accomplish, and we develop the public option. We do not go it 
alone; we have a steering committee to help us evaluate this. 
Then and only then if it makes sense do we invite the public 
and the private sector to compete along with us. If the private 
sector can beat our public option, then we enter into a P3 
process.
    It is important to note that we never take the public 
option off the table. This has worked very well for us in 
Virginia with our I-66 deal that we just did, a $3.1 billion 
deal. We ended up doing it with no public subsidy and an 
additional $500 million paid as a concession payment to the 
State up front.
    This is not free money. This is how the public toll funds 
will be used. This new process considers that users' fees 
benefit taxpayers.
    As you guys consider--as Congress considers potential 
infrastructure packages, I would strongly urge members to be 
careful not to create unintended consequences through new 
incentives for P3s.
    Many of the concepts being considered would provide 
incentives only available if a project is privately financed. 
This can undercut the published negotiating position.
    In closing, P3s have real promise to address certain 
transportation projects, but according to FHWA, there are only 
42 surface transportation projects across the country that 
involve private financing and 60 percent in five States: 
Virginia, Texas, Florida, California, and Colorado. Thirty-five 
States have never entered a single transaction involving 
private financing.
    I would encourage Congress to ask two questions if we 
consider incentives. How will it help deliver the best deal for 
taxpayers and whether it will create distortions that will hurt 
the public negotiating position.
    I have one last closing comment. I know you will hear a lot 
of people say there are a lot of barriers to P3s, but I 
strongly disagree. These are the same people who said, when we 
reformed our program, that it would kill it. It turned out that 
just was not true.
    Thank you very much for the opportunity to testify.
    [The prepared statement of Mr. Layne follows:]
    
    
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    Senator Inhofe. Thank you very much, Secretary Layne.
    Let us start with Director Gatz. You did not say much about 
the Driving Forward Program, the projects it would cover and 
why we developed this plan in our State of Oklahoma.
    Mr. Gatz. Mr. Chairman, the Driving Forward Program really 
consists of two parts. There are three projects that represent 
major reinvestment in our existing toll network to make sure it 
stays in good operational condition.
    One of those is a six lane project that is about 22 miles 
on the east end of the Turner Turnpike in Tulsa. The other in 
the Tulsa area that is an expansion project is the Gilcrease 
that I discussed in my testimony. In the Oklahoma City 
metropolitan area, in our efforts to try to continue to manage 
increasing traffic volumes and make sure we can continue to 
move people, goods, and services, we are expanding the John 
Kilpatrick Turnpike on the southwest side of Oklahoma City and 
introducing a new reliever route between Interstate 40 and 
Interstate 44, the Turner Turnpike in eastern Oklahoma County.
    Again, those expansion projects are really being predicated 
on developing congestion in the metropolitan areas and the 
increase in accidents we see occurring as a result of that. 
That is our effort to stay ahead of it, Mr. Chairman.
    Senator Inhofe. Thank you.
    Mr. Yarema, you heard the attacks on P3s. It has been my 
experience in conversations I have had with our new President 
that everything is on the table. It is going to take a lot of 
imagination, a lot of hard work, experience, and gifted people, 
and I would hesitate taking anything off the table. Is there 
anything you would like to say after the attack on P3s, your 
feelings about them?
    Mr. Yarema. Thank you, Mr. Chairman.
    I do not know that I would serious disagreement with what 
has been said. I agree with others and with you that P3s are 
not anymore a silver bullet to solve the big infrastructure 
challenges we have than conventional delivery is. We have 
problems with every delivery device.
    They do not produce new funding. That should not be the 
purpose of P3s. They are much more than financing devices; they 
are effective project delivery mechanisms in the right 
circumstances.
    I believe there is too narrow an understanding of what that 
term applies to and the potential value they offer to both 
urban and rural areas. There are two main types of P3s: those 
that require revenue streams and those that do not.
    Most commentators focus on the P3s that require revenue 
streams, like toll roads and manage lanes. These do raise the 
issues about rate setting and non-compete clauses and the 
limits on potential future activity by State DOTs.
    The other type of P3, known as an availability payment 
contract or performance contract, raises none of those issues. 
It does not involve toll revenues. In fact, it is the most 
common type of P3 in the U.S. and the global market today, but 
it is not widely appreciated.
    If I could, I would take just a second to explain the 
performance P3. It offers a different value proposition than 
conventional delivery. With conventional delivery, a State DOT 
or a regional transit agency tells a contractor not just what 
to do but how to do it. It compensates for the resulting work 
on a progress basis, and there is no warranty generally for the 
outcome.
    With a performance P3, you compensate the contractor only 
for the infrastructure performance over its useful life. It is 
akin to a super-warranty. The government generally makes no 
payments until the project is complete, and then the payments 
over the life of the project are subject to adjustment downward 
to the extent the infrastructure underperforms.
    The tool ensures that companies that design and build a 
project are on the hook for the long term infrastructure 
performance; they are required to bid life cycle costs, and 
they reward the contractor for innovative solutions.
    There is strong competition and rigorous bidding for these 
kinds of contracts. There are numerous examples in this 
country: the Ohio River bridges in Indiana, the Purple Line in 
Maryland, three major projects in Florida, and the Los Angeles 
World Airport is delivering $4 billion worth of these kinds of 
contracts today for its major project, just as examples.
    I respectfully suggest that the outcomes that an 
availability payment or performance payment P3 can produce are 
just as valuable in a rural setting as they would be in an 
urban contracting environment.
    Senator Inhofe. Thank you, Mr. Yarema. I appreciate that 
clarification.
    Senator Carper.
    Senator Carper. Thank you, Mr. Chairman.
    Again, welcome and thank you for your testimony which I 
think, for the most part, is illuminating. Tomorrow we are 
going to hold another hearing in this room, and the witness 
will be the Secretary of Transportation, Elaine Chao.
    I met with her several weeks ago and had a good meeting. 
One of the questions I asked of her was what do you think the 
Administration would like to do to fund transportation 
projects? I am a believer that if things are worth having, they 
are worth paying for. I also believe that a basic underlying 
concept for building transportation projects is those who use 
them, people and businesses help pay for them. That is sort of 
where I come from, Danville and Roanoke, Virginia, Mr. 
Secretary.
    The Secretary will be sitting tomorrow where you are. Just 
kind of lift yourself out of your chair and put yourselves up 
here with us, and it is tomorrow. You are here to give her 
advice on how to fund transportation projects.
    She seemed to think public-private partnerships made a lot 
of sense. I explained to her that I think in the last I do not 
know how many years, but for a number of years, if you add them 
all up, there are maybe 40 or 50. There are big ones; some are 
really big. There are several you said, but there is just not 
that many of them.
    What advice would you give her? Start, if you could, with 
our friend from Oklahoma, Tim Gatz.
    Tim Gatz, keep it within a minute. What advice would you 
give her for funding?
    Mr. Gatz. I think the most important thing is to understand 
there is going to have to be a lot of tools in our 
infrastructure toolbox. It is going to take a healthy 
combination of revenue and financing mechanisms.
    I think with public-private partnerships, we have to 
explore innovation that will begin to allow some of the smaller 
projects--but not the billion dollar projects--to potentially 
take advantage of those opportunities.
    I think, again, as stated many times here in the Committee 
meeting today, it is going to take a lot of BBs to be able to 
make that happen.
    Senator Carper. Not a lot of silver bullets but a lot of 
silver BBs.
    Mr. Yarema, what advice would you give the Secretary for 
funding transportation?
    Mr. Yarema. No. 1, leave existing programs in place. No. 2, 
find $200 billion in new funding for infrastructure. Allocate 
$100 billion of that to surface transportation, and then create 
the Infrastructure Incentive Initiative Program, I3, so you 
take that $100 billion, and you are able to leverage it into 
significantly more funding.
    You are able to find the efficiencies that life cycle cost 
approach delivery gives you, the efficiencies that modernizing 
business practices gives you, and the efficiencies that 
technology gives you. Then you can get a 5 to 7 times multiple 
in total infrastructure outcomes.
    Senator Carper. Thanks so much.
    Mr. DeGood.
    Mr. DeGood. Thank you.
    I think the No. 1 piece of advice I would give is that we 
have a longstanding tradition of a user pays model of 
infrastructure finance for most infrastructure sectors. That 
has served us incredibly well.
    I think unfortunately for a number of political reasons, we 
have drifted away from that, and it has made the political lift 
for members to try to find offsets to continue to fill the 
Trust Fund increasingly difficult. As that number grows with 
each successive round and surface bill, it gets harder and 
harder.
    I would think that we need to look at those sectors, 
whether ports, inland waterways, aviation, and surface 
transportation where we have a user fee structure in place and 
try to raise those fees to match inflation over the years where 
we have not.
    Senator Carper. Thank you.
    Secretary Layne.
    Mr. Layne. First of all, I would echo the current funding 
programs in place like Fast Lane, because P3s are a financing 
alternative, not a funding alternative.
    In terms of P3s, I want to make it clear. I am a big 
believer in them. I just think you need to understand the two 
different types of risk and how they need to be negotiated. I 
believe that is a pretty steep learning curve in some of the 
States in terms of how to evaluate construction, operational 
and particularly financial risk.
    When you talk about concessions, that is truly the risk you 
are trying to pass on. If you think about equity, in any deal 
you do, that is the most significant and most costly part of 
the capital stream in terms of that.
    Quite frankly, it has been attracted because of the low 
interest public debt programs that are out there. That is what 
has really enticed many of them to invest.
    I would certainly encourage the Secretary, if we are going 
to continue that, to have some type of programs to help States 
gear up for the use of these tools. Certainly I believe outcome 
based results are needed. In the Commonwealth of Virginia, we 
prioritize now, with our limited resources, through a process 
we call Smart Scale. It is based on outcomes, not so much 
inputs but outcomes. Are we reducing congestion using land use?
    I have found in my professional career the better way to 
get more money is to use what you have more effectively and 
more efficiently. Certainly, I think a prioritization program 
along with that would be shortening the periods of 
environmental work and what is needed and helping these 
projects come to fruition.
    That would be my advice to the Secretary.
    Senator Carper. Thanks so much. We will see you tomorrow.
    Senator Inhofe. Senator Fischer.
    Senator Fischer. Thank you, Mr. Chairman.
    Like many of my colleagues, I believe in the importance of 
funding our nation's infrastructure. Reliable infrastructure 
represents a critical investment in advancing safety and also 
commerce.
    The Highway Trust Fund has served to equitably distribute 
funds to all States, rural and urban, and is the lynchpin of 
our transportation system. As many of you are aware, we are 
looking at a shortfall of over $100 billion that we will face 
in the 5 years following the FAST Act. I happen to have a bill 
that will handle that, Mr. Chairman.
    However, Mr. Gatz, can you elaborate on how important it is 
that we have certainty in the formula funding to your State's 
transportation systems? When it comes to maintaining our roads 
and bridges, is there really any substitute to that critical 
apportioned funding that we have?
    Mr. Gatz. Senator, I would tell you in many cases, there is 
no substitute, there is no alternative, especially for a State 
like Oklahoma. We have to have funding to be able to maintain 
the system that we have.
    Again, it is all predicated on inspection, understanding 
what our needs are, and then having a very carefully crafted 
investment strategy to meet those needs. That investment 
strategy is fiscally constrained based on what resources we 
believe we are going to have available.
    Again, there will have to be continued investment at the 
Federal level to be able to manage our infrastructure for the 
future.
    Senator Fischer. I like that you used the term 
``investment'' because that is what this is. It is not going to 
be a stimulus; it is not really job creation, but it is an 
investment in the future. When you look at the strategy for 
that investment, it really, I believe, needs to take place at 
the State and local levels so you can have those stakeholders 
come together and decide on the priorities that meet that 
strategy you are looking at for your State. Do you agree with 
that?
    Mr. Gatz. I would agree. The States are typically held 
accountable by the folks that reside in those States. Again, we 
are responding. We have a responsibility to those constituents 
to be able to explain our investment strategy and make sure 
they understand how we are reinvesting in the network to make 
sure its operationally as good as it can be.
    Senator Fischer. It is important to involve constituents 
and the people in our States in these decisions.
    Mr. Gatz. Absolutely.
    Senator Fischer. Mr. Yarema, you talked about evaluating 
infrastructure investments based on their performance. Can you 
elaborate on what performance based standards would look like? 
Do you believe these could be applied to publicly funded 
projects?
    Mr. Yarema. I would be happy to. In an availability payment 
P3 or a performance P3, in a conventional project, the 
Government basically comes up with standards and specifications 
that it applies prospectively where they serve as a proxy for 
outcomes they want to achieve. They mandate how a project is to 
be built, the manner in which it is to be built, and the means 
in which it is to be built.
    In a performance based P3, the contractor is held to 
contractual requirements of the infrastructure's long term 
performance. They are only paid to the extent that performance 
is actually retrospectively secured.
    By performance, we mean that the infrastructure is 
available, it is safe, it is meeting all of its maintenance 
criteria, and on many other standards set forth, and it is 
potentially applicable to apply environmental standards.
    Under NEPA and in Federal permits, there is a need to have 
mitigation requirements, but whether those mitigation 
requirements actually achieve the desired environmental 
outcomes is speculative. If it is applied in a performance 
contract, it is contractually required.
    That is the difference in a P3 environment as opposed to a 
conventional contracting environment.
    Senator Fischer. Thank you.
    Secretary Layne, the FAST Act requires States to develop 
freight plans in order to receive Federal funding. My State, 
Nebraska, is in the process of developing a very comprehensive 
freight plan.
    Can you talk about the importance of ensuring we have a 
thorough strategy to address the growing movement of freight 
across this country?
    Mr. Layne. Yes. Thank you very much for the opportunity to 
respond to that.
    We, in Virginia, just received one of the largest FAST lane 
grants for our Atlantic Gateway project, a $1.4 billion 
project, between Richmond and the I-95 corridor up to northern 
Virginia.
    It consists of $1.4 billion, $165 million in a Federal 
grant, but supported by $565 million of private investment and 
$710 million coming from the State of Virginia to deliver these 
projects. A big part of that was freight.
    We teamed with our partner, CSX, one of the most congested 
freightways in the country. It is very important not only for 
freight but passenger traffic. We certainly support the Port of 
Virginia having double stacked trains coming up through that 
corridor.
    Having a freight program is actually helping not only 
freight, but other modes of transportation, taking people off 
the highway by allowing passenger trains. The freight 
improvements also helped our passenger movements.
    Senator Fischer. That intermodal connection is very, very 
important. I am glad to hear you are doing that.
    Mr. Layne. Yes, it is extremely important.
    Senator Fischer. Thank you.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Fischer.
    Senator Duckworth.
    Senator Duckworth. I thank the Ranking Member, and I thank 
the gentleman from Rhode Island for his generosity. I want to 
thank our witnesses for participating in this very important 
conversation.
    Mr. DeGood, the details of the President's $1 trillion 
infrastructure investments are still unavailable to anyone 
outside of the Administration. However, his budget blueprint 
reduces transportation funding in very troubling ways.
    What little we know about the President's plan suggests 
that there is actually no trillion dollar investment. Rather, 
he will rely on financing gimmicks that have limited 
applicability in most of the country.
    I tend to agree with your view that financing mechanisms 
are mostly limited to urban and mega-project applications. Your 
testimony suggests that the real constraint facing State and 
local government is lack of actual dollars, not a lack of 
access to financing markets. Would this be a correct assessment 
of your testimony?
    Mr. DeGood. Absolutely, and I think one of the more 
disappointing aspects that so much of the conversation from 
this Administration has been around the possibility of tax 
credits for equity investors, which I think is both a huge 
addition to the budget deficit if it were enacted, and also 
does not really deliver the benefits communities need. We need 
to get dollars into the hands of project sponsors.
    I think one of the things unappreciated about this tax 
credit program is that, for the most part, it is not something 
investors are looking for. In my conversations with folks in 
Wall Street firms, they have repeatedly said to me people bring 
us money because they want it put into projects and want it 
earning a return. What we do not need is 82 cents back on the 
dollar.
    I think if Congress were to move forward with this sort of 
tax credit scheme, we would see it have almost no net effect on 
overall construction, and it would deliver almost no benefits 
to the vast majority of communities out there.
    We need to bring Federal dollars to the table. I think 
there is a certain virtuous cycle from that which is when State 
and local officials know the Federal Government is acting as a 
partner, they are more likely to take on that political risk to 
go out and raise their own dollars.
    Senator Duckworth. Otherwise there is an interesting 
history with public-private partnerships. The CREATE Program in 
Chicago, which is a partnership between the Federal Government, 
the State of Illinois, the city, and the freight rail industry 
with their hard dollars, is an extremely effective and balanced 
effort to address Chicago's freight rail challenges.
    In fact, the nation's freight rail challenge is a logjam 
there in Chicago, but it is not a traditional P3 mechanism. It 
does not shift risk from one entity to another. However, 
Chicago's parking meter and Skyway deals highlight how 
difficult it can be to evaluate public assets to ensure 
taxpayers get a good deal.
    All of these examples are in the context of a challenge of 
large urban infrastructure. I am interested in learning more 
about opportunities for rural communities. What financing 
opportunities are best suited for rural communities where 
access to private investment is limited, Mr. DeGood?
    Mr. DeGood. I think one of the potential benefits for rural 
communities in this conversation about public-private 
partnerships is that any urban mega-project that is sort of 
taken care of as a result of a P3 can free up dollars that the 
State has, general tax dollars that the State has to do smaller 
projects that just do not fit with that kind of procurement and 
financing model.
    I think it is important for us to be sensitive to the fact 
that rural communities and small towns just do not have the 
same tax base. They also do not have the same ability to 
generate user fees because there is less travel demand on the 
roadways.
    No matter what plan we come up with, we have to make sure 
to set aside an appropriate amount of money for rural 
communities and recognize their unique needs.
    Senator Duckworth. Thank you.
    Secretary Layne, as you noted, most public assets are owned 
by State and local jurisdictions. I am concerned about the 
ability of States and local governments to assess and implement 
complex financing opportunities and also protect local 
taxpayers at the same time.
    As your testimony suggests, VDOT's I-66 expansion project 
could have gone down a very long path due to an original 
analysis that was flawed. Relying on that original analysis 
would likely have led to a very bad deal for Virginia 
taxpayers.
    Secretary Layne, how can States and municipalities avoid 
similar circumstances? How can we better prepare to assess 
complex financial deals that ensure taxpayers get the best 
deal? What can the Federal Government do to help in this 
effort?
    Mr. Layne. Senator, I do agree with that assessment. When 
we came into office, the analysis that was put forth by the 
department suggested that we were going to need $1 billion in 
public subsidy. It was not going to support any multimodal 
solutions in the area or additional improvements.
    What we did, which I think is the key going forward, was to 
develop the public option. If you are going to negotiate with a 
third party, you need to understand what it is going to cost 
you before you begin negotiating.
    We did our public option. We said it would only take $600 
million in public subsidy and substantial moneys, over $800 
million for multimodal improvements. As it turned out, true 
competition, that is the other key besides having a public 
option on the table, is what resulted in the great deal for 
taxpayers.
    Unless you have true price discovery, which is through 
competition, you cannot determine what actually has a bidder to 
make an offer. It could be other factors other than the deal, 
competition, a competitor being in control of the whole market, 
maybe a lower cost to capital that we do in the United States. 
These are big multinational companies.
    The two things we can do to help the States negotiate these 
deals is have a public option and have true competition. I 
believe the Federal Government, in helping that, could help us 
educate the States in how we go forward.
    Let me push back on one thing. Every P3 does have a revenue 
stream. Availability payments do not have a specific one 
connected to a project, but it still has to be a revenue 
stream. How else are you going to pay back the third parties?
    There is some value for money or the options given up if 
that money is used for something else already. In the State of 
Virginia, that would be considered debt because if we do not 
pay for a project within our construction period, it is 
considered debt.
    I do think availability payments do help in some areas in 
that, but they are dedicating a revenue stream that could go 
somewhere else. There are some lost opportunities in those 
investments.
    Those are the things I would say, the public option and 
having true competition in these deals.
    Senator Duckworth. Thank you.
    Senator Inhofe. Thank you, Senator Duckworth.
    Senator Ernst.
    Senator Ernst. Thank you, Mr. Chairman.
    Republicans and Democrats are often at odds over a number 
of things, but when it comes to infrastructure, we generally 
have bipartisan agreement. That gives me hope. I think coming 
up this year, really the Federal Government does have a very 
important role to play in this issue.
    Along with ensuring our national defense, which I think is 
very important, I believe building and maintaining our nation's 
infrastructure should also be a top priority for our Federal 
Government.
    Director Gatz, you have served at the Oklahoma Turnpike 
Authority for nearly 30 years. Thank you very much for your 
service.
    In your testimony, you stated, ``Until recently, no public-
private partnership opportunities really made sense for 
Oklahoma.'' Oklahoma has almost 1 million more people than the 
State of Iowa. Its largest metro area in Oklahoma, Oklahoma 
City, has more than twice the population of our capital city of 
Des Moines.
    If to this point, a public-private partnership has not 
worked for Oklahoma, under what circumstance do you see a 
public-private partnership working for the State of Iowa?
    Mr. Gatz. Thank you for the question, Senator.
    I think as much as we have engaged in discussions with a 
lot of different governmental partners, whether that be the 
city of Tulsa, the Oklahoma Department of Transportation, Tulsa 
County, and others, on the Gilcrease Project, we are trying to 
find ways to leverage resources in a project of some size but 
certainly not a mega-project, to be able to create an 
opportunity for a private party to come in and help with only 
the construction of that project.
    Again, we think we can create a very competitive 
environment that would facilitate that investment. It is a bit 
unique. Again, we have some question marks we are going to have 
to resolve, but we simply--I would say that Iowa has, have 
never had the right project to be able to try to accomplish 
this.
    Quite frankly, we have been talking about the Gilcrease 
expansion now for about 9 years with these partners. We are 
only now to a point where we feel we have an opportunity to 
move forward with it.
    Senator Ernst. Every circumstance is very, very different, 
and making sure it is not one size fits all, I think is really 
important.
    I thought it was interesting that Mayor Garcetti mentioned 
Los Angeles and their county of 10 million people. My county 
back home, Montgomery County, is 10,000 people, very different 
circumstances.
    Director Gatz, you also mentioned in your testimony that 
tolling should be recognized as a long term and sustainable 
transportation revenue mechanism. My concerns with tolling are 
a couple different points.
    One is how many roads are we going to toll, and at what 
point do we start inhibiting movement of travelers? This is 
very true in those rural areas. Oklahoma has the same minimal 
rural areas where the tax base is really pretty low, and every 
penny, of course, in those families' budgets count.
    Second, wouldn't we be forcing people to go off onto those 
secondary roads that maybe have not been built for heavy 
traffic?
    Mr. Gatz. Most importantly, I think you have to have a very 
careful vetting process in place to make a decision about 
tolling. It cannot be arbitrary. Again, where you have critical 
transportation needs that are developing that are simply 
otherwise going to go unmet without a resource commitment, 
certainly with a lack of traditional transportation investment 
revenue streams, we think that tolling is a viable option.
    In Oklahoma, that is how we have used tolling, where we 
have had critical needs that we see all the indicators 
developing, whether that is accidents, congestion, access 
issues. We have been able to invest and use toll roads to meet 
those needs and have been pretty successful in doing that.
    Again, that cannot be arbitrary. You have to have the right 
set of circumstances and very careful consideration and 
vetting.
    Senator Ernst. I appreciate that. Again, the one size for 
all does not fit all kind of approach and thorough vetting. 
Thank you very much.
    Thank you to all our witnesses.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Ernst.
    Senator Whitehouse.
    Senator Whitehouse. Thank you, Mr. Chairman.
    I am actually optimistic and hopeful that we are going to 
be able to get something done on infrastructure. You have been 
a great Chairman on infrastructure projects before. We have 
worked in terrific bipartisan fashion. We do not always agree 
on everything, but I think this is a great place to get things 
done.
    First all, thank you for that, Mr. Chairman.
    Secretary Layne, although it is not one size fits all, 
although you have to be able to adapt P3s to different 
projects, are there certain red flags that we should look out 
for that should ordinarily be a warning sign for people trying 
to protect the taxpayer in P3 deals? If there are those red 
flags, which ones would you highlight for us?
    Mr. Layne. First, let me say that you never can 
institutionalize risk. Every deal is different. For instance, 
here in the Commonwealth, the risk for extending new lanes on 
Interstate 66 in an existing right-of-way is a lot different 
than sticking a tube underneath the Elizabeth River for a new 
tunnel.
    To answer your question, it really gets down to what risks 
are in each particular project. They primarily fall into three 
areas: construction risk, operations risk, or financing. That 
is really where we get into the concessions, and most people 
think of P3s where we are transferring all those risk to the 
third parties.
    The only way I know to be able to mitigate that is to, 
first of all, understand what the project is you want built and 
what it would cost the entity that owns the project, in our 
case, the State, so that you, one, understand those risks and 
when you start talking about negotiating those risk away, what 
they may be a value to in terms of the deal.
    Senator Whitehouse. There is no easy red flag. You just 
have to go in with your heads up and knowing that there are 
smart people on the other side who are interested in getting 
money out of taxpayers?
    Mr. Layne. That is correct. That is not because they are 
not good citizens. That is their fiduciary responsibility. As a 
trustee at a real estate corporation, fiduciary responsibility 
meant a great deal to who I was representing. That is what we 
need to understand. They are good citizens, but they are 
fiduciaries.
    One red flag that I have found, this is my first time in 
the public arena, is when you have government, particularly a 
Governor as we do, a one term Governor, standing up and saying 
this is the most important project, and I am going to deliver 
this project before I leave office, that undercuts the public's 
ability to negotiate the terms of the deal.
    That would be a red flag, and my hat is off to Governor 
McAuliffe for allowing us to walk away from a bad deal. That is 
why it is important to keep the public option on the table. Not 
walk away from the project, but walk away from a bad deal.
    As I said, I was, in the private sector, an unabashed 
capitalist and believe in private industry, but you do 
understand where the fiduciary relationships are. That is what 
they are going to do.
    Senator Whitehouse. Let me turn to another topic that I 
think also relates to Virginia. Your State is a coastal State, 
rather like Rhode Island. We are seeing very extraordinary 
infrastructure needs emerging along our coast as we are seeing 
very extraordinary sea level rise projections coming from our 
local scientists, national scientists, NOAA, coastal resources 
folks, and so forth.
    You are seeing this down at Norfolk Naval Station, which is 
getting all sorts of trouble. You are seeing this down at 
Hampton Roads. Are you doing anything in particular, or should 
we do anything in particular looking at infrastructure to 
address that specific problem of new risks to coastal 
infrastructure whether it is wastewater, roads, coastal 
defenses, or military bases? The sea does not like any of that 
very much. It takes it all over. Are you focusing in any 
particular way on that threat?
    Mr. Layne. You are correct. It is a significant threat 
because it is not just sea level rise; the ground in those 
coastal areas is also sinking because of taking out 
groundwater, and they are compressing it.
    The answer is yes, but not enough. Particularly on our new 
projects, that is one part of the big scoring, the resiliency 
or the environmental impact as we develop new projects. 
However, we have also had to devote resources to what we call 
our State of Good Repair because we do have significant assets 
subject to that, raising the roads or whatever we have to do in 
those areas. It is far short of the needs.
    I have seen that localities have been doing much more, and 
we assist them. The city of Norfolk got a $100 million grant 
from the Federal Government. They have been doing a lot, and we 
have been assisting them.
    We do not have in our budget the ability to take care of 
all of the resiliency and the sea level rise impacts on the 
State of Virginia.
    Senator Whitehouse. Thank you very much.
    Thank you for the extra 30 seconds, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Whitehouse.
    Senator Cardin.
    Senator Cardin. Thank you, Mr. Chairman.
    I really thank all the witnesses. I have found this 
presentation to be very helpful.
    I want to drill down a bit more on the recommendation that 
came in on the I3, that we change the way we configure the 
Federal partnership in infrastructure to reward, place an 
incentive for leveraging with either more local government 
support and/or private sector, which was one leg of it.
    The other two legs, I will get to in a moment, deal with 
technology and dealing with maintenance. I think both of those 
are very important issues we should talk about at the national 
level.
    Let me talk about leveraging particularly private sector 
because I thought, Mr. DeGood, you raised a very important 
point about accountability and so forth and private sector 
participation.
    Secretary Layne, I was listening to your testimony pretty 
carefully. I was trying to figure out where you come down on 
this. It sounds like you want to be left alone. Where you want 
to do public-private partnerships, let the States do it, but do 
not put any incentives or restrictions at the national level. 
Let the States figure it out. Am I reading you correctly?
    Mr. Layne. Yes, sir. I do believe the current tools we have 
in place, TIFIA and the Government programs, there could be 
things to enhance that. In terms of tax credits or giving some 
type of bonus for incentivizing the project be done as a 
public-private partnership, that puts the factors in the deal 
that the other side, the private sector, is going to know they 
are there, too, and they will figure out a way to make sure 
they use them and how they can benefit from that.
    I am not saying that is wrong, but I am pointing out you 
may not get the dollar for dollar increase the Federal 
Government would be spending, particularly in tax credits and 
certainly with the incentives in that.
    Yes, we have seen no problem attracting private investment 
in the Commonwealth of Virginia for those projects that lend 
themselves to P3s.
    Senator Cardin. Mr. DeGood, let me ask you a question. Is 
there anything in the current Federal authorization and 
implementation of our transportation programs that causes you 
heartburn as it relates to private partnerships?
    Mr. DeGood. I do not think there is anything in the current 
Federal program that gives me heartburn with respect to P3s. I 
think the biggest shortcoming is that we do not have aggressive 
enough performance metrics when it comes to holding States and 
metropolitan regions accountable for how they expend the vast 
majority of money which the Federal Government hands out 
through formulas.
    I agree with the Secretary's point that you have to look at 
this from the perspective of performance, and that should 
inform your project selection decisions. I would also say I 
think we need to push substantially more money down to 
metropolitan regions. I think too much of the decisionmaking 
authority currently rests with State DOTs.
    I think it is a natural outcome of being a State DOT 
employee that when what you look at every day is a State 
highway network, you tend to think the solution to the State's 
mobility challenges is going to rest with expansion of the 
State highway network, even if there are other lower cost or 
more environmentally sustainable approaches or things that just 
provide more transportation options for local families.
    I think more money to locals and more performance 
accountability at the State level is important.
    Senator Cardin. That is helpful.
    In my opening statement, I strongly supported the 
flexibility for local governments. I am proud of the role that 
Senator Cochran and I played in preserving the transportation 
alternative programs with the help of this Committee so that we 
do have that flexibility under the current system. We are going 
to fight to maintain that.
    Let me go to the other two issues, technology and 
maintenance, which I strongly support. I think we have 
neglected maintenance. Everyone likes to cut ribbons and they 
do not like to preserve roads and bridges.
    How do we, at the national level, provide the right 
incentives for advancing technology and dealing with life cycle 
maintenance?
    Mr. Yarema. I would be happy to take a crack at that.
    Again, we start with the proposal that base programs be 
kept in place and new money be handled differently. Handling it 
by way of incentives is a new way of establishing a Federal, 
State, local, and private partnership.
    One of those incentives should be preserving assets to the 
end of their life and doing effective maintenance. Let us draw 
a line in the sand and say we are not going to build anything 
new, we are not going to reconstruct anything unless we make 
that commitment.
    One of the ways of making sure that will take place is 
through an availability payment P3. The contract will obligate 
the contractor to achieve life cycle costs and useful life 
length by contract. That is a way of achieving it with 
certainty.
    The truth about the Federal-State relationship in 
transportation, at least, is that the States and localities own 
the assets. The Federal role is to fund, to provide TIFIA 
financing, and to regulate. Hopefully, what we can do is add an 
incentive, a stronger incentive, as a Federal role as it 
evolves.
    Senator Cardin. Does anyone else want to comment on that?
    Mr. Layne. If I may, yes. In Virginia, more than half of 
our transportation dollars, Federal and State, go to 
maintaining the roads. In fact, we just added a new law that 
requires 45 percent of our construction moneys goes into what 
we call State of Good Repair. Those assets that you cannot pave 
anymore or just paved, you have to rebuild them, but you are 
not adding capacity.
    Senator Cardin. Is there something we can do at the 
national level to encourage States to meet their commitments on 
life cycles?
    Mr. Layne. You can probably tell I am not an engineer. I am 
not enlightened or encumbered by that degree. I look at things 
from a logistical standpoint or from a pragmatic business 
perspective.
    Certainly rating performance of your current assets, which 
we do in the Commonwealth, I believe, should be part of the 
Federal program. Are we maintaining assets to a standard, 
particularly interstate systems and what have you and that they 
make sure, like we do, that we are maintaining those.
    Senator, I would suggest that there be some performance 
output based results in the moneys the Federal Government 
passes on to the States.
    Senator Cardin. That is a good suggestion.
    I would make this final comment, Mr. Chairman. In the days 
when we used to have congressionally designated funding, better 
known as earmarks, I have never known a legislator to request 
money for maintenance, but we do request for new roads and new 
projects because we like to see new projects.
    It is a tough political sell when you are dealing with 
maintenance, but it is our responsibility to make sure that is 
built into the accountability and into the way we develop our 
partnership.
    I look forward to your input as we develop the next 
infrastructure authorization bill to see how we can be more 
effective in preserving our transportation infrastructure in 
this country, and by the way, also to deal with technology. I 
think that is an emerging area that is not always given the 
priority that it needs.
    Thank you all for your testimony.
    Senator Inhofe. Thank you, Senator Cardin.
    I thank all the witnesses.
    We started in the opening session talking about the 
successes we have had over the last couple years. It has been 
rewarding because people think things get bogged down in 
political rhetoric, and nothing gets done. That is not the case 
with this Committee. We actually do things.
    I am optimistic. I have heard it from the Administration 
that we are going to get aggressive and do the things we should 
have done before.
    I do look wistfully back at the old days when our biggest 
problem was too much surplus in the Trust Fund, but those days 
will never come back.
    I appreciate very much the expertise expressed by the 
witnesses today.
    I am going to adjourn, but this happens to be the 30th year 
of the partnership program, one in which I was involved 30 
years ago this year. We are going to be holding the celebration 
in this office building in about an hour. I would hope all of 
you who were kind enough to show up will leave as quickly as 
you got here.
    [Laughter.]
    Senator Inhofe. I appreciate that very much.
    We are adjourned.
    [Whereupon, at 4:50 p.m., the Subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
    
    
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