    [Senate Hearing 115-146]
    [From the U.S. Government Publishing Office]

      TRANSPORTATION, HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
                      APPROPRIATIONS FOR FISCAL YEAR 2018

                                  ----------

                            WEDNESDAY, MARCH 8, 2017

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10:02 a.m., in Room SD-192, Dirksen
    Senate Office Building, Hon. Susan Collins (chairman)
    presiding.
        Present: Senators Collins, Boozman, Daines, Hoeven, Reed,
    Leahy, and Coons.

                          DEPARTMENT OF TRANSPORTATION

    STATEMENT OF HON. DAVID BERNHARDT, COMMISSIONER, MAINE
                DEPARTMENT OF TRANSPORTATION, PRESIDENT,
                AMERICAN
                ASSOCIATION OF STATE HIGHWAY AND
                TRANSPORTATION
                OFFICIALS

                   opening statement of senator susan collins

        Senator Collins. The hearing will come to order. Today, our
    subcommittee is holding this hearing on the state of our
    Nation's transportation infrastructure and potential funding
    and financing options to help meet the long-term transportation
    needs of our Nation.
        I am very pleased to be joined by Senator Jack Reed, who
    returns to the subcommittee as our ranking member. We have
    worked very, very closely together, and I am just delighted
    that he did not abandon me and go to some other subcommittee. I
    also want to also welcome our other subcommittee members who
    have joined us today, as well as our panel of witnesses.
        We are joined by witnesses Dave Bernhardt, who is the
    Commissioner of Maine's Department of Transportation, and he
    also serves as President of the American Association of State
    Highway and Transportation Officials, or AASHTO, as I am told
    it is called. Jim Tymon, the Chief Operating Officer of AASHTO
    is also with us.
        Todd Hauptli, the President and CEO of the American
    Association of Airport Executives, will be providing an
    important perspective, as well as Ed Mortimer, the Executive
    Director of Transportation Infrastructure at the U.S. Chamber
    of Commerce, and we are delighted that Beth Osborne, the
    Director of Technical Assistance for Transportation for
    America, or (T4A), is also with us.
        The impetus for today's hearing, not surprisingly, is
    President Trump's intention to invest $1 trillion in our
    Nation's infrastructure over the next 10 years. I doubt that
    there is a person in this room who would dispute that our
    transportation system is in disrepair and requires additional
    investments.
        The American Society of Civil Engineers (ASCE) has rated
    our roads, transit, and aviation systems as a ``D,'' and our
    bridges a as ``C+.'' ASCE will be releasing its updated grades
    tomorrow.
        According to Airports Council International, our airports
    have nearly $100 billion in infrastructure needs over the next
    5 years to accommodate growth in passenger and cargo
    activities.
        For our Nation's highways and bridges, the Department of
    Transportation's Conditions and Performance report also
    identifies a backlog of unmet needs that approaches $840
    billion.
        We have made marginal improvements in reducing the
    percentage of bridges that are either structurally deficient
    and functionally obsolete, but the percentage of highways rated
    as ``poor'' quality has increased, particularly in rural areas.
        The DOT report projects that current funding levels are
    only sufficient to maintain our existing infrastructure. In
    order to address the $836 billion backlog and meet the future
    needs over the next two decades, all levels of government
    combined would be required to increase spending by 36 percent.
        Deficient roads have a real cost. They are costing
    motorists in my home State of Maine $1 billion annually in
    vehicle damage, congestion delays, and traffic crashes. In
    Portland, those costs can exceed $1,000 per motorist. You only
    have to drive on Maine roads during the spring and hit all
    those potholes to know what I am talking about, despite the
    great efforts of Maine's DOT, I hasten to say.
        So, it should be no surprise that according to a recent
    poll, 87 percent of American voters support increasing Federal
    spending on roads, mass transit, and other infrastructure.
        The question is how do we pay for this much needed
    investment. The average American now pays less than $160 per
    year in Federal gasoline and diesel taxes, virtually unchanged
    since the last gas tax hike in 1993.
        In the interim, many states have raised their gas taxes,
    which makes it more difficult for the Federal tax to be
    increased, given the combined impact on consumers, particularly
    those in large rural states like mine, who have no choice but
    to drive long distances to get to work or to doctor
    appointments.
        As a result of the inadequate gas tax revenues to support
    the Highway Trust Fund, Congress has been required to transfer
    $143 billion in General Fund revenues since 2008, and will
    likely once again be required to plug the hole in fiscal year
    2020 if we do not find a long-term solution now. Of course,
    with any fiscal problem, the longer you delay addressing it,
    the more difficult it becomes.
        The challenge that this Administration and Congress faces,
    as previous ones have faced, is finding a way to pay for much-
    needed infrastructure spending without increasing taxes on
    those who are least able to afford them or using budget
    gimmicks that simply lead to more deficit spending and add to
    our Nation's ever-growing debt.
        It is important that we explore all potential sources of
    revenues that would allow us to invest in our infrastructure.
    Many states are testing a vehicle miles traveled or VMT, user-
    fee model, while others have switched to a sales tax.
        The FAST Act provided funding for states to pilot
    alternative funding mechanisms to allow certain states to test
    these concepts in the real world.
        Regarding our Nation's airport infrastructure, it is
    critical to recognize that airports play a pivotal role in
    moving people and goods, and are a great economic driver for
    our communities.
        In Maine alone, airports directly or indirectly generate
    $2.9 billion in economic activity, while employing more than
    26,000 people in jobs related to aviation. These astounding
    numbers show just how important a role airports play.
        Improving our Nation's highway and airport infrastructure
    will also require us to look to new ways to finance projects
    such as public/private partnerships, tolling, expansion of the
    TIFIA loan program, and private activity bonds that are
    typically more useful in large urban areas.
        However, the Department of Transportation at the Federal
    level has been slow to fully utilize these programs, and I hope
    that our witnesses will offer us ideas on how to cut red tape
    in order to move the available private financing, loans, and
    tax credits out the door faster.
        For rural areas similar to Maine, what has worked well are
    competitive grant programs, such as the Transportation
    Investment Generating Economic Recovery (TIGER) Program, which
    allows DOT to prioritize funding to projects that are essential
    to our transportation network but may otherwise not be funded.
        The Airport Improvement Program, or AIP, also provides the
    means to fund critical investments in our Nation's airport
    infrastructure through the collection of Passenger Facility
    Charges or PFCs.
        Now, previous Administrations had proposed increasing the
    cap on the Passenger Facility Charges, but it has been
    accompanied by lowering the overall AIP funding substantially,
    and that has generated opposition in Congress.
        Working with the new Administration, we in Congress have a
    great deal of work to do in developing an infrastructure
    project to promote economic development, improve the transport
    of people and products, and create jobs, and our biggest task
    is going to be figuring out how to pay for it.

        [The statement follows:]
                 Prepared Statement of Senator Susan M. Collins
        Today, our subcommittee is holding this hearing on the state of our
    nation's transportation infrastructure and potential funding and
    financing options to help meet the long- term needs of our nation. I am
    very pleased to be joined by Senator Jack Reed, who returns as the
    Subcommittee's Ranking Member. I want to welcome our panel of
    witnesses. We are joined today by:

      --Dave Bernhardt, the Commissioner of Maine's Department of
            Transportation, who is also currently serving as the President
            of the American Association of State Highway and Transportation
            Officials, or AASHTO;
      --Jim Tymon, the Chief Operating Officer of AASHTO;
      --Todd Hauptli, the President and C.E.O. of the America Association
            of Airport Executives;
      --Ed Mortimer, Executive Director of Transportation Infrastructure at
            the U.S. Chamber of Commerce; and
      --Beth Osborne, Director of Technical Assistance for Transportation
            for America, or T.4.A.

        The impetus for today's hearing is the Administration's intention
    to invest $1 trillion in our nation's infrastructure over the next 10
    years. I believe there is not a person in this room who would dispute
    that our transportation system is in disrepair and requires additional
    investments.
        The American Society of Civil Engineers (A.S.C.E.) has rated our
    roads, transit, and aviation systems as a ``D'', and our bridges are
    rated ``C+''. A.S.C.E. will be releasing its updated grades tomorrow.
        The Department of Transportation's ``Conditions and Performance''
    report also identifies an $836 billion backlog of unmet needs for our
    nation's highways and bridges. We have made marginal improvements in
    reducing the percentage of bridges that are structurally deficient and
    functionally obsolete, but the percentage of highways rated as ``poor''
    quality has increased, particularly in rural areas that have lower
    travel volumes.
        The report projects that current funding levels are only sufficient
    to maintain our existing infrastructure. In order to address the $836
    billion backlog and meet the future needs over the next two decades,
    all levels of government combined would be required to increase
    spending by 36 percent.
        Deficient roads are costing motorists in my home state of Maine $1
    billion annually in vehicle damage, congestion delays, and traffic
    crashes. In Portland, these costs can exceed $1,000 per motorist. So it
    should be no surprise that according to a recent Quinnipiac University
    poll, 87 percent of American voters support increasing Federal spending
    on roads, mass transit, and other infrastructure. The question is: how
    do we pay for this much-needed investment? The average American pays
    less than $160 per year in Federal gasoline and diesel taxes, virtually
    unchanged since the last gas tax hike in 1993. In the interim, many
    states have raised their gas taxes, making it more difficult for the
    Federal tax to be increased given the combined impact on consumers. As
    a result of inadequate gas tax revenues to support the Highway Trust
    Fund, Congress has transferred $143 billion in general fund revenues
    since 2008 and will likely once again be required to plug the hole in
    fiscal year 2020 if we do not find a long-term solution now.
        The challenge that this Administration faces, as previous ones have
    faced, is finding a way to pay for the much-needed infrastructure
    spending without increasing taxes on those who are least able to pay
    them or using budget gimmicks that simply lead to more deficit spending
    and add to our nation's ever-growing debt.
        I think it is important that we explore all potential sources of
    revenues that will allow us to invest in our nation's infrastructure.
    Many states are testing a vehicle-miles-traveled, or V.M.T., user-fee
    model, while others have switched to a sales tax. The FAST Act provided
    funding for states to pilot alternative funding mechanisms to allow
    certain states to test these concepts in the real world.
        Regarding our nation's airport infrastructure, it is critical that
    we remember that airports play a pivotal role in moving people and
    goods, and are a great economic driver for communities. Upgrading and
    modernizing our nation's airports are crucial to any infrastructure
    spending proposal.
        In Maine alone, airports directly or indirectly generate over $2.9
    billion in economic activity while employing over 26,000 people in jobs
    related to aviation. This astounding number shows just how important a
    role airports play in local communities.
        Improving our nation's highway and airport infrastructure will also
    require us to look to new ways to finance projects, such as public-
    private partnerships, tolling, expansion of the TIFIA loan program, and
    private activity bonds that are typically more useful in large urban
    areas. However, the Department of Transportation has been slow to fully
    utilize these programs, and I hope our witnesses will offer ideas on
    how to cut the red tape in order to move the available private
    financing, loans, and tax credits out the door faster.
        For rural areas similar to Maine, what has worked well are
    competitive grant programs, such as TIGER, which allows D.O.T. to
    prioritize funding to projects that are essential to our transportation
    network but may otherwise not be funded. The Airport Improvement
    Program, or A.I.P., also provides a means to fund critical investments
    in our nation's airport infrastructure through collection of Passenger
    Facility Charges, or P.F.C.s.
        Previous administrations have proposed increasing the P.F.C. cap
    from $4.50, but this was also coupled with lowering the overall A.I.P.
    funding substantially, which generated opposition in Congress. Some
    have questioned the timing, need, and magnitude of such increases. I
    look forward to discussing whether a modified proposal to the P.F.C.
    increase could
        provide additional funding for all airports, even those in rural
    communities. Working with the new Administration, we in Congress have a
    great deal of work to do in developing an infrastructure package to
    promote economic development, improve the transport of people and
    products, and create jobs.
        Let me now turn to Senator Reed for his opening remarks.

        Senator Collins. Let me now turn to Senator Reed for his
    opening statement. Senator Reed, welcome.

                         STATEMENT OF SENATOR JACK REED

        Senator Reed. Thank you very much, Chairman Collins. I want
    to commend you for your leadership, and your great patience and
    tolerance of me, which is a Herculean task sometimes. I look
    forward to the work of the committee, and I thank you again for
    your leadership.
        We, on the committee are charged with trying to provide the
    resources for critical aspects of American life--the safe and
    efficient transportation and access to safe and quality
    housing. These are responsibilities that we take very
    seriously, and we are fortunate to have this Chairman in the
    lead.
        While we are still considering the funding package for 2017
    and anticipating the budget request for 2018, it is a very
    opportune time to discuss, with your expertise the issues that
    we will face as we go forward.
        What is very clear is that the current levels of Federal,
    state, and local funding are insufficient to bring our
    transportation network into a state of good repair. Like many
    Americans, I am eager to hear the details of President Trump's
    plan to invest $1 trillion in our Nation's infrastructure. It
    is one area where I think that we can find broad bipartisan
    agreement. Leader Schumer has already laid out a blueprint for
    how we can work together to deploy resources among a wide
    assortment of infrastructure needs.
        Certainly, we have mechanisms in place through the Highway
    Trust Fund, the Airport Improvement Program, the TIGER Grant
    Program, New Starts, and other programs to make smart and bold
    investments in transportation projects across the country, not
    to mention addressing needs in other areas, including
    affordable housing, water infrastructure, and school
    facilities.
        What I hope we do not see from this Administration is a
    plan built around massive tax incentives for private investors.
    This approach will not fix our crumbling roads, replace lead
    water pipes, or build new schools without placing a huge
    financial burden on average Americans. Those types of deals
    just do not pencil out in rural communities, and as a result, I
    am afraid those communities might be left behind.
        I also hope that the Trump administration does not attempt
    to solve our infrastructure problems on the cheap. When we
    crafted the last surface transportation authorization bill, our
    counterparts in the House restricted investments in our
    transportation infrastructure, barely providing more than an
    inflation adjustment. If we are going to make real progress, we
    must do more, much more.
        That is why I am also deeply concerned about the budget
    plan that was recently outlined by OMB Director Mulvaney. If we
    adhere to the steep budget cuts that the Administration is
    contemplating for non-defense discretionary funding, it will be
    impossible to sustain even today's funding levels for critical
    infrastructure programs: such as TIGER, rail safety, Amtrak,
    and transit Capital Investment Grants.
        The fact is that we cannot take $54 billion in cuts to non-
    defense programs without doing significant harm to the
    sustainability and safety of our transportation network. Even
    if the Administration completely eliminated its favorite
    target, the EPA, another $46 billion in cuts to the budget
    would still need to be made.
        As we consider where funding is needed, here is what is at
    stake, according to the Department of Transportation's most
    recent Conditions and Performance Report. We are facing an $800
    billion maintenance backlog on the Federal-aid highway system
    and a $123 billion maintenance backlog for structurally
    deficient bridges.
        Traffic congestion is now wasting 6.7 billion hours and 3
    billion gallons of fuel nationwide. This cost our economy
    $154.2 billion last year, and that is a new record
    unfortunately. There is a $90 billion state of good repair
    backlog on transit systems, a $28 billion state of good repair
    backlog for Amtrak's Northeast Corridor, and a $3.35 billion
    shortfall in airport improvement funding.
        DOT's report confirms what we already knew. This moment
    calls for new ideas and additional funding in order to meet our
    current and future needs. This moment, again, beckons us to
    build our economy for the future and to create good paying jobs
    today.
        As the President said, it is a chance to buy American and
    hire Americans. Finally, on that note, we should make sure that
    the infrastructure investments that we make also benefit the
    American workers who build our roads, bridges, railways, and
    airports.
        We know that the wages of average Americans have stagnated,
    and we know that we should reject any attempts to scale back
    the Davis-Bacon Act as well as barriers to entry into project
    labor agreements. Such efforts only denigrate and cheapen the
    hard work that everyone from masons to welders to painters to
    operators do every day.
        I look forward to the testimony of our witnesses today.
    Your ideas and experience will help to inform our funding
    decisions to make our transportation system smarter, safer, and
    more efficient going forward. Once again, thank you very much,
    Chairman Collins.
        Senator Collins. Thank you, Senator Reed. I introduced the
    witnesses in my opening statement, so we will proceed directly
    to their testimony, starting with Commissioner Bernhardt.

                   SUMMARY STATEMENT OF HON. DAVID BERNHARDT

        Mr. Bernhardt. Chairman Collins, Ranking Member Reed, and
    members of the subcommittee, thank you for the opportunity to
    provide input on investing in America by funding our Nation's
    transportation infrastructure needs.
        My name is David Bernhardt, and I serve as the Commissioner
    of the Maine Department of Transportation, as President of
    (AASHTO), the American Association of State Highway and
    Transportation Officials.
        Today, it is my honor to testify on behalf of the great
    State of Maine and AASHTO, and AASHTO represents the state
    departments of all 50 states, Washington, D.C., and Puerto
    Rico.
        My testimony today will emphasize four main points. One,
    maintaining a strong Federal investment in surface
    transportation by stabilizing the Highway Trust Fund, ensuring
    timely action on annual appropriations to minimize program
    disruptions, developing and deploying multimodal transportation
    solutions with Federal funding support, and supporting the
    development of a major infrastructure package that benefits
    every part of our Nation.
        Transportation matters more today than ever before, not
    only in Maine but to our country and across the world. Families
    and businesses depend on a strong transportation infrastructure
    to keep our Nation competitive, and the backbone of Federal
    investment in transportation has been the Highway Trust Fund.
        It has provided predictable stable support for most of its
    life, since 1956, but this crucial capital funding instrument
    has been at risk since 2008 when it required the first of seven
    general fund transfers totaling $140 billion.
        Thanks to Congress' leadership, the passage of the FAST Act
    has given us a temporary reprieve from the deep cuts in Highway
    Trust Fund investments through 2020.
        At Maine DOT, we produce a three-year work plan containing
    all the work we plan to do over that period of time. Having
    stability in Federal funding makes this work much more of a
    reality than a guessing game.
        It also means that we can keep our word with our customers,
    from downtown reconstruction in Ogunquit, new road construction
    in Presque Isle, to major bridge construction projects in
    Kittery and Jonesport/Beales Island. Stable funding means
    Mainers can depend on us sticking to our schedule.
        Looking at the near term, we urge your leadership and
    support in enacting a final fiscal year 2017 appropriations
    package for transportation that honors the FAST Act obligation
    levels.
        For state DOTs, a series of continuing resolutions this
    year has provided two challenges. First, states can make good
    on their planned investments for the Federal fiscal year, only
    if obligation authority for the entire year becomes available
    on October 1.
        Especially in cold northern states like mine, with a
    limited construction window, not having the full year
    obligation authority could mean project disruptions and delays.
        Second, although the FAST Act provided for $43.2 billion in
    highway obligation authority for fiscal year 2017, the
    continuing resolution has locked in the fiscal year 2016 amount
    of $42.2 billion so far. This means state DOTs are unable to
    access the $1 billion that could be put to important use
    throughout the country.
        In addition, positive train control funding was authorized
    only in fiscal year 2017 at $199 million from the Mass Transit
    Account. This critical safety funding would be lapsed if CR is
    extended for the rest of 2017.
        State DOTs manage an increasing multimodal and
    interconnected transportation network, and your subcommittee's
    holistic approach to funding that covers all modes has been
    invaluable. Thanks to the strong support from you, Madam
    Chairman, and high quality applications and projects, Maine DOT
    is fortunate to have been successful at every round of TIGER,
    and in the first round of FASTLANE. The result is critically
    needed infrastructure that would have been difficult to build
    any other way.
        For example, the Sarah Mildred Long Bridge connecting Maine
    and New Hampshire, plus rail on the bridge to the Navy
    Shipyard.
        We have used a mix of funding, including TIGER funds. TIGER
    funds also support rail and port infrastructure in Northern and
    Central Maine, and built a commercially important breakwater in
    Eastport, Maine.
        With the help of Federal freight funds and your support,
    Madam Chairman, Maine is also upgrading large portions of its
    freight rail network, allowing for higher speeds and weights on
    existing track. These projects support natural resource based
    manufacturing and agriculture throughout rural Maine. Similar
    gains and benefits have been seen across the Nation.
        Finally, I urge the Congress and the Administration in
    designing a major infrastructure package this year that any
    increase in Federal funds should flow through the existing FAST
    Act formula-based program structure rather than through
    untested new approaches that will consume more time and
    oversight.
        The current federally assisted state implemented framework
    has a century plus track record of success, which speaks for
    itself. It is also important to note that any major
    infrastructure package must focus on direct funding rather than
    on Federal financing support.
        Most projects we do cannot generate a sufficient revenue
    stream through tolls, fares, or availability payments to
    service debt or provide adequate return on investment to
    equity.
        To close, state DOTs remain committed in assisting Congress
    to develop strategies to ensure long-term economic growth and
    enhanced quality of life through robust multimodal
    transportation investments.
        Just last week, many of state DOT leaders from all corners
    of the country were only a couple of blocks away attending
    AASHTO's 2017 Washington briefing, over three days of
    productive discussions.
        Many of my colleagues and I were on Capitol Hill meeting
    with our respective congressional delegations. As we did then
    and as we do again now, AASHTO and the state DOTs will continue
    advocating for the reaffirmation of a strong Federal/state
    partnership to address our surface transportation investment
    needs.
        I want to thank you again for this opportunity to testify,
    and I am happy to answer any questions that you may have. Thank
    you.

        [The statement follows:]
                 Prepared Statement of Hon. David B. Bernhardt
                                  introduction
        Chairman Collins, Ranking Member Reed, and Members of the
    Subcommittee, thank you for the opportunity to provide input on the
    condition of our nation's transportation system and funding and
    financing options to sustain long-term growth. My name is David
    Bernhardt, and I serve as the Commissioner of the Maine Department of
    Transportation (Maine DOT) and as President of the American Association
    of State Highway and Transportation Officials (AASHTO). Today it is my
    honor to testify on behalf of the great State of Maine and AASHTO,
    which represents the State departments of transportation (State DOTs)
    of all 50 States, Washington, DC, and Puerto Rico.
        I first joined Maine DOT as a registered professional engineer in
    1984. Prior to my appointment as Commissioner in 2011, I held several
    positions at the agency over the years including Director of
    Engineering and Operations and Director of Maintenance and Operations,
    among other roles. During my tenure as AASHTO President in 2016-2017,
    my three emphasis areas for the Association are to work closely with
    the new Administration and you--the members of Congress--to develop
    strong transportation legislation, freight and freight connectivity,
    and implementing AASHTO's comprehensive committee restructuring.

    My testimony today will emphasize four main points:

      --Maintaining a strong Federal investment in surface transportation
            by stabilizing the Highway Trust Fund;
      --Ensuring timely action on annual appropriations to minimize program
            disruptions;
      --Developing and deploying multimodal transportation solutions with
            Federal funding support, and;
      --Supporting the development of a major infrastructure package that
            benefits every part of our nation.
     maintaining a strong federal investment in surface transportation by
                       stabilizing the highway trust fund
        Transportation matters more today than ever before, not only in
    Maine, but throughout our country and across the world. Families and
    businesses depend on a strong transportation infrastructure to keep our
    state competitive. Smart investment in the maintenance and upgrade of
    this infrastructure is critical to sustaining a vibrant Maine economy
    and connecting us to a global economy.
        Going back to the founding days of the Nation, Article I, Section 8
    of the United States Constitution notes that it is a duty of the
    Federal government to provide support for the nation's transportation
    system. Through the development of post roads, canals, railroads and
    highways with strong Federal support throughout history, transportation
    investment has an illustrative track record of creating jobs and
    supporting economic development throughout the country.
        For most of its life since its inception in 1956, the Federal
    Highway Trust Fund (HTF) has provided stable, reliable, and substantial
    highway and transit funding. I would be remiss if I did not share the
    State departments of transportation's utmost appreciation for your
    Committee's leadership, along with your Senate and House colleagues on
    partner committees, in shepherding the Fixing America's Surface
    Transportation (FAST) Act in December 2015 to ensure stability in the
    federally supported passenger rail, freight, safety, highway, and
    transit programs through 2020. While the 5 years authorized under the
    FAST Act has given us a temporary reprieve--thanks to over $140 billion
    of General Fund transfers since 2008--from recurring deep cuts in
    obligations due to the $15 billion annual gap between Highway Trust
    Fund receipts and outlays, the case for maintaining a strong Federal
    role and investment in transportation remains as important as ever.
        We in the transportation industry do everything in our power to
    build our projects as fast as possible, but due to the nature of large
    capital programs, including an extensive regulatory process many of
    them take several years to complete. The lack of stable funding from
    the HTF makes it nearly impossible for State DOTs to plan for large
    projects that need a reliable flow of funding over multiple years.
    Major transportation projects around the country will be put to risk
    near the expiration of the FAST Act due to the unpredictability of
    Federal funding at that time. Such delays have serious economic
    consequences both in the short- and long-term. These projects employ
    thousands of companies and hundreds of thousands of workers every year.
    More importantly, these projects are what connect the traveling public
    to the many of facets of their lives. Once completed, they help
    stimulate economic growth in every community where they are built.
        At MaineDOT, we produce a three-year work plan containing all the
    work we plan to do over that period. Having stability in Federal
    funding makes this work much more of a reality than a guessing game. It
    also means that we can keep our word with our customers. From downtown
    reconstruction in Ogunquit and new road construction in Presque Isle,
    to major bridge construction projects in Kittery and Jonesport/Beales
    Island, stable funding means Mainers can depend on us sticking to our
    schedule.
        Nationwide, State DOTs rely on the Federal surface transportation
    program for nearly half of their capital investment on highway and
    bridge projects. This year the Federal highway program apportioned over
    $44 billion to State DOTs for road and bridge projects across the
    country, in addition to over $9 billion in Highway Trust Fund support
    for transit. It is important to note that Federal dollars are not
    provided to States upfront; rather, this is a program based on
    reimbursement. States only receive funding from the Federal Highway
    Administration (FHWA) when work is completed on a project and the State
    submits a request for reimbursement. States typically receive
    reimbursements electronically from FHWA the same day payments to the
    contractor are made.
        If Congress is unable to address the structural cash shortfall in
    the Highway Trust Fund by 2020 and allows the Highway Account of the
    HTF cash balance to fall below $4 billion, FHWA will change how quickly
    they reimburse State DOTs for work already completed. Rather than
    reimbursing States as soon as the reimbursement request is submitted,
    FHWA may delay reimbursements or make partial reimbursement subject to
    available cash in the Trust Fund. States count on prompt payment from
    the Federal government to be able to manage cash flow and pay
    contractors for work they have already completed. Any delay in
    reimbursement from FHWA will jeopardize the ability of States to pay
    contractors in a timely manner. In turn, contractors rely on prompt
    payment from the State to be able to pay their employees and suppliers.
    Disruptions to this process have the potential to send unwelcome
    shockwaves throughout the transportation community and other industries
    indirectly supported by infrastructure investment. Of particular
    concern should be the countless number of small businesses that perform
    work on our nation's highways, as they often don't have the flexibility
    to wait for additional days or weeks for payment on the work they have
    already completed on a project.
        As I mentioned, we do have a bit of a grace period right now in not
    having to face this funding cliff until 2020--thanks to the FAST Act.
    But without action before then to shore up the HTF, this extremely
    costly and disruptive scenario will be all but inevitable.
      ensuring timely action on annual appropriations to minimize program
                                  disruptions
        The work of your Subcommittee is absolutely crucial to the dynamic
    I described above with the Highway Trust Fund. That is because HTF
    contract authority for the Federal surface transportation program can
    only maximize its value and effectiveness when paired with timely
    annual appropriations for the entire fiscal year that provide robust
    obligation limitation and the liquidating cash necessary to pay for
    Federal reimbursements to States. While we understand the difficulties
    in Congress when it comes to resolving budget and spending issues, we
    want to raise some of the impacts that can be felt by state DOTs and
    our local partners from the use of continuing resolutions (CR). And we
    stand ready to assist the Subcommittee as you work to complete the
    fiscal year 2017 appropriations process and begin work on fiscal year
    2018.
        An important funding feature of the FAST Act was to authorize a 5.6
    percent increase in highway funding from fiscal year 2015 to fiscal
    year 2016, with subsequent annual adjustments between 2.1 and 2.4
    percent. For the mass transit program, the FAST Act authorized a 10.2
    percent increase between fiscal year 2015 and fiscal year 2016, with
    subsequent annual increases up to 3.3 percent. In addition to avoiding
    a series of short-term extensions of program authorization because the
    FAST Act is in place until 2020, AASHTO is especially grateful to
    Congress for being able to build in increases in annual authorized
    funding levels above inflation. And we very much appreciate your
    Subcommittee and the full Committee for honoring the FAST Act
    obligation limitation in fiscal year 2016.
        There are two principal challenges for States if Congress is unable
    to pass a full-year appropriations measure that honors the FAST Act
    funding levels.
        First, building on FAST Act apportionments of contract authority,
    States can make good on their planned investments for the Federal
    fiscal year--especially in cold, northern States like mine with a
    limited construction window--if obligation limitation for the entire
    year becomes available on October 1. Continuing resolutions that
    provide only a portion of obligation limitation mean that even if we
    are ready to proceed with our much-needed projects, we can only commit
    Federal dollars to a small portion of those projects. Missing the
    construction window due to a less than full year obligation limitation
    can mean that some projects are delayed.
        Second, because continuing resolutions freeze obligation limitation
    levels at prior year levels, FHWA is unable to provide the full funding
    anticipated under the FAST Act. For fiscal year 2016, FHWA has been
    able to provide only $42.2 billion of obligation limitation this fiscal
    year at an annualized rate as opposed to $43.2 billion expected under
    the FAST Act. This translates to States around the nation receiving
    over $1 billion less in Federal highway funding, with resulting
    reductions in funding at the State and local level. In addition,
    operating under a continuing resolution in fiscal year 2016 has
    prevented transit and passenger rail agencies from accessing $199
    million authorized for positive train control (PTC) in the FAST Act for
    fiscal year 2017. Given that fiscal year 2017 is the only year for PTC
    funding from the Mass Transit Account, it is important that Congress
    enact an appropriations measure for the balance of fiscal year 2017.
        AASHTO is ready to provide any and all assistance necessary to
    ensure the timely passage of annual appropriations bills on October 1
    of each year, and respectfully request your Subcommittee and the full
    Committee to honor the obligation limitation contained in the FAST Act
    in the final fiscal year 2017 appropriations, and in future fiscal
    years as well.
       developing and deploying multimodal transportation solutions with
                            federal funding support
        AASHTO and its member departments of transportation proudly trace
    our lineage back to the early days of the State and Federal highway
    program at the beginning of the 20th century. Since then, State DOTs
    have underpinned economic activities enabled by passenger and freight
    movement as the primary stewards of our nation's highway infrastructure
    by designing, building, maintaining, and operating key highway assets
    ranging from 7 percent of public road miles in California to 89 percent
    in West Virginia. State DOTs also own and operate the Interstate
    Highway System which handles nearly 25 percent of total vehicle miles
    traveled annually and 40 percent of truck traffic even though it
    comprises only 1.2 percent of total public road miles.
        We are also proud, however, of the fact that State DOTs manage an
    increasingly multimodal network by investing in public transportation
    at a larger share than the Federal government, and in non-motorized
    travel modes such as walking and biking. In addition, some State DOTs
    operate public transportation systems, short line railroads, airports,
    and harbors.
        Similar to State DOTs, your Subcommittee has always brought a
    holistic approach to transportation funding by directing the Senate's
    resources to support all modes of transportation, especially through
    the highly successful TIGER discretionary grant program. Since 2009,
    the TIGER program has provided a combined $5.1 billion to 421 projects
    in all 50 states, the District of Columbia, Puerto Rico, Guam, the
    Virgin Islands, and tribal communities. These Federal funds leverage
    money from private sector partners, states, local governments,
    metropolitan planning organizations and transit agencies. The 2016
    TIGER round alone is leveraging nearly $500 million in Federal
    investment to support $1.74 billion in overall transportation
    investments.
        Thanks to the strong support from you Madam Chairman and high
    quality applications and projects, MaineDOT is fortunate to have been
    successful at every round of TIGER and in the first round of FASTLANE.
    The result is critically needed infrastructure that would have been
    difficult to build any other way. For example, the Sarah Mildred Long
    bridge connecting Maine, New Hampshire and an important Navy shipyard
    is currently under constructions using a mix of funding including TIGER
    funds. TIGER funds also support rail and port infrastructure in
    Northern and Central Maine and built a commercially important
    breakwater in Eastport, Maine.
        In addition, the National Highway Freight Program, a new formula-
    based funding category, and the Nationally Significant Freight and
    Highway Projects better known as FASTLANE Grants, in the FAST Act have
    enabled States around the country to provide more targeted freight
    funding support. These new programs focus investment in infrastructure
    and operational improvements that strengthen economic competitiveness,
    reduce congestion, reduce the cost of freight transportation, improve
    reliability, and increase productivity. They also improve the safety,
    security, efficiency, and resiliency of freight transportation in rural
    and urban areas, and enhance all aspects of the National Highway
    Freight Network.
        I had mentioned earlier that one of my three emphasis areas during
    my AASHTO presidency are freight and freight network connectivity.
        The International Marine Terminal, in Portland, Maine, is a great
    example of the FASTLANE Grant program. The Maine Port Authority and
    MaineDOT have undertaken major upgrades that will double the capacity
    of a terminal that is growing 20 percent year over year. The facility
    utilizes marine, rail, and truck modes to move product across the
    regional and internationally. The result--new markets for Maine and
    U.S. products, lower logistical costs for Maine businesses and fewer
    trucks in highly congested corridors in the Northeast.
        With the help of Federal freight funds, and your support Madam
    Chairman, Maine is also upgrading large portions of its freight rail
    network allowing for higher speeds and weights on existing track. These
    projects support natural resource based manufacturing and agriculture
    throughout rural Maine.
       supporting the development of a major infrastructure package that
                       benefits every part of our nation
        For over one hundred years, we as a nation have enjoyed the fruits
    of the Federal government's highly successful partnership with State
    DOTs to build and maintain our Nation's surface transportation system.
    From the Federal-Aid Road Act of 1916 establishing the foundation of a
    federally-funded, State-administered highway program that has been
    well-suited to a growing and geographically diverse nation like ours,
    Federal investment in all modes of transportation have allowed States
    and their local partners to fund a wide range of projects that serve
    the interest of the nation as a whole. Thanks to the Federal surface
    transportation program's flexibility that defers project selection and
    investment decisionmaking to State and local governments based on
    extensive public input, diverse communities in rural, suburban, and
    urban areas of the country have all been able to help people get to and
    from work, and help goods get access to a larger market than ever
    before in a way that best meet their unique needs.
        AASHTO and its member DOTs, like many of us in the transportation
    industry, recognize a special opportunity this year to enact a major
    infrastructure investment initiative given the high degree of interest
    from the Trump Administration and strong bipartisan support in
    Congress. As you and the President consider the design of this package
    for transportation infrastructure, based on the Federal surface
    transportation program's long track record of success, we recommend
    that any increase in Federal funds should flow through the existing
    FAST Act formula-based program structure rather than through untested
    new approaches that will require more time and oversight.
        Any effort that does not rely on the existing Federal surface
    transportation program could undermine timely and successful delivery
    of the new infrastructure package. Putting the program framework that
    built the Interstate Highway System and the National Highway System--
    the backbone of our national network of roads and bridges that drive
    our national economy--into work again to deploy additional Federal
    resources represent the optimal approach to serve all corners of our
    country, improving mobility and quality of life in urban, suburban, and
    rural areas.
        It is also important to note that any major infrastructure package
    must focus on direct funding, rather than on Federal financing support.
    This is because financing tools that leverage existing revenue
    streams--such as user fees and taxes--are typically not viable for most
    transportation projects in the United States. We in Maine and many of
    our state DOT peers certainly appreciate the ability to access capital
    markets to help speed up the delivery of much-needed transportation
    improvements. But we also fully recognize the inherent limitations of
    financing for the vast spectrum of publicly-valuable transportation
    projects that nevertheless cannot generate a sufficient revenue stream
    through tolls, fares, or availability payments to service debt or
    provide return on investment to equity holders.
        The state DOTs continue to support a role for financing and
    procurement tools such as public-private partnerships given their
    ability to not only leverage scarce dollars, but to also better
    optimize project risks between public and private sector partners best
    suited to handle them. But we also maintain that financing instruments
    in the form of subsidized loans like TIFIA, tax-exempt municipal and
    private activity bonds, infrastructure banks, and tax code incentives
    are just simply not enough in and of themselves to meet most
    transportation infrastructure investment needs.
        AASHTO and its member are well-prepared to work with Congress to
    take advantage of our strong, productive partnerships with Federal and
    local governments to deliver on a major infrastructure initiative.
                                   conclusion
        State DOTs remain committed in assisting Congress to develop
    strategies to ensure long-term economic growth and enhanced quality of
    life through robust multimodal transportation investments. Just last
    week, hundreds of State DOT leaders from all corners of our country
    were only a couple of blocks away attending AASHTO's 2017 Washington
    Briefing. Over three days of productive discussions, many of my
    colleagues were on Capitol Hill meeting with their respective
    Congressional delegations. As they did then, and as I do again now,
    AASHTO and the State DOTs will continue advocating for the
    reaffirmation of a strong Federal-State partnership to address our
    surface transportation investment needs.
        I want to thank you again for the opportunity to testify today, and
    I am happy to answer any questions that you may have.

        Senator Collins. Thank you very much, Commissioner. Mr.
    Tymon?
    STATEMENT OF JIM TYMON, CHIEF OPERATING OFFICER AND
                DIRECTOR OF POLICY AND MANAGEMENT, AMERICAN
                ASSOCIATION OF STATE HIGHWAY AND
                TRANSPORTATION OFFICIALS
        Mr. Tymon. Thank you. Chairman Collins, Ranking Member
    Reed, members of the subcommittee, thank you for the
    opportunity to testify today. My name is Jim Tymon, and I serve
    as the Director of Policy and Management and the Chief
    Operating Officer at the American Association of State Highway
    and Transportation Officials, otherwise known as AASHTO.
        I would like to begin by expressing the state DOTs'
    appreciation for your support and leadership in passing the
    Fixing America's Surface Transportation Act (FAST Act). The
    FAST Act provides a level of predictability for Federal
    highway, transit, and passenger rail programs through 2020 that
    allows states and local transit agencies to plan for large
    projects that span multiple years.
        However, that predictability is threatened by the lack of a
    fiscal year 2017 transportation, housing and urban development
    appropriations bill. The predictability of a five-year
    authorization bill means little if we are unable to pass annual
    appropriations bills that are consistent with the authorized
    funding levels in the FAST Act.
        As we approach the beginning of the spring construction
    season, we urge you to pass a full year 2017 appropriations
    bill that fully funds the surface transportation programs at
    the authorized levels in the FAST Act.
        In addition to 5 years of predictability, the FAST Act also
    provided a small increase in funding over the baseline.
    However, this increase does not begin to meet our Nation's
    transportation investment needs.
        As has been cited already this morning, according to the
    most recent Conditions and Performance Report published by the
    U.S. Department of Transportation, a funding increase of at
    least 35 percent is necessary to begin to improve the state of
    our Nation's highways and transit systems.
        Despite these clear needs for additional investment, how we
    fund our Nation's Federal Surface Transportation Program
    remains at a crossroads. The Highway Trust Fund has provided a
    stable and reliable source of funding for our highways and
    transit programs since 1956, but today, that is no longer the
    case.
        Since 2008, the Highway Trust Fund has been sustained
    through a series of General Fund transfers, and we are
    currently spending approximately $15 billion a year more than
    we are bringing in in receipts, and that amount continues to
    grow each year.
        If Congress were to reauthorize the FAST Act for 5 years
    when it expires in 2020, nearly $100 billion in additional
    revenue would be needed to keep the Highway Trust Fund solvent
    through 2025.
        The Highway Trust Fund derives about 90 percent of its
    revenues from taxes on motor fuels, but that revenue source is
    facing an increasingly unsustainable long-term future. Three
    factors explain the challenges facing the Highway Trust Fund.
        A leveling off of the number of vehicle miles that people
    are driving each year, a more fuel-efficient vehicle fleet due
    to changes in CAFE standards, and a loss of purchasing power
    for a Federal gas tax that has not been increased in 24 years.
        When the FAST Act expires in 2020, Congress will likely
    need to choose from three possible scenarios to keep the
    Highway Trust Fund solvent--provide additional General Fund
    transfers to the Highway Trust Fund, provide additional
    receipts to the Highway Trust Fund by either increasing
    existing revenue mechanisms, such as the gas tax, or
    implementing new sources of revenue, or by reducing funding for
    programs funded by the Highway Trust Fund by over 40 percent.
        A cut of over 40 percent will help keep the Highway Trust
    Fund solvent moving forward, but again, that is a reduction on
    the funding levels we are spending today.
        If Congress does decide to increase revenue to keep the
    Highway Trust Fund solvent, there are no shortages of
    technically feasible options.
        AASHTO produces a matrix of over 35 surface transportation
    revenue options for Congress to consider. This matrix is
    included in my written testimony, and AASHTO is happy to serve
    as a resource as Congress works toward a long-term solution to
    keep the Highway Trust Fund solvent.
        As Congress begins consideration of an infrastructure
    package, state DOTs strongly believe that the focus should be
    on direct Federal funding distributed to the states and transit
    agencies through existing programs.
        Using existing programs is the most equitable and efficient
    way to ensure that funding is distributed to every state in the
    country and to every transit agency in the country.
        Federal financing support, such as public/private
    partnerships, are a great option for state and transit agencies
    to consider. However, public/private partnerships are not
    viable for most transportation projects in the United States.
        As Commissioner Bernhardt said, most transportation
    projects cannot generate a sufficient revenue stream through
    tolls, fares, or availability payments to service debt or
    provide a return on investment for private sector partners.
        The state DOTs continue to support public/private
    partnerships as an option, but state DOTs believe an
    infrastructure package should include both direct Federal
    funding and innovative financing tools, such as TIFIA or
    private activity bonds.
        I want to thank you again for the opportunity to testify
    today, and I am happy to answer any questions you may have.

        [The statement follows:]
                        Prepared Statement of Jim Tymon
                                  introduction
        Chairman Collins, Ranking Member Reed, and Members of the
    Subcommittee, thank you for the opportunity to provide input on the
    condition of our nation's transportation system and funding and
    financing options to sustain long-term growth. My name is Jim Tymon,
    and I serve as the Director of Policy and Management and Chief
    Operating Officer at the American Association of State Highway and
    Transportation Officials (AASHTO). Alongside David Bernhardt, our
    Association's President and Commissioner of the Maine Department of
    Transportation, today it is my honor to also testify on behalf of
    AASHTO, which represents the departments of transportation (state DOTs)
    of all 50 States, Washington, DC, and Puerto Rico.

        My testimony today will emphasize five main points:

      --Instability in Federal surface transportation funding due to
            recurring Highway Trust Fund shortfalls;
      --Examination of well-documented surface transportation capital
            investment needs;
      --Additional revenues needed simply to support current spending
            levels;
      --Policy considerations on surface transportation revenue options,
            and;
      --Critical importance of direct program funding relative to
            financing.
    instability in federal surface transportation funding due to recurring
                         highway trust fund shortfalls
        I would like to first begin by expressing the State departments of
    transportation's utmost appreciation for your Committee's leadership,
    along with your Senate and House colleagues on partner committees, in
    shepherding the Fixing America's Surface Transportation (FAST) Act in
    December 2015 to ensure stability in the federally supported passenger
    rail, freight, safety, highway, and transit programs through 2020.
    While the 5 years authorized under the FAST Act has given us a crucial
    yet temporary reprieve, the case for maintaining a strong Federal role
    and investment in transportation remains as important as ever.
        As we prepare for the post-FAST Act years, the Federal surface
    transportation program funding remains at a crossroads. While the
    Highway Trust Fund (HTF) has provided stable, reliable, and substantial
    highway and transit funding over many decades since its inception in
    1956, this is no longer the case. Since 2008, the HTF has been
    sustained through a series of General Fund transfers now amounting to
    over $140 billion. And according to the January 2017 baseline of the
    Congressional Budget Office (CBO), HTF spending is estimated to exceed
    receipts by about $17 billion in fiscal year 2021, growing to about $24
    billion by fiscal year 2027. Furthermore, the HTF is expected to
    experience a significant cash shortfall in fiscal year 2021, since it
    cannot incur a negative balance.
        CBO projects that based on the current funding levels for surface
    transportation, the HTF will need at least $144 billion to remain
    solvent through fiscal year 2027, which includes the minimum prudent
    balance of $4 billion for the Highway Account and $1 billion for the
    Mass Transit Account. To support a five-year FAST Act reauthorization
    (fiscal year 2021-2025), the necessary additional HTF deposits or
    increased tax receipts needed total about $95 billion; to support a
    six- year bill, about $120 billion would be necessary.
        Framing this HTF ``cliff'' in terms of Federal highway obligations,
    we estimate that states may see a 40 percent drop from fiscal year 2020
    to the following year--from $46.2 billion to $27.7 billion. In the
    past, such similar shortfall situations have led to the possibility of
    reduction in Federal reimbursements to states on existing obligations,
    leading to serious cash flow problems for states and resulting project
    delays. Even more alarmingly, due to a steeper project shortfall in the
    Mass Transit Account, Federal transit obligations are expected to be
    zeroed out between fiscal year 2021 and fiscal year 2023 excluding
    ``flex'' of highway dollars to transit. Simply put, this is a
    devastating scenario that we must do all we can to avoid.

         examination of well-documented surface transportation capital
                                investment needs
        Despite Federal funding challenges, investment needs continue to
    mount. According to the US Department of Transportation's (USDOT) 2015
    Conditions and Performance Report, $142.5 billion in annual capital
    investment is necessary for highways in order to improve Interstate
    Highways, the National Highway System, and one million-plus miles of
    Federal-aid Highways. Put another way, annual funding necessary to
    tackle this $836 billion backlog of highway investment needs would
    represent a 35.5 percent increase from 2012 levels, which itself was
    above the baseline spending levels due to outlays related to the
    temporary funding boost provided by the American Recovery and
    Reinvestment Act. Similar funding outlook exists for Federal mass
    transit investment. The Conditions and Performance Report states that
    low- and high-growth scenarios for transit will necessitate annual
    capital investment of $22.8 billion and $26.4 billion, respectively,
    equating to a 34 or 55 percent increase over 2012 levels.
        However, in the recent decades--especially after the completion of
    the Interstate Highway System--Federal investment in transportation has
    declined significantly as a share of the Gross Domestic Product (GDP).

        Given that much of the Interstate system has now reached the end of
    its design life and must be reconstructed or replaced--and there is
    considerable need for additional capital improvements to the broader
    Federal-aid highway network and the country's transit system--there is
    a strong argument that the Federal government should strive to return
    to this prior level of investment relative to the national economy. Yet
    the Federal government's share of transportation and water spending has
    actually been falling behind relative to state and local governments,
    as evidenced by its 19 percent drop between 2003 to 2014; during the
    same timeframe total state and local spending saw a 5 percent decline.

        States are expected to reverse this decline in the coming years,
    however, thanks to a series of successful enactments of state-level
    transportation packages, numbering 23 states since 2012.
        Our nation's freight network is an especially illuminating example
    of the capital investment backlog in our transportation infrastructure.
    Freight received a targeted funding boost to the tune of about $11
    billion through the new National Highway Freight Program and the
    Nationally Significant Freight and Highway Projects--also known as
    FASTLANE Grants--in the FAST Act. While we welcome this new Federal
    investment and focus on the freight network, it is important to provide
    some context regarding the scale of the need for these projects.
    According to the nationwide survey conducted for the State of Freight
    II report published by AASHTO and the American Association of Port
    Authorities last year, 57 percent of surveyed states have already
    identified 6,202 projects through their freight plan development
    process. Furthermore, $259 billion in project costs have been
    identified by just 35 percent of all states--therefore we know the
    national figure is much higher.
        At the same time, we continue to fall behind global peers in
    infrastructure quality and economic competitiveness. The recent Global
    Competitiveness Report rankings from the World Economic Forum on
    infrastructure quality has listed the United States at just 11th place
    overall.

    Sources: The Global Competitiveness Report 2016-2017
        In light of continued population growth and increases in freight
    movements for all modes, capacity enhancements--and not just
    maintenance of existing infrastructure stock--must remain a key element
    of the national transportation investment strategy. A potentially
    catastrophic disruption to the Federal transportation program in fiscal
    year 2021 will produce serious losses that threaten the macroeconomic
    gains made since 2008.
       additional revenues are needed simply to support current spending
                                     levels
        While the HTF continues to derive about 90 percent of its revenues
    from taxes on motor fuels, they are facing an increasingly
    unsustainable long-term future, therefore placing the viability of the
    HTF in question.

        Three factors explain the structural challenge faced by long-term
    motor fuel tax revenue prospects.
        First is the slowdown in the growth of vehicle miles traveled (VMT)
    in the United States, on an aggregate basis. A steady increase in VMT
    has allowed the HTF to see corresponding revenue increases without
    necessitating constant adjustments in fuel tax rates for most of its
    existence. While total VMT has resumed its growth in the last 2 years
    due to increases in both population and economic activity in the post-
    recessionary environment, it is unlikely to see the 3.2 percent growth
    rate experienced on average between 1956 and 2007.
        Second, motor fuel taxes at the Federal level were last increased
    to the current rates of 18.4 cents per gallon for gasoline and 24.4
    cents for diesel 24 years ago in 1993. As an excise tax levied per
    gallon, taxes on motor fuel have lost a significant share of its
    purchasing power. Compared to the Consumer Price Index, the gas tax had
    lost 39 percent of its purchasing power by 2015, and is expected to
    lose more than half of its value--or 52 percent--by 2025. Put another
    way, while college tuition has increased by 379 percent and healthcare
    by 180 percent in nominal costs since the last time Federal motor fuel
    taxes were increased, Federal motor fuel taxes have stayed at the exact
    same rate during this period.

    Source: Bureau of Labor Statistics, Center for Medicare and Medicaid
    Services, College Board, Federal Reserve Bank of St. Louis, Oak Ridge
    National Laboratory, Census Bureau, Energy Information Agency, Postal
    Service
        Third, according to the CBO, the recent increases in Corporate
    Average Fuel Economy standards are expected to cause a significant
    reduction in fuel consumption by light-duty vehicles, which would
    result in a proportionate drop in gasoline tax receipts. CBO expects
    gradual lowering of gasoline tax revenues, eventually causing them to
    fall by 21 percent by 2040. Just in the 2012 to 2022 period, CBO
    estimates that such a decrease would result in a $57 billion drop in
    revenues credited to the fund over those 11 years, a 13 percent
    reduction in the total receipts credited to the fund.

        policy considerations on surface transportation revenue options
        While its annual cash imbalance widens, the HTF cannot incur a
    negative balance unlike the General Fund. This situation leads to three
    possible scenarios for fiscal year 2021:
        1. Provide additional General Fund transfers to the HTF in order to
    maintain the current level of investment and prevent a dramatic drop;
        2. Provide additional receipts to the HTF by adjusting existing
    revenue mechanisms or implementing new sources of revenue, or;
        3. Reduce Federal highway obligations supported by the HTF by 40
    percent in fiscal year 2021 and beyond, and reduce Federal transit
    obligations supported by the HTF by 100 percent for 3 years.
        In order to support the first two scenarios where current highway
    and transit investment levels are maintained or increased, there is no
    shortage of technically feasible tax and user fee options that Congress
    could consider.

        An area of rapid deployment thanks to seed funding in the FAST Act
    is in the area of mileage- based user fees. The Surface Transportation
    System Funding Alternatives grants from the Federal Highway
    Administration (FHWA) provides $95 million through fiscal year 2020 to
    states or groups of states to demonstrate user-based alternative
    revenue mechanisms that utilize a user fee structure to maintain the
    long-term solvency of the Highway Trust Fund. The objectives of the
    program are:
      --To test the design, acceptance, and implementation of two or more
            future user-based alternative mechanisms;
      --To improve the functionality of the user-based alternative revenue
            mechanisms;
      --To conduct outreach to increase public awareness regarding the need
            for alternative funding sources for surface transportation
            programs and to provide information on possible approaches;
      --To provide recommendations regarding adoption and implementation of
            user-based alternative revenue mechanisms; and
      --To minimize the administrative cost of any potential user-based
            alternative revenue mechanisms.
        For the first round of funding under this program, FHWA identified
    eight state DOT projects-- including two multistate consortia on east
    and west coast--to test various user-fee concepts.

        However, if no new revenues can be found for the HTF and the third
    scenario prevails in fiscal year 2021, state DOTs and their local
    partner agencies will be left to face a dire program disruption that
    will severely undermine much-needed transportation investments
    throughout the nation and therefore, will have a significantly negative
    impact on the nation's economy.
      critical importance of direct program funding relative to financing
        Beyond fixing the HTF, it cannot be emphasized enough that any
    major transportation infrastructure package must focus on direct
    funding based on formula apportionments, rather than on Federal
    financing support. This is because financing tools that leverage
    existing revenue streams--such as user fees and taxes--are typically
    not viable for most transportation projects in the United States.
    AASHTO's member DOTs certainly appreciate the ability to access capital
    markets to help speed up the delivery of much-needed transportation
    improvements, and many states already rely on various forms of
    financing and procurement as seen below:
      --General obligation or revenue bonds: 45 states, DC, Puerto Rico
            (PR)
      --GARVEE bonds: 33 states, DC, PR
      --Build America Bonds: 15 states
      --Private Activity Bonds: 6 states
      --TIFIA Federal credit assistance: 12 states, PR
      --State infrastructure banks: 34 states, PR
      --Public-private partnerships: authorized in 33 states, PR
      --Design-build: authorized in 45 states, DC, PR
        At the same time, states fully recognize the inherent limitations
    of financing for the vast spectrum of publicly-valuable transportation
    projects because they cannot generate a sufficient revenue stream
    through tolls, fares, or availability payments to service debt or
    provide return on investment to equity holders. In 2014, non-direct
    funding sources amounted to less than 18 percent of total capital
    outlays.

        The state DOTs continue to support a role for financing and
    procurement tools such as public- private partnerships given their
    ability to not only leverage scarce dollars, but to also better
    optimize project risks between public and private sector partners best
    suited to handle them. But we also maintain that financing instruments
    in the form of subsidized loans like TIFIA, tax- exempt municipal and
    private activity bonds, infrastructure banks, and tax code incentives
    are just simply not enough in and of themselves to meet most
    transportation infrastructure investment needs.
        AASHTO and its member are well-prepared to work with Congress to
    take advantage of our strong, productive partnerships with Federal and
    local governments to deliver on a major infrastructure initiative.
                                   conclusion
        There is ample documented evidence that shows infrastructure
    investment is critical for long- term economic growth, increasing
    productivity, employment, household income, and exports. Conversely,
    without prioritizing our nation's infrastructure needs, deteriorating
    conditions can produce a severe drag on the overall economy. In light
    of new capacity and upkeep needs for every state in the country, the
    current trajectory of the HTF--the backbone of Federal surface
    transportation program--is simply unsustainable as it will have
    insufficient resources to meet current Federal investment levels beyond
    fiscal year 2020.
        Congress could address the projected annual shortfalls by
    substantially reducing spending for surface transportation programs, by
    boosting revenues, or by adopting some combination of the two
    approaches. Whichever revenue tools are utilized, it is crucial to
    identify solutions that will, at a minimum, sustain the FAST Act-level
    of surface transportation investment in real terms.
        A potential 40 percent reduction of Federal highway funding fiscal
    year 2021 and a virtual wipeout of Federal transit funding from fiscal
    year 2021 to fiscal year 2023 will have a devastating impact on all
    aspects of the national and regional economy. To overcome this
    significant challenge, AASHTO looks forward to assisting you and the
    rest of your Senate colleagues in finding and implementing a viable set
    of revenue solutions to the HTF not only for fiscal year 2021, but that
    can also be sustained for the long term.
        I want to thank you again for the opportunity to testify today, and
    I am happy to answer any questions that you may have.

        Senator Collins. Thank you very much. Mr. Hauptli?
    STATEMENT OF TODD HAUPTLI, PRESIDENT AND CEO, AMERICAN
                ASSOCIATION OF AIRPORT EXECUTIVES
        Mr. Hauptli. Senator Collins, thank you for holding this
    hearing, thank you all for your service to the country. I am
    Todd Hauptli, the President and CEO of the American Association
    of Airport Executives.
        I want to make three points this morning. The first point
    is that we are chronically and systematically underinvesting in
    infrastructure in this country, and it is not just airport
    infrastructure or aviation infrastructure, or for that matter,
    transportation infrastructure, the subject of this hearing, we
    are also underinvesting in communications and power and water
    infrastructure.
        Increasingly, this lack of infrastructure investment is
    negatively impacting both our domestic and our international
    competitiveness. It is my belief that we need to do something
    about this now for our generation, for my children's
    generation, and for the generations that follow, so thank you
    for holding this important hearing today.
        Point number two. It is our belief that the Federal
    Government and the Federal Government alone cannot solve this
    problem. I will use airport infrastructure as an example.
    Airports have about $20 billion a year in capital development
    needs. The FAA says that the Airport Improvement Program, the
    primary Federal program for infrastructure investment in
    aviation, has about $7 billion a year in eligible projects, yet
    the Congress funds that program at a little over $3 billion a
    year.
        Senator, your colleagues on the authorizing committees
    could double the authorization level for the Airport
    Improvement Program, and you and your colleagues in the
    Appropriations Committee in the House and Senate could double
    the obligation limitation each year for AIP, and you still
    would not be in any danger of overinvesting in airport
    infrastructure.
        There is still a significant gap between what the needs are
    and what we are able to meet through the sources that we have
    for the Airport Improvement Program, through local fees, with
    the Passenger Facility Charge, through non-aeronautical
    revenues at airports, and also through access to the capital
    markets.
        That is why we believe it is so important that Congress
    lift the cap on the Passenger Facility Charge Program. This is
    an antiquated Federal cap that has been in place for 17 years
    without adjustment. This is the single biggest bang for the
    infrastructure buck with the least impact on the Federal
    budget.
        Point number three. Senator Reed, as a military history fan
    and a fan of history, I hope you will appreciate this. Winston
    Churchill once said that democracy is the worst form of
    government, except for all the others. When it comes to
    infrastructure investment and aviation infrastructure
    investment, the Passenger Facility Charge Program is much like
    democracy. It is the worst option, except for all the others.
        There is only so much Federal AIP money. There is only so
    much that airports can raise through non-aeronautical revenues,
    and the access to the capital markets is uneven across the
    country.
        The Passenger Facility Charge Program allowing local
    communities and local governments to decide, not the Federal
    Government, but the governments closest to the people, to
    decide what those local fees should be will allow for the
    leveraging of those infrastructure dollars that you referenced
    earlier.
        P-3s are exciting and interesting in some circumstances,
    access to the capital markets work in some circumstances. The
    Passenger Facility Charge Program is the only program that can
    benefit every airport of all sizes across the country.
        I will be happy to answer your questions. Thank you.

        [The statement follows:]
                       Prepared Statement of Todd Hauptli
        Chairman Collins, Ranking Member Reed, and members of the Senate
    Appropriations Subcommittee on Transportation, Housing and Urban
    Development, and Related Agencies, thank you for inviting me to
    participate in this hearing on the condition of our nation's
    transportation system and financing options to sustain long-term
    growth. It is an honor for me to be here today.
        The American Association of Airport Executives (AAAE) is the
    world's largest professional organization representing the men and
    women who manage commercial service, reliever, and general aviation
    airports. On behalf of all our members, I would like to begin by
    thanking each of you for helping airports in your respective states and
    throughout the country build critical infrastructure through the annual
    appropriations process.
        This committee has a strong track record of supporting the Airport
    Improvement Program (AIP)--a Federal program that airports of all sizes
    rely on to upgrade aging facilities and construct runways, taxiways and
    other capital projects. Airport executives are also grateful that this
    Subcommittee has funded programs that ensure people who live in rural
    and less populated areas have access to safe and reliable air service.
    We are also appreciative of the strong support for the Contract Tower
    Program.
        Unfortunately, the limited Federal funding that airports receive is
    not nearly enough to cover their AIP-eligible projects let alone the
    longer list of capital projects that airports must fund with other
    revenues. By any measure, airports need additional resources to upgrade
    aging facilities, accommodate rising demand, and to keep pace with
    evolving safety and security standards.
        While a number of difficult and complicated proposals for
    infrastructure investment are swirling in Washington, airports have a
    simple solution for expediting airport infrastructure: We are calling
    on Congress and the Administration to eliminate the outdated Federal
    cap on Passenger Facility Charges (PFCs), local airport user fees that
    are imposed locally, justified locally, and used locally for key
    airport projects. At a time when there is enormous pressure to reduce
    Federal spending, allowing airports to finance a greater share of their
    projects with local revenue free from Federal interference is by far
    the easiest way to improve our nation's airport infrastructure.
                     the need for infrastructure investment
        Considering the significant infrastructure needs in this country,
    the women and men who operate airports around the country are
    encouraged that this Subcommittee, lawmakers in both chambers, and the
    Administration are focusing on improving our nation's infrastructure.
    Investing in infrastructure will help rebuild our nation's airports,
    roads, and bridges while supporting good-paying jobs.
        We are systematically and chronically under-investing in
    infrastructure in this country. And it is not just airport
    infrastructure, aviation infrastructure, or even transportation
    infrastructure. We are under-investing in water infrastructure, power
    infrastructure, and communications infrastructure. And, increasingly,
    this lack of investment in infrastructure across the board is having a
    negative impact on our domestic and international competitiveness.
        According to the 2016 Global Competitiveness report, the United
    States has the 11th best infrastructure in the world and the 9th best
    aviation infrastructure. The report points out that the United States
    has been falling behind on infrastructure since 2007. It also makes the
    case that ``effective modes of transport--including high-quality roads,
    railroads, ports, and air transport--enable entrepreneurs to get their
    goods and services to market in a secure and timely manner . . . .''
        I'm sure all of us would agree that we can and should do better.
    After all, 9th or 11th place simply isn't good enough if we want to
    compete in the 21st century. That's why airport executives are
    encouraged that Congress and the Administration are exploring various
    ideas for a major infrastructure investment package.
        President Trump and his advisors have talked about a $1 trillion
    infrastructure package that could include possible tax credits for
    private investors. Senate Democrats recently unveiled their own
    proposal that includes $30 billion to improve airports and our aviation
    system. In the House, there appears to be some level of bipartisan
    support for legislation that proposes to eliminate the PFC cap.
        Like other infrastructure stakeholders, we're awaiting details on
    the Administration's approach and are anxious to see what proposals
    Congress may ultimately coalesce around. Different approaches from the
    White House and both chambers of Congress may have various components
    that could help airports in some ways. But the PFC is the biggest bang
    for the buck to build critical safety and security infrastructure at
    our nation's airports without stressing the Federal budget.
        Giving airports more local autonomy through additional PFC
    flexibility would help airports of all sizes move forward with a long
    list of critical infrastructure projects. Allowing large airports to
    finance a greater share of their projects with local revenue could also
    open the door to focus limited Federal dollars on smaller airports
    around the country that rely on Federal assistance the most.
      rising demand, aging facilities, and a long list of airport capital
                                     needs
        Rising Demand: 2016 was a banner year for our airline partners.
    According to Airlines for America (A4A), U.S. passenger airlines set
    multiple traffic and capacity records last year. The airline group
    indicated that passenger enplanements, revenue passenger miles,
    available seat miles and load factors all hit record highs in 2016.
        Considering the current trajectory, it should be no surprise that
    the FAA anticipates passenger levels will continue to grow in the
    short- and long-terms. The agency's 2016 Aerospace Forecast estimates
    that U.S. commercial air carrier enplanements will increase from an
    estimated 786 million in 2015 to 839 million this year. That's an
    increase of more than 50 million passenger enplanements in just 2
    years.
        The FAA's latest Forecast also indicates that passenger
    enplanements will reach the one billion mark by 2027--just 10 years
    from now and 2 years earlier than previously expected. By 2033,
    passenger levels are expected to reach 1.16 billion. Adding
    approximately 325 million passengers between now and 2033 is the
    equivalent of adding the entire U.S. population to our already
    constrained aviation system.
        Sixteen years may seem like a long time into the future. But
    planning, designing, and building runways, terminals and other
    capacity-enhancing projects can take an enormous amount of time.
    Airports need to prepare now for rising passenger levels to come in
    order to avoid congestion on the ground.
        Along with increasing passenger enplanements, the number of
    aircraft operations is also slated to rise in the years ahead.
    According to the FAA's Forecast, operations are expected to increase
    from 50,000 in 2016 to almost 60,000 by 2036--a 20 percent jump. But
    the FAA warns that ``inadequate'' infrastructure could result in
    congestion and delays as well as impact the agency's projections for
    demand and operations.
        Increasing Airport Capital Needs: With increasing passenger levels
    and aging facilities, large and small airports are also facing
    significant capital needs. As part of its 2017 National Plan of
    Integrated Airports System (NPIAS) report, the FAA estimated that
    airports have $32.5 billion in AIP-eligible projects between 2017 and
    2021 or approximately $6.5 billion annually.
        As members of this Subcommittee know, Congress has appropriated
    $3.35 billion for AIP in recent years, down from $3.5 billion a few
    years ago. Of the current amount, approximately $3.2 billion is
    designated for actual capital projects. The remaining amount goes to
    the FAA to administer the program and to fund other research and small
    community programs. At $3.2 billion, AIP funding is only enough to
    cover about half of airport's annual AIP-eligible projects.

        The FAA's NPIAS provides a snapshot of certain airport capital
    needs. But it is important to note that the FAA estimate only reflects
    some projects that are eligible for Federal funds. The FAA report does
    not include other necessary but ineligible infrastructure projects such
    as gates and certain terminal projects that airports fund with PFCs and
    other revenue sources.
        Like the FAA, our colleagues at Airports Council International-
    North America (ACI-NA) evaluate airport capital needs. The
    association's latest Airport Capital Needs Survey--which evaluates the
    full range of airport capital needs rather than just AIP-eligible
    projects--estimates that airports will face $100 billion in capital
    needs between 2017 and 2021 or approximately $20 billion annually.
        The results from ACI-NA's latest Airport Capital Needs Survey are
    up from its survey 2 years ago that showed $15.1 billion in annual
    capital needs. The new estimate is also more than three times the $6.3
    billion that airports received in AIP funds and PFC revenue last year.

        Construction Cost Inflation: In addition to rising passenger
    levels, airports have been hit hard by rising construction costs.
    According to the Means Construction Cost Indexes, the average
    construction costs for 30 major U.S. cities have jumped approximately
    75 percent since 2000--the last time Congress raised the PFC cap.
        Unfortunately, rising construction costs have eroded the purchasing
    power of artificially-capped PFCs and stagnant AIP funding levels.
    Because the PFC has not been adjusted for inflation over the years, a
    $4.50 PFC is worth only about $2.20 today according to the Means
    Construction Cost Indexes. Unless corrective action is taken, the value
    of PFCs will erode even more. The easiest way to keep up with annual
    construction inflation is to completely eliminate the PFC cap.
     recommendations for helping airports finance critical infrastructure
                                    projects
        Airports rely mostly on local PFCs, Federal AIP grants, and bonds
    to finance infrastructure projects at their facilities. Ensuring that
    airports have adequate funding to build critical infrastructure
    projects will require Congressional action in all three areas. Needless
    to say, flat or reduced AIP funding will only increase pressure on
    airports to secure funds from other revenue sources like PFCs.
        As you continue to move forward on the annual appropriations bills
    and prepare to debate a possible infrastructure package, airports have
    four steps that Congress could take to ensure that they have the
    revenue they need for airport capital projects.
                  eliminate outdated federal cap on local pfcs
        Airports are united behind a proposal to eliminate the Federal cap
    on local PFCs. For more than 25 years, the PFC program has helped
    airports increase safety, security, and capacity; mitigate the impact
    of aircraft noise; and increase competition.
        PFCs are local fees that must be approved locally, imposed locally,
    and used locally for projects approved by the Department of
    Transportation (DOT) in consultation with the airlines. There is an
    inherent level of accountability locally that ensures any revenues
    raised through the PFC are used for critical locally-supported
    projects.
        A PFC adjustment is long overdue. Congress has not adjusted the cap
    since 2000--17 years ago. Considering the ongoing pressure to reduce
    Federal spending, it is now more important than ever that Congress
    eliminate the Federal cap on local PFCs. Eliminating the cap would
    allow airports to finance a greater share of critical infrastructure
    projects with their own local revenues.
        PFCs Help Increase Capacity; Enhance Competition: Airports use PFC
    revenue to build infrastructure projects that increase capacity, reduce
    delays, and enhance competition among carriers. With over $13 billion
    in capital needs, the Seattle-Tacoma International Airport (SEA-TAC) is
    a good case study for why Congress should eliminate the Federal cap on
    local PFCs.
        Seattle-Tacoma International Airport: Last week, Lance Lyttle, SEA-
    TAC's Managing Director, testified before the House Aviation
    Subcommittee during a hearing on the state of American airports. He
    told lawmakers that the airport plans to invest more than $3.2 billion
    in capital improvement projects during the next 7 years including $660
    million for a new International Arrivals Facility.
        He also indicated that these upcoming capital projects will ``use
    essentially all of Sea-Tac's anticipated PFC collections through 2035,
    and most PFC collections through 2047, to pay revenue bond debt service
    on PFC eligible projects.'' In other words, unless Congress adjusts the
    outdate PFC cap, the airport will be PFC-constrained for the
    foreseeable future.
        But SEA-TAC, like other airports around the country, needs to
    continue to repair aging infrastructure and expand its facilities to
    accommodate rising passenger levels. The airport expects its passenger
    levels will jump from 46 million last year to 66 million by 2034. To
    accommodate the huge influx of travelers, SEA-TAC will need another $10
    billion to build 35 more gates, expand ticketing/check-in facilities,
    and rebuild airport access roads.
        With AIP funding held flat in recent years, many in the airport
    community think a big boost in Federal funding is unlikely. In Seattle,
    airport officials would prefer that funds for their infrastructure
    projects come from PFCs rather than from airline rates and charges.
    Absent additional PFC flexibility, SEA-TAC has few feasible options
    remaining.
        PFCs Help Small Airports: Although large airports obviously benefit
    from PFCs, the local user fee is an important source of income for
    smaller commercial service airports around the country, too. In fact,
    some of the most compelling calls for self-help come from communities
    like Bangor, Maine; Providence, Rhode Island; and Missoula, Montana.
        Small airports rely on PFCs to augment their AIP funding and to
    help pay the higher local matching requirement for AIP funds. The last
    FAA reauthorization bill regrettably doubled the local matching share
    requirement for small communities over the previous requirement.
    Doubling the local match requirement has had an enormous financial
    impact on small airports. Eliminating the PFC cap would help small
    airports generate more local revenue to meet their higher local
    requirements.
        Bangor International Airport: Madame Chair, as you know, the Bangor
    International Airport recently completed work on a $14 million terminal
    project that allowed the airport to add another passenger gate and jet
    bridge for domestic travelers. That major renovation project was made
    possible by a combination of local PFCs, AIP grants, and other revenue
    sources.
        Officials at the non-hub airport now have their sights set on two
    major airside projects including rehabilitating a taxiway that
    parallels the runway. At over 11,000 feet in length, the project is
    expected to cost approximately $10 million. The airport, which is home
    to the 101st Air Refueling Wing, also plans to redo the adjacent
    runway. The runway project could cost twice as much as the taxiway, and
    the airport plans to use AIP grants and PFCs for both.
        The Bangor International Airport is experiencing tremendous
    passenger growth. Last year the airport had a record 492,000
    enplanements. That's 120,000 more enplanements than the airport had
    just 8 years ago. With increasing passenger loads and the continuous
    need to upgrade aging facilities, it's clear that the airport will need
    to invest in other necessary airside and landside projects. Lifting the
    PFC cap would give the airport another financing option to meet its
    infrastructure demands.
        T.F. Green Airport: T.F. Green Airport near Providence, Rhode
    Island has relied on Federal grants and PFC revenue for critical
    infrastructure projects. Two week ago, Rhode Island Airport Corporation
    officials, Ranking Member Reed, and other leaders announced that the
    airport will begin receiving new international service this summer.
    Senator Reed deserves a great deal of credit for facilitating that new
    service by helping to secure $110 million in AIP grants to upgrade the
    airport and extend its runway.
        Looking ahead, airport officials indicate that raising or
    eliminating the PFC cap could help the airport fund critical
    infrastructure projects and airfield equipment. With potential growth
    in service to international destinations, airport officials point out
    that they may need to use PFCs to help pay for expanding or potentially
    building a new Federal Inspection Service facility. The airport also
    intends to use PFCs to pay for debt service on associated airfield
    projects.
        Missoula International Airport: The Missoula International Airport
    is another airport in need of a new terminal. The current terminal at
    the Montana airport was built in the late 1940s, and the airport has
    added on to it about a dozen times since then. In an effort to replace
    outdated facilities and accommodate unprecedented passenger growth,
    airport officials are preparing to break ground next year on a new $72
    million terminal. The airport plans to use a combination of PFCs, AIP
    grants, and other revenue sources to pay for the much-needed project.
        Adjusting the PFC cap would allow the airport to service a higher
    level of debt and complete all phases of the new terminal project.
    Airport officials also point out that a higher PFC cap would allow them
    to pay off the terminal-related debt more quickly. It would also allow
    them to use PFC revenue for other high-priority projects such as
    airfield pavement, Aircraft Rescue and Fire Fighting equipment, and
    Snow Removal Equipment.
        Response to Airline Arguments: Unfortunately, airports and airlines
    don't agree on the need to eliminate the PFC cap. We've been going
    around and around on this issue for the past 25 years. It is a dispute
    about money. But, more importantly, it is a dispute about control.
    Airlines don't like the fact that airports can use PFC revenue to help
    increase competition at their facilities, which can lead to lower
    fares.
        The dispute between airports and airlines is also about
    perspective. Airlines tend to look at the world in 90-day increments of
    time and their next quarterly report. That is understandable since
    their job is to maximize revenue for their shareholders. Airports, on
    the other hand, look at the world in 3-, 5-, 7-, 10-, even 15-year
    increments because that's how long it takes to build necessary
    infrastructure.
        Airports, like you, are representatives and stewards of their
    communities. Airports are trying to provide the best opportunities for
    competition and enhanced service. If an airline doesn't like their
    yield in a particular market, they can pick up and leave. We believe
    that our interest, as units of local government, aligns with your
    interest, as members of the United States Senate, in looking out for
    what is best interest of your community.
        The airlines often make the erroneous claim that PFCs are taxes.
    But PFCs are not taxes. They are local user fees charged to passengers
    using airport facilities to help defray the costs of building airport
    infrastructure. Moreover, PFCs are imposed by states or units of local
    government--not the Federal government. PFCs are not collected by the
    Federal government, not spent by the Federal government, and not
    deposited into the U.S. Treasury.
        Marc Scribner from the libertarian Competitive Enterprise Institute
    described PFCs as ``classic example of a user fee.'' He correctly
    pointed out that ``unlike taxes, user fees can only be imposed on the
    service beneficiaries . . . The primary beneficiaries of airports are
    the passengers who use the airports; thus, charging them a facility
    user fee that will be used solely for specific, statutorily-defined
    airport improvements cannot constitute a tax.''
        Our airline partners will continue to try to make the case in that
    raising the PFC cap isn't necessary because commercial service airports
    collected $24.5 billion in revenues in 2013. The airlines might have a
    point if airports could have devoted that entire amount for capital
    projects. But, not surprisingly, airports use various revenue sources
    to pay for capital and operational expenses.
        The fact is almost half of the airline's estimate--or $11.7
    billion--paid for airport operating expenses such as personnel costs,
    firefighting and law enforcement. According to airport financial
    reports, airports also had $6.3 billion in debt service costs in 2013.
    That's the amount of principal and interest that airports paid for
    long-term bonds during the year. When combined with airport operating
    expenses, airport non-capital costs were $18 billion in 2013--or 73
    percent of A4A's estimate.
        Another 25 percent of A4A's estimate--or $6.2 billion--came from
    AIP funds and PFCs. That estimate is misleading because airports didn't
    actually receive the full $3.4 billion in AIP grants. According to the
    FAA, airports received less than $3 billion in AIP grants in 2013 and
    slightly less than $2.8 billion from PFCs. There's no question that
    $5.8 billion is a large amount of money. But revenue from those two
    programs would only cover a fraction of the $20 billion in annual
    airport capital needs.
        Finally, A4A's estimate also doesn't take into account the amount
    of debt that airports have outstanding. Airport financial reports show
    that airports had more than $83 billion in outstanding debt in 2013,
    and that number climbed to more than $88 billion by 2015. Without a PFC
    increase, airports that have more borrowing capacity will have to issue
    even more debt to finance their infrastructure projects. Eliminating
    the PFC cap and paying for more projects on is a fiscally responsible
    approach that would help both airports and airlines.
           continue to invest in federal airport improvement program
        Airports are also urging Congress to continue to provide full
    funding for AIP in the annual appropriations bills. As members of this
    Subcommittee are well aware, no general fund revenues are used for AIP
    grants. The AIP program is supported entirely by users of the aviation
    system through various taxes and fees deposited into the Airport and
    Airway Trust Fund.
        AIP is a critical source of funding for airports of all sizes and
    especially smaller airports around the country that don't generate as
    much PFC revenue or have easy access to the bond market. Large and
    medium hub airports also depend on AIP funding--particularly money
    distributed through the Letter of Intent Program--to help pay for large
    capacity-enhancing projects.
        AIP funds key airport projects that improve safety, security,
    capacity, and efficiency. Airports often rely on Federal grants to
    construct and rehabilitate runways and taxiways. Despite enormous
    demand and increased construction cost inflation, the authorized
    funding levels for AIP has dropped in recent years from $3.515 billion
    to $3.35 billion.
        It is important to point out that not all AIP funding actually
    flows to airports for actual construction projects. In fiscal year 16,
    for instance, only about $3.2 billion went to actual infrastructure
    projects. Slightly more than $107 million of AIP went to the FAA to
    operate the program. At that funding level, the annual appropriations
    for AIP amount is only enough to cover half the FAA's estimated $6.5
    billion in annual AIP-eligible projects and one-third of airports'
    entire annual capital needs.
        The next FAA reauthorization bill may propose slightly higher
    funding levels for AIP. But we realize that it is unlikely that the
    program will double in size any time soon. It is for that reason that
    we believe that it is absolutely imperative for Congress to eliminate
    the PFC cap. Doing away with the cap could potentially open the door to
    recalibrate the AIP program. With a PFC increase firmly in place,
    limited Federal funds could be focused on smaller airports that need
    AIP funds the most.
          preserve and restore tax exempt financing for airport bonds
        While it isn't under this Subcommittee's jurisdiction, airports
    urge you to work with your colleagues on the Senate Finance Committee
    to help airports pay for their infrastructure projects with bonds.
    Specifically, we are urging Congress to retain the tax exemption for
    municipal bonds and to eliminate the tax burden of the Alternative
    Minimum Tax (AMT) on airport private activity bonds.
        AAAE and ACI-NA have long argued that Federal tax law unfairly
    classifies the vast majority of bonds that airports use as private
    activity even though they are used to finance runways, taxiways and
    other facilities that benefit the public. Since private activity bonds
    are subject to the AMT, airport bond issuers traditionally have been
    charged higher interest rates on their borrowing.
        A permanent AMT fix would help airports reduce their borrowing
    costs, allow them to invest in more infrastructure projects, and
    support more jobs. Since reducing borrowing costs would benefit
    airports and their customers, this is one airport infrastructure
    financing proposal that airports and airlines will likely continue to
    agree makes sense.
        But it is important to note that unlike AIP and PFCs, bonds are not
    a revenue source--they are essentially loans that airports need to pay
    back. In terms of additional borrowing, many airports are unable to
    issue new bonds because they have reached the limits of their debt
    capacity. Other small airports are simply unable to go to the bond
    market to finance infrastructure projects.
                             close bag fee loophole
        While airports and airlines may agree on the need for AMT relief,
    we continue to have a fundamental disagreement over the impact of
    airlines' increasing reliance on baggage fees and other ancillary
    charges. AAAE is recommending that those fees be subject to the same
    aviation excise taxes as base air fares and that the revenue be
    deposited into the Airport and Airway Trust Fund.
        Airport operators respect our airline partners and the highly
    competitive nature of the commercial airline industry. However, at a
    time when Federal funding for airport infrastructure projects is
    stagnant, and the purchasing power of PFCs is eroding, the airlines'
    current business model simultaneously reduces funds that could be used
    for airport infrastructure projects and air traffic control
    modernization.
        Air carriers are increasingly relying on revenue generated from
    checked baggage fees and other ancillary charges and less on funds from
    base airline tickets. Unlike airline tickets, baggage fees and some
    other ancillary charges are not subject to a 7.5 percent excise tax. In
    other words, the airlines' a la carte pricing model allows carriers to
    avoid paying aviation excise taxes for services that were once included
    in the price of traditional airline tickets.
        According to DOT's Bureau of Transportation and Statistics, U.S.
    airlines collected more than $3.8 billion in baggage fees in 2015--the
    last complete year available. And carriers were on track to exceed that
    amount in 2016 having collected approximately $3.15 billion in first
    three quarters of the year. Those figures are for bag fees alone and do
    not include revenue that carriers generate from reservation change fees
    and other ancillary charges. The 2015 airline bag fee revenue exceeds
    the amount that Congress approved for AIP in fiscal year 16 and the
    amount that airports collected in PFC revenue in the same calendar
    year.

        The airlines' use of ancillary fees shortchanges the Airport and
    Airway Trust Fund of revenue that could otherwise support airport
    infrastructure projects, air traffic control modernization, and other
    aviation system improvements. Between 2008 and the third quarter of
    2016, the airlines raked in almost $28 billion in revenue from bag
    fees. By the end of the first quarter of 2017--less than 1 month from
    now--that number will likely climb to approximately $30 billion.
        Closing the baggage fee loophole and charging the same 7.5 percent
    as base fares would have generated approximately $285 million in 2015
    alone. From 2008 through the first quarter of 2017, the bag fee
    loophole is expected to cost the Airport and Airway Trust Fund
    approximately $2.2 billion in foregone revenue.

        We appreciate the airlines' responsibility to answer to their
    shareholders. And airports want our airline partners to be successful.
    But the ancillary fee loophole should be closed. Doing so would
    generate over $1 billion every 4 years that could be used for AIP and
    NextGen. It would also help the nation meet the long-term needs of our
    aviation system.
                 recommendations for helping small communities
        This Subcommittee has long looked out for small communities by
    supporting programs that ensure people who live and work in rural areas
    have access to our aviation system. As you consider the annual
    appropriations bills, we urge you to protect the cost-effective
    Contract Tower Program and maintain funding for small community
    programs.
        Contract Tower Program: On behalf of the 253 airports with FAA
    contract towers, we would like to thank this Subcommittee for the full
    and dedicated funding you have provided the contract tower program over
    the years. This successful program allows smaller airports in 46 states
    to have air traffic control services that have a direct impact on
    aviation safety. It also plays a key role in connecting smaller
    airports and rural communities with our national air transportation
    system.
        As you well know, the Contract Tower Program continues to enjoy
    strong bipartisan and bicameral support in Congress for the way it
    enhances aviation safety and provides significant cost savings to the
    FAA and U.S. taxpayers. The enormous benefits of this highly-regarded
    government/industry partnership have been validated repeatedly by DOT's
    Office of Inspector General.
        Almost half of all military operations at civilian airports in the
    U.S. occur at contract towers and approximately 70 percent of all
    contract controllers are veterans. Contract towers operate together
    with FAA-staffed facilities throughout the country as part of a unified
    national air traffic control system. Without this Federal program and
    critical support from this Subcommittee, many of these towers would be
    forced to close.
        We are grateful that Senate and House versions of the fiscal year
    17 DOT Appropriations bill include $159 million for the Contract Tower
    Cost Share program. We urge you to include that full amount in the
    final fiscal year 2017 and fiscal year 2018 DOT spending bills.
        Essential Air Service: Congress created the Essential Air Service
    (EAS) program as part of the Airline Deregulation Act of 1978 to ensure
    that small communities could maintain a minimal level of scheduled air
    service. Since then, this program has successfully allowed people who
    live in rural and less populated areas to have access to the national
    aviation system. According to DOT, 173 communities participate in the
    EAS program including 61 in Alaska.
        Commercial air service is not just a matter of convenience for
    leisure travelers. It is also critical to economic development efforts
    in communities around the country. Without the EAS program it would be
    difficult for many small communities to retain commercial air service
    and attract businesses that promote economic development and create
    jobs.
        The EAS program is funded by a combination of annual appropriations
    and revenue from overflight fees. On behalf of EAS communities around
    the country, we urge you to continue to support this program.
        Small Community Air Service Development Program: AAAE has been a
    strong supporter of the Small Community Air Service Development
    Program. Since its creation, the program has helped numerous small
    communities suffering from insufficient air service or unreasonably
    high fares.
        DOT officials have pointed out that small community grants fund a
    variety of projects including financial incentives for airlines and
    marketing initiatives. At a time when small airports are trying to do
    everything they can to hold on to commercial air service and attract
    new service, the Small Community Air Service Development Program can
    provide small communities with a much-needed boost.
        It is worth noting that small communities that participate in the
    program bring significant local funds to the table. When announcing
    grant recipients last year, DOT noted that ``nearly all the communities
    pledged local cash and/or in-kind contributions from local, state,
    airport, or private sources to complement their requests for Federal
    assistance.''
        Vision 100 authorized $35 million per year for the Small Community
    Air Service Development Program, and authorizers reduced that level to
    $6 million annually in the FAA Modernization and Reform Act of 2012.
    This Subcommittee has approved even higher funding levels for the Small
    Community Air Service Development Program in recent years, and we urge
    you to help airports in small communities by continuing to support this
    program in fiscal year 17 and fiscal year 18.
                                   conclusion
        Chairman Collins, Ranking Member Reed, and members of the Senate
    Appropriations Subcommittee on Transportation, thank you again for
    inviting me to participate in this hearing on airport issues and
    infrastructure financing. We appreciate your long-standing support of
    the nation's airports and maintaining air service. We look forward to
    working with you as we seek to better prepare airports to deal with the
    significant challenges on the horizon.

        Senator Collins. Thank you very much.
        Mr. Mortimer.
    STATEMENT OF EDWARD L. MORTIMER, EXECUTIVE DIRECTOR FOR
                TRANSPORTATION INFRASTRUCTURE, U.S. CHAMBER
                OF COMMERCE
        Mr. Mortimer. Great. Good morning, Chairman Collins,
    Ranking Member Reed, and members of the subcommittee. My name
    is Ed Mortimer. I serve as Executive Director of Transportation
    Infrastructure at the U.S. Chamber of Commerce.
        I also have the privilege of serving as Executive Director
    of the Chamber-led Americans for Transportation Mobility
    Coalition, which includes business, labor, and transportation
    stakeholders advocating for improved and increased Federal
    investment in the Nation's aging and overburdened
    transportation system.
        America's transportation network is a vast system that
    connects people and places, moves goods, and boosts our
    economy, and ensures our quality of life and safety. It has
    served as the backbone of the Nation's economy.
        For almost 100 years, America's infrastructure has been the
    envy of the world, from our transcontinental railroads to our
    airports, and from subways to the interstate highway system.
        Our Nation's history of providing state-of-the-art
    infrastructure is impressive, but like those who own a home
    know, failure to maintain an asset allows minor problems to
    turn into major reconstruction, and now we see an
    infrastructure that we need to rebuild and modernize.
        The U.S. Department of Transportation's Beyond Traffic
    Report describes in detail what the future may hold for our
    changing population. The report finds that the U.S. population
    is expected to grow by 70 million people in the next 30 years.
    By 2045, the Nation's economy is forecasted to grow by 115
    percent.
        We talked earlier about the needs that are out there. My
    written statement really gets into those, but again, the needs
    are great and the resources are limited.
        What has changed? We are very excited that President Donald
    Trump has announced his desire to enact an infrastructure
    investment package, which many in Congress, many on this
    committee and others, including the leadership, have expressed
    a willingness to advance such legislation.
        The Chamber and the ATM Coalition believes this is a once
    in a generation opportunity to modernize America's
    infrastructure, and that this effort is critical to future
    economic success.
        As this process moves forward, the Chamber believes any
    package should include the following three principles: first,
    the legislation should focus on actual infrastructure projects
    whose completion can create greater potential for long-term
    economic growth. The package should not be a replication of
    what happened in 2009 with the Recovery Act.
        These projects need to be selected and funded based on
    potential to support long-term economic growth, not at the
    speed at which they can be brought into construction and
    completion.
        Second, the legislation should employ a variety of funding
    mechanisms tailored to various infrastructure project lines and
    where possible utilize existing Federal programs. Funding
    should come in the form of direct Federal funding, revolving
    loan programs, direct Federal loan programs, tax-preferred
    financing, and public/private partnerships.
        Again, as my colleagues from AASHTO said, any legislation
    must ensure the long-term solvency of the Highway Trust Fund,
    and I will speak about that further in a minute.
        Thirdly, while new Federal programs may be necessary to
    reflect the breadth of infrastructure projects envisioned,
    where possible, existing programs should be utilized and
    reformed as necessary.
        Additional financing and funding should be accompanied by
    reforms that increase accountability, maximize and expedite the
    use of scarce Federal resources, and accommodate future needs.
    Best practices and performance requirements are needed to
    ensure projects are selected to maximize economic
    competitiveness, and that our national transportation system
    remains cohesive and efficient.
        By expediting permitting, modernizing procurement
    practices, promoting innovation, and committing to project
    analysis that focuses on long-term risk management, the Federal
    Government can extract greater value out of limited funds, and
    support the delivery of higher quality, longer lasting
    infrastructure.
        Rebuilding the Nation's transportation infrastructure
    should also include embedding new technologies that can
    leverage the impact of advances such as autonomous vehicles and
    drones.
        Before I get into some of the funding and financing options
    for this infrastructure package, I would like to reiterate what
    Commissioner Bernhardt and Jim Tymon from AASHTO said, we do
    believe this committee needs to make sure that when the fiscal
    year 2017 appropriations are done, that we fully fund this year
    the FAST Act.
        It is critical to maintain trust with our state partners
    and business community to ensure that the funding levels
    authorized in the FAST Act are met.
        Now, I would like to talk about some of the funding and
    financing options that could be evaluated as we look forward to
    how we do this critical infrastructure package. Again, the
    Federal Highway Trust Fund will run out of money after the FAST
    Act expires in 2020. I think Jim talked about this.
        Obviously, we have a hole at the end of that legislation of
    over $100 billion, just to maintain the funding in the last
    year of the FAST Act.
        This shortfall will result in significant uncertainty, and
    you all have seen what happened when we had extension after
    extension of authorization, it really caused a lot of
    uncertainty and it slowed down a lot of projects around the
    country because of the lack of Federal long-term planning,
    again, this is something we believe needs to be addressed as
    part of any infrastructure package this year.
        We believe that business, labor, public transit advocates,
    and other key stakeholders must partner with Congress to find
    long-term sustainable funding for the Highway Trust Fund.
        Currently stuck at 18.4 cents per gallon, the Federal
    gasoline tax has not been increased since 1993. Since then, the
    user fee has lost more 35 percent of its purchasing power.
        Could you imagine if we had indexed that and kept pace with
    inflation? We would not have a lot of the problems we have
    today.
        Look, we understand that politically, this is the most
    challenging one, but as the business community, we are
    committed to stand with members of Congress to try to make sure
    this is addressed this year, and we are willing to support this
    type--it has been the way that has worked since 1956, and we
    are willing to stand with elected officials to make that tough
    decision and to make it happen.
        Of course, there are several funding and financing tools
    that are also available. We talked about TIFIA. Again, we
    believe TIFIA can be reformed, and utilization of the Build
    America Bureau can provide new opportunities. We also believe
    the Railroad Rehabilitation and Improvement Financing (RRIF)
    can be another program that can be reviewed.
        The private activity bonds, we believe that cap on private
    activity bonds should be lifted. There is a lot of opportunity
    there moving forward. Tax credit bonds, we know Senator Hoeven
    on this committee and others have looked at trying to use some
    type of tax credit bonds.
        But again, while these are all valuable private sources,
    they are not a replacement for core Federal funding.
        In closing, this is a critical juncture in our country, the
    business community stands ready to work with all of you to
    ensure that we actually have an infrastructure that can serve
    the Nation for the next 50 years, just like Dwight Eisenhower
    developed the interstate highway system.
        Thank you for your time, and I look forward to your
    questions.

        [The statement follows:]
                    Prepared Statement of Edward L. Mortimer
                                  introduction
        Good morning Chairman Collins, Ranking Member Reed, and members of
    the Subcommittee. My name is Ed Mortimer and I serve as the Executive
    Director for Transportation Infrastructure at the United States Chamber
    of Commerce. I also serve as the Executive Director of the Chamber-led
    Americans for Transportation Mobility Coalition (ATM), which includes
    business, labor and transportation stakeholders advocating for improved
    and increased Federal investment in the nation's aging and overburdened
    transportation system.
        The U.S. Chamber is the world's largest business federation. We
    represent the interests of over 3 million businesses of all sizes,
    sectors, and regions, as well as state and local chambers and industry
    associations.
            condition of the nation's transportation infrastructure
        America's transportation network is a vast system that connects
    people and places, moves goods and boosts our economy, and ensures our
    quality of life and safety. The country's transportation system is
    comprised of roads, bridges, public transit, airports, ports, and
    interchanges affecting thousands of communities, multiple industries
    and job sectors. It has served as the backbone of the nation's economy.
        For almost one hundred years, America's infrastructure has been the
    envy of the world. From the transcontinental railroads to electric
    streetcars, and from subways to the interstate highway system, our
    nation's history of providing state-of-the art infrastructure is
    impressive.
        ``Today, there are more than 4 million miles of road, 600,000
    bridges, and 3,000 transit providers in the U.S. And yet, over the past
    20 years, total Federal, state, and local investment in transportation
    has fallen as a share of Gross Domestic Product--while population,
    congestion, and maintenance backlogs have increased,'' according to
    2014 White House document entitled: ``An Economic Analysis of
    Transportation Infrastructure Investment.''
        But like those of us who own a home know, failure to maintain an
    asset allows minor problems to turn into major reconstruction. In the
    infrastructure market, the latest American Society of Civil Engineers
    Infrastructure Report Card, which will be revised tomorrow, tells this
    sad story, ranking the nation's infrastructure a D+. Shockingly, this
    is an improvement from a grade of D in the previous report. Grades that
    should give this subcommittee pause include: Bridges (C+); Aviation
    (D); Roads (D) and Transit (D).
        Study after study has shown that investing in transportation
    infrastructure leads to better safety, faster economic growth and
    higher quality of life. Not maintaining the infrastructure will have
    the reverse effect; the recent challenges of the Washington
    Metropolitan Area Transit Authority are just the most recent example.
        Another recent report analyzing the U.S. Department of
    Transportation's (U.S. DOT) recently-released 2016 National Bridge
    Inventory data finds cars, trucks and school buses cross the nation's
    55,710 structurally compromised bridges 185 million times daily. About
    1,900 are on the Interstate Highway System. State transportation
    departments have identified 13,000 Interstate bridges that need
    replacement, widening or major reconstruction.

        The data in the report shows 28 percent of the nation's bridges
    (173,919) are over 50 years old and have never had any major
    reconstruction work in that time.
        The most recent 2015 U.S. DOT conditions and performance report
    highlighted the current state of good repairs needed for highways and
    bridges at an estimated $830 billion. Of the total backlog, $394.9
    billion (18.8 percent) is required for the Interstate System; $394.9
    billion (47.2 percent) is for the National Highway System, and $644.8
    billion (77.1 percent) is for Federal-aid highways.
        This U.S. DOT report also stated the current state of good repair
    needs for public transit at $89.8 billion. (2015 Status of the Nation's
    Highways, Bridges, and Transit, U.S. Department of Transportation) Some
    of the impacts of future transit capital investment scenarios are
    listed below.

        In the airport sector, a recent survey by the Airports Council
    International-North America (ACI-NA) showed U.S. airports have an
    estimated $75.7 billion in infrastructure investment needs through 2019
    to accommodate growth in passenger and cargo activity, rehabilitate
    existing facilities, and support aircraft innovation (Airport Capital
    Development Needs: 2015-2019).
              importance to system conditions to freight movement
        The nation's freight network continues to experience strain. In
    2015, our nation's transportation system moved 18.1 billion tons of
    goods, worth $19.2 trillion, according to a Bureau of Transportation
    Statistics document entitled ``DOT Released 30-year Freight
    projection'' (March 2016). A recent U.S. DOT report, Beyond Traffic,
    projects that the amount of freight traveling on our nation's
    transportation network will grow 40 percent over the next 40 years. The
    chart below shows the breakdown of those estimates by transportation
    mode:

        The nation's supply chain is also adapting to American consumers
    expecting quicker delivery of product. Supply-chain programs are moving
    from an inventory based ``manufacture-to-supply'' model to a
    ``manufacture-to-order'' model. Emerging technologies such as vehicle-
    to-vehicle and vehicle-to-infrastructure communications and autonomous
    vehicles need to have a transportation infrastructure able to allow
    these innovations to achieve the desired effort of maximizing the
    efficiency of the transportation network.
                              the challenge ahead
        The Beyond Traffic report describes in detail what the future may
    hold for our changing population. The report finds that the U.S.
    population is expected to grow by 70 million people in the next 30
    years. By 2045, the nation's economy is forecasted to grow by 115
    percent and the transportation sector will represent $1.6 trillion of
    gross domestic product.
        The same report shows investment in surface transportation is not
    meeting demand. For example, improving the condition and performance of
    highways and bridges over the next 5 years is estimated to cost $120
    billion annually from all levels of government. Yet, we currently are
    investing only $83.1 billion. For public transportation, current
    investment is $17.1 billion annually, a far cry from the necessary $43
    billion.
              what should be included in an infrastructure package
        President Donald Trump has announced his desire to enact an
    infrastructure investment package, and many in Congress, including
    leadership, have expressed a willingness to advance such legislation.
    The Chamber and the ATM Coalition believe this is a once in a
    generation opportunity to modernize America's infrastructure, and that
    this effort is critical to future economic success. As this process
    moves forward, the Chamber believes any package should include the
    following principles:
       legislation should focus on actual infrastructure projects whose
     completion can create greater potential for long-term economic growth.
      --Infrastructure includes transportation (roads, bridges, transit
            systems, aviation, rail, ports and waterways), energy
            infrastructure, water and wastewater infrastructure, and
            broadband. Initiatives outside of these core areas should not
            be included in the package.
      --The package should not be a ``stimulus'' bill. Projects should be
            selected and funded based on the potential to support long-term
            economic growth, not the speed at which they can be completed.
     legislation should employ a variety of funding mechanisms tailored to
     the various infrastructure project lines and, where possible, utilize
                           existing federal programs.
      --Funding should come in the form of direct Federal funding,
            revolving loan programs, direct Federal loan programs, tax-
            preferred financing, and public-private partnerships.
      --Any legislation must ensure the long-term solvency of the Highway
            Trust Fund (HTF).
      --While new Federal programs may be necessary to reflect the breadth
            of infrastructure projects envisioned, where possible, existing
            programs should be utilized and reformed as necessary.
      --A discretionary grant program should be created to fund mega-
            projects, fund projects without existing Federal funding
            source, stimulate competition, and maximize leveraging state,
            local, and private-sector funds.
    additional financing and funding should be accompanied by reforms that
       increase accountability, maximize and expedite the use of scarce
                federal resources, and accommodate future needs.
      --Accountability, best practices, and performance requirements are
            needed to ensure projects are selected to maximize economic
            competitiveness and that our national transportation system
            remains cohesive and efficient.
      --By expediting permitting, modernizing procurement practices,
            promoting innovation, and committing to project analysis that
            focuses on long-term risk management, the Federal government
            can extract greater value out of limited funds and support the
            delivery of higher quality, longer lasting infrastructure.
      --Rebuilding the nation's transportation infrastructure should
            include embedding new technologies that can leverage the impact
            of advances such as autonomous vehicles.
       need to utilize various financing and funding options to increase
                    transportation infrastructure investment
    Reauthorization, 6-year Highway Trust Fund Fix

        The Federal Highway Trust Fund (HTF) will run out of money after
    the Fixing America's Surface Transportation Act (FAST Act) expires in
    2020. It will require an investment of approximately $150 billion over
    current revenue projections just to maintain funding at FAST Act levels
    over the following 6-year period. This shortfall will likely result in
    significant uncertainty with states possibly delaying major
    transportation projects. The size of the shortfall also will likely
    mean that Congress will be unable to complete a well-funded
    authorization bill in a timely manner and might force undesirable
    policy outcomes that run counter to the best interests of the nation.

    Funding Highway Trust Fund

        We believe that business, labor, public transit advocates and other
    key stakeholders must partner with the Congress to find a long-term,
    sustainable funding source for the Highway Trust Fund. Currently stuck
    at 18.4 cents per gallon, the Federal gasoline tax has not increased
    since 1993. Since then, the user fee has lost more than 35 percent of
    its purchasing power. Even with the passage of the FAST Act, our
    nation's current level of investment in surface transportation is less
    than half of what is needed.
        It is the Chamber's position that the simplest, most straight
    forward solution to the immediate problem we face is to increase user
    fees--gasoline and diesel taxes--going into the HTF. Adding a penny, a
    month for a year and indexing the total user fee to inflation could
    support current services funding levels for the foreseeable future. The
    collection system itself is highly efficient: the owner of the fuel at
    the time it breaks bulk from the terminal rack pays the excise tax to
    the Internal Revenue Service. According to the American Petroleum
    Institute, there are about 1300 terminals in the country, translating
    to a low number of payers and low cost of administration. The gas tax,
    if adjusted in amount and indexed, is ideal and most transparent as a
    revenue source.
        And yes, in the long run, we know that there is a need to look to
    other methods to pay for surface transportation investment. The vehicle
    fleet is becoming more fuel-efficient. Driving patterns are changing.
    Construction costs typically grow faster than the Consumer Price Index.
    And multi-modal transportation investment calls for more diversified
    sources of revenue. We have been closely following pilot programs
    looking at transitioning to vehicles miles traveled such as Oregon and
    others. While progress is being made, we believe that national
    implementation of such a funding mechanism is at least 10 years away.

    Financing Tools

        Federal Loan Programs--Direct Federal loans are a critical tool to
    bringing private capital to the infrastructure market. The most
    successful loan program is known as Transportation Infrastructure
    Finance and Innovation Act (TIFIA), which makes loans to highway and
    transit projects. The Federal cost of loan programs (known as subsidy
    cost) is determined based on the expected value of a potential default
    of each project, which has historically been 8 percent. Each dollar
    provided in subsidy cost historically leverages $30 in total project
    funding. The FAST Act lowered subsidy cost funding from $1 billion to
    $350 million because there was not enough demand for the higher level
    of loans. We believe that with increased resources in U.S. DOT's Build
    America Bureau, more project sponsors will find it easier to utilize
    TIFIA.
        We also would like to see expanded use of a financing tool for rail
    projects, known as the Railroad Rehabilitation & Improvement Financing
    (RIFF). The program, authorized in 1998, has experienced limited use
    due to the private sector being required to pay the government the
    subsidy cost when the loan closes, along with its restrictive loan
    terms.
        Private Activity Bonds--Private Activity Bonds (PABs) allow
    private-sector project sponsors to issue tax-exempt bonds when
    financing public-benefit infrastructure projects. Currently there is a
    $15 billion cap on such issuances. We believe that raising or
    eliminating this cap would provide a further incentive to increase
    private sector investment in surface transportation projects. We
    propose increasing the cap by $10 billion. The average P3 project is
    funded 25 percent with PABs, so we assume an additional $10 billion cap
    could leverage $40 billion in projects.
        Tax-Credit Bonds--There are several competing proposals to leverage
    private-sector investment by creating a new category of bonds,
    including Build America Bonds (BABs) and Transportation and Regional
    Infrastructure Project Bonds (TRIP Bonds). Many of the proposals would
    provide a tax credit in lieu of paying the bondholder interest. We
    believe they can be utilized as an additional tool to supplement other
    financing/funding sources.
        These valuable Federal credit tools, along with other sources of
    debt and equity, are not free. When a project sponsor determines to
    utilize private financing, revenues are required to repay lenders and
    investors. Although using P3's and other private financing instruments
    can free up pay-as-you go funding sources for projects that are not
    amenable to private investment, they are no replacement for fixing the
    revenue problem facing the HTF.
        The Chamber has joined with the Bipartisan Policy Center and
    several other industry stakeholders, including the National Governors
    Association, the Business Roundtable, North America's Building Trades
    Unions, the National Association of Manufacturers and the Securities
    Industry and Financial Markets Association to promote robust, reliable
    Federal funding as well as unleashing the power of the private sector
    to address these infrastructure needs.
                               regulatory relief
        The FAST Act and MAP-21 have made great strides in improving
    project delivery for highway and transit projects, but many of the
    provisions have yet to be fully implemented. Also, not all
    infrastructure projects benefited from those changes. The Chamber urges
    Congress to pass permit streamlining legislation, which would help all
    infrastructure projects move forward in a timely but environmentally
    responsible manner.
        It is difficult to estimate the amount of direct saving regulatory
    relief could bring to infrastructure projects. Generally speaking,
    streamlining the permitting process accelerates spending rather than
    leveraging additional funds. However, this acceleration of project
    completion saves money. Additionally, the added certainty of a more
    reasonable timeline for approval of Federal permits would likely
    attract additional private capital to the U.S. infrastructure market.
                                   conclusion
        The bottom line is that the time to make important infrastructure
    investments is NOW. Delaying action only makes the decisions more
    difficult and projects costlier. From the business community's
    perspective, the question is not if we need to make these decisions,
    but when.
        The Chamber strongly supports Federal investment in transportation.
    We need a smooth flowing, efficient national transportation network
    that will support the transportation needs of businesses from origin to
    destination across the globe, and from the factory to the corporate
    headquarters to main street retailers to medical centers.
        From all levels of government, there is no single funding solution
    that will solve all of our infrastructure problems. The Chamber
    believes communities should have a large toolkit of funding and
    financing options available that can be utilized to provide the
    infrastructure needed, not just to succeed, but to lead the world in
    providing economic and social mobility. Improving our current
    infrastructure will be a key component in modernizing many parts of the
    country. The Chamber and the ATM Coalition are committed to working
    with elected officials to ensure our nation provides an infrastructure
    that keeps up with the changing times.
        Thank you for the opportunity to testify today. The Chamber as well
    as the ATM Coalition look forward to working with this subcommittee to
    provide the tools necessary to modernize America's transportation
    network, stabilize the HTF, and grow investment in this nation's
    transportation infrastructure so each state and region can get out of
    the system what they need to be successful--whether that is moving
    freight or their employees.

        Senator Collins. Thank you very much for your testimony.
    Ms. Osborne, I hope you will forgive me if I yield to the
    ranking member of the full committee who has joined us and is
    on a very tight timetable, and would like to give a very brief
    opening statement.
        Ms. Osborne. Of course.
        Senator Collins. Senator Leahy, welcome.

                       STATEMENT OF SENATOR PATRICK LEAHY

        Senator Leahy. Madam Chair, I appreciate the courtesy very
    much. I am glad to see somebody from Maine and New England. You
    have three New England Senators here, and our distinguished
    colleague from Delaware.
        Look, every single state could talk about the crumbling
    infrastructure. We have the power to improve it. We should not
    talk as though we do not have the power to do it. We used to do
    this in a bipartisan way. We have to come back to that. We
    cannot have a small minority in the Congress block what we need
    to do.
        Mr. Mortimer, you talked about the gas tax, that had it
    been indexed, where we would be on that. Whatever we do, it
    cannot be with hope and smoking mirrors, if you will excuse the
    cliche. It has to be real. We cannot talk about, especially
    those of us who come from rural areas, well, we will just build
    toll roads or something of that nature; that just does not
    work.
        I join with my fellow Democrats to building a $1 trillion
    infrastructure unit. It creates 15 million jobs, both in urban
    and rural centers.
        The President says he wants to invest in infrastructure,
    but when he talks about increasing money as part of defense
    spending, $25 billion for a wall on our southern border, that
    takes money away from infrastructure, job creation, education,
    and the environment.
        If you think we are going to do this just by some kind of
    tax incentives, that is not going to help rural America at all.
    We do a lot in our state, in our small state, but we do need
    help.
        Madam Chair, I thank you for holding this hearing.
        Senator Collins: Thank you very much, Senator Leahy.
        Ms. Osborne.
    STATEMENT OF BETH OSBORNE, SENIOR POLICY ADVISOR,
                TRANSPORTATION FOR AMERICA
        Ms. Osborne. Thank you very much for having me today. On
    behalf of Transportation for America (T4A) and our alliance of
    local transportation civic and business leaders across the
    country, we are very pleased to be here.
        Transportation for America seeks to ensure that local
    leaders are better represented in the Federal programs since
    that is the level at which most travel happens.
        We also provide technical assistance to state and local
    transportation agencies on measuring the performance of their
    transportation systems, implementing practical and multimodal
    design strategies, and successful models for raising state and
    local money to support transportation.
        As everybody testifying today has said, we have a great
    need to invest in the transportation system, and one of the
    best things about going last is I get to say what they said.
        We at Transportation for America have been very supportive
    of putting more funding into this program. Two years ago, we
    produced a revenue proposal that suggested several ways to do
    that. AASHTO has gone much further. Ours was just a subset.
        I believe Jim said 35 different techniques that we could
    use to fund those programs, and we agree that funding should be
    sustainable and reliable, so that transportation agencies can
    do the thoughtful planning and asset management necessary to
    maintain our national transportation system.
        However, funding is not the only thing that we need. We
    need programs that promote innovation, that encourage
    collaboration and maximize benefits. This committee funds most
    of the programs that do that the best, including the TIGER
    Program, New Starts, Small Starts, and potentially the
    Consolidated Rail Infrastructure and Safety Improvements
    Program, known as CRISI, which I think is an adorable name.
        In fact, while we talk about the need to put more funding
    into our crumbling infrastructure, that is not necessarily
    where existing funding is going.
        A 2014 report called ``Repair Priorities'' found that
    between 2009 and 2011, states collectively spent $20.4 billion
    annually to build new roadways and add lanes, but at the same
    time, they spent only $16.5 billion repairing and preserving
    the existing system.
        As we talk about large infrastructure packages, it is only
    fair to ask that the priorities of our transportation program
    more closely align with the rhetoric we use to justify spending
    on it.
        There are some parts of the program, as I mentioned, that
    do a better job of aligning these priorities with needs,
    priorities like maintenance, and encouraging innovation and
    leveraging local and Federal funds.
        These programs tend to rely on you, and my particular
    favorite is the TIGER Program, which I know many people on this
    committee agree. To some extent, that is because when I was at
    the U.S. Department of Transportation, it was my office that
    was in charge of it. It also could possibly be that as a
    graduate of Louisiana State University, I like the name.
        This program is very popular with local and state
    governments and transportation agencies across the country
    because of its wide-ranging eligibility. It can fund anything
    from ports to rail to transit to highways, and it has wide-
    ranging eligible recipients.
        Any governmental entity can apply. In fact, since the loss
    of earmarks, this is one of the only programs that allow local
    and county governments to directly access Federal funds.
        The popularity has stayed strong in spite of the fact that
    only five to 6 percent of applicants receive any funding from
    the program, and that is because stakeholders can see the
    enumerated strategic priorities of the U.S. Department of
    Transportation in the funded project.
        The program encourages people to try things that they never
    tried before, like design-build project delivery or complete
    street designs, or public/private partnerships.
        It turns out that American cities and states will go a long
    way to beat out their neighbors. Competition also makes it
    possible to better coordinate transportation and development
    decisions, which occur at the local level, and I hear a lot of
    state engineers complain that they are always ``chasing the
    land uses.''
        I think about an example that was provided to me by folks
    at Florida DOT of two houses that were 70 feet apart, but it
    was a seven-mile drive between the two of them. This kind of
    roadway design and local land use pattern seems almost designed
    with the express purpose of generating traffic snarls.
        When the problem is addressed, it is brought to the state
    and the Fed, as if this is a congestion problem that requires
    massive Federal spending.
        No one is suggesting that the Fed needs to get involved in
    local development decisions. That sounds like a terrible idea.
    However, there should be a way to reward cities and states that
    consider these issues and take action to produce better
    results, and to lower all of our costs, and competitive
    programs are the best ways to do that.
        While I started my testimony by pointing out that Federal
    funding is not the sole answer to addressing our Nation's
    transportation needs, I do want to make clear that Federal
    funding is essential.
        Across the country, our cities, our suburbs, our rural
    towns are in a serious bind. They know they must have top notch
    transportation networks to attract the talent, and to compete
    on a global scale, and preserve their quality of life. They
    know they need to get workers of all wage levels to jobs, they
    need to eliminate crippling bottlenecks.
        And these communities are stretching themselves to raise
    their own funds and to innovate, but they cannot bring these
    important projects to fruition without a strong Federal funding
    partner.
        The programs that this committee funds are often the
    lynchpin for aiding states and localities in meeting these
    demands.
        Thanks again for having me here today.

        [The statement follows:]
                       Prepared Statement of Beth Osborne
        On behalf of Transportation for America and our alliance of local
    transportation, civic and business leaders across the country, I'd like
    to thank Chairman Collins and Ranking Member Reed for inviting me to
    testify today. Transportation for America seeks to ensure that local
    leaders are better represented in the Federal program since this level
    is where most travel happens and where people and freight are getting
    stuck. We provide technical assistance to state and local
    transportation agencies as well as metropolitan planning organizations
    (MPOs) on measuring the performance of the transportation system,
    implementing practical and multi-modal designs, and successful models
    for raising local money to support transportation.
        As everyone testifying today will say, we have great need to invest
    in our transportation system, including our roads, bridges, and transit
    systems. We can all cite big numbers from many studies, such as the
    American Society of Civil Engineers infrastructure report card and the
    U.S. Department of Transportation's (USDOT) System and Performance
    report, explaining the challenge in stark numbers. However,
    Transportation for America believes that our problems run far deeper
    than just overall lack of funding.
        To be clear, Transportation for America has been very supportive of
    more funding for this program and has produced a revenue proposal that
    suggests several specific ways that the Federal government could raise
    more money for our nation's transportation needs, which can be found
    here: http://t4america.org/our-vision/investment. This funding should
    be long term and reliable so that transportation agencies can do the
    thoughtful planning and asset management necessary to maintain our
    national transportation system.
        Because the bulk of the Federal program is handled outside of the
    annual budget and appropriations process, we only sporadically talk
    about how this funding is spent or how we could get more from our
    sizable Federal investment. Yet, the programs that this committee funds
    each year have an outsized role in promoting innovation, encouraging
    collaboration and maximizing benefits. I am speaking specifically about
    TIGER, New Starts, Small Starts, Core Capacity, and the Consolidated
    Rail Infrastructure & Safety Improvements (CRISI) programs.
        These programs are a vital part of the solution to our
    transportation challenges. For decades now, Congress has consistently
    increased transportation spending with each successive reauthorization
    bill, sometimes by large amounts (like with TEA-21 and SAFETEA-LU) and
    sometimes more modestly (as in MAP-21 and the FAST Act). While some
    progress has been made, progress has been uneven and we are simply not
    getting the maximum benefit--even with increasing Federal spending.
        For one, we do nothing to require that current spending be
    prioritized for repairs. So while we all cite huge figures for mounting
    repair needs to make the case for investing more transportation
    dollars, there is no guarantee that the current transportation
    program--no matter how well funded--will actually repair our roads,
    bridges and transit systems.
        In fact, a 2014 report conducted by Smart Growth America called
    ``Repair Priorities'' found that repair and maintenance was not getting
    its due. The report found that between 2009 and 2011, the latest year
    with available data at the time of the report, states collectively
    spent $20.4 billion annually to build new roadways and add lanes to
    existing roads. During that same time, states spent just $16.5 billion
    annually repairing and preserving the existing system, even while roads
    across the country were deteriorating. On a scale of good, fair or
    poor, 21 percent of America's roads were in poor condition in 2011.
    Just 37 percent of roads were in good condition that year--down from 41
    percent in 2008.
        In fairness, that report showed that not all states approach the
    problem equally, and some states dedicated a higher proportion of
    funding to repair and maintenance needs. In the years since, as funding
    has gotten tighter, some states report that they have increased their
    focus on state of repair needs. However, in my technical assistance
    work, I have found that some agencies classify expansions as state of
    repair projects if they feel they are bringing a road or bridge ``to
    standard.''
        It's only fair to ask that the priorities of our transportation
    program more closely match the rhetoric we use to justify more spending
    on it -- especially at a time when we are discussing major cuts that
    are likely to impact other major infrastructure spending programs, such
    as housing and stormwater.
        There are some parts of the Federal program that support aligning
    spending with priorities and also encourage innovation and leveraging
    of Federal funds. These are the competitive grant programs, my favorite
    of which was created by this committee--the TIGER program. When I was
    at USDOT, my office managed this program. This program is by far the
    most popular at USDOT, and that is because it is the most flexible in
    terms of eligible uses (everything from ports to rail to transit to
    highways) and in terms of eligible recipients (any governmental
    entity).
        In fact, this is one of the only programs that allow cities and
    counties to directly access Federal funds.
        This popularity stayed strong in spite of the fact that only 5-6
    percent of applicants received any funding. In fact, part of my job was
    explaining to the 94-95 percent of applicants who didn't get funded why
    their applications weren't chosen. It is not easy to have a popular
    program when you are saying no to almost everyone. But through
    competition, applicants and stakeholders could see the enumerated
    strategic priorities of USDOT in the funded projects. The program
    encouraged project sponsors to try strategies they had never tried
    before--like design-build project delivery or complete street designs
    or public-private partnerships. While I was at USDOT, TIGER projects
    brought two non-Federal dollars to the table for every one TIGER dollar
    they received. I have seen some analysis that shows this leveraging has
    continued to increase. I also saw project delivery complaints, like
    issues with the National Environmental Policy Act (NEPA), fade away
    when project sponsors faced time constraints on the TIGER funding.
    Turns out that American cities and states will go a long way to beat
    out their neighbors and to keep a Federal grant. Competition brings out
    the best.
        TIGER, along with programs like New Starts, Small Starts, and the
    Consolidated Rail Infrastructure & Safety Improvements (CRISI) program,
    encourage transportation agencies to work with their sister agencies to
    coordinate funding streams and planning efforts.
        One of the places where this can have the greatest impact is when
    transportation and development decisions are coordinated with one
    another to serve the same goals. Aligning transportation investments
    and development patterns can prevent transportation agencies from a
    complaint I regularly hear from transportation agencies is that they
    are continuously ``chasing land uses.'' They say as soon as they
    address one group of needs along a corridor, poorly designed
    development pops up and undercuts their investment, sending them back
    to the drawing board. Using competitive programs can reward those that
    interrupt this pattern, create better connectivity and avoid trying to
    fix poor land use choices with expensive (and often ineffective)
    transportation solutions.
        I think about the two houses in Florida that are 70 feet apart but
    require a seven-mile drive to get from one to the other. Such a roadway
    and land use pattern is almost designed with the express purpose of
    generating traffic snarls. But the problem is not categorized as a
    development or road connectivity problem. It is put to the state and
    the Federal government as a congestion problem that requires big
    spending to widen roads. I think about my brother's house in Baton
    Rouge that is three blocks from the grocery store but he has to drive
    there because he is not willing to walk in 45 mph traffic with his
    kids. Then the mass of cars required to carry everyone on every three-
    block trip is presented not as a development and connectivity problem
    but as a traffic problem that requires big spending to widen roads.
        When I was at USDOT, I would regularly hear from school districts
    that had sited a new school or consolidated schools to save money on
    facilities. Only after this investment was made did people think about
    the transportation burden they were putting on families and the cost
    that would be associated with busing everyone to schools that once were
    easily reached on foot. They would come to USDOT and present this not
    as siting error but as a transportation challenge that required
    transportation spending to fix.
        Land use is a local issue, making it one of the reasons that local
    governments are essential to the transportation program. That is the
    level of governance that can best coordinate these efforts. However, we
    are starting to see states seek ways to better engage in the
    development conversation as well.
        Governor Doug Burgum of North Dakota stated it about as well as
    anyone I've ever heard when talking about his Main Street Initiative.
    He calls for smart, efficient infrastructure as part of this initiative
    and explains why it is important this way:

            ``A community's horizontal, low density expansion often results
            in a geographic footprint that is increasingly expensive over
            time, even to the point of becoming economically unsustainable.
            Larger footprints require communities to invest more in
            virtually every category--from new water towers, sewer lines
            and sewage systems, to streetlights, sidewalks, snow plows,
            lawnmowers, garbage collection, and more. And these aren't one-
            time costs--they're ongoing expenses that require personnel and
            maintenance, year after year.

            ``Ultimately, this leads to bigger government, higher property
            taxes, and unsustainable spending.

            ``As one example, let's look at three cities: Fargo, North
            Dakota; Ann Arbor, Michigan; and Boulder, Colorado. All of
            these cities have comparable populations, yet Fargo's
            geographic footprint (about 49 sq. miles) is nearly twice as
            large as either Ann Arbor or Boulder. This means that in Fargo,
            there are more roads to plow and patrol, more pipes to fix, and
            an overall larger infrastructure to maintain, for a similar
            population. Fargo now has over 2,000 lane miles of roads to
            plow after each snow storm. That's almost twice as long as the
            distance from Fargo to Frisco, Texas.

            ``Simply put, one of the major determinants of cost for a city
            or community is linear feet. The more linear feet, the greater
            the cost of everything.''*
    ---------------------------------------------------------------------------
        * https://dougburgum.com/main-street-initiative/

        I am sure Governor Burgum is not calling for the Federal government
    to get involved in local land use decisions. No one is calling for
    that. It is not an issue that can be handled through Federal dictates
    or regulation. However, it is not a cost burden that the Federal
    taxpayer should have to bear either. Through competitive programs that
    this committee funds, the Federal government can reward the states and
    local leaders that are coordinating land use and transportation to
    encourage less expensive local development patterns. This can reduce
    the need for humungous funding increases and make the case to the
    American taxpayer that we are maximizing Federal investment and not
    passively reacting to and throwing money at the problems caused by
    inefficient land use patterns.
        Competition can also make it possible to reward those that are
    getting more out of their transportation investment. With the new
    Federal rules requiring states and MPOs to measure the performance of
    their transportation system in terms of safety, state of repair and
    system reliability, transportation leaders will set goals for their
    programs and report to stakeholders and the public whether they have
    met their own goals. While the new Federal rules are rather gentle--
    transportation agencies set their own targets, grade their own papers
    and suffer no real consequence for failure--these rules are an
    important first step to greater transparency in this program and to
    making clear to stakeholders and the public how far current spending
    can really take us in meeting Federal, state and local policy
    objectives.
        My organization works with overachieving transportation leaders
    that want to go beyond the Federal minimum requirements and more
    typical engineering measures to consider metrics like transportation
    costs and access to jobs, education and essential services. Finding
    ways to reward agencies that set tougher performance targets, get
    greater results and use more innovative outcome measures is going to be
    an important task for Congress in the future. The competitive programs
    that you all fund can play a significant role.
        While I started this testimony by pointing out that Federal funding
    is not the sole answer to addressing our nation's transportation needs,
    I do want to make clear that Federal funding is essential. Across the
    country, our cities, rural towns and suburbs--the local centers of
    commerce that form the backbone of America's economy--are in a serious
    bind: They know they must have top-notch transportation networks to
    attract talent, compete on a global scale and preserve their quality of
    life. They know they need to get workers of all wage levels to jobs.
    They also know they need to eliminate crippling bottlenecks in freight
    delivery. These communities are stretching themselves to raise their
    own funds and to innovate, but they cannot bring these important
    projects to fruition without a strong Federal funding partner. The
    programs that this committee funds are often the lynchpin for aiding
    states and localities in meeting the twin demands of maintaining their
    existing infrastructure and preparing for the future.

        Senator Collins. Thank you very much. Mr. Tymon, you put in
    your testimony a very interesting matrix of some 35 options for
    dealing with the financial problem and funding problem that we
    face. I wish I had thought to put them all on a chart and blow
    them up because you do go through every possible alternative.
        In your professional judgment, which of these options would
    best meet our need to fund the Highway Trust Fund without being
    unduly burdensome for the average American driver?
        Mr. Tymon. Well, again, thank you for recognizing the hard
    work that was put into producing this matrix. I agree, it does
    present better in a larger format, but we do have copies for
    all of the members of the committee, as well as for the staff,
    and we can get that to you.
        I would say that the existing revenue sources for the
    Highway Trust Fund have served the Trust Fund very well for
    over 50 years. I would say that it is probably also the most
    efficient way of collecting revenue from the users of the
    system and being able to funnel that revenue back into surface
    transportation programs.
        The Federal gas tax is a very efficient program or a very
    efficient method of collecting revenue, even if it is not
    something that has been adjusted in the last 24 years.
        I do think that using those existing revenue sources,
    taking a look at them, is probably the most efficient way. We
    are doing a lot of work in looking at vehicle miles traveled.
    There is the pilot program that was referenced in the FAST Act.
    The first round of money went out last year to essentially
    further explore whether or not vehicle miles traveled fees are
    the solution to moving forward.
        The gas tax is very efficient. It served the program very
    well for the past 50 years. It is something that I think
    Congress should continue to look at.
        Senator Collins. Thank you. Mr. Mortimer, you, too, have
    suggested that we look at the gas tax. In preparing for this
    hearing, I was surprised to see the number of states, including
    some very conservative states, like Idaho and Wyoming, that had
    acted to increase their gas tax.
        To what do you attribute the reluctance at the Federal
    level to even consider indexing the gas tax?
        Mr. Mortimer. Thank you, Chairman Collins. Look, it comes
    down to political courage. If you go and look at a lot of those
    states that you just mentioned, the business community was
    there with organized labor helping, and none of those people I
    am aware of have lost their seat because they supported
    increasing revenue to pay for infrastructure.
        I know some members here have signed a pledge saying they
    did not want to raise revenue for anything. I think our belief
    is everyone needs to come into Congress as elected officials
    with an open mind, and we need to look at this.
        Jim lays out there has been two national commissions that
    Congress has authorized. There have been more studies known to
    man.
        The gas tax is the most sufficient, and the least
    administrative cost, and getting to your earlier question, what
    is the easiest way that does not impact rural America versus
    others, there is no simple answer to that. Unfortunately, we
    have to pay for the infrastructure. There has to be a component
    of revenue.
        Even all the private investment that I talked about, and I
    think there is a great opportunity to increase private
    investment, there has to be public investment.
        The gasoline tax is the only way we have seen. Now, we are
    open to other options. Jim talked about the vehicle miles
    traveled. We are watching those pilot programs very closely. We
    do believe that is the future. We believe it is 10 plus years
    away. We are not there yet.
        Senator Collins. Thank you. I am shocked that you would
    suggest state legislators have more courage than members of
    Congress, but I will try to get over that, but that was an
    interesting analysis.
        Commissioner Bernhardt, given your role as President of
    AASHTO, could you tell us how states around the country are
    coping with the insufficient transportation funding?
        Mr. Bernhardt. Madam Chairman, so what we are doing, DOTs,
    we understand that the Nation's infrastructure is running on
    less than optimal at this point in time efficiency. So, we are
    problem solvers.
        Some of the things we are doing is we are getting our own
    houses in order, becoming more efficient and effective. We are
    using innovative materials, innovative designs, innovative ways
    of getting projects out. We are trying to stretch the dollar as
    much as we can. We use asset management principles where we
    optimize with the funding we have the amount of assets we can
    get to.
        I can tell you we are not getting to all the assets that we
    would like to. There is only so much we can do to become
    efficient and effective with the resources we have. At some
    point in time, there will be a breaking point, and something
    will fail.
        Senator Collins. Thank you.
        Senator Reed.
        Senator Reed. Thank you very much, Madam Chairman, for your
    leadership. Thank you, ladies and gentlemen, for your great
    testimony; it was extraordinary.
        Mr. Bernhardt, Maine and Rhode Island have many things in
    common. Unfortunately, one of them is their deteriorating
    bridges, but I think Rhode Island has the record, 56 percent of
    our bridges are structurally deficient or functionally
    obsolete. In fact, at one point we, had to close Interstate 95
    because of a bridge in Pawtucket, Rhode Island, and, as a
    result all of New England was slowed to a crawl.
        With that in mind, have you done an assessment of what you
    need to fix your bridges, and related to that, to the extent
    that you do not fix them and they keep deteriorating, the
    situation gets worse, I assume. Is that accurate?
        Mr. Bernhardt. That is accurate. So, it was just a few
    years ago that I had asked through my chief engineer to put a
    team together to do just that. So, we did a report. Anybody can
    get it online. It is ``Keeping Our Bridges Safe Report.''
        What it came down to, it took them about a year to put this
    report together, we had great asset inventory on every one of
    our bridges, so what they did is they looked at what we were
    spending and what was necessary to spend, so we were spending
    on average around $70 million per year on bridges.
        So, I asked, are we moving the needle, and the answer was
    no, and the answer came back that we needed to spend around
    $140 million per year.
        One, we have not been able to get to that level yet. We are
    at around $119 million per year. One of the things that we
    looked at heavily is what are some of the trade-offs on the
    bridges.
        There are certain bridges that we have to post, we post
    down to weight. We might go fix them, but we might only fix
    them up to another certain weight, just to get a school bus
    across, a fire truck, a fuel delivery. We might not bring it
    back to its optimal level.
        So, those are the tradeoffs we have to do. Maine being very
    rural, spread out. There are certain bridges that we have to
    get to that 100,000 pound because of the types of vehicles that
    are crossing them. We are a heavy fiber industry. We have to
    focus on those. It is a tradeoff.
        Senator Reed. Let me just raise a point, which I think
    throughout the course of the hearing will come back, and that
    is if a project is a private/public partnership, the private
    entity has to be able to realize profits, which means the
    private benefits have to exceed the costs. It is a simple
    analysis.
        In many cases, particularly when it comes to bridges in
    rural areas and many other infrastructure projects, those
    private benefits are not as substantial as the public benefits,
    i.e., getting a school bus or an emergency vehicle across the
    bridge.
        As a result, the likelihood of a public/private partnership
    there is close to zero, but the necessity of fixing the bridge
    exists, and that calls for much more direct public investment.
    Is that your view?
        Mr. Bernhardt. That is my view. That is correct.
        Senator Reed. Thank you. Let me switch gears slightly. Ms.
    Osborne, we tend to categorize projects in terms of rail,
    transit, highway, et cetera, but the real future is intermodal
    transportation.
        We have some successful examples. We have an old Navy Base,
    Quonset Point. It has an airport. It has rail service. It has
    access to the sea. In fact, it is one of our biggest import
    ports for automobiles on the East Coast. That success has
    resulted from over 20 years of effort. Also, at T.F. Green
    airport, we are working very diligently to get trains to stop,
    including MBTA, et cetera.
        One of the things that strikes me is that we have different
    categories in the programs of Federal matches, Federal
    requirements, et cetera, which sometimes do not encourage
    intermodal transportation. In fact, discourage it.
        Can you comment about that?
        Ms. Osborne. Absolutely. You are absolutely right, that a
    lot of our programs are very siloed and kind of put the thumb
    on the scale for particular modes. If you want to connect to
    communities by a highway, you can get 80 percent Federal
    funding. If you want to connect those same communities by
    transit, it is down to about half. If you want to do it by
    rail, it is generally about zero.
        So, people make the logical decision based on where the
    funding is. Through the FASTLANE Program, we encourage states
    to do really thoughtful freight planning that looks at the
    needs across the state to set the priorities, and then it says
    but we will really only fund the highway ones. That also sends
    a very clear indication about where the priority is from the
    investor.
        Also, when you are trying to put all those various programs
    together, it actually is a lot more complicated than it needs
    to be. That is just within DOT. That is one agency trying to
    put together funding for ports and highways in the various
    programs, even between surface and aviation, it is very
    complicated. If you then try to bring in funding from other
    agencies that are authorized by totally different committees,
    it gets even more complex.
        When I was at USDOT, we tried to do joint planning grants
    between USDOT and HUD. We made joint awards, but when we tried
    to go and sign grant agreements with the recipients, we had to
    do two separate grant agreements from the two agencies because
    of all their different rules and their cultures.
        So, it really puts a huge onus on those local leaders to
    figure out how to overcome all of these different rules and
    cobble together the funding.
        That is why programs like TIGER are so important because
    you can come in with a project that has a great objective, and
    you can ignore those silos. You can just come in and say these
    are the things we want to accomplish, the methods that we are
    going to use to accomplish include many different modes, and
    programs like TIGER can meet that.
        Senator Reed. Thank you. Thank you, Madam Chairwoman.
        Senator Collins. Thank you.
        Senator Boozman.
        Senator Boozman. Thank you, Madam Chair, and thank you all
    for being here. You know, the nice thing about these committee
    hearings is as we look around, everybody really is in agreement
    we want to get these things. This is not a Republican or
    Democrat thing. This is about trying to improve the
    infrastructure.
        I have been running back and forth between the Environment
    and Public Works Committee, and there is great ranker on the
    environment part of that, but the public works part of it,
    again, people are joined at the hip trying to get these things
    done. We do appreciate your hard work in that respect.
        Commissioner Bernhardt, we have had a lot of talk about the
    public/private partnerships and stuff. The tolling in rural
    states, tolling in places like Arkansas, because of traffic and
    things, it really does not seem to benefit that much.
        Can you talk about specific areas that perhaps specific
    public/private partnerships would be of benefit, when you take
    tolling out of the equation?
        Mr. Bernhardt. I can give examples in Maine, as was
    discussed. Very difficult for public/private partnerships
    because of the rural nature, the inability to toll, how are you
    going to pay it back. We already do financing through bonding
    and stuff. I can get a much better rate than they would give me
    to pay them back, so I can do that.
        We in Maine do public/private partnerships. It is something
    I developed about 4 years ago, we call it ``business
    partnership initiative.'' In those public/private partnerships,
    it is not necessarily the equity firm, it is not the person
    coming with capital, it is a business that benefits from what
    we do at a certain location.
        I am building an interchange on the interstate, and the
    business is paying a third. I do not have to pay them back
    because in the end, they are going to get it back because their
    business is going to be able to grow.
        There are some states that have large projects where
    public/private partnerships will work. I can tell you in Maine
    I have had equity firms come to me, sit with me in my office,
    and the dollar amounts they talk about are much bigger than
    what I would ever put out as a project, and anything lower than
    that, they really do not want to talk to you. It has to be $100
    million plus.
        Even some of your bigger states that have the ability, they
    still have hundreds and hundreds of projects that go out every
    year that would not meet that public/private partnership need.
        Senator Boozman. Very good. Mr. Mortimer, it is encouraging
    again that we are talking and the Administration is talking,
    really about trying to get some of these things done. One of
    the things that I am a little bit concerned about is the fact
    that when we talk about infrastructure, we do just talk in
    terms of roads and bridges and things, or inland waterways, the
    infrastructure that is so important. We talk about rural
    states. All of that. Our ports, our harbors. With the economy
    that we have, so much imports. Hopefully, we are working hard
    to get more going in the other way. Our farmers relying on our
    inland waterways and things.
        Can you talk about how important it is for reliable and
    efficient ports and waterways to help our industries remain
    competitive in both the domestic and global marketplace?
        Mr. Mortimer. Sure, glad to, Senator Boozman. Well, I mean,
    ports are kind of the gateways to trade, so our ports are
    critical to the economy, and we are in a global economy.
        We have done a lot of research on the ports, and what we
    found is while there are some water access needs, a lot of it
    is the connections with the rail and the last mile of the
    infrastructure, getting in and out of the port areas.
        Again, our inland waterways, as you mentioned, they are
    critical to agriculture and other communities. We continue to
    under invest and we continue to have locks and dams in this
    country that are over 100 years old. The Army Corps of
    Engineers has a project list that says some projects will not
    be got to until 2097. That is unacceptable.
        So, we need to figure out a way--the Congress has done a
    good job, so at least now we are authorizing new Army Corps'
    projects every 2 years. That is very important, to show that
    Federal commitment to continue to move this process forward,
    but we need to come up with more innovative ways.
        Again, encouraging more public/private partnerships in the
    water infrastructure to supplement Federal funding. The bottom
    line is there is no--this conversation about public/private
    partnerships, there is no one tool or solution that is going to
    solve all these infrastructure funding and financing needs,
    what we talk about is we would like to have communities to have
    a toolkit of options so they choose what makes sense in their
    communities.
        In some communities, it is a toll. In rural communities,
    public/private partnerships work, like in Pennsylvania, they
    took a rural bridge program, put it together, and they used a
    P-3. Public/private partnerships are not always tolls, they are
    also availability payments.
        There are a variety of tools and options we would love to
    see project stakeholders have, so they can choose which ones
    they want to use to fund and finance their projects.
        Senator Boozman. Did you say 2097?
        Mr. Mortimer. That is correct, Sir.
        Senator Boozman. That is remarkable. Thank you, Madam
    Chair.
        Senator Collins. Thank you.
        Senator Coons.
        Senator Coons. Thank you, Madam Chair, Ranking Member Reed.
    If I could be an honorary New Englander, I would be thrilled.
        Senator Collins. We will not tell your constituents.
        Senator Coons. I said honorary.
        Senator Reed. Your state is small enough; you might
    qualify.
        Senator Coons. I really appreciate all of the witnesses
    today. I think it was Commissioner Bernhardt who at the outset
    reviewed the deeply failing grade given by the ASCE to our
    infrastructure. The chairwoman also reviewed that they are
    about to give another grade, which we expect will also be well
    below a ``D.''
        There are some areas of rail that are only a ``C,'' but
    there is nothing that is above a C. We have D grades in roads,
    aviation, transit, inland waterways, rail and ports get Cs.
        If my kids came home from school with grades like this, my
    wife and I would be deeply disappointed, and why we consider it
    acceptable year in and year out as Federal legislators for us
    to deliver this sort of a report card to the American people
    about our shared investment in the infrastructure that moves
    our families, our goods, and tries to keep us competitive, I
    think it is completely unacceptable.
        I am going to agree with what every member of the panel
    said. We need to find sustainable bipartisan ways to finance
    America's infrastructure. Those of us who have the opportunity
    to occasionally travel overseas and see the world class cutting
    edge competitive infrastructure that our competitors enjoy
    recognize just how much this is putting us at risk, and just
    how much this is causing us to fall behind.
        If I might, Mr. Mortimer, on Amtrak, as someone who rides
    Amtrak virtually every day to and from my home state, I
    understand passenger rail is a critical part of our
    transportation network, it reduces congestion, it improves
    efficiency, it connects towns and cities across our country.
        Does continued funding for Amtrak through discretionary
    investment help take cars off the road and reduce pressure on
    the highway system in your view, and does it make sense for
    Congress to continue to fund Amtrak really only through
    discretionary funding rather than having a predictable and
    dedicated source of funding for rail?
        Mr. Mortimer. Sure. Thanks for the question. Look,
    passenger rail is a critical component of the national
    transportation system from the business community's
    perspective. There are parts of the country, and in particular,
    where you are from in Delaware, the Northeast Corridor, where
    passenger rail service is critical to mobility.
        Those are places we believe need investments, and there has
    to be a variety of sources. We are very excited with the new
    leadership at Amtrak and looking at trying to operate more like
    a business. We believe there are some great opportunities there
    for growth and expansion.
        At the same time, one of the challenges Amtrak has always
    had is to get support in Congress. We have service in a lot of
    parts of the country that perhaps the ridership needs do not
    meet it. So, we would like to see focused investment in Amtrak
    and passenger service to those communities that most need it,
    and that it is a partnership.
        It cannot just be the Federal Government. The Federal
    Government can play a role. It has to be a public/private
    partnership of everyone coming together. I think you know in
    Delaware the business community works with your elected leaders
    to make sure that Amtrak service in Delaware is good, and I
    think those opportunities are there.
        How we fund it through the Federal Government,
    discretionary or not discretionary, I am not sure I have the
    exact answer to that question except that there is a Federal
    role, and it is a partnership though that the Federal
    Government cannot overtake and just do all of it, it is a
    partnership as we move forward.
        Senator Coons. Thank you, Mr. Mortimer. One of the funding
    vehicles that is a partnership, as you just testified, Ms.
    Osborne, is TIGER. My state relies on a variety of different
    transportation means. We are part of the Southeastern
    Pennsylvania Transportation Authority (SEPTA) regional rail
    network. We benefit from the Port of Wilmington. We have civil
    aviation terminals in several places.
        As you said in your testimony, TIGER is popular because of
    its flexibility, to support a wide range of uses and funding
    recipients. Would you agree we should invest more in TIGER,
    obviously, and what can we do in Congress to support and
    empower local government transportation decisions through that,
    and tell me if you would about the economic importance of
    investing in rail and transit capacity and train stations, and
    the role that CRISI grants might play?
        Ms. Osborne. Yes, there is a lot there. Starting from the
    latter and talking about the importance of investing in rail
    infrastructure, you know, one of the great innovative financing
    tools in rail is value capture. That tells you a lot about the
    importance of investing in rail. It often creates value next to
    it so you can take some of those increased property values and
    put it back into the system to support its maintenance and
    operating.
        That shows you right there what a value that investment is.
    It creates a center of gravity. It brings a focal point for
    development in an area.
        When I was at USDOT, one of the things we worked on between
    Federal Transit and HUD was the fact that in many cases when we
    invest in rail, we create so much excitement and development
    around that infrastructure that we increased the cost of living
    there to the point where those that are transit dependent
    cannot afford to then take advantage of the service and be
    close by.
        It is just a sign of what a huge level of demand there is
    for this kind of transportation, but we are holding the supply
    very low, making sure only people who have a lot of money can
    compete to get into those communities.
        We definitely need to reach deeper into that demand and
    make sure we are providing those centers of gravity for our
    communities.
        Senator Coons. Thank you, Ms. Osborne. I would like to
    thank the whole panel. Thank you, Madam Chair.
        Senator Collins. Thank you, Senator.
        Senator Daines.
        Senator Daines. Thank you, Madam Chair. Thank you all for
    testifying today. I come from the State of Montana. We have an
    extensive transportation system. It is truly a pillar of our
    economy. We are land locked. Agriculture is our number one
    business. Energy is one of our huge sectors. So, without having
    infrastructure, we are not able to compete in a global economy.
        It is a big topic for us back home and it is how we stay
    connected to the rest of the world.
        As it relates to the energy sector, we have about 14,000
    Montanans who work in the energy sector. Obviously, relying on
    our transportation infrastructure to get goods to market. We
    are working to expand production. We have tremendous
    opportunities. In fact, Montana has more recoverable coal than
    any other state in the United States.
        When I think of my home state, I think about fly fishing
    and the amazing national parks we have, incredible public
    lands. Absolutely true, it is what keeps Montanans there.
        We also have to have jobs so we can stay there, so we do
    not just become a playground for the rich and famous, but the
    average Montanan who buys their elk tag at Wal-Mart still can
    stay and raise their kids there, and that is why these energy
    jobs are also so important.
        Mr. Mortimer, in your testimony you touched on the
    increasing multimodal demands to move freight, which includes
    energy commodities. As demand grows, how do we ensure the
    infrastructure will meet future needs and our rural communities
    will have access to this funding?
        Mr. Mortimer. Thanks, Senator, great question. Obviously,
    the Chamber truly believes that we need to have a country that
    is energy independent, and a big part of that is making sure we
    are able to get those energy sources to and from market, so it
    is a combination of sources.
        Obviously, the freight rail business, which is largely
    private, we need to allow them to continue to innovate and
    grow. It used to be whether it is rail or truck, I think that
    debate is pretty much over. We need to have a lot more of both.
        Making sure communities have those tools because we know
    the freight is coming. Again, energy independence is critical
    on transportation options. Having those sources.
        You touched on just getting the workers to and from work,
    that is something a lot of businesses--we talk to local
    chambers around the country, and when the local chambers are
    looking to attract businesses to those communities, one of the
    first questions they ask is what is the infrastructure in that
    community, are they connected by rail, is there adequate
    highways, is there an airport close by, what are the
    connections.
        These are all questions that businesses ask for where they
    locate. As you are looking at the State of Montana, those are
    the types of things that businesses look at when they locate.
    We need to make sure that the tools are there for those
    communities to make those decisions so they can grow in the
    economy.
        Senator Daines. Thank you. Speaking of connectivity and
    infrastructure, a question for Mr. Hauptli. I was very glad to
    hear you reference Missoula's airport's new terminal in your
    written testimony. This is one great example of aviation
    development certainly in Montana, and I am grateful. Aviation
    allows many of us to get back and forth to work here in
    Washington, D.C.
        You mentioned Passenger Facility Charges (PFC), being used
    to finance these projects, and argue that the cap should be
    increased.
        I held an aviation roundtable recently back home. It was
    clear the jury was still out on whether or not the cap should
    be raised, while it may be a local user fee, it can
    disproportionately affect rural airports which require more
    connections. It is rare as a Montanan we can get to our
    destination without having to make a connection. That would
    therefore raise ticket prices for Montanans.
        How do you ensure that increases in fees will not
    negatively affect rural Americans? I speak as someone who lives
    in a state where we are typically in the bottom quartile if not
    in the bottom 10 percent in per capita wages.
        Mr. Hauptli. Senator Daines, thank you for the question. It
    is good to see you again. It is an interesting question in
    terms of connectivity for rural America.
        As I noted before you had a chance to come in the room, the
    Passenger Facility Charge, lifting the cap there, really is the
    only funding option for airports that guarantees that airports
    of all sizes, whether they are urban or rural, whether they are
    large hub, medium hub, small hub, non-hub, or general aviation
    airports, they will actually benefit.
        The larger airports as they increase funding will then give
    up Federal funding through the AIP, and that recirculates back
    into the smaller airport fund, generating additional revenues
    for smaller airports. Point one.
        Point number two, your concern, as I understand it, would
    be let's say we are going to go from Bozeman to Chicago or
    Denver and then on from there, and the concern that a Chicago
    or a Denver might increase their fee to a non-competitive rate.
        Airports have an incentive to keep their passenger costs as
    low as possible because they are competing against each other
    for traffic as well, and in the case of Chicago, we will use
    that as an example, lots of people flowing through Chicago as a
    hub, but it is almost equally split between those that are
    going through Chicago as a transit point versus those that
    would originate in Chicago.
        So, if I am the mayor of Chicago, I do not want to raise
    that local fee to an unhealthy amount, an uncompetitive amount
    that is going to hurt my own constituents any more than they
    would want to hurt yours.
        Senator Daines. I am out of time here. Thank you, Madam
    Chair.
        Senator Collins. Thank you very much. I want to follow up,
    Mr. Hauptli, on the very good question--I am sorry, Senator
    Hoeven, it is your turn.
        Senator Hoeven. Thank you, Madam Chairman, and to the
    ranking member as well, and thanks for holding this hearing on
    this very important issue, and thanks to our panelists,
    appreciate it.
        If you want to go on with your question, I am sure it is a
    really good one, I would be happy to listen.
        Senator Collins. It can wait.
        Senator Hoeven. The President said that he wants to do an
    infrastructure package, which I think is a great idea, and he
    also said that we ought to have public/private partnerships,
    which I also think is a great idea.
        In fact, I have introduced legislation along with Senator
    Ron Wyden, called the ``Move America Program.'' Has anyone
    heard of it? Oh, good. Then you get to answer first. I am going
    to ask you all the same question.
        Essentially, the Move America Program provides either a tax
    credit or tax exempt financing so that we can capture private
    investment along with public investment to build all kinds of
    infrastructure, and the states, there is an allocation to every
    state, and that number would be $1.5 billion for the least
    populous states, all the way up to more. It is based on a
    population calculation, and other considerations.
        The state essentially gets to decide. So, if you need a
    bridge, you build a bridge. If you need an airport, you build
    an airport. If you need to deepen your port, you deepen your
    port. Right? We like that, instead of the Federal one size fits
    all.
        As you might not be surprised to hear, I am advocating for
    this legislation, and I would like to know what each of you
    think. That is kind of dangerous, right? Because somebody might
    say something negative, which would break my heart, of course.
    I would like all of your honest opinions on the legislation and
    maybe thoughts on how we can advance it.
        Mr. Mortimer. Senator Hoeven, thanks for the question. I
    appreciate your leadership. Look, we think tax credit financing
    is a tool in a toolkit. It is not necessarily going to solve
    every problem, but as you mentioned, it can be used for a
    variety of infrastructure financing needs, and we think it
    needs to be part of this package and part of this discussion.
        It is an important part of the discussion. We think as the
    Congress is going to take up tax reform, this is going to be an
    important part of the discussion, this infrastructure package,
    an important part of the discussion.
        Again, from our perspective, it is another tool in a
    variety of tools that are needed. There is no one thing that is
    going to solve all the problems. We certainly think your
    proposal along with many others has to be part of the solution.
        Senator Hoeven. Well, I am glad you raised your hand first.
    I agree. I think that is right, it is not the whole thing. We
    need public sector financing, too. It is part of the package,
    but it does create dramatic leverage. I think it scores it at
    about $8 billion, but leverages $226 billion, which would be a
    very significant part of the package, particularly when you
    consider the FAST Act was $305 billion.
        Maybe you would like to go next.
        Ms. Osborne. Absolutely. I am going to make this easy and
    not take up much of your time. I am just going to echo
    everything that Ed said. I could not have said it better
    myself.
        Senator Hoeven. I thought he did a good job, too.
        Mr. Hauptli. I will go next, Senator. As Ed said, we are
    for any additional tools in the toolkit that can help with
    leveraging. In the case of airports and the advantage of
    lifting the cap on the Passenger Facility Charge Program, just
    like your legislation, it allows for that dramatic leveraging
    to occur without negatively impacting the Federal budget.
        Senator Hoeven. And at local discretion, too. Steve raised
    a real good point, but who's better to make that decision than
    the local authority. Their customers are starring them in the
    face every day. That is what counts. I appreciate that.
        Mr. Tymon. Senator Hoeven, I would also echo what Ed had
    said. I would also say that AASHTO is an organization that has
    had a long history with this concept and providing technical
    assistance to your office, Senator Wyden's office, and your
    predecessors that have sponsored this bill in the past.
        It is an important tool to have in the toolkit. It is
    something that helps us better leverage. Let's be honest. It
    has been politically difficult to insert additional funding on
    the transportation side in recent years, and this is an
    innovative approach to get additional money out there, like you
    said, provide states and localities with the flexibility to
    choose which projects are the best fit to address their
    transportation challenges.
        We did talk earlier about the fact that the Highway Trust
    Fund is continuing to run a deficit. We are spending more out
    of it than we are bringing in. We talked about the existing
    revenue streams and the gas tax. Obviously, that has
    politically been difficult to address that from a gas tax
    standpoint or for the existing revenue sources.
        Looking at kind of innovative options like your bill is
    certainly important in moving forward.
        Senator Hoeven. AASHTO has been very helpful, and we
    appreciate it. Thank you.
        Mr. Bernhardt. So, I am last. We like any new tool in the
    toolbox, not specifically knowing enough about that, it would
    only be one of the tools. The fact that states will still need
    some type of funding mechanisms, not only just financing
    mechanisms, especially in some of the more rural states.
        Senator Hoeven. Right, and that is absolutely true, and I
    agree with you. What I would emphasize is this is a tool that
    is at your discretion. You get to decide how to use it, whether
    you want to use the tax credit to draw on private investment,
    whether you want to use the tax exempt financing, what you want
    to do in terms of how you bid the projects, where you do the
    construction, any of the pay-fors, and again, I emphasize,
    because I do not want this to get into an either/or. This is
    part of a package that includes public funding, right?
        Thank you very much, appreciate it. Again, Madam Chairman,
    thank you.
        Senator Collins. Thank you. Mr. Hauptli, I want to go back
    to the issue of the Passenger Facility Charges and the Airport
    Improvement Program. If the funding for the Airport Improvement
    Program remains flat, how would an increase in the Passenger
    Facility Charge benefit small and medium hub airports such as
    in the State of Maine that are competing for funding?
        Mr. Hauptli. Thank you very much for the question, Senator
    Collins. The way the Passenger Facility Charge Program
    interacts with the Airport Improvement Program is important
    here, and as larger airports with an increased Passenger
    Facility Charge, larger airports would forego AIP entitlement
    funds.
        Those dollars then flow under the formulas in the
    authorization legislation into what is called the Small Airport
    Fund. Smaller, non-hub airports and general aviation airports
    all across the country have increased revenues to tap into to
    help them.
        So, even if for some reason an airport in Maine decided
    with the additional PFC authority that this committee will
    grant, they did not want to do that, they would still benefit
    from that because there would be a larger pool of dollars on
    the AIP side for them to get.
        Senator Collins. Thank you. That is very helpful. Ms.
    Osborne, in your role at Transportation for America, you
    provide technical assistance to state and local governments
    that are applying for the TIGER Grant Program, which is
    extremely competitive, and one of my favorite programs.
        Could you tell us what specific benefits you are seeing
    from the TIGER Program that the traditional formula highway and
    transit programs are not able to provide? In other words, I
    fully expect when we get the budget, that we may well see the
    TIGER Grant Program slashed.
        Help me make the case for why we need the TIGER Grant
    Program in addition to the traditional formula programs.
        Ms. Osborne. Absolutely. To be clear, the formula program
    is essential because it allows for real asset management, which
    is what we want, but programs like TIGER reward performance and
    innovation in a way that formula grants cannot.
        In the formula grant program, whether you are ambitious or
    innovative or performing beautifully or not so well, your
    formula stays even. In competition, when you do more than your
    neighbor, you get the money, you win.
        What I found is a lot of agencies, in many cases, they have
    something they want to try on the books, and the competition is
    what gets it off the shelf and gets them to just go ahead and
    give it a try. They know it sets them apart by adding that to
    the project, so maybe they make it a little more multimodal,
    maybe they try a new project delivery method, maybe they try a
    completely different type of project than is funded by formula
    grant programs.
        I think of places like Rochester, New York that took a 12-
    lane highway that had no more traffic on it than H Street here
    in D.C., but they were paying for 12 lanes, and decided maybe
    that was not an efficient expenditure of dollars, and they are
    shrinking it down to an urban boulevard, reclaiming a lot of
    what they used to maintain for economic development that will
    generate profit.
        That is a great thing that the regular program does not do
    quite as well, it is something that is outside of the norm. I
    have also seen locals come in and say just the process of
    preparing for a TIGER grant has gotten more stakeholders
    involved, not just in supporting the project but in funding a
    project, and in many cases, even when they do not get funded by
    TIGER, they have so much excitement generated behind the
    project, they are able to go forward even without it.
        Senator Collins. Thank you. Commissioner Bernhardt, if you
    could just add to that. In Maine, we have seen the ability to
    use TIGER grants for regional projects with New Hampshire.
    Could you expand on that? You talked a little bit about the
    Sarah Mildred Long Bridge. There was a second bridge as well.
        Mr. Bernhardt. Yes, the Sarah Mildred Long and the Memorial
    Bridge both had TIGERs. The unique thing about the Sarah
    Mildred Long Bridge, which is under construction now, is the
    fact that it is not just a highway bridge, but it is also a
    freight rail bridge, which goes to the Portsmouth Naval
    Shipyard.
        The fact of the matter is you cannot use Federal highway
    money for a freight rail. So, what TIGER grants have done,
    because it is through USDOT, has allowed us to do things,
    projects, two of them were through Maritime Administration
    (MARAD), three of them have been through Federal Railroad
    Administration (FRA), some of them have been a mix, and it has
    allowed us to make those regional connections, those freight
    connections, where in the past, we would not have been able to
    do or we would have had to come up with massive amounts of
    state funding to make that happen.
        A lot of these things like the Sarah Mildred Long, is a
    very regional project, so half of it is being paid for by New
    Hampshire, half by us. Without the TIGER, it would have been
    very difficult to make that project happen.
        Senator Collins. Thank you. That is a great example. Of
    course, that bridge and that freight line are absolutely
    essential to the public shipyard, the Portsmouth Naval Shipyard
    in Kittery, Maine, which overhauls nuclear submarines. This is
    an example of a project that also had implications for our
    national security as well. Thank you.
        Senator Reed.
        Senator Reed. Thank you, Madam Chairman. First, let me
    thank you all for your excellent testimony. I particularly want
    to recognize Mr. Mortimer, who reminds us that we really have
    to put our money where our mouth is when it comes to the
    Highway Trust Fund. Revenue is necessary, and we have to find
    ways to generate it. It is challenging, but we have to meet
    that challenge.
        Let me just switch briefly to Ms. Osborne. Your
    organization has put together some proposed solutions in terms
    of how we generate that revenue. Can you kind of give us an
    idea of what your preference or what your preferred option
    would be?
        Ms. Osborne. That is a very good question. My answer is we
    do not have a strong preference between them. There are pluses
    and minuses to all the approaches. I really like what Jim said
    earlier about the gas tax being an incredibly efficient way to
    fund the program. Each way you might fund it comes with pluses
    and minuses that might need to be ameliorated with other
    policies.
        I also want to mention something that Ed said about while
    locals and states are raising money, we are not seeing people
    lose their seats due to voting for increases in these areas.
        In fact, we did an analysis a couple of years ago of what
    happened after the gas tax was raised, and even in
    Massachusetts where the voters reversed the tax increase, they
    still did not throw the people out of office who voted for the
    thing they just reversed. People get why this is important.
        One of the things we just need to do, I think, at the
    Federal level, is make the Federal program a little bit more
    understandable to the taxpayer. It is very much removed from
    them, and how the money is raised and where the money goes is
    not very well understood by our taxpayers, making it a little
    bit harder to understand why they want to put more money in our
    hands up here. At the state and local level, they are a little
    bit better connected, so there is more confidence there.
        Senator Reed. Thank you. Let me just shift gears for a
    minute. Mr. Bernhardt, transit is the stepchild of most of our
    transportation programs, frankly. The Committee with
    jurisdiction is the Banking Committee, not the Public Works
    Committee. It does not enjoy some of the built-in structural
    preferences that we give to other modes of transportation, but
    it is absolutely critical to every state in the country, and
    particularly urban communities.
        In your position, what is the main challenge? Is it funding
    for capital investment, operations, or both, or everything? Can
    you comment?
        Mr. Bernhardt. Everything above. The big challenge is our
    rural nature and our aging population when it comes to transit.
    What we have done is we have put together a 25-year strategic
    plan working with all our providers.
        It is not always the capital side. Sometimes we can come up
    with the capital, but it is the operating of those, and who is
    going to even drive the bus. Those are the things that we are
    having issues with. We are so spread out that it is very
    difficult for us to get providers out to those people that have
    need.
        Senator Reed. Again, as you point out, some of this is
    basic human capital, including trained, adequate drivers,
    mechanics, et cetera. That is a challenge too.
        Mr. Bernhardt. That is a challenge.
        Senator Reed. Again, I think we tend to focus on the
    Highway Trust Fund, building roads, rail, airports, et cetera,
    and then we forget that transit is so important, particularly
    to seniors and to entry level workers trying to get to their
    jobs. We have to focus on that quite significantly.
        A final point I would make is that I am still processing
    your comments about Winston Churchill. He was a remarkable
    gentleman. Let me share; he was at a dinner party once with a
    very, very difficult woman, who went on and on, and finally she
    was so frustrated that she said Mr. Churchill, if I was your
    wife, I would put poison in your coffee, to which he replied,
    Madam, if you were my wife, I would drink it.
        A tip of the hat to a historian. Thanks.
        Mr. Hauptli. Senator Reed, before you yield, may I just
    make one comment?
        Senator Reed. Yes.
        Mr. Hauptli. I just wanted to compliment you on the work at
    Providence. You have done amazing work with the airport
    management there in bringing that airport new opportunities for
    air service, new resources with CBP and others, and it is
    making a very big difference in the region. I just wanted to
    compliment you on that.
        Senator Reed. Thank you very much. Thank you, Sir.
        Senator Collins. Thank you. I want to thank all of our
    witnesses today. This was indeed an excellent hearing. When I
    first heard of the President's plan for $1 trillion
    infrastructure investment, I was extremely excited about it,
    but I started thinking about the financing and the fact that no
    one was really talking in specific terms about the financing.
        So, it is my hope that this hearing today will help advance
    the dialogue as we move forward on what I believe could well be
    one of the few bipartisan activities of this Congress, and I
    think there is widespread support and recognition of the need
    for major investments in our infrastructure.
        It has been extraordinarily helpful to have such an expert
    panel before us today, and I thank all of you for
    participating.
        I also want to thank our staff. I think we are very
    fortunate to have our staff directors back with us during this
    Congress, and the supporting staff as well.

                         ADDITIONAL COMMITTEE QUESTIONS

        I should mention before I do that the record will remain
    open until next Wednesday, March 15, 2017. That means there may
    be some additional questions from members who are not able to
    be here today or from us that may come your way.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                 Questions Submitted to Hon. David B. Bernhardt
                  Questions Submitted by Senator Steve Daines
        Question. Mr. Bernhardt, local and regional surface transportation
    benefits the nation. For example, those in Chicago benefit from
    Interstate 90 traversing Montana--they get access to the best beef in
    the nation and they receive goods cheaper from our coasts than if they
    had to be flown. You understand this as a rural state department of
    transportation (DOT) commissioner. As we continue the conversation
    about long-term infrastructure financing, how do we ensure Congress
    fully appreciates the benefits to urban centers from rural
    infrastructure? How do we ensure there is equitable financial support
    for this infrastructure?
        Answer. The Federal surface transportation program supports
    communities located in urban, suburban, and rural areas across our
    nation. I would offer the following reasons to aid in Congress's
    appreciation of investment in rural transportation infrastructure, and
    how this investment directly benefits urban areas as well:

      --Rural transportation system serves as a safe and reliable route for
            truck and personal traffic between other states and between
            major metropolitan areas, advancing interstate commerce and
            mobility;
      --Rural transportation system serves the nation's agriculture,
            ethanol production, energy extraction, and wind power
            industries, which are located largely in rural areas;
      --Rural transportation system provides access to scenic wonders like
            the Acadia, Glacier, and Yellowstone national parks, along with
            many other great national parks, monuments, and forests located
            in rural states;
      --Rural transportation system enables people and business to access
            and traverse vast tracts of federally-owned land, and;
      --Rural transportation system facilitates military readiness.

        The best way to ensure equitable financial support for rural
    transportation infrastructure is to rely on direct funding through the
    federally-assisted, state administered transportation program that has
    worked well for over a hundred years and is exemplified by the FAST
    Act. The formula-based apportionments remain well-suited to a growing
    and geographically diverse nation like ours, allowing states and their
    local partners to fund a wide range of projects in all parts of the US
    that serve the interest of the nation as a whole. This means Federal
    support for financing mechanisms rather than funding would face
    inherent limitations given that most transportation projects simply
    cannot generate a sufficient revenue stream through tolls, fares, or
    other user fees to service debt or provide return on investment to
    private-sector equity holders. In 2014, such non-direct funding sources
    amounted to less than 18 percent of total capital outlays.
        Question. In your testimony, you mentioned supporting an
    infrastructure package that would reach all corners of the nation. To
    be holistic, we should include communications infrastructure. Would you
    please elaborate on how state DOTs can leverage their tools to
    facilitate this connectivity? How can the Federal government equip
    state DOTs?
        Answer. An important component to advance roadway technology is the
    ability to create a digital highway with fiber optics to make our roads
    smarter and safer, benefiting surrounding communities, including
    underserved rural areas. I believe this is best accomplished through
    voluntary partnerships between transportation agencies and
    communication providers. In addition, streamlining Federal regulations
    that provide maximum flexibility to states would better enables us to
    successfully support expansion of service provider networks. Rigid
    regulations or mandates can remove the very flexibility that is needed,
    complicating implementation and adding unnecessary additional system
    costs.
              Questions Submitted by Senator Christopher A. Coons
                             investment in transit
        Question. Every day, Americans take more than 35 million trips on
    public transportation. This level of ridership enables the nation's
    largest regions to sustain a level of economic output that is essential
    for our international competitiveness. However, aging transit
    infrastructure, reflected in a $90 billion state of good repair
    backlog, is suppressing transit ridership. Because reliable transit is
    such a critical part of the nation's transportation network and helps
    Americans save millions of hours of travel time and preventing billions
    of dollars in lost productivity, how does public investment in
    maintaining transit infrastructure support the nation's overall
    transportation goals and priorities?
        Answer. In both metropolitan and rural areas, a well-performing
    transit network expands commuting options as well as providing expanded
    access to jobs and essential services. AASHTO supports continued
    investment in public transportation with a goal of doubling transit
    ridership to 20 billion trips by 2035.
        Public transportation is indispensable to move people in both urban
    and rural areas and remains a critical part of the nation's multimodal
    transportation system. It also provides basic mobility options for
    elderly individuals, individuals with disabilities, and low-income
    individuals. Public transportation continues to play a significant role
    in state and national efforts to mitigate traffic congestion, conserve
    fuel, enhance the efficiency of highway transportation, address air
    quality issues, and support security and emergency preparedness
    activities. As our nation's population is expected to top 400 million
    by 2050 and the population of seniors is expected to slightly more than
    double by this time, our member DOTs are continuing to focus on
    providing public transportation as a mobility option.
        Historical funding patterns demonstrate the important role that
    state DOTs fulfill in public transportation finance and administration.
    State DOTs spent approximately $17.2 billion on transit in fiscal year
    2014, which is an increase over the past 5 years when states spent
    $13.6 billion in fiscal year 2010. (It is also larger than $10.6
    billion in Federal investments in fiscal year 2014.) States remain
    committed to sustain these important investments in order to grow our
    public transportation system.
                                     ______

                        Questions Submitted to Jim Tymon
                Questions Submitted by Senator Dianne Feinstein
        Question. I hope that Congress will decide to invest more in our
    nation's infrastructure, and one of the key reasons is that we have an
    enormous maintenance and repair backlog. One-third of our major roads
    are in poor or mediocre condition, and one-tenth of our bridges are
    structurally deficient. The American Society of Civil Engineers have
    given the nation's infrastructure a grade of ``D+''. More specifically,
    bridges received a grade of ``C+'', aviation a ``D'', ports a ``C+'',
    roads a ``D'', and transit a ``D-''.
        But when Congress has provided new funding, we have not actually
    required the states to focus on a fix-it-first approach.
        Mr. Tymon, as a representative of state highway officials, how do
    you decide what the right balance is between maintenance of existing
    road networks and expansion of those networks?
        Answer. State departments of transportation (State DOTs) are
    constantly optimizing their program to find the appropriate balance
    between preservation/maintenance and new capital investments. When
    making this determination, states rely on extensive input from the
    public and their local partner agencies to develop planning and
    programming frameworks including, but not limited to, the statewide
    long-range transportation plan, statewide transportation improvement
    program, asset management plan, and project financial plans.
        By AASHTO's estimate based on state DOT-reported data to the
    Federal Highway Administration's Office of Policy Information, state
    DOTs invest about 71 percent on highway system preservation and 29
    percent on capacity expansion. System preservation includes
    restoration, rehabilitation and resurfacing of existing facilities,
    bridge replacement, bridge rehabilitation, reconstruction of a facility
    on an existing footprint, minor widening and right of way acquisition.
    System expansion includes new construction, major widening, and new
    bridge construction. Our estimate excludes spending on operational
    investments such as safety, traffic operations and control systems, and
    environmental enhancement.
        There are other analyses that in some case estimate state DOT
    investment in capacity expansion at 45 percent of all expenditures. We
    have found such analyses to inaccurately portray state DOT investments
    because they tend to focus on ``road repair and preservation'' to the
    exclusion of state DOTs investments in bridges. Bridge preservation is
    an important aspect of ``road repair and preservation,'' and a basic
    element of transportation asset management.
        Question. America's failure to adequately maintain existing
    infrastructure will only get worse with climate change. I worry that
    neither the Federal government nor states have done enough to
    anticipate increased storm damage, both in terms of retrofitting
    existing infrastructure, but also in terms of long-term planning to
    move infrastructure away from increasingly hazardous areas.
        For example, California's State Route 37 runs along the north edge
    of San Pablo Bay near San Francisco. It is surrounded on both sides by
    marsh land that is increasingly vulnerable to rising sea levels, and it
    was just out of commission for weeks due to storm-related flooding.
        Mr. Tymon, what steps has your national association taken to ensure
    that state highway officials are including climate change in their
    assessments of maintenance needs and even relocation projects?
        Answer. In order to ensure transportation infrastructure resiliency
    and sustainability, AASHTO provides technical assistance to our member
    DOTs through the Resilient and Sustainable Transportation Systems
    (RSTS) Program. It is designed to help state DOT practitioners better
    understand the potential effects of extreme weather and the range of
    strategies and options for mitigation and adaptation.
        RSTS technical assistance covers a broad range of topics, including
    climate change, energy efficiency, energy security, infrastructure
    adaptation, alternative vehicles and fuels, and other relevant topics.
    This program is a critical resource for state DOTs to examine climate
    change and energy issues, while also providing the information needed
    to engage in and influence infrastructure resiliency and energy policy
    developments at the Federal level.
    Examples of RSTS products are listed below (links embedded within
    product name):

      --State-by-State Interactive Map: This interactive map of the United
            States contains links to information on state DOT climate
            change and energy activities. Links include reports, policies,
            plans, and research sponsored by the designated state DOT or
            generated as part of a collaborative effort that involves the
            state DOT. Information on both greenhouse gas mitigation
            activities as well as climate adaptation activities is
            provided.
      --Extreme Weather 101 Briefs: These briefs provide high level
            information on four common extreme weather events: coastal
            flooding; heat waves; heavy rainfall; and drought, dust storms,
            and wildfire. Each one-pager includes a brief overview of the
            event, as well as regional trends and regional projections.
            They also give examples of how state DOTs and MPOs are
            effectively responding to these events, and provide links to
            additional resources for further investigation.
      --Extreme Weather Sessions: As a follow-up to the 2013 Extreme
            Weather Events Symposium, AASHTO in partnership with the FHWA
            and sponsored by the Center for Environmental Excellence by
            AASHTO, presented practitioner-focused updates on the latest
            research, case studies, and tools pertaining to extreme weather
            and climate change in 2014 and 2015.
      --Extreme Weather Events Symposium 2013: In 2013, AASHTO held a
            national symposium entitled ``Impacts of Extreme Weather Events
            on Transportation'' in Washington, D.C. The symposium was
            sponsored by the RSTS Program, in coordination with the Center
            for Environmental Excellence by AASHTO and the FHWA. The
            symposium provided an opportunity for DOT staff from a broad
            range of disciplines to convene and discuss the implications of
            extreme weather events on transportation. The event covered
            state DOT case studies related to experiences with extreme
            weather events; an overview of trends and projections for
            extreme weather in the United States; costs of extreme weather
            events; and risk management strategies in design, operations
            and maintenance, and asset management, and emergency response.
      --Workshop on Adapting Infrastructure to Extreme Weather Events: In
            2012, AASHTO hosted a 3-hour workshop titled ``Adapting
            Infrastructure to Extreme Weather Events: Best Practices and
            Key Challenges.'' The purpose of the workshop was to provide a
            forum for information exchange on state transportation
            agencies' past experiences and future plans for managing
            impacts of extreme weather events on transportation
            infrastructure.
      --National Climate Change Symposium: In 2010, Center for
            Environmental Excellence by AASHTO, FHWA, FTA, the RSTS
            Program, AASHTO Environmental Technical Assistance Program, and
            the AASHTO Standing Committee on Planning, held a Climate
            Change Symposium in Washington, D.C. The purpose of the
            symposium was to provide information, both policy-oriented and
            technical, to support State DOTs in their efforts to address
            the challenges of climate change.
      --Climate Change Adaptation Strategies Workshop: This workshop was
            held in conjunction with the T&DI/ASCE Green Streets & Highways
            Conference in Denver, Colo. Held in 2010, the workshop
            discussed strategies for public agencies to proactively and
            retroactively adapt infrastructure to the impacts of global
            climate change. The workshop's technical focus was targeted at
            planners, engineers, and environmental scientists from
            government agencies, consulting, academia, and industry.
      --State DOT Climate Change Workshops: In 2010, AASHTO sponsored
            climate change workshops for 10 state DOTs: Colorado, Georgia,
            Hawaii, Iowa, Missouri, Mississippi, Pennsylvania, Rhode
            Island, Tennessee, and West Virginia. In 2011, an additional 7
            workshops were conducted: Arizona, Connecticut, District of
            Columbia, Illinois, Massachusetts, North Carolina, and Vermont.
            These 17 states were selected from 30 states that applied to
            AASHTO for a workshop. The workshops were one full day,
            followed by a 1-2 hour executive session the following day.
      --Webinar Series: These webinars, delivered February 2010 through
            June 2012, cover myriad relevant climate change mitigation and
            adaptation topics.
              Questions Submitted by Senator Christopher A. Coons
                             investment in transit
        Question. Every day, Americans take more than 35 million trips on
    public transportation. This level of ridership enables the nation's
    largest regions to sustain a level of economic output that is essential
    for our international competitiveness. However, aging transit
    infrastructure, reflected in a $90 billion state of good repair
    backlog, is suppressing transit ridership. Because reliable transit is
    such a critical part of the nation's transportation network and helps
    Americans save millions of hours of travel time and preventing billions
    of dollars in lost productivity, how does public investment in
    maintaining transit infrastructure support the nation's overall
    transportation goals and priorities?
        Answer. Public transportation is a critical part of the nation's
    multimodal transportation system and State DOTs spend more on public
    transportation each year than the Federal government. In 2014 State
    DOTs spent approximately $17.2 billion on public transportation
    compared to $10.6 billion in Federal investments in the same year.
    AASHTO supports continued investment in public transportation with a
    goal of doubling transit ridership to 20 billion trips by 2035.
        In metropolitan areas, a well-performing transit network expands
    commuting options as well as providing expanded access to jobs. This
    multimodal approach to transportation helps mitigate traffic
    congestion, conserves fuel, improves highway efficiency, addresses air
    quality issues, and supports security and emergency preparedness.
        But public transportation is also essential to moving people in
    rural areas. Our nation's public transportation network provides basic
    mobility options for elderly individuals, individuals with
    disabilities, and low-income individuals. State DOTs receive Federal
    transit funding to assist in providing rural public transportation
    services including non-fixed route paratransit services and intercity
    bus service.
        As our nation's population is expected to top 400 million by 2050
    and the population of seniors is expected to slightly more than double
    by this time, our member DOTs are continuing to focus on providing
    public transportation as a mobility option.
                                     ______

                      Questions Submitted to Todd Hauptli
                  Questions Submitted by Senator Steve Daines
        Question. Mr. Hauptli, as we discussed, connectivity is important
    for rural America and our economic opportunity. We must continue to
    expand this infrastructure without unduly increasing fees for rural
    passengers that typically have to make more connections. You described
    passenger facility charges (PFC) as a local user fee. As we continue
    the debate on PFC changes, we should ensure airports justify fees to
    the communities they serve. Enabling local accountability and not
    subjecting transiting passengers to increased fees, what are your
    thoughts on allowing an increase to the PFC cap for only the
    originating airport?
        Answer. Senator, I completely agree with your assessment that
    airports should justify local user fees with their local communities.
    Unlike Federal taxes, Passenger Facility Charges are local user fees
    that airports must justify locally. Most commercial service airports
    are owned and operated by state and local governments or by airport
    authorities that are ultimately accountable to local citizens. As a
    result, airport operators answer to local officials and their
    constituents who live in nearby communities.
        AAAE is advocating for Congress to eliminate the outdated Federal
    cap on local PFCs to help airports finance critical infrastructure
    projects, recognizing that it is highly unlikely that Congress will
    dramatically increase annual spending for airport construction given
    Federal budget constraints. If Congress agrees to adjust the PFC cap,
    many--but not all--airports would consider raising their fee to help
    pay for necessary capital projects.
        At the same time, however, airports would be under enormous
    pressure to keep their cost structure as low as possible in order to
    retain and attract new commercial air service, to encourage passengers
    to use their facilities, and to compete with other commercial service
    airports--regionally, nationally, and internationally. In many ways,
    airport executives and governing bodies that oversee airport operations
    are judged by their ability to keep air service options as high as
    possible and their costs as low as possible. Any decision about
    possible fee or costs increases is made carefully with a keen eye on
    what it means for an airport's cost per enplaned passenger or CPE.
        Given the imperative that exists to get local buy-in to any
    proposed fee increases and the market principles that exist to ensure
    that airport costs remain as low as possible to ensure regional
    national, and international competitiveness, AAAE and others continue
    to advocate for the complete elimination of the antiquated Federal cap
    on local passenger facility charge user fees. We understand that
    proposals have emerged to provide for a possible increase only at
    originating airports recognizing the legitimate concern that you and
    others have articulated about the potential impact on rural passengers
    who may be required to travel through ``hub'' airports to reach their
    ultimate destinations because of the airline hub and spoke system. We
    are certainly open to discussions on those proposals.
        Question. I share your assessment about the importance of
    commercial air service to the economic development of rural
    communities. What concerns do you have about a reliance on private
    capital to airports with only 10,000 enplanements or less per year?
        Answer. I believe there is a role for private investment in airport
    infrastructure and that airports could benefit from more Public-
    Private-Partnerships (P3s). There are, however, legitimate concerns
    that private investment may not be the solution for a large number of
    smaller commercial service airports in Montana and throughout the
    county that are seeking funds for capital projects.
        In 2015, the Port Authority of New York and New Jersey (PANYNJ)
    selected a private consortium for a massive $4 billion project at
    LaGuardia. Other large airports in Denver and Los Angeles are also
    turning to P3s for financial assistance. There may be instances where
    P3s make sense at smaller airports, too. But, private investment is not
    likely to be a widely deployable option for a large number of smaller
    commercial service airports including those non-hub airports with less
    than 10,000 enplanements.
        That's why AAAE continues to urge Congress to eliminate the PFC
    cap, which in addition to helping airports directly through local fee
    collections can also boost funding for smaller airports because of the
    return by larger airports of certain entitlement funding through the
    Airport Improvement Program as I noted during the hearing. We are also
    highly supportive of increasing Federal AIP funding overall, which
    would obviously provide a direct impact to smaller airports. These are
    two time-tested ways that Congress could quickly help large and small
    airports rebuild aging facilities and construct critical infrastructure
    projects.
        Question. In your testimony, you highlighted the anticipated
    increases in aircraft operations and looming congestion. As you know
    NextGen air traffic control should help, but it has been slow to
    deliver. That is why I introduced the NextGen Accountability Act
    requiring tangible benchmarks and increased transparency in deployment.
    How would this help airport planning and operations?
        Answer. Senator, your proposal, which calls for annual performance
    goals, makes sense. I am hopeful that Congress, the Administration, and
    aviation stakeholders will continue to work together to expedite the
    implementation of NextGen. Transitioning to a satellite-navigation
    system should increase efficiency and capacity at a time when passenger
    levels and aircraft operations are continuing to rise.
        But improving efficiency through NextGen-related initiatives is
    only part of the answer to enhancing capacity and reducing congestion.
    We also need to focus on traditional infrastructure projects that
    require bricks, mortar, concrete, and asphalt. We need to ensure we
    have enough runways and taxiways to accommodate more aircraft. Airports
    also need more gates and terminal space to accommodate increasing
    numbers of passengers. As the FAA's latest Aerospace Forecast points
    out, inadequate infrastructure ``could result in even more congestion
    and delays.''
        Finally, as the FAA continues to move forward with NextGen, it is
    absolutely critical that the agency consult with airports and local
    communities about new flightpaths that expose nearby residents to
    aircraft noise. The FAA has already experienced problems at a number of
    airports and communities around the country. I hope Congress will
    continue to monitor this issue to ensure the FAA is working with
    closely with airports and local communities.
              Questions Submitted by Senator Christopher A. Coons
                             investment in transit
        Question. Every day, Americans take more than 35 million trips on
    public transportation. This level of ridership enables the nation's
    largest regions to sustain a level of economic output that is essential
    for our international competitiveness. However, aging transit
    infrastructure, reflected in a $90 billion state of good repair
    backlog, is suppressing transit ridership. Because reliable transit is
    such a critical part of the nation's transportation network and helps
    Americans save millions of hours of travel time and preventing billions
    of dollars in lost productivity, how does public investment in
    maintaining transit infrastructure support the nation's overall
    transportation goals and priorities?
        Answer. Senator, I completely agree that transit is a critical part
    our nation's transportation system. I think we need an ``all of the
    above'' approach to improving our nation's infrastructure. That means
    increasing our investment in highways, bridges, transit, and airports.
    All modes of transportation need to work together seamlessly to ensure
    passengers can move efficiently on the ground and in the air. But we
    have a lot of work to do. As you know, the American Society of Civil
    Engineers recently issued its infrastructure report card. According to
    the report, transit received a D-, and aviation received a slightly
    better D.
        It's critical that we continue to press for an efficient multi-
    modal transportation system. Airline passengers often rely on public
    transportation to get to and from our nation's airports. Without
    reliable transit systems, airports would face increasing road
    congestion. They would also likely be forced to invest in more roadside
    projects and parking garages at a time when airports are struggling to
    come up with enough funding to pay for runways, taxiways and other
    critical infrastructure projects.
                                     ______

                   Questions Submitted to Edward L. Mortimer
                  Questions Submitted by Senator Steve Daines
        Question. Mr. Mortimer, we discussed the long-term economic
    importance of multimodal transportation infrastructure that moves
    energy commodities. In your testimony you also mentioned the importance
    of broadband deployment within an infrastructure package to create
    greater economic potential. As a former tech executive for a global
    cloud computing company based in Bozeman, Montana. I know firsthand the
    importance of digital connectivity in addition to physical connectivity
    for economic opportunity. How can we leverage limited resources to
    expand broadband to rural America?
        Answer. The Chamber believes Federal decision-makers should
    continue to work in partnership with the private sector and states to
    foster infrastructure deployment in remaining unserved areas. An
    important role the Federal government can play is facilitating the
    planning and approval process to provide regulatory certainly to this
    process. With regulatory certainty, we believe leveraging limited
    resources can play a key role in ensuring all parts of America have
    broadband access.
        Question. In your testimony you mentioned leveraging advances in
    autonomous vehicles. Nationally, 54 percent of automobile fatalities
    occur on rural roads, despite the fact that only 19 percent of
    Americans live in rural areas. There is an opportunity here to save
    lives as well as improving passenger and freight mobility. How do you
    think we can accelerate those benefits to rural America?
        Answer. The Chamber believes that making ``smart'' infrastructure a
    priority by leveraging Internet of Things (IoT) solutions in new and
    existing construction would increase connectivity, computing
    capabilities, and the utilization of data analytics. Below are some
    examples on how this could be done:

      --Investment in 5G infrastructure to accelerate Automated Vehicles,
            Vehicle-to-Vehicle safety, and Vehicle-to-Infrastructure
            communications.
      --Prioritize integration of IoT and data-centric solutions that
            connect, secure, and manage actionable data from existing and
            new infrastructure.

        IoT solutions increase safety, efficiency and mobility--by
    improving real-time decisionmaking and management of infrastructure
    assets, enabling predictive maintenance, lowering long term
    infrastructure cost, and increasing infrastructure life-span--thereby
    saving significant taxpayer dollars, improving societal challenges, and
    boosting the economy.
                Questions Submitted by Senator Dianne Feinstein
        Question. Mr. Mortimer, you mentioned in your testimony the need
    for Congress to think beyond just transportation when it considers
    infrastructure. Should Congress pass legislation leading to $1 trillion
    in new infrastructure investments, what proportion would you recommend
    be dedicated to improving America's water infrastructure?
        Answer. The U.S. Marine Transportation System (MTS) consists of
    ports, coastal and inland waterways, the Great Lakes, and the St.
    Lawrence Seaway and is an integral part of the global supply chain and
    the broader transportation network. While Congress did approve the
    Water Infrastructure Improvements for the Nation (WIIN) Act, further
    investment is needed to address many critical navigation needs.
        The Chamber also recognizes that Federal investment and regulatory
    relief for our drinking water, wastewater, and storm water systems
    should be a part of any infrastructure package. The water the nation
    uses for agriculture, manufacturing, and power production drives
    economic development, maximize societal returns, and build strong
    communities. While most water investments are made at the local level
    or involve private investment, we do believe there is a targeted
    Federal role to ensure limited resources are maximized to provide
    adequate water investments.
        Without knowing the scope of what infrastructure components would
    make up a $1 trillion infrastructure investment bill, we are unable to
    put a precise number on the proportion of an infrastructure package
    should go to water investments. But we do believe water investments
    should be included in any Federal legislation.
              Questions Submitted by Senator Christopher A. Coons
                             investment in transit
        Question. Every day, Americans take more than 35 million trips on
    public transportation. This level of ridership enables the nation's
    largest regions to sustain a level of economic output that is essential
    for our international competitiveness. However, aging transit
    infrastructure, reflected in a $90 billion state of good repair
    backlog, is suppressing transit ridership. Because reliable transit is
    such a critical part of the nation's transportation network and helps
    Americans save millions of hours of travel time and preventing billions
    of dollars in lost productivity, how does public investment in
    maintaining transit infrastructure support the nation's overall
    transportation goals and priorities?
        Answer. Public transportation must continue to be an important
    option in solving our infrastructure crisis. Businesses nationwide
    determine where they locate based on transportation options available.
    For a growing amount of communities, public transportation is a
    critical component of the transportation solution. Study after study
    has shown that investing in transit leads to better safety, faster
    economic growth and higher quality of life. Not maintaining the
    infrastructure will have the reverse effect. A strong Federal role in
    public transportation investment ensures mobility for its over 35
    million riders each day.
                                     ______

                      Questions Submitted to Beth Osborne
                  Questions Submitted by Senator Steve Daines
        Question. Amtrak's Empire Builder serves 12 communities along
    Montana's Hi-Line. It currently passes through the City of Culbertson.
    This is an opportunity to expand Amtrak's service and produce a net
    positive financial impact, according to a previously completed Amtrak
    feasibility study. Transportation for America has shared its expertise
    with Culbertson as it works to reinstate this service.
        Ms. Osborne, in your testimony, you discussed the potential for the
    Consolidated Rail Infrastructure & Safety Improvements (CRISI) program,
    should it be funded. Would you please elaborate on what we as a nation
    can accomplish if Congress fully funds CRISI and allows all eligible
    projects, as authorized, to compete?
        Answer. This program can provide connections for communities to job
    centers, medical facilities and airports, which is especially important
    to rural areas as Essential Air Service becomes unavailable in more and
    more places. It is also important to improve the safety of the railroad
    system by providing communities with much needed funds for grade
    separations and crossing controls.
                Questions Submitted by Senator Dianne Feinstein
        Question. I hope that Congress will decide to invest more in our
    nation's infrastructure, and one of the key reasons is that we have an
    enormous maintenance and repair backlog. One-third of our major roads
    are in poor or mediocre condition, and one-tenth of our bridges are
    structurally deficient. The American Society of Civil Engineers have
    given the nation's infrastructure a grade of ``D+''. More specifically,
    bridges received a grade of ``C+'', aviation a ``D'', ports a ``C+'',
    roads a ``D'', and transit a ``D-''. But when Congress has provided new
    funding, we have not actually required the states to focus on a fix-it-
    first approach.
        Ms. Osborne, how do you recommend that Congress, and specifically
    this Committee, ensure that sufficient resources are devoted to
    maintaining rather than just expanding the transportation
    infrastructure we already have?
        Answer. Absolutely. For decades, the American people have been told
    that roads and bridges are crumbling. Every few years Congress passes a
    transportation bill and promises it will fix things only to come back a
    few years later and complain about the condition of infrastructure
    again. Smart Growth America reviewed transportation spending across the
    nation in a 2014 report called ``Repair Priorities'' and found that the
    majority of funding is currently spent on new capacity, not state of
    repair. Congress needs to make its rhetoric and its spending
    consistent.
        Question. America's failure to adequately maintain existing
    infrastructure will only get worse with climate change. I worry that
    neither the Federal government nor states have done enough to
    anticipate increased storm damage, both in terms of retrofitting
    existing infrastructure, but also in terms of long-term planning to
    move infrastructure away from increasingly hazardous areas.
        For example, California's State Route 37 runs along the north edge
    of San Pablo Bay near San Francisco. It is surrounded on both sides by
    marsh land that is increasingly vulnerable to rising sea levels, and it
    was just out of commission for weeks due to storm-related flooding.
        Ms. Osborne, how do you recommend that Congress ensure that states
    are using Federal funds to make their infrastructure more climate
    resilient?
        Answer. Congress required transportation agencies to create asset
    management plans and to measure the state of repair of the
    transportation system in MAP-21. Congress could require that asset
    management plans and state of repair performance measures be inclusive
    of climate resilience. Congress might also require that design
    standards for roadway infrastructure include resiliency in those
    designs.
        Question. The area where this subcommittee has the most direct
    impact on infrastructure is the Capital Investment Grant or New Starts
    program for transit investment. I am particularly grateful to Chairman
    Collins for always treating the transit investment projects fairly and
    keeping them moving along with the annual funding they need.
        As Congress begins to discuss additional funding for infrastructure
    investments, I want to point out that other modes of transportation do
    not receive the same level of scrutiny and opportunities for
    Congressional delays that transit does. For example, when a state wants
    to invest in new highway capacity, it can direct its share of Federal
    funds in almost any manner it chooses. But when a transit agency wants
    to invest in new rail capacity, it has to come before Congress for each
    individual project, year after year.
        Ms. Osborne, how do we ensure that states are building new highway
    capacity in ways that actually reduce congestion and encourage the
    development of more sustainable communities?
        Answer. The simplest approach is to put the entire Federal Transit
    program and the new rail programs under the Highway Trust Fund, so that
    project sponsors need not come to Congress every year. While
    considering this, it might also be worthwhile to think about aligning
    the design of the highway, transit and rail programs. Many facets of
    the transit program should be considered for the entire transportation
    program. For example, in the transit program fomula funds are used for
    maintenance of the system while new capacity requirements have to come
    to the Federal government for evaluation based on 1) project benefits,
    2) the sponsor's ability to maintain the project once built and 3)
    evidence that the sponsor can maintain the rest of their system with
    the addition of the project. At the very least, the latter two factors
    should be evaluated before any Federal investment is made, whether
    through grants or loans.
              Questions Submitted by Senator Christopher A. Coons
                               local governments
        Question. I noted in your testimony that the TIGER program is one
    of the only programs that support transportation projects at the local
    level. As a former county executive, I understand the headaches that
    can come from trying to combine land use planning, transportation
    decisions, and other local community priorities; and I appreciate the
    flexibility that TIGER grants can provide. Other than TIGER grants,
    what are a couple of things we can do in Congress to support and
    empower local government transportation decisions?
        Answer. Congress could make more funding available to local
    communities, either through growing programs like TIGER or by
    increasing local involvement in decisionmaking within the formula
    programs.
        Additionally, local governments often run into challenges because
    they are more likely to prioritize serving regional businesses with
    boulevards and main streets while states are more likely to prioritize
    throughput by moving vehicles through and past those businesses on high
    speed and wide roadway designs. State transportation engineers often
    want to give locals what they are seeking but feel their hands are tied
    by Federal requirements and by the highway-focused engineering
    standards laid out by the American Association of State Highway and
    Transportation Officials (AASHTO) ``Green Book.'' More flexibility in
    design of roadways would help local governments get the roadway network
    that best serves their needs.
                             last mile connections
        Question. Passenger rail brings more and more riders, many of them
    commuting to work, some on business travel, some of them tourists
    exploring towns and cities on these routes. What can we do to improve
    last mile connections, both rail-to-rail (i.e. passenger rail to local
    or regional transit) and multi-modal connections such as rail to
    busses, or rail to shared-use platforms such as ride shares and bike
    shares to allow these customers to experience seamless integration of
    their travel experience?
        Answer. There are two things that can be done. First, Congress can
    provide more for these purposes either through increasing the size of
    the Transportation Alternatives or getting flexible funding down to the
    local level where these investments are best understood.
        Second, first and last mile challenges with transit and rail are a
    sign of poor roadway design and/or poor land use decisionmaking. To
    address the roadways, the Federal government could push for a
    modernization of roadway design that more consistently supports the
    safe movement of all users (drivers, bicyclists, transit users and
    pedestrians) rather than focusing solely on moving cars and trucks at
    high speeds.
        Land use is a local issue; however, the Federal government need not
    reward and subsidize land use decisions that drive up costs and reduce
    mobility and safety. Spread out, low-density development results in
    more need for driving, which in turn causes more and more expensive
    infrastructure on the back of a smaller tax base. It also makes walking
    to destinations difficult because they are farther away. That larger
    infrastructure needed to support the induced car travel caused by
    spread out development leads to the roadway design (referred to above)
    that is both expensive and unsafe. A good place to start to fix this is
    to emphasize the connection between land use and transportation
    throughout the transportation program and project development process.
    Congress could also provide the Federal Highway Administration (FHWA)
    with funding and a directive to develop transportation models that are
    capable of recognizing how land use can impact travel demand. The
    current four-step model cannot.
                               pedestrian safety
        Question. Delaware is one of the deadliest states for pedestrians
    in America, with one of the highest rates of pedestrian deaths per
    capita (#1 in 2015). My understanding is that most attention paid to
    this problem has focused on urban areas, but this is largely a suburban
    problem for us, with most fatalities occurring due to uncontrolled
    pedestrian crossings of high-speed suburban commercial corridors. What
    kind of support can we provide at the Federal level to help address
    this issue?
        Answer. Pedestrian deaths are often by poor roadway design and/or
    poor land use decisionmaking. To address the roadways, the Federal
    government could push for a modernization of roadway design that more
    consistently supports the safe movement of all users (drivers,
    bicyclists, transit users and pedestrians) rather than focusing solely
    on moving cars and trucks at high speeds.
        Land use is a local issue; however, the Federal government need not
    reward and subsidize land use decisions that drive up costs and reduce
    mobility and safety. Spread out, low-density development results in
    more need for driving, which in turn causes more and more expensive
    infrastructure on the back of a smaller tax base. It also makes walking
    to destinations difficult because they are farther away. That larger
    infrastructure needed to support the induced car travel caused by
    spread out development leads to the roadway design (referred to above)
    that is both expensive and unsafe. A good place to start to fix this is
    to emphasize the connection between land use and transportation
    throughout the transportation program and project development process.
    Congress could also provide the Federal Highway Administration (FHWA)
    with funding and a directive to develop transportation models that are
    capable of recognizing how land use can impact travel demand. The
    current four-step model cannot.
        The National Complete Streets Coalition can bring national leaders
    to these communities analyze the transportation and land use changes
    needed to address the problem.

                              SUBCOMMITTEE RECESS

        Senator Collins. This hearing is now adjourned.
        [Whereupon, at 11:39 a.m., Wednesday, March 8, the
    subcommittee was recessed, to reconvene at a date and time
    subject to the call of the Chair.]