[Senate Hearing 117-540]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 117-540

                   FUNDING AND FINANCING OPTIONS TO 
                    BOLSTER AMERICAN INFRASTRUCTURE

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

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 18, 2021

                               __________

                                     
                                     

            Printed for the use of the Committee on Finance
            
                               __________
            
            
                 U.S. GOVERNMENT PUBLISHING OFFICE

50-297 PDF                WASHINGTON : 2023



                          COMMITTEE ON FINANCE

                      RON WYDEN, Oregon, Chairman

DEBBIE STABENOW, Michigan            MIKE CRAPO, Idaho
MARIA CANTWELL, Washington           CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey          JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland         RICHARD BURR, North Carolina
SHERROD BROWN, Ohio                  ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado          PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania   TIM SCOTT, South Carolina
MARK R. WARNER, Virginia             BILL CASSIDY, Louisiana
SHELDON WHITEHOUSE, Rhode Island     JAMES LANKFORD, Oklahoma
MAGGIE HASSAN, New Hampshire         STEVE DAINES, Montana
CATHERINE CORTEZ MASTO, Nevada       TODD YOUNG, Indiana
ELIZABETH WARREN, Massachusetts      BEN SASSE, Nebraska
                                     JOHN BARRASSO, Wyoming

                    Joshua Sheinkman, Staff Director

                Gregg Richard, Republican Staff Director

                                  (ii)
                                  
                                  
                                  
                                  
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee 
  on Finance.....................................................     1
Crapo, Hon. Mike, a U.S. Senator from Idaho......................     3

                               WITNESSES

Kile, Joseph, Ph.D., Director of Microeconomic Analysis, 
  Congressional Budget Office, Washington, DC....................     6
Sheehan, Victoria F., president, American Association of State 
  Highway and Transportation Officials, Washington, DC...........     8
Buch, Heather, subcommittee chair, Transportation Steering 
  Committee, National Association of Counties, Washington, DC....    10
Bloomfield, Shirley, chief executive officer, NTCA--The Rural 
  Broadband Association, Arlington, VA...........................    11

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Bloomfield, Shirley:
    Testimony....................................................    11
    Prepared statement...........................................    53
    Responses to questions from committee members................    59
Buch, Heather:
    Testimony....................................................    10
    Prepared statement...........................................    60
    Responses to questions from committee members................    65
Crapo, Hon. Mike:
    Opening statement............................................     3
    Prepared statement...........................................    66
Kile, Joseph, Ph.D.:
    Testimony....................................................     6
    Prepared statement...........................................    67
    Responses to questions from committee members................    83
Sheehan, Victoria F.:
    Testimony....................................................     8
    Prepared statement...........................................    86
    Responses to questions from committee members................    93
Wyden, Hon. Ron:
    Opening statement............................................     1
    Prepared statement...........................................    94

                             Communications

American Council of Life Insurers................................    97
American Public Gas Association (APGA)...........................    99
American Securities Association (ASA)............................   101
American Truck Dealers...........................................   102
Center for Fiscal Equity.........................................   109
Global Infrastructure Investor Association.......................   115
Government Finance Officers Association..........................   117
INCOMPAS.........................................................   119
Municipal Bonds for America......................................   120
NAFA Fleet Management Association................................   124
National Association of Health and Educational Facilities Finance 
  Authorities....................................................   126
National Association of Manufacturers............................   128
Owner-Operator Independent Drivers Association...................   130
The Real Estate Roundtable et al.................................   131
Reinsurance Association of America...............................   139
Securities Industry and Financial Markets Association............   144




 
FUNDING AND FINANCING OPTIONS TO BOLSTER AMERICAN INFRASTRUCTURE

    TUESDAY, MAY 18, 2021
        U.S. Senate,
          Committee on Finance,
            Washington, DC.
The hearing was convened, pursuant to notice, at 10 a.m., via 
  Webex, in the Dirksen Senate Office Building, Hon. Ron Wyden 
  (chairman of the committee) presiding..........................
Present: Senators Stabenow, Cantwell, Carper, Brown, Bennet, 
  Casey, Warner, Whitehouse, Hassan, Cortez Masto, Warren, Crapo, 
  Grassley, Cornyn, Thune, Portman, Cassidy, Lankford, Daines, 
  Young, and Sasse...............................................
Also present: Democratic staff: Robert Andres, Professional Staff 
  Member; Joshua Sheinkman, Staff Director; and Tiffany Smith, 
  Chief Tax Counsel. Republican staff: Jen Deci, Senior Counsel; 
  and Gregg Richard, Staff Director..............................
                OPENING STATEMENT OF HON. RON WYDEN, A U.S. 
                  SENATOR FROM OREGON, CHAIRMAN, COMMITTEE ON 
                  FINANCE
The Chairman. The Senate Finance Committee will come to order. 
  This is going to be a busy week. Today we are going to look at 
  options for financing infrastructure, and then later in the 
  week we will be examining the lessons we have learned from the 
  pandemic. I look forward to working with all colleagues and 
  pursuing these issues in a bipartisan way......................
With respect to infrastructure, I think it would be fair to say 
  that right now in Washington, DC, it would be hard to get 
  members of Congress to agree on the proper way to butter toast. 
  But I think everybody understands the importance of upgrading 
  infrastructure. That is because it is widely understood, you 
  cannot have big league economic growth in America with little 
  league infrastructure..........................................
The sorry state of our infrastructure right now is a danger to 
  individuals. For example, you cannot cross the Mississippi 
  River on a bridge that is cracked in half. It is also a recipe 
  for national decline, and the United States continues to fall 
  behind China and other countries on broadband, on roads, on 
  highways, on ports, on rail, airports, housing, and in other 
  areas..........................................................
Obviously--and this is why we are holding the hearing--the tough 
  question with respect to infrastructure is how you go about 
  paying for it. In my judgment, there is an obvious answer if 
  you say that it is essential to pay for infrastructure in a 
  fair way.......................................................
It is long past time for mega-corporations to pay a fair share 
  for building and repairing roads and bridges. They drive trucks 
  across America's roads and highways. They send products to 
  market through our airports and our waterways. They rely on our 
  power grids and communications systems. And it seems to me to 
  be just basic fairness that they ought to pitch in for the 
  infrastructure that makes our country an economic superpower...
Now the hard evidence shows that the mega-corporations--and this 
  is based on the fact that the Finance Democratic staff has been 
  out crunching the numbers--have never contributed less to 
  Federal revenues in modern American history than they are doing 
  now............................................................
Data from the independent Congressional Budget Office shows that 
  in the aftermath of the Trump tax law, corporate income tax 
  revenue is down nearly 40 percent from the 21st-century 
  average. Many of the mega-corporations, the largest 
  corporations, are paying nothing. That is it--zero.............
News reports out just this week said that mega-corporations flush 
  with cash are also gearing up for a new round of stock buybacks 
  that overwhelmingly benefit the wealthy shareholders. It is not 
  any kind of cash crunch that has kept major corporations from 
  pitching in here...............................................
Asking the largest of the mega-corporations in America to pitch 
  in a fair share is not going to sacrifice America's ability to 
  compete in tough global markets. ``Competitive'' does not mean 
  that the biggest corporations should pay zero tax. Paying for 
  infrastructure and creating high-wage, high-skill jobs are not 
  mutually exclusive.............................................
Now, there is lots of talk about how it has to be user fees that 
  pay for infrastructure. I will say the suggestion is, somehow 
  middle-class workers are supposed to pay what mega-corporations 
  will not. Middle-class budgets are already very hard-pressed, 
  and if you do not think Americans keep track of the cost of 
  driving, you have not been watching the TV news much of the 
  last week......................................................
The fact is, the infrastructure bill has been growing for decades 
  due to Congress's negligence and the failure of mega-
  corporations to pitch in fairly. And when you say it is going 
  to be fair, it means allowing someone like myself, honored to 
  represent Oregon in the Senate, telling a rancher in eastern 
  Oregon or a home health aide on the coast, that they are not 
  going to carry the whole burden; they are not going to make up 
  the shortfall..................................................
Working people driving long distances are willing to pay their 
  fair share. They tell that to us in our community meetings. I 
  just came off 13 of them in Oregon. They have been doing so 
  every time they pull up to the pump. What they do not want to 
  do is support immunizing mega-corporations from paying anything 
  at all.........................................................
Prior to 2017, there was bipartisan interest in bringing back 
  cash trapped overseas as the best way to fund a major 
  infrastructure bill. A number of us on a bipartisan basis said 
  that to then-
  President Trump. Study after study showed that corporations had 
  trillions of dollars parked around the world...................
Senators had repatriation bills ready to go. There was bipartisan 
  interest in that idea on the Senate Finance Committee. In 2017, 
  however, Donald Trump and Republicans went in a different 
  direction and plowed that cash into even bigger corporate tax 
  subsidies as part of the Trump tax law. That was a major lost 
  opportunity, and the infrastructure tab has only grown in the 
  years since then...............................................
So now, first and foremost, we ought to be looking at smart 
  financing tools to help draw private dollars off the sidelines 
  and into infrastructure. It worked a decade ago with Build 
  America Bonds. And just in the interest of brevity, let me tell 
  colleagues, when I proposed for the first time these Build 
  America Bonds, it was completely bipartisan....................
Senator Wicker was a leading cosponsor of it. Senator Thune was a 
  leading cosponsor. Senator Collins was a leading cosponsor. 
  Senator Klobuchar was deeply involved. And in the Finance 
  Committee, the last night of the Recovery Act, I was asked what 
  might happen. I said, ``Let me low-ball it. It's only going to 
  last a year and a half.'' Government had never bonded before. I 
  said we might sell $3 billion to $5 billion worth of Build 
  America Bonds..................................................
America, in a year and a half, sold $182 billion worth of Build 
  America Bonds, an example of a public/private partnership 
  coming together. This is an approach that Congress has to 
  return to, because it works....................................
I want to thank our witnesses for joining the committee. What we 
  are going to do now is, we are going to hear from Senator 
  Crapo. We understand how urgent this is. That is why the 
  committee is having this hearing. Senator Crapo and I thought 
  it was so important to air all of the options. We will hear 
  from Senator Crapo, and then we will have Senator Shaheen do an 
  introduction...................................................
Senator Crapo?...................................................
[The prepared statement of Chairman Wyden appears in the 
  appendix.].....................................................
                OPENING STATEMENT OF HON. MIKE CRAPO, 
                  A U.S. SENATOR FROM IDAHO
Senator Crapo. Thank you very much, Mr. Chairman. Thank you for 
  holding this timely hearing on funding and financing options 
  for our Nation's infrastructure................................
Infrastructure investment has traditionally been bipartisan and 
  accomplished through regular order. I am encouraged by the 
  productive meeting that I had last week with President Biden 
  and some of my Republican colleagues in the Senate about the 
  need to modernize and expand our transportation system and 
  broadband in a bipartisan manner...............................
The framework Republican Senators discussed with President Biden 
  included roads and bridges, transit, rail, airports, drinking 
  water and wastewater, and port and inland waterways, as well as 
  water storage and broadband infrastructure.....................
Consideration of offsetting the cost of infrastructure with a 
  corporate tax rate increase, or increases in international 
  taxes, especially coming out of the largest negative shock to 
  the economy on record, is counterproductive and a nonstarter on 
  my side of the aisle...........................................
With the FAST Act extension expiring at the end of September, 
  reauthorization of our surface transportation programs should 
  be the basis of any infrastructure conversations...............
As our witnesses will discuss, Congress must provide long-term 
  stability and certainty for these programs so that 
  transportation agencies, cities, counties, and States across 
  the country can make responsible long-term transportation 
  planning decisions.............................................
For the last few transportation authorizations, Congress has made 
  the decision to spend more than the receipts going into the 
  highway trust fund. In order to advance a comprehensive, long-
  term reauthorization bill, it is important that we do so in a 
  fiscally responsible manner. There is no silver bullet for how 
  to pay for transportation infrastructure, but historically it 
  has been paid for by user fees, which makes sense..............
For many years, the users of transportation infrastructure paid 
  fees for that use through the gas and diesel taxes, which were 
  deposited into a highway trust fund and then distributed to pay 
  for our Nation's roads, bridges, and transit systems...........
There have been many changes to the transportation landscape 
  since Congress last raised the gas tax in 1993, such as 
  increased fuel efficiency and a significant increase in 
  electric vehicles, or EVs, on the road.........................
With this evolution, Congress needs to ensure that all users of 
  the transportation infrastructure are paying into the highway 
  trust fund. To make up the projected $195-billion 10-year 
  shortfall of the highway trust fund, Congress needs to think 
  creatively of ways to ensure that EVs are paying their fair 
  share..........................................................
If we are able to identify a top-line spending number and go 
  through a bipartisan FAST Act reauthorization process, I am 
  ready to work with my colleagues on the other side of the aisle 
  to do the hard work of addressing the solvency of the highway 
  trust fund. With that, the United States will have the funding 
  we need to maintain and modernize our transportation system to 
  meet the rapidly evolving landscape of today and in the future.
To maximize use of taxpayer dollars, we should consider proposals 
  to attract private capital for infrastructure projects, 
  repurpose unused Federal funds, and improve and expand upon 
  existing infrastructure loan programs..........................
I agree with the comments that our chairman just made about the 
  Build America Bonds. They can be a significant way of 
  incentivizing private capital into our infrastructure. We 
  should consider how public/private partnerships can fit into 
  our comprehensive infrastructure funding, and our financing....
The Transportation Infrastructure Finance and Innovation Act, or 
  TIFIA as we call it, the Railroad Rehabilitation and 
  Improvement Financing Act, and the Water Infrastructure 
  Financing and Innovation Act are good examples of financing 
  tools that can leverage Federal resources, and we should 
  consider ways those programs should be improved and expanded...
Private Activity Bonds for transportation projects have proven so 
  attractive that the program is oversubscribed. And with the 
  $15-billion cap having been met, and additional applications 
  outstanding, we should address it. We need to consider how PABs 
  and other bond programs can be used to help States and 
  localities improve and move their infrastructure projects 
  forward........................................................
There are hundreds of billions of dollars in unspent funds from 
  COVID relief packages. Those funds should be put to work and 
  repurposed to fund infrastructure projects.....................
Mr. Chairman, the word ``infrastructure'' itself has become 
  somewhat of a fluid term lately. As this hearing demonstrates, 
  there is bipartisan support for finding long-term funding and 
  financing solutions for transportation infrastructure, as well 
  as increasing access to broadband connections, particularly in 
  rural America..................................................
Americans rely heavily upon broadband technology for business, 
  government, education, and personal activities. Efforts have 
  been underway for some time to address a digital divide in 
  broadband deployment between rural and urban or suburban areas 
  to ensure communities, regardless of size, can access 
  technological advancements. The pandemic magnified the 
  importance of expansive and reliable broadband technology, as 
  so many Americans found themselves working and learning from 
  home...........................................................
Mr. Chairman, thank you again for holding this hearing. Let's get 
  to work in a bipartisan way to maintain, modernize, and expand 
  America's infrastructure. I thank our witnesses today for their 
  willingness to participate in this hearing.....................
[The prepared statement of Senator Crapo appears in the 
  appendix.].....................................................
The Chairman. Thank you very much, Senator Crapo. And I would 
  just like to note for our colleagues, we are only 19 minutes 
  into this morning's hearing, and we have already had an 
  outbreak of major bipartisanship around Build America Bonds. 
  And I want to thank Senator Crapo for his thoughtfulness.......
Now I also want to render an apology to Senator Hassan, because 
  Senator Hassan, so that the record is clear, is now going to 
  introduce one of her thoughtful guests, who is Ms. Sheehan.....
So, you New Hampshirites all stick together, apparently even with 
  respect to your name. Senator Hassan, we welcome you. Please 
  make the introductory comments you desire......................
Senator Hassan. Well, thank you so much, Senator Wyden. Thank you 
  for being such an effective chair of our committee, and, 
  Ranking Member Crapo, thank you as well for your work and for 
  holding today's hearing on how we can invest in American 
  infrastructure.................................................
And I would like to welcome a Granite Stater who is an expert on 
  this topic of today's hearing. And she is Victoria Sheehan from 
  Nashua, NH, and she has served as the Commissioner of the New 
  Hampshire Department of Transportation since 2015..............
I have seen firsthand her commitment to providing safe and 
  efficient transportation systems throughout our State. When I 
  was Governor, I appointed Commissioner Sheehan and partnered 
  with her to move forward a number of infrastructure improvement 
  projects.......................................................
Commissioner Sheehan has since been reappointed to her post by 
  Governor Sununu. Commissioner Sheehan has also taken her 
  expertise to the American Association of State Highway and 
  Transportation Officials, where she currently serves as 
  president. And she is only the second woman in the 
  Association's history to serve in this role....................
An engineer by training, Commissioner Sheehan has extensive 
  experience in transportation management, and she will bring an 
  important perspective to today's hearing.......................
Commissioner, thank you for being here today and for all of your 
  work to help keep Granite Staters safe, and keep our economy 
  moving. I am looking forward to hearing from you today.........
Thank you, Mr. Chairman..........................................
The Chairman. The first witness will be Dr. Joseph Kile, Director 
  of Microeconomic Analysis at the Congressional Budget Office...
As we all heard, Senator Hassan has sought to have Ms. Victoria 
  Sheehan, who is president of the American Association of State 
  Highway and Transportation Officials, and Commissioner of the 
  New Hampshire Department of Transportation, here. We are glad 
  that Senator Hassan has arranged for Ms. Sheehan to be here....
Our third witness will be Ms. Heather Buch, subcommittee chair 
  for the National Association of Counties' Transportation 
  Steering Committee. She is a County Commissioner for Lane 
  County, OR. I know Ms. Buch well. Nobody works harder. She 
  gives public service a good name every single day, and we are 
  so glad that she is here from Lane County......................
Our final witness will be Ms. Shirley Bloomfield. She is chief 
  executive officer of the Rural Broadband Association...........
We will make your formal remarks a part of the hearing record in 
  their entirety, and why don't we begin first with Dr. Joseph 
  Kile of CBO....................................................
                STATEMENT OF JOSEPH KILE, Ph.D., DIRECTOR OF 
                  MICROECONOMIC ANALYSIS, CONGRESSIONAL BUDGET 
                  OFFICE, WASHINGTON, DC
Dr. Kile. Thank you, Chairman Wyden, and good morning to you and 
  to Ranking Member Crapo. Thank you very much for inviting me to 
  today's hearing................................................
I am going to touch briefly on three points this morning: first, 
  the status of the highway trust fund; second, options to 
  generate revenue for the trust fund; and third, options for 
  subsidizing increased borrowing by State and local governments.
For more than a decade, the government has been spending more 
  each year from the highway trust fund than the revenues 
  collected for it. Those revenues come mostly from taxes on 
  gasoline and diesel fuel, as well as various taxes on heavy 
  trucks.........................................................
CBO estimates that the balances in both the highway and the 
  transit account will be exhausted in the first half of the 
  coming fiscal year. The total shortfall over the next 10 years 
  is projected to be $195 billion in CBO's baseline estimates....
If the trust fund's balances were to be exhausted, the Federal 
  Government would not be able to make payments to States on a 
  timely basis. As a result, States would face challenges in 
  planning for transportation projects because of uncertainty 
  about the amount or timing of payments from the Treasury.......
Turning to options for generating revenue, one approach would be 
  to require users of the highway system to bear more of those 
  costs. When people drive, they impose costs they do not fully 
  pay for--and those include wear and tear on bridges and roads, 
  delays from traffic congestion, and the harmful effects of 
  exhaust emissions..............................................
A combination of taxes on fuel and mileage that make its users 
  pay for more of those costs would make use of the system more 
  efficient. If you wanted to increase revenues by charging users 
  in the system, you would have various options..................
One option would be to increase existing taxes on gasoline and 
  diesel fuel. Those taxes have been unchanged since 1993. 
  Increasing them by 15 cents a gallon and indexing them for 
  inflation would raise about $26 billion in revenue for the 
  trust fund in the first year, and that amount would gradually 
  increase over time.............................................
Another option would be to impose new taxes on users of the 
  system. For instance, the government could impose a tax on 
  vehicle miles traveled. Some States already have VMT taxes. And 
  CBO found that each 1 cent per mile of Federal tax would raise 
  $2.6 billion per year if it was levied on all commercial 
  trucks.........................................................
Still another option would be to impose an annual tax or fee on 
  owners of electric vehicles. Currently EVs comprise only a 
  small share of vehicles on the road, and such a tax would raise 
  about $0.2 billion per year initially..........................
It is important to note that implementing a new tax would require 
  resolving several practical steps to assess and collect the 
  tax, and implementing new taxes would probably cost more for 
  the government than increasing existing ones...................
Some approaches would raise concerns about privacy, especially if 
  applied to personal vehicles. An alternative to imposing the 
  cost of increased spending on users would be to distribute them 
  more broadly...................................................
Since 2008, the Federal Government has transferred over $150 
  billion from the general fund at the Treasury to the highway 
  trust fund. You could adopt that approach again. And compared 
  with some options such as increasing the gas tax, funding 
  highways through broad-based taxes would have the advantage of 
  imposing a smaller burden on low-income households as a share 
  of their income................................................
As an alternative to increasing funding for highways or other 
  infrastructure, the Federal Government could increase subsidies 
  that reduce the cost of borrowing by State and local 
  governments. The Federal Government subsidizes about $20 
  billion of such borrowing for highways each year, most of that 
  through tax-exempt bonds. Of course, such financing is not a 
  new source of revenue, but a way of making future State and 
  local revenue available to pay for projects sooner.............
I will briefly mention two options for subsidizing borrowing. The 
  Federal Government could authorize tax credit bonds which would 
  allow lenders to take a credit against their taxes owed, rather 
  than deducting new trust earnings from their income. The cost 
  to the Federal Government for such bonds would depend on the 
  credit subsidy, and that is a decision that you would be faced 
  with in making such authorizations.............................
The Federal Government could also increase the cap on Private 
  Activity Bonds for highways. Two PABs that have been issued 
  account for about 90 percent of the $15 billion total allowed 
  for that purpose under current law. The cost to the Federal 
  Government of such bonds is similar to municipal bonds, but 
  they can be used for a broader range of purposes...............
I will stop there, and I would be delighted to answer any 
  questions that you might have. Thank you very much.............
[The prepared statement of Dr. Kile appears in the appendix.]....
The Chairman. Thank you, Dr. Kile................................
We will next hear from Ms. Sheehan...............................
                STATEMENT OF VICTORIA F. SHEEHAN, PRESIDENT, 
                  AMERICAN ASSOCIATION OF STATE HIGHWAY AND 
                  TRANSPORTATION OFFICIALS, WASHINGTON, DC
Ms. Sheehan. Well, good morning, Chairman Wyden, Ranking Member 
  Crapo, and members of the committee. Thank you for the 
  opportunity to appear today and speak to the critical need to 
  provide stable and predictable funding for the Federal 
  transportation program, as well as financing tools for State 
  and local governments to utilize. Thank you also, Senator 
  Hassan, for your words of welcome..............................
My name is Victoria Sheehan, and I serve as the Commissioner of 
  the New Hampshire Department of Transportation, and as 
  president of AASHTO, the American Association of State Highway 
  and Transportation Officials. It is my honor to testify on 
  behalf of the Granite State and AASHTO, which represents the 
  State departments of transportation for all 50 States, 
  Washington, DC, and Puerto Rico................................
First, allow me to express on behalf of all the State DOTs our 
  gratitude for the leadership of this committee on several 
  important issues. These include the repeal of the $7.6-billion 
  recission of highway contract authority in 2019, the extension 
  of surface transportation programs for fiscal year 2021 while 
  shoring up the highway trust fund, as well as the $10 billion 
  in COVID-19 relief provided last December......................
We also thank you for your firm commitment to getting the Federal 
  surface transportation bill done on time, as well as possibly 
  providing infrastructure funding as part of an economic 
  stimulus and recovery package..................................
This morning I would like to begin by discussing why timely 
  reauthorization of the Federal surface transportation program 
  is so important. New Hampshire, as a small rural State, relies 
  heavily on Federal funds to make infrastructure improvements. 
  Any delay, or even worse a series of short-term extensions, 
  would wreak havoc across the country and would impact not just 
  State DOTs but our partners, which are local governments and 
  the construction industry......................................
Projects of all types and sizes would be at risk, including 
  roadway safety improvements, repair work, as well as capacity 
  improvements and active transportation investments.............
AASHTO members know only too well that the timely reauthorization 
  relies on securing the funding to pay for these programs. We 
  stand ready to work with this committee and others in Congress 
  to find a solution that addresses the growing infrastructure 
  investment needs across the country............................
Since 2008, Congress has had to transfer over $150 billion from 
  the general fund of the Treasury to the highway trust fund in 
  order to maintain funding levels. While AASHTO is very grateful 
  that Congress and this committee were unwilling to reduce 
  surface transportation investments, we recognize that general 
  fund transfers do not provide the long-term solution needed to 
  stabilize these important programs.............................
In order to simply maintain the current highway trust fund 
  spending levels, adjusted for inflation after the current 
  extension of the FAST Act, it is estimated that Congress will 
  need to identify $74.8 billion in additional revenues for a 5-
  year bill through 2026, while at the same time, the purchasing 
  power of the highway trust fund revenue has declined 
  substantially, losing over half of its value in the last 28 
  years. For the value of the dollars we are provided, the State 
  DOTs continue to support a role for the Federal financing tools 
  that allow needed projects to be advanced sooner...............
I want to recognize the work of you, Mr. Chairman, and others on 
  this committee to develop and pursue additional financing tools 
  to help meet transportation needs. As an example, in 2014 the 
  New Hampshire legislature approved a 4.2-cent increase in the 
  State gas tax, primarily intended to complete the 
  reconstruction of Interstate 93 from the Massachusetts State 
  line to Manchester, the largest city in New Hampshire..........
However, at the same time, New Hampshire DOT pursued a 
  Transportation Infrastructure Finance Innovation Act, or TIFIA, 
  loan, backed by that State gas tax increase. The TIFIA loan was 
  structured so that New Hampshire is paying interest only for 
  the first 10 years of the 20-year loan, allowing us to pledge 
  the additional new revenue to rural paving and bridge work.....
The result was the completion of a regionally significant 
  project, savings of over $20 million in financing, as well as 
  improved pavement and bridge conditions across New Hampshire 
  due to our ability to pave the 1,400 additional lane miles of 
  roadway and replace 23 structurally deficient bridges..........
Financing tools can play an important and specific role, and many 
  States already rely on various forms of financing, ranging from 
  traditional tax-exempt bonds, tax credit bonds, State 
  infrastructure banks, and private equity, among other financing 
  options........................................................
Lastly, I want to say that State DOTs are extremely encouraged 
  that both Congress and the Biden administration are discussing 
  potential infrastructure investment. An infrastructure package 
  coupled with a robustly funded surface transportation bill 
  provides a unique window of opportunity to make much-needed 
  investments in our Nation's transportation systems.............
Whichever revenue tools you utilize to fund these programs, 
  AASHTO looks forward to assisting you and the rest of your 
  Senate colleagues in finding and implementing a viable set of 
  revenue solutions..............................................
Thank you again for the honor of being here today, and the 
  opportunity to testify. I am happy to answer your questions....
[The prepared statement of Ms. Sheehan appears in the appendix.].
The Chairman. Thank you, Ms. Sheehan, and we very much appreciate 
  your representing the Association of State Highway and 
  Transportation Officials.......................................
Our next witness will be Heather Buch. And I am always 
  explaining, Ms. Buch, the fact that folks from Oregon are up 
  early for these sessions. You had your corn flakes at the crack 
  of dawn. So, thank you for all the good work that you do for 
  Lane County, and let's have your testimony, please.............
                STATEMENT OF HEATHER BUCH, SUBCOMMITTEE CHAIR, 
                  TRANSPORTATION STEERING COMMITTEE, NATIONAL 
                  ASSOCIATION OF COUNTIES, WASHINGTON, DC
Ms. Buch. Thank you, Chair Wyden, Ranking Member Crapo, and 
  distinguished members of the committee. Thank you for having me 
  here today.....................................................
My name is Heather Buch. I serve as a County Commissioner for 
  Lane County, OR. I am also representing the National 
  Association of Counties........................................
Owning and operating 44 percent of public roads and 38 percent of 
  the national bridge inventory--more than any other level of 
  government--America's 3,069 counties, parishes, and boroughs 
  are the leaders in the Nation's transportation infrastructure 
  network. We also directly support 78 percent of public transit 
  systems, and 34 percent of public airports that keep Americans 
  connected in every corner of our country.......................
I am here today to underscore the significance of the county role 
  in transportation and infrastructure, and to discuss how we can 
  best work together to meet the challenges of today and the 
  demands of the future..........................................
I would like to begin with a point on which I believe we all 
  agree: our Nation's infrastructure is in need of investment, 
  and now is the time to act. Counties appreciate the continued 
  bipartisanship around infrastructure and urge Congress to seize 
  this exceptional moment to deliver historic investments that 
  will enhance the quality of life for Americans across the 
  country and help improve our global competitiveness from the 
  bottom up......................................................
A snapshot of infrastructure backlogs that include $17.3 billion 
  just for local bridges located off our Nation's highways and 
  $19.4 billion of deferred maintenance on U.S. Federal lands, 
  reveals the great and immediate need for investment. The chair 
  and ranking member know well the considerable role Federal 
  forest revenues play in supporting roads and bridges across the 
  western United States..........................................
We urge final passage of Senate bill 435 reauthorizing the Secure 
  Rural Schools program for 2 years. While counties play a 
  significant role in the national network, we understand that 
  improving our Nation's infrastructure relies on a strong 
  Federal/State/local partnership................................
Annually, counties invest $134 billion in the maintenance and 
  operation of public works and construction infrastructure. This 
  includes essential community institutions such as schools, 
  hospitals, jails, courthouses, parks, broadband deployment, and 
  water and sewage systems.......................................
In fact, local governments are the main funders of 
  infrastructure. In 2015, we spent $1.6 trillion directly on 
  infrastructure, more than both our State and Federal partners. 
  We are doing our part at the local level. However, 45 States, 
  including Oregon, limit the ability of counties to raise local 
  revenues in various ways, making the intergovernmental 
  partnership vital to meeting our public-sector 
  responsibilities...............................................
Given our unique position to support America's infrastructure, 
  counties call on our Federal partners to implement additional 
  financing tools and dedicated funding streams that will allow 
  us to continue to provide excellent public service.............
Municipal bonds and other Federal financing tools are key 
  resources for county infrastructure projects. We appreciate the 
  work of the membership in this committee to reintroduce the 
  American Infrastructure Bond Act. To build on that progress, 
  American counties offer the following recommendations..........
Continue to protect the tax-exempt status of municipal bonds. 
  These bonds remain the primary method used by States and local 
  governments to fund public infrastructure projects. Any changes 
  to their tax-exempt status would drive up costs for both 
  counties and taxpayers.........................................
Restore the tax exemption for advance refunding bonds. This would 
  lower borrowing costs, optimize our stewardship of taxpayer 
  resources, and drastically improve the ability of State and 
  local governments to invest in critical projects...............
Fully restore the State and local tax deduction. The SALT 
  deduction is an essential aspect of preserving our Nation's 
  system of federalism. Repealing the cap ensures that when 
  counties make these local decisions to deliver our essential 
  public services, our citizens are not double-taxed.............
Provide a permanent fix for the highway trust fund. To plan and 
  execute small and large-scale transportation projects that are 
  critical to moving countless amounts of people and goods across 
  our Nation, a permanent fix that will return long-term solvency 
  to the fund is needed..........................................
Direct Federal funds to locally owned infrastructure. Counties 
  firmly believe that increased or expanded financial 
  opportunities can't come in lieu of dedicated Federal funding 
  streams for locally owned and operated transportation..........
As the form of government closest to the people, counties know 
  how to put Federal dollars to work where they are needed the 
  most. Counties appreciate your attention and stand ready to 
  work with you..................................................
Thank you, and I am happy to answer any of your questions........
[The prepared statement of Ms. Buch appears in the appendix.]....
The Chairman. Thank you, Ms. Buch, and again for participating so 
  early. Just for the record, our committee created the Secure 
  Rural Schools program, and Senator Crapo and I both are very 
  supportive. So, we will be working with all of you in the 
  counties in a bipartisan way...................................
Our final witness will be Ms. Shirley Bloomfield, chief executive 
  officer of the Rural Broadband Association.....................
                STATEMENT OF SHIRLEY BLOOMFIELD, CHIEF EXECUTIVE 
                  OFFICER, NTCA--THE RURAL BROADBAND ASSOCIATION, 
                  ARLINGTON, VA
Ms. Bloomfield. Good morning, Chairman Wyden, Ranking Member 
  Crapo, and members of the committee. I thank you for the 
  opportunity to testify before you about funding and financing 
  infrastructure, particularly how it relates to broadband.......
I am Shirley Bloomfield, the CEO of NTCA, the Rural Broadband 
  Association. We represent about 850 community-based providers 
  who are providing high-speed broadband and other advanced 
  services across the most sparsely populated parts of our 
  country........................................................
The rural broadband industry and our Nation as a whole have a 
  great story of success to date in delivering these services, 
  and that certainly has never been more important than it has 
  been over the past 15 months. But we still have so much work to 
  do in both deploying as well as operating networks.............
We still have far too many Americans who are lacking 
  connectivity. And this is where public policy can play a really 
  important role in helping to build and sustain broadband in 
  rural markets that are otherwise not able to justify these 
  kinds of investments...........................................
The high cost of providing service into rural areas is an 
  imposing obstacle, and you have to deploy, and you have to 
  maintain, and you have to make it affordable. So there are 
  other barriers as well that come into play.....................
We have supply chain concerns that are very time-consuming, and 
  expensive permitting issues. So as this committee and as 
  Congress consider plans to bridge the current digital divide, I 
  would like to offer some specific recommendations with respect 
  to broadband infrastructure and how it might be considered.....
First, we should be building networks that are built to last. 
  Given the user demands that have grown exponentially over time, 
  a smart infrastructure plan should aim for the best return on 
  those long-term investments that will meet the future needs of 
  consumers and keep pace with the bandwidth-intensive 
  applications that Americans desire. Putting resources towards 
  infrastructure that must be substantially rebuilt in just a few 
  years frankly is a waste, and it will leave rural Americans 
  behind.........................................................
Second, we have to coordinate the many broadband programs that 
  are out there and direct funding for new networks to under-
  served areas to limit overbuilding of existing Federal network 
  investments, and make sure that any new broadband program 
  actually coordinates with existing broadband programs that we 
  have at the FCC, at USDA, NTIA, and numerous State programs....
Additionally, rather than just creating new programs from 
  scratch, we have some existing programs, such as the High-Cost 
  Universal Service Fund, that have a real proven track record of 
  success in promoting accountability, and they should also be 
  looked at to receive additional support, to be able to build on 
  their success in extending and sustaining broadband............
Third, it cannot be lost that networks must be maintained after 
  they are built. Congress should consider funding for this 
  purpose, which will keep rates affordable for consumers. 
  Distance and density make it very difficult, if not impossible, 
  to justify a business case for infrastructure investment to 
  start. No provider, whether you are a cooperative, a commercial 
  entity, regardless of your size, can deliver high-speed, high-
  capacity broadband to rural America without the ability to 
  justify and then recover the initial ongoing cost of sustaining 
  that infrastructure investment in these high-cost areas. If 
  there is insufficient support in the first place to enable the 
  business case for ongoing operation of affordable broadband in 
  rural areas, initiatives like tax incentives alone simply may 
  do little to move that needle. You do not need tax relief in an 
  area where you are already not making money....................
Fourth, we need really clear standards for providers looking to 
  leverage Federal resources to meet the real-world needs of 
  consumers. And we should avoid using rural America as a test 
  lab to see if technologies work, or whether they do not. Those 
  receiving support should be required to show that they clearly 
  can meet the program standards, and then use those resources to 
  deliver better, more affordable broadband that will satisfy 
  consumer demand over the life of the network in question. 
  Otherwise, consumers are the losers here.......................
Fifth, we must encourage policymakers to look local when it comes 
  to identifying broadband solutions in rural America, and to 
  leverage the expertise and the experience of smaller community-
  based providers, regardless of their corporate form, in 
  overcoming these challenges....................................
I look at our members. NTCA service providers are based in their 
  communities. They have deep, longstanding relationships with 
  their local governments and their anchor institutions. And the 
  best results can often be achieved when operators with 
  significant experience in building networks and delivering 
  communication services work together with their stakeholders in 
  the community to identify and respond to their specific needs..
Finally, barriers to broadband deployment must be addressed to 
  sustain. We have to be looking at things like how do we 
  minimize some of these barriers--environmental reviews, Federal 
  lands, historical obligations--and also looking at supply chain 
  issues. And I cannot stress this enough. But at a time when our 
  Nation's supply chain is stretched so thin, providers are 
  experiencing longer and longer times for deliveries of supplies 
  to actually build these networks. There are so many 
  opportunities for this committee to weigh in and to ensure that 
  we are able to shore up that supply chain......................
In conclusion, my sincere appreciation for the ability to come 
  testify and share some thoughts about how critical broadband is 
  to all Americans, regardless of where you live. And I look 
  forward to your questions......................................
The Chairman. Thank you very much, Ms. Bloomfield................
[The prepared statement of Ms. Bloomfield appears in the 
  appendix.].....................................................
The Chairman. We have many Senators to ask questions, and we are 
  going to try to stick to the 5-minute rule. Let me note that 
  Senator Crapo and I have already announced our support for the 
  renewable effort of Build America Bonds. What I can tell 
  colleagues is, we have five current Senators who were original 
  sponsors of the Build America Bonds effort, and now both 
  Senator Crapo and I would like to see it included in the effort 
  to fund infrastructure.........................................
So what I want to start with is getting into the principles of 
  this user fee issue. Because to me, when you think about 
  infrastructure, Congress has to contemplate the cost of the use 
  and the amount of money on the table...........................
So, Dr. Kile, you have been looking at these issues. If Congress 
  imposed a $100-per-year fee on electric vehicle owners, would 
  it make a meaningful dent in the highway trust fund shortfall, 
  in CBO's opinion?..............................................
Dr. Kile. Senator, currently electric vehicles account for about 
  1 percent or so of the vehicle fleet on the road. They account 
  for about 2 percent of sales...................................
So if a $100 fee, or tax, were to be imposed, that would raise 
  about $200 million, two-tenths of a billion dollars per year in 
  the first years. That is about 1.6 percent of the shortfall in 
  the coming years. That would probably change over time as 
  electric vehicles became more prevalent on the road, but in the 
  near-term, that would only have a small effect on the 
  shortfall......................................................
The Chairman. All right. Now driving a mile in a four-door 
  electric sedan obviously does not do the same harm to the 
  highways as driving a mile in a fully loaded 18-wheeler. And 
  the State highway officials and the Department of 
  Transportation have shown that harm done to our Nation's roads 
  by heavy trucks is essentially much more than that done by 
  passenger vehicles. There have actually been some estimates 
  that a heavy truck does nearly 10,000 times more damage than an 
  electric sedan.................................................
So, Dr. Kile, the Congressional Budget Office and the Joint 
  Committee on Taxation have examined options for additional 
  truck taxes, including a 5-cent-per-mile mileage tax. Can you 
  give us a sense of what the potential revenue would be that 
  would be raised in this kind of approach, according to the work 
  done by the Congressional Budget Office?.......................
Dr. Kile. Of course. We recently did an assessment of the 
  possibility of vehicle-miles-traveled taxes on commercial 
  trucks. In looking at that, we did note, as you have just 
  noted, that heavy trucks cause much more pavement damage than 
  passenger vehicles. Passenger vehicles contribute significantly 
  to congestion in urban areas. But in terms of pavement damage, 
  it is mostly heavy trucks......................................
So we looked at the possibility of a VMT tax and how much revenue 
  that would raise. And we found that each 1 cent of the tax 
  would raise about $2.6 billion. So a 5-cent tax would raise $13 
  billion per year...............................................
In thinking about that, it is important to understand that new 
  institutions need to be put in place to collect that, and those 
  are not there now..............................................
The Chairman. I appreciate the answers, Dr. Kile. For colleagues, 
  the math here is pretty clear from CBO. CBO says that a 
  reasonable truck VMT could raise $8 billion to $12 billion per 
  year. And if you add a $100-per-year fee on electric vehicle 
  owners, CBO says that that would raise roughly $200 million per 
  year...........................................................
So that is the math. And we are obviously going to have a debate 
  about lots of issues, but that is what CBO has told us on the 
  math...........................................................
Now, Ms. Buch, we are so glad you are here to give us a sense of 
  your on-the-ground perspectives. And I think you heard us talk 
  about the ability of local governments to use Build America 
  Bonds. That is something that has been used all across Oregon 
  on bridges, and Lane County had a great interest in that. 
  Oregon issued nearly a billion dollars' worth of Build America 
  Bonds for roads and bridges and schools........................
If paired with robust Federal funding, is that the kind of 
  financing tool that would be helpful to Lane County in 
  accelerating the financing of your infrastructure needs?.......
Ms. Buch. In Lane County, as you mentioned, we were able to 
  utilize the Build Back Better Bonds for significant upgrades to 
  our community college and a large bridge construction project. 
  Today, our county has new infrastructure challenges that could 
  be similarly met with such a Federal tool and a combination of 
  financing......................................................
We have ideas of being able to ensure that we capture the 
  greenhouse gases at our landfill and being able to potentially 
  sell those back to our public transit district. Counties will 
  use every tool in the toolbox that we are able to see, and we 
  support any effort on that behalf..............................
The Chairman. Thank you for your good work and for being up early 
  to educate the Senate on what things are like on the ground. I 
  am over my time................................................
Senator Crapo?...................................................
Senator Crapo. Thank you very much, Mr. Chairman.................
My first question is for you, Ms. Sheehan. I was very interested 
  and impressed with what New Hampshire has done. In your 
  testimony, you highlighted that the New Hampshire Department of 
  Transportation has used Federal loans--I think you were 
  referring to a TIFIA loan that you were giving the example on--
  to help finance infrastructure projects in the State...........
Could you just go over again the reasons you utilized that 
  approach, and what the ultimate leverage was you received, and 
  the benefits you received from doing that?.....................
Ms. Sheehan. Well, thank you, Senator, for the question. We are 
  very proud of the work that we were able to accomplish with the 
  TIFIA loan in New Hampshire. In 2014, as I mentioned in my 
  opening testimony, the New Hampshire legislature approved a 
  State gas tax increase--we actually refer to it as the ``road 
  toll'' in New Hampshire, to infer that it is a user fee........
And the intent was to complete primarily one project, the 
  widening of I-93 from Salem to Manchester, NH. With the TIFIA 
  loan, we were able to stretch the value of that gas tax 
  increase. The way the loan was structured, we pledged the 
  revenue to rural bridge and paving work, in addition to the 
  completion of 93. That is because in the first 10 years we are 
  paying interest only, so we were able to take all that 
  additional revenue and invest it across the State..............
We also qualified for the rural rate, so the loan interest rate 
  was 1.09 percent, and so there was also a significant savings 
  in terms of the financing costs as compared to traditional 
  bonding........................................................
Senator Crapo. Well, thank you. Could you just clarify to me what 
  kind of leverage you got? In other words, what I am trying to 
  get at is, for the amount of money that you were able to put up 
  in terms of the loan, how much in addition to that were you 
  able to leverage it into? You indicated there were a number of 
  existing or additional projects, but what was that in dollars, 
  roughly, or in a ratio of dollars?.............................
Ms. Sheehan. So we were able to reconstruct 1,400 miles of 
  roadway and approximately 23 structurally deficient bridges. So 
  that was a significant cost avoidance for the State, because we 
  were able to invest in the near-term, as opposed to having to 
  continue to Band-Aid that infrastructure.......................
So directly, there was savings of approximately $40 million, in 
  terms of the ability to advance things sooner. And then, as I 
  mentioned, the financing savings provided further value........
Senator Crapo. All right; thank you..............................
And, Dr. Kile, in the testimony and discussion so far, we have 
  heard a lot of discussion about, I think I would call it 
  increasing access to private capital for infrastructure........
We have heard discussion of tax credit bonds, Private Activity 
  Bonds, Build America Bonds, infrastructure banks, and so forth. 
  Each of those could be--and we have other funds. We have TIFIA, 
  we have WIFIA, we have the RRIF and other funds or programs, 
  and they focus on things like roads and bridges and rail and 
  water infrastructure...........................................
Could you tell me and maybe just discuss some of these different 
  approaches to accessing private capital? Are they effectively 
  able to be utilized to leverage spending as has been shown in 
  the case of New Hampshire? And do you have any kind of data on 
  how effective that might be, what kind of revenue we might 
  expect from certain Federal investments into these types of 
  bonding programs?..............................................
Dr. Kile. Sure; I'll be happy to do that. And I will use TIFIA as 
  an example. Over a recent 5-year period, I think there were 19 
  projects that used TIFIA funding. With TIFIA, the Federal 
  Government makes direct loans to an organization that is 
  undertaking a transportation infrastructure project. That 
  entity needs to either get private financing or borrowing 
  through Private Activity Bonds that also complement the Federal 
  money in that..................................................
So I think TIFIA loans accounted for about a quarter of the 
  financing in those 19 projects that I mentioned earlier........
Senator Crapo. Maybe ``return'' is the wrong word, but a 3-to-1 
  leverage in terms of the money that is put in versus the money 
  that is getting applied, or incentivized to be applied to 
  infrastructure?................................................
Dr. Kile. In those examples, about a quarter of the funding would 
  have come from the TIFIA loan program. Some of the funding 
  comes from Private Activity Bonds, which are also tax-favored 
  bonds..........................................................
Senator Crapo. All right. And very quickly, do we have anything 
  like that working for broadband right now?.....................
Dr. Kile. I am not aware of any such programs that are 
  specifically on broadband. Perhaps one of the other colleagues 
  on the panel knows more about that than I do...................
Senator Crapo. I am out of time. But, Ms. Bloomfield, maybe I 
  will give you that question afterward for you to respond in 
  writing. Thank you.............................................
Thank you, Mr. Chairman..........................................
The Chairman. Thank you, Senator Crapo...........................
Senator Stabenow is next.........................................
Senator Stabenow. Well, thank you very much, Mr. Chairman and 
  Ranking Member. First, I want to just briefly comment on 
  proposals that some colleagues are making about Federal fees 
  for EVs to fund the highway trust fund.........................
I sincerely wish we had enough electric vehicles on the road 
  today to make this a big issue. And in fact, EVs are about 2 
  percent of vehicles. So today we hope there will be more down 
  the road, but as Dr. Kile made clear, a fee on EVs right now 
  would be equivalent to what people pay in gas tax; it would 
  fill about 1.6 percent of the highway trust fund revenue 
  shortfall over the next 5 years................................
So I support going down the road that we should explore a range 
  of options to fund the highway trust fund, including something 
  on electric vehicles at some point where it is actually an 
  issue, but it is certainly not a solution for funding in the 
  next 5 years at least..........................................
But in that context, I would agree with Chairman Wyden that our 
  first priority for funding should be to make sure large 
  corporate users of our roads and highways are paying their fair 
  share. And I can assure you that people in Michigan do not 
  think paying zero is fair. And so, that is where I hope we will 
  focus..........................................................
Now I would like to turn to Ms. Buch for a question. Prior to 
  2017, as you have indicated, State and local governments had 
  access to a financing option called advanced refunding for 
  municipal bonds used to fund a whole range of infrastructure 
  projects. And the details of advanced refunding are 
  complicated, as you know, but the bottom line is that it 
  allowed communities to finance an infrastructure project at the 
  lowest cost....................................................
So, Ms. Buch, in your testimony you noted that the Government 
  Finance Officers Association found that in the decade prior to 
  repeal, there were over 12,000 advanced refundings, saving 
  communities over $18 billion. And I know this has been 
  supported by Michigan's State Treasurer as well, urging that 
  this tool be put back in the toolbox...........................
So that is why Senator Wicker and I teamed up, as you know, to 
  introduce the Local Infrastructure Act, which will reinstate 
  advance refunding. We have over 20 bipartisan cosponsors. I 
  really hope this is going to be put in the next infrastructure 
  bill. But I wonder if you could just speak more to the kinds of 
  projects that municipal bonds are used to finance, and explain 
  why you think restoring the advance refunding would be, quote, 
  ``one of the most effective actions to provide State and local 
  governments.''.................................................
Ms. Buch. Senator, thank you so much for the question. We have a 
  variety of bonds. We are a medium-sized county, and we have 
  used them over the years for a variety of needs................
We would be interested in knowing what is available and what we 
  can do on our level for bonding. It is really important for us 
  when we are speaking about utilizing one of these bonding tools 
  that we are able to pay them back within the 20-, 30-, 40-year 
  time in which they would be out and they are at rates that are 
  low enough--and that we know that we would be able to refinance 
  them should rates change. That is really important.............
For example, we tried recently to go out for a bonding with our 
  taxpayers for a county courthouse to the tune of about $250 
  million. The State was going to pay for half of that. But it 
  did not pass, and we need to be able to show our partner in the 
  future, if we go out again, that this has economic development 
  and stimulus associated with it. I think the pairing of those 
  two would make it more enticing to our taxpayers...............
Senator Stabenow. Thank you very much............................
Let me turn now to talk about broadband for a second. I think we 
  all agree now that that is certainly what anyone would call 
  ``infrastructure.'' And as chair of the Senate Agriculture 
  Committee, I have been laser-focused on working with colleagues 
  to really deliver on robust investments to deal with the 
  digital divide. And certainly, that became extremely apparent 
  during COVID...................................................
Ms. Bloomfield, in your testimony you mentioned that Federal 
  funds to address gaps in high-speed Internet access must be 
  done in a manner that is sustainable, which is important given 
  the Federal Government's role, because we have three different 
  agencies involved, as you know, in broadband deployment........
So in the 2018 farm bill, we authorized a number of USDA programs 
  to scale up broadband in rural America, but we also added 
  requirements for coordination with USDA, FCC, NTIA, to improve 
  the targeting..................................................
So what would you recommend as we build out these efforts, 
  building on what we did in the farm bill and other efforts to 
  ensure that that effective partnership really exists?..........
Ms. Bloomfield. So thank you, Senator. And first of all, let me 
  applaud the leadership you all showed on the Ag Committee. The 
  work that you did creating the ReConnect Program has really 
  meant dollars on the ground. People are getting broadband for 
  the first time, thanks to that program.........................
So I would say a couple of things. First, use the same metrics. 
  Use the same maps. Right now, you in Congress recently had 
  legislation, and then funded legislation recently, to actually 
  complete a national mapping program. The FCC is hard at work. 
  Let's make sure we use the same maps so we can stay coordinated 
  on all of that.................................................
RUS and the FCC have a long history of staying coordinated with 
  each other, a longstanding relationship. USDA really funds the 
  capital of these broadband networks in these rural markets. The 
  FCC has really supported the ongoing operations and 
  affordability..................................................
But I think there is some work that could be done to make sure 
  that at the operational level, as we talk about grants, how do 
  we make sure that grants are not going into overlapping 
  jurisdictions? So again, I applaud the initiative. It is 
  critically important, and I think we've got some great work 
  ahead, thanks to your leadership...............................
The Chairman. I would not disagree with a thing Senator Stabenow 
  said, or Ms. Bloomfield said. We are just going to have to move 
  on.............................................................
So let's go next to Senator Grassley.............................
Senator Grassley. Well, we will go on from--thank you, Senator--
  we are going to go on from where Senator Stabenow left off----.
The Chairman. Good...............................................
Senator Grassley [continuing]. Because I am interested in the 
  infrastructure. So before I ask my questions, I would just note 
  that the infrastructure has always been an area where Congress 
  has worked in a bipartisan way. We have always proved that this 
  Senate can move such bills, with the passage of the water 
  infrastructure bill within the last couple of weeks. The 
  Republicans and Democrats are not far apart on the 
  infrastructure-related items...................................
I am encouraged that bipartisan talks continue with the 
  President. As former chairman and ranking member of this 
  committee, I understand that it is hard to find consensus of 
  how to pay for infrastructure. But, Mr. Chairman, we have met 
  that challenge before, and I think we are going to do it again 
  this time......................................................
I appreciate all the witnesses participating today. So my first 
  question is, if we have learned anything over the past year of 
  the pandemic, it is the vital importance of broadband and being 
  able to stay connected for our businesses, health, education, 
  and well-being. The State of Iowa estimates that it will 
  require over $800 million in new investment to make affordable 
  high-speed broadband available to all Iowans. These are the 
  hardest to connect, mainly rural farms and homes...............
In recent testimony before the Commerce Committee, several 
  witnesses, including former FCC Commissioner O'Rielly, stated 
  that to meet the unmet needs of those who are truly unserved, 
  we need to be laser-focused on concentrating on those without 
  service and should meet that goal before expanding the focus to 
  those who already have some service............................
I know that there is concern that if we were to expand this 
  focus, it would divert money and attention from those without 
  service. So obviously my question is to you, Ms. Bloomfield. Do 
  you agree that we need the laser focus on connecting those 
  unserved? And if you want to expand in any way on this issue, I 
  would appreciate it. Could you continue to explain how 
  coordination of Federal programs can be improved, as well as my 
  first question?................................................
Ms. Bloomfield. Absolutely, Senator. So you have the distinction 
  of having the most community-based broadband providers in the 
  country in the State of Iowa. So I could not agree with you 
  more that we have to be laser-focused on those Americans who 
  are still waiting for connectivity. And again, if we have not 
  learned anything over the past year, then shame on us..........
Those folks need connectivity. And when we think about 
  prioritizing, absolutely the prioritization has to be to those 
  who are still waiting for that connectivity. That is where the 
  first traunch of dollars should go.............................
Then there are a number of--you know, networks are living, 
  breathing entities. They need to be upgraded. They need to be 
  maintained. That is when we can then pivot to thinking about 
  how we continue to improve all of the networks that already 
  exist--for example, the ones that are provided by your 100 
  independent carriers out in the State of Iowa..................
That is why mapping is going to be so important, because we do 
  not really know the full story of where those unserved or 
  under-served Americans are. So I think that is one thing.......
The other point that I would make to your comment is, we have a 
  once-in-a-generation opportunity on the investment side on 
  infrastructure to do this right, to aim higher, to do better. 
  So when we talk about connecting those unconnected Americans, 
  we should not be putting in infrastructure that in 2 or 3 years 
  we are going to be back to you talking about how we fund 
  upgrading that infrastructure..................................
We have learned so much about how Americans use broadband over 
  the course of the last year. We need to make sure that we are 
  looking at symmetrical services, 100/100, the ability for folks 
  to upload as fast as they are downloading. We are seeing that 
  in application. We are seeing demand for broadband bandwidth go 
  up by about 25 percent a year. That is only going to explode, 
  and that is going to create innovation, and that is going to 
  help the American economy......................................
So there are a lot of different places that we need to be looking 
  at, but you are absolutely right. Let's get those folks who are 
  not on the networks, let's get them connected, and then let's 
  focus forward..................................................
Senator Grassley. I yield back, Mr. Chairman. Thank you very 
  much...........................................................
The Chairman. Thank you very much, Senator Grassley..............
Next is the chairman of the Environment and Public Works 
  Committee, Senator Carper......................................
Senator Carper. Thanks, Mr. Chairman, so much for your holding 
  this hearing today. I want to thank you and Senator Crapo for 
  doing that. I want to thank each of our witnesses: Dr. Kile, 
  Ms. Sheehan, nice to see you again--you were just before the 
  committee 2 months ago, as I recall--Heather Buch and Shirley 
  Bloomfield.....................................................
A lot of you heard, I am not a huge hockey fan, but I have a lot 
  of respect for Wayne Gretzky, who is maybe the greatest hockey 
  player who ever played. He was asked in his prime, ``Why are 
  you such a good hockey player, Mr. Gretzky?'' And he said, ``I 
  go where the puck will be, not where the puck is.'' That is 
  what he said. ``I go where the puck will be, not where the puck 
  is.''..........................................................
A couple of weeks ago we had a hearing in our Committee on the 
  Environment and Public Works, and we had a hearing on vehicle 
  miles traveled, a notion which really, I think, has its roots 
  in Oregon, as the chairman knows--a road user charge. And we 
  had witnesses from around the country who came and talked about 
  whether or not that is where the puck will be and if that is 
  where we need to be pointed....................................
Senator Stabenow, if she is still on the line, knows what is 
  going on in the auto industry in terms of moving off of gas- 
  and diesel-powered vehicles onto electric and onto hydrogen. It 
  has been a very slow uptick until of late. Twenty years ago, 
  colleagues, I went out and bought a Chrysler Town and Country 
  minivan with my son Christopher. Today it has 550,000 miles on 
  it. He and I went out about 2 months ago, when he was home from 
  California, we went out about 2 months ago and drove cars 
  again. We drove all-electric vehicles..........................
The electric vehicles--the Chevrolet Volt was the car of the year 
  about 10 years ago; it got 38 miles on a charge. We drove all 
  kinds of vehicles just a month or two ago that get over 300 
  miles on a charge. And I ordered one just 2 days ago that gets 
  326 miles on a charge..........................................
But we are going to see just an incredible uptick. People love to 
  drive these vehicles. They are fun. They are fast. And they do 
  not send any pollution into the air. Their upkeep is low. That 
  is where we are going..........................................
And it is not going to happen overnight, but it is going to 
  happen with increased velocity going forward. When I was new in 
  the Senate, I sat right in front of a guy named Ted Kennedy, 
  whom my colleagues remember well. And I remember having lunch 
  with him when I was new in the Senate, and I asked him, I said, 
  ``Why do all these Republicans want you, Ted Kennedy, big 
  liberal Democrat, why do they want you to co-sponsor their big 
  bills?'' And he said, ``I am always willing to compromise on 
  policy, but never willing to compromise on principle.'' That is 
  what he said: always willing to compromise on policy, never 
  willing to compromise on principle.............................
The chairman has already mentioned principles. Some of you have 
  mentioned principles. I will just ask our witnesses--I am going 
  to say a principle that I think that we can agree on, and I 
  just want our witnesses to say really ``yes'' or ``no.''.......
One of the principles would be that we need to make substantial 
  investments in infrastructure, and particularly in 
  transportation infrastructure. Is there anybody among our 
  witness panel who would say ``no''? Speak now or forever hold 
  your peace.....................................................
I don't hear anybody. Okay, another principle would be, things 
  that are worth having are worth paying for. Is there anybody 
  among our witnesses who would disagree with that, say, ``no''?.
Hearing nothing, forever hold your peace. Another one would be, 
  those who use our roads, highways, bridges have some obligation 
  to help pay for them. Is there anyone who would say ``no'' to 
  that?..........................................................
All right, here's another one. Our witness from the counties--
  sometimes we think to be responsible, whether it is 
  transportation or it is water, which we work on a lot, it 
  should all be on the Federal Government. I think maybe a 
  principle should be that this is a shared responsibility. We 
  heard that from our NAC folks just this morning................
Is there anybody who thinks that this should not be a shared 
  responsibility?................................................
Okay. And I would like to say there are no silver bullets when it 
  comes to funding surface transportation. There are a lot of 
  silver BBs, and some are bigger than others. I was interested 
  to find that--George Voinovich and I teamed up during the 
  Bowles-
  Simpson days, more than a decade ago, and we suggested 
  restoring the purchasing power of the gas and diesel tax.......
I will be honest, friends, I think where we are going as a 
  country in the next dozen or so years, I think we are moving to 
  something akin to VMT. It is not going to be the only thing, 
  but it is something that makes a lot of sense..................
What we need to do is create a bridge to the future, a bridge to 
  the future. I am going to ask each of our witnesses to take a 
  minute apiece and say what should that bridge to the future be? 
  Very, very crisply and succinctly, starting with Dr. Kile. 
  Thank you, Dr. Kile; very crisp and succinct. What should a 
  bridge to the future be?.......................................
Dr. Kile. So, Senator, I hate to not give you a direct answer to 
  that question, but my job is to give you options and help you 
  evaluate them..................................................
Senator Carper. Okay; on the record, for the record please. Thank 
  you............................................................
Ms. Sheehan, good to see you again. Again, the bridge. We are 
  looking for a bridge to help build bridges, but the bridge to 
  the future?....................................................
Ms. Sheehan. So in 2019, the AASHTO board of directors took up a 
  resolution concerning the future sustainability of the highway 
  trust fund, as well as what the near-term solutions might be...
We really narrowed in on four options: a motor fuel tax increase 
  or indexing; freight-based user fees; per-barrel oil fee; as 
  well as continuing to advance a mileage-based user fee 
  solution, or a 
  vehicle-miles-traveled fee.....................................
Senator Carper. Thanks so much...................................
Ms. Buch, the bridge to the future? What would that bridge 
  include?.......................................................
Ms. Buch. Returning solvency to the fund by increasing Federal 
  fuel taxes, implementing a vehicle-miles-traveled program, and 
  other alternatives would provide sustainable revenue. And that 
  is imperative for our Nation's highway and transit systems.....
Senator Carper. Thank you, ma'am. Finally, Ms. Bloomfield, what 
  would the bridge look like, the bridge to the future?..........
Ms. Bloomfield. It is going to be a digital bridge. The 21st-
  century superhighway is broadband connectivity. We found that 
  out when we could not go to our offices, we could not go to our 
  schools. The ability to stay connected, do commerce, do 
  education, do tele-medicine, all through digital--so I am going 
  to give you the digital bridge.................................
The Chairman. Thank you, Senator Carper, Chairman Carper.........
Senator Cornyn?..................................................
Senator Cornyn. Well, thank you, Mr. Chairman and Ranking Member 
  Crapo, for having the hearing on the absolutely taboo subject 
  of paying for infrastructure. It is a conversation we have 
  needed to have for a while.....................................
And for myself, let me just say that a repeal of the 2017 Tax 
  Cuts and Jobs Act is a nonstarter, as is the general tax 
  increase on the American people in the gas tax. So we need, in 
  my view, something a little different. And I will have a 
  suggestion, or at least an idea that we can explore............
But, Dr. Kile, the Department of Transportation has not conducted 
  a national cost allocation study in almost 2 decades. So we do 
  not actually have a clear picture of how much wear and tear is 
  being done to our highways, or who is doing most of that 
  damage.........................................................
As someone who is clearly an expert in good budgeting, does it 
  concern you that we are sitting here trying to figure out how 
  much to pay for infrastructure without actually knowing how 
  much it should cost, or who should be chipping in to cover the 
  maintenance of our roads and bridges?..........................
Dr. Kile. It does create challenges, Senator. Obviously, the most 
  recent cost allocation study is about 20 years old. And if that 
  were to be updated, I think that would be quite helpful to 
  everyone.......................................................
Senator Cornyn. Ms. Sheehan, the witnesses today have spoken at 
  length about fixing the highway trust fund, and I am all in for 
  that. While not likely feasible in this context--and I do not 
  want to take that off the table--but can you speak to the 
  potential benefits and challenges of eliminating various 
  revenue generators like the tire tax, the heavy vehicle use 
  tax, and others, and replacing them with a single cost-adjusted 
  user fee like miles traveled?..................................
Ms. Sheehan. As we transition to any new solution, the cost of 
  collection is something that we want to look at closely. And 
  until we know more about the solutions that are being proposed 
  and are able to adequately estimate what those costs are, it is 
  challenging for us as State transportation officials to have an 
  opinion on whether one solution is more advantageous than 
  another. But we at AASHTO stand ready to continue to support 
  this committee and Congress as you look at all the alternatives 
  so we can understand what the cost implications might be of 
  implementing these solutions...................................
Senator Cornyn. Dr. Kile, in 2019 the Joint Tax Committee 
  provided a score for a vehicle-miles-traveled user fee on Class 
  7 and 8 trucks. These are the heaviest commercial trucks, with 
  some exemptions for farm, State, and local government trucks...
They assumed a rate of about 25 cents a mile, and it generated on 
  average about $33 billion a year. The total they projected from 
  2019 to 2024 was $101.3 billion. Just as an idea that the 
  committee ought to consider, do you see that as a viable means, 
  if the policy was accepted, of raising the money that now we 
  need--that is missing in the highway trust fund?...............
Dr. Kile. So a VMT tax does have the potential to raise 
  significant revenue, as in the example that you cited. A 
  challenge would be that the types of mechanisms for collecting 
  and enforcing the tax are not yet in place. And those would 
  need to be developed. And the cost of doing so could be 
  substantial....................................................
Senator Cornyn. Yes, I am sure the administration of that would 
  be a challenge; any sort of new approach. But right now, we 
  have a big hole in the highway trust fund, and we have to come 
  up with some money from somewhere. And I would just propose, 
  respectfully, we call this what it has always been under the 
  highway trust fund, which is a ``user fee'' tied to the gas 
  tax............................................................
But as I indicated earlier, I do not believe there is any 
  political support for an increase in the gas tax across the 
  board. I think I have heard President Biden say that, and I 
  know that that is true on our side of the aisle as well. But a 
  targeted vehicle-miles-
  traveled user fee on heavy trucks used as commercial vehicles, 
  along with perhaps some relief on other fees that the trucking 
  industry pays, to me seems like one idea that--while there is 
  no perfect idea, and there is also nothing free, we need to 
  come up with something that makes sense. And so that is 
  something I appreciate the committee considering, Mr. Chairman. 
  Thank you very much............................................
The Chairman. Thank you, Senator Cornyn, and we will be working 
  in a bipartisan way on these issues. Thank you.................
Senator Brown is next. He is chairman of the Housing and Banking 
  Committee, which has significant transportation 
  responsibilities as well. Senator Brown?.......................
Senator Brown. Thank you. Amazingly enough, Mr. Chairman, I am 
  going to ask about that. So thank you, and thanks for the 
  comments of my colleagues, and I really appreciate your holding 
  this hearing...................................................
We know there is an enormous need for infrastructure investment 
  everywhere in this country. And in my State especially, the 
  neighborhoods and towns and homes have been overlooked by 
  Washington and by Wall Street for too long. I worked with 
  Chairman Wyden, Senator Whitehouse, and my Republican colleague 
  Senator Portman, to introduce the Bridge Investment Act to 
  provide competitive grants for bridge replacement..............
The Brent Spence Bridge over the Ohio River between Cincinnati 
  and northern Kentucky carries 3 percent of our Nation's GDP 
  across it. But that bridge is dangerously outdated. We secured 
  more than $3 million for bridge repair in the highway package 
  developed by now-chairman Carper and Senator Barrasso last 
  Congress in their committee, but that barely scratches the 
  surface, as we know............................................
The Federal share of replacing Brent Spence alone is likely more 
  than $1 billion. Each of our States has thousands of small 
  bridges owned by cities and counties that need repair..........
So my question, Ms. Buch, is this. As the chairman said, I chair 
  the Banking and Housing Committee that has jurisdiction over 
  public transit issues too. Talk to me about how--what can 
  Congress do to make possible housing and transit investments, 
  working together? And as you answer, talk about the benefit to 
  workers and their families as we do that.......................
Ms. Buch. Chair Wyden, Senator Brown, thank you so much for the 
  question. At the county level, there are a variety of things 
  that we have determined that could help the investments in 
  housing, while paired with transportation......................
There are several ideas, one of which is to pursue transit-
  oriented development housing partnerships with agencies and 
  support the FTA joint development projects. This prioritizes 
  the development of under-utilized and surplus properties across 
  transit corridors. In addition, there is a partnership outreach 
  to local financial institutions. This outreach could support 
  widespread development of ADU construction loan projects, 
  appraisal of pilot programs, and construction of loan programs 
  for home conversions and additional housing units..............
Also, there is the pursuit of community land trusts and limited 
  equity cooperative models in rural lands. This strengthens and 
  facilitates rural affordable housing via the community land 
  trust model, and the LEC hybrid model..........................
Senator Brown. Thank you.........................................
I had a conversation with Chairman Wyden over the weekend, a 
  pretty lengthy conversation about the tax gap. We know the 
  Trump-appointed IRS Commissioner estimates that the tax gap is 
  as large as $1 trillion. Senator Thune and Senator Whitehouse 
  in their subcommittee last week discussed that.................
People know that the difference between taxes owed and taxes 
  paid, when it is that large, it is not fair. Constituents in 
  Portland and Eugene, OR, or Columbus or Cleveland, OH, know if 
  you punch a clock in a factory, or wait tables, or help the 
  elderly in nursing homes, you have to pay the taxes you owe....
That is why, as I heard Senator Cornyn talk about revenue, this 
  is a place to start when it comes to financing these priorities 
  we are discussing. It is not about raising taxes. It is about 
  collecting taxes already owed by taxpayers who are not paying 
  what they owe..................................................
So I am hopeful my colleagues on both sides of the aisle can 
  agree that closing this tax gap, ensuring corporations and the 
  wealthy pay what they already owe, that that is a good place to 
  start when it comes to funding these infrastructure priorities.
Mr. Chairman, I yield back the last minute of my time. Thank you.
The Chairman. Thank you, Senator Brown. And thank you very much 
  for the helpful input as well, over the weekend. It was really 
  useful.........................................................
Senator Thune is next............................................
[Pause.].........................................................
The Chairman. John, you are muted................................
Senator Thune. You got me?.......................................
The Chairman. Yes................................................
Senator Thune. Thank you, Mr. Chairman, and thanks to all of our 
  witnesses for being here today as this committee begins working 
  toward a reauthorization of surface transportation programs....
This committee plays a crucial role in funding any 
  reauthorization of these programs, and it must be done in a 
  bipartisan manner that recognizes our Nation's diverse and 
  highly interconnected transportation systems. For example, it 
  is crucial that transportation policy and investment recognize 
  the importance of rural areas where the vast majority of 
  agricultural and industrial commodities originate..............
I have said it before, and I will say it again, that those 
  investments benefit the entire country, not just rural areas, 
  by keeping the national transportation system fluid and 
  interconnected. While they may not be located in major cities 
  or experience high traffic volumes, rural freight corridors are 
  a critical component of the Nation's transportation system, 
  ensuring that goods are transported around the Nation and the 
  world safely and efficiently...................................
Their circumstances also mean that revenue solutions which might 
  work in an urban area, such as tolling, are simply unworkable 
  in rural areas.................................................
Finally, it is crucial that we work together in this committee on 
  long-term funding for the highway trust fund, which is long 
  overdue and sorely needed. And I want to thank the witnesses 
  again for being here to talk about that subject................
Ms. Sheehan, as you all know, the highway trust fund will face a 
  $190-billion shortfall by 2030. Continued transfers from the 
  general fund, which pass this burden on to our grandkids, are 
  not a long-term solution to solvency...........................
Could you describe why the uncertainty associated with the 
  highway trust fund revenues has a negative effect on 
  infrastructure investments at the State level? And then, if you 
  could try and answer this together so we can try to get to a 
  second question through another panelist, you listed several 
  options for providing additional highway trust fund receipts. 
  Under current circumstances, and as the Nation recovers from 
  the pandemic, which do you see as the most viable?.............
Ms. Sheehan. Well, thank you for the question. It is extremely 
  important to have certainty around this funding. Any shortfall 
  on the highway trust fund would jeopardize our ability to 
  deliver on the projects and programs that we are committing to 
  and would be extremely disruptive to the communities that we 
  serve..........................................................
It also causes challenges for the construction community, as they 
  prepare to bid and advance the work that we are advertising. So 
  it is very important that we look at long-term funding 
  solutions for the highway trust fund...........................
As I mentioned, the AASHTO board of directors in 2019 coalesced 
  around four specific revenue mechanisms. The first would be a 
  motor fuel tax increase with indexing. Alternatively, you could 
  look at a freight-based user fee, a per-barrel oil fee, and 
  many of our State DOTs have been active participants in the 
  Surface Transportation System Funding Alternatives Program, 
  soliciting through that grant program funding to advance 
  mileage-based user fee or vehicle-miles-traveled fee concepts..
So we have a lot of experience now in this area and look forward 
  to working with the committee..................................
Senator Thune. Which of those do you think make the most sense, 
  based on where we are today?...................................
Ms. Sheehan. We believe we should look at a national pilot before 
  we would be ready to award a mileage-based user fee, or a VMT 
  model. So we would favor some of the other solutions perhaps as 
  short-term solutions...........................................
Senator Thune. Ms. Bloomfield, the American Rescue Plan tasked 
  the Department of Treasury to help close the digital divide. 
  But without coordination with expert agencies like the FCC and 
  NTIA, we risk wasting these funds and over-building existing 
  broadband networks.............................................
Could you talk about the need for proper coordination to ensure 
  that this funding goes to the areas that are truly unserved?...
Ms. Bloomfield. Absolutely. So first of all, given your 
  leadership role in the broadband space and how much work you 
  have done, I think we have just started to see some of the 
  rules come out from Treasury...................................
I am very heartened by the fact that they are really taking a 
  very forward-looking perspective on it. They are explicitly 
  allowing funding to be used for broadband, looking at making 
  sure we look at a target of 100/100 symmetrical speeds that 
  will bring the most robust broadband out all to parts of the 
  country. And, not unlike your commentary about transportation, 
  the fact is, the more Americans who are connected digitally as 
  well, the more valuable it is for everybody across the country.
So again, I think the threshold of looking at areas that are 
  lacking 25/3 being the basis for being unserved is really 
  critical. How do we get those folks connected? And then build 
  onto that with those who have networks that need to be 
  maintained and make sure that we can make broadband affordable 
  for all. That is another key component of all of this..........
But transportation and broadband have a lot of similarities, I am 
  discovering this morning.......................................
Senator Thune. Thank you, Mr. Chairman. My time has expired......
The Chairman. Thank you, Senator Thune...........................
Next is Senator Bennet...........................................
Senator Bennet. Thank you very much, Mr. Chairman. I want to 
  thank you and Senator Crapo for your comments about Build 
  America Bonds. That gives me some hope going forward...........
And I wanted to start with Ms. Buch. Last month, my colleague 
  Senator Wicker and I reintroduced our bipartisan American 
  Infrastructure Bond Act. The bill would create a new class of 
  direct-pay taxable bonds to help State and local governments 
  finance critical public projects...............................
These bonds would be similar to Build America Bonds created in 
  the Recovery Act, but would improve on those because, among 
  other things, they would be exempt from sequestration automatic 
  budget cuts. American Infrastructure Bonds would be attractive 
  to investors who do not benefit from traditional tax-exempt 
  bonds, such as pension funds and institutional investors.......
So, Ms. Buch, if States and local governments had access to this 
  additional tool of direct-pay bonds, what effect would you 
  expect it to have on public infrastructure growth and 
  development? Could it potentially save them money as compared 
  to relying solely on tax-exempt bonds?.........................
Ms. Buch. Senator Bennet, thank you. Expanding access to the 
  taxable bond market will incentivize and boost investment in 
  local communities. The COVID-19 pandemic has compounded the 
  existing strain on the Nation's infrastructure systems and 
  widened our digital divide.....................................
Thank you to Senators Bennet and Wicker for introducing this 
  bill. It will greatly improve our ability to invest in the 
  critical infrastructure projects and improve the resiliency of 
  our many county-owned infrastructure assets....................
We believe that the direct-pay bonds like Build America Bonds are 
  an excellent complement to municipal bonds for county 
  infrastructure projects, especially now as we continue to 
  battle the dangerous effects of COVID-19 on county budgets. And 
  we welcome the extra assurances that direct-pay bonds provide..
Senator Bennet. Thank you. Thank you for that....................
Ms. Bloomfield, 2 months ago I wrote to the Biden administration, 
  along with Senators King, Portman, and Manchin, urging the 
  administration to bring our Federal broadband standards into 
  the 21st century...............................................
Today, the FCC defines high-speed broadband as a download speed 
  of 25 megabits per second, and an upload speed of 3 megabits 
  per second. The standard at the U.S. Department of Agriculture 
  is even slower. If you are a parent working remotely with kids 
  going to school online, there is nothing high-speed about that.
As a country, we have to stop spending billions of dollars on 
  networks, as you said. They are outdated as soon as they are 
  finished. That hurts rural communities the most, marooning them 
  with broadband speeds that people living in a city or a suburb 
  would never accept, yet the Federal Government would say that 
  the job has been done..........................................
We need to invest in future-proof networks across the country 
  that will meet our needs not only today, but for years to come. 
  And I am sure you have heard people in Washington talk about 
  how high-speed broadband cannot work in rural communities. And 
  even if it did, people do not need those speeds. That has not 
  been our experience in Colorado, and I know your members 
  disprove that view every single day............................
Could you tell us more about how your members are investing in 
  affordable future-proof networks in rural America?.............
Ms. Bloomfield. Absolutely. And thank you, Senator, for your 
  leadership on weighing in about how important it is that we do 
  this right. We have this opportunity. We look at 100/100 as the 
  buildout minimum speed for any Federal funding because, again, 
  anything less is going to be obsolete immediately. And Federal 
  dollars would be wasted........................................
I think we have this chance to do this in a way that also brings 
  comparability, to your point. We are seeing providers 
  constructing networks in urban areas that are capable of 100/
  100. Why shouldn't rural America have the same access to that 
  connectivity?..................................................
We certainly want to make sure that we haven't got, you know, one 
  set of citizens who are second class, particularly when we see 
  that one of the biggest hurdles for rural Americans is the 
  geography handicap.............................................
We have been able to bridge that with broadband. Again, you know, 
  watching folks--the number of telemedicine clinics that got set 
  up, as an example, over the course of the pandemic is amazing. 
  The use of telemedicine--a 40-percent increase.................
We will never put that genie back in the bottle, nor should we. 
  The ability to really unleash innovation and invention, and the 
  fact that we have to have our kids doing homework at the 
  counter while we are on our VPN for work--again, I think we are 
  short-sighted as a country if we make less of an investment....
Senator Bennet. Thank you for that...............................
Mr. Chairman, thank you..........................................
The Chairman. Thank you very much, Senator Bennet. And I am glad 
  that you and Senator Wicker are looking at a variety of 
  different bond options. I remember Senator Wicker was one of 
  our original sponsors back when we proposed Build America 
  Bonds, and the Federal Government had never bonded before. We 
  have come a long way, and we will be working very closely with 
  you and Senator Wicker. And I know Senator Crapo is going to 
  want to work in a bipartisan way on this as well...............
Senator Casey is next............................................
Senator Casey. Mr. Chairman, thanks very much. And I want to 
  thank our witnesses for their testimony today on so many of 
  these critical issues..........................................
I will start with what I think is an assertion that both parties 
  agree with. And that is, if we fail to invest in our 
  infrastructure, we are paying a cost. That failure to invest 
  results in costs to the Nation. And I would say, in my 
  judgment, our failure to invest in infrastructure is not a 
  problem of recent vintage......................................
We have failed to invest in our infrastructure for about a 
  quarter of a century. Once in a while we have made investments 
  in transportation infrastructure, but broad-based investments, 
  we have not made...............................................
In our State of Pennsylvania, the most recent estimate is that 
  about 15 percent of our bridges are in the structurally 
  deficient category. So that means thousands of bridges in our 
  State need substantial repairs. And I think that is one of the 
  reasons we are all wrestling with these issues about what are 
  the needs, and what are the investments we have to make, and 
  how do we pay for them?........................................
I come from a State that has a substantial rural population. We 
  have 67 counties, but 48 of the 67 are considered rural. And in 
  some parts of counties, that means that you have a lot of 
  agriculture, obviously, but ``rural'' can also mean a small 
  town. ``Rural'' can often mean communities that are left behind 
  when it comes to investments in infrastructure.................
One of the ways that I am looking at this infrastructure 
  challenge is through the context of not just bridges in the big 
  cities or in the larger population communities, but in off-
  system bridges. The bridge that takes that ambulance over a 
  bridge to make sure that someone can be provided medical care. 
  The bridge in that small town that takes that school bus full 
  of children from their homes to the school that they go to. And 
  these off-system bridges, as Commissioner Buch has noted, have 
  not been the subject of nearly enough attention. I am not 
  putting words in her mouth; they are my words..................
So, Commissioner, I want to start with you on these off-system 
  bridges. About 47 percent of bridges in my home State are off-
  system bridges. You told us there is about a little more than 
  $17 billion in backlog in maintaining these bridges............
Can you tell us what happens to a community when a bridge is not 
  maintained, these so-called off-system bridges?................
Ms. Buch. Senator Casey, thank you so much. I also live in a 
  district that is largely rural here in Oregon, and those 
  bridges are lifelines to metro centers where supplies are 
  needed. When we are considering emergency preparedness in our 
  community, those bridges are absolutely essential. With natural 
  disasters coming more frequently, more often, and more 
  powerful, it is so critical that we make sure that those roads 
  and bridges are in good repair so that emergency services can 
  come when they are needed......................................
They are also a way in which communities can easily get cut off 
  from the rest of the Nation, both from just physical trouble 
  but also when lines of communication are down--Internet, phone 
  lines, and such. So it is imperative that those bridges are 
  maintained on a very regular basis with ongoing funding, where 
  there are not fits and starts..................................
Senator Casey. Well, I appreciate that. And I think one of the 
  challenges we have is to make sure that we have local inputs 
  when we are making these determinations about infrastructure...
And I would ask you this, Commissioner: how can the Federal 
  Government better include local leaders in deciding how best to 
  spend Federal resources?.......................................
Ms. Buch. Counties firmly believe that at the local level is 
  where we make the best decisions on the best use of those 
  funds. It is so important to be able to receive those direct 
  payments so that we can make those critical decisions on behalf 
  of our residents...............................................
Senator Casey. Commissioner, thank you. I want to thank you and 
  the other witnesses, especially you and Ms. Bloomfield, for 
  focusing on these rural communities............................
Thank you, Mr. Chairman..........................................
The Chairman. Thank you, Senator Casey...........................
Senator Portman?.................................................
Senator Portman. Thank you, Mr. Chairman, for fitting me in. I 
  think this is an incredibly important hearing because, probably 
  the most important aspect of infrastructure that we are not 
  talking enough about is, how do you pay for it?................
I think there is a general consensus on the need for more funding 
  for our roads and bridges, and a broad definition of 
  infrastructure, including broadband, and certainly wider 
  infrastructure and electrical grids and so on. But how do you 
  pay for it is the tough thing..................................
I am going to mention three things here quickly. One is to use 
  some of the COVID money that has already been appropriated but 
  not obligated. Another would be these public-private 
  partnerships, the so-called P3s. Another would be 
  infrastructure banks; you know, building on TIFIA, and so on...
Let me start, if I could, with a question to you, Commissioner 
  Sheehan, with regard to transportation projects under the 
  COVID-19 legislation. $350 billion is supposed to go out under 
  the new American Rescue Plan. I think only about $50 billion or 
  $65 billion of that has gone out so far........................
My State of Ohio wants to use some of this for infrastructure. 
  Are you finding that is true with regard to other States?......
Ms. Sheehan. I thank you for that question. And yes, we are 
  hearing the same thing here in New Hampshire and across the 
  country. During the pandemic, many of our Governors were forced 
  to implement stay-at-home orders, and as a result we saw less 
  travel on our transportation network. That meant there was a 
  significant reduction in revenue at the State level............
Many of our States also support municipal transportation 
  investment. Here in New Hampshire, 12 percent of the revenue 
  that we collect goes to cities and towns. And so we would very 
  much anticipate the American Rescue Plan dollars being used to 
  both advance projects that have been put on hold because of 
  revenue uncertainty, as well as to increase the investment.....
Senator Portman. So under the current law, it can be used for 
  broadband and water infrastructure, but not for those roads and 
  bridges you are talking about. So would that be helpful to be 
  able to use that funding? And is there a way we can get credit 
  for that?......................................................
In other words, as we are asking about how do we pay for new 
  infrastructure, roads, and bridges, wouldn't this be a good 
  example of how we could take some already appropriated funds 
  and attach them to new infrastructure spending by changing the 
  law?...........................................................
Ms. Sheehan. So here in New Hampshire, we are closely examining 
  the guidance that came from the U.S. Treasury in terms of the 
  allowable uses of the American Rescue Plan dollars. But yes, 
  our goal is always to stretch the value of the Federal funds 
  that are provided to State DOTs and look at all the different 
  financing and funding options to make sure that we can maximize 
  the opportunity................................................
Senator Portman. In New Hampshire, would you use the Federal 
  money if you had to do more than a 20-percent match? Normally 
  it is a 20/80 match, most of the grant programs. What if it was 
  a 30/70 match? Would you still be interested in using the money 
  for infrastructure?............................................
Ms. Sheehan. Well, here in New Hampshire it is a little bit 
  different for us. We primarily use toll credits to match our 
  Federal programs. But we certainly would be looking at 
  opportunities to access discretionary grants, perhaps with 
  additional relief dollars. The more flexibility we have, the 
  more opportunity to extend the value and compete, as well, for 
  additional discretionary opportunities.........................
Senator Portman. Yes. Well, I will tell you, in some States like 
  Ohio, there is a strong interest in this, and it sounds like 
  New Hampshire is in the same situation. I hope we can use some 
  of this funding as a way to help close some of the gaps we will 
  have in terms of funding.......................................
The other is the P3s. I guess, Commissioner, you are probably a 
  good person to ask about this too, but also our representative, 
  Commissioner Buch, from the National Association of Counties: 
  what can we do on the Federal level to incentivize the use of 
  P3s?...........................................................
Right now, as I understand it, there is value-for-money analysis, 
  sort of like a cost/benefit analysis, that is used to evaluate 
  whether traditional public financing works better or a P3 
  structure of 
  public-private partnership. And the States are not required to 
  use this analysis for every project in the transportation 
  improvement plan. Should we be encouraging its use to try to 
  drive the use of P3s more for project financing? Would that 
  help pay for infrastructure?...................................
Ms. Sheehan. So certainly, in the State DOTs we have been 
  embracing the concepts of asset and performance management. So 
  we are looking at the cost/benefit analysis around different 
  investment strategies. And certainly, the P3s are a powerful 
  tool, and those opportunities to partner with the private 
  sector to increase the investment in transportation are 
  extremely attractive...........................................
Senator Portman. How about the National Association of Counties? 
  Quick answer to that. Is that interesting to you, to try to 
  encourage P3s more?............................................
Ms. Buch. It would definitely interest counties to know that 
  there are these options available. And the more variety, the 
  more tools in our toolbox, the more that we can find programs 
  that will fit and can help implement our infrastructure and 
  transportation needs----.......................................
Senator Portman. Okay. Thank you very much.......................
Dr. Kile, you detailed some Federal financing options available 
  to States and localities, like Federal infrastructure banks. 
  Can you talk for a second about the differences between 
  expanding TIFIA, which we used in Ohio and elsewhere, as 
  opposed to creating a new Federal infrastructure bank?.........
Dr. Kile. Sure. So, expanding TIFIA would allow more State and 
  local governments to borrow money to finance projects that 
  would be partly financed by private money. And State 
  infrastructure banks tend to be capitalized by either their own 
  money, or grants from the Federal Government. Those then 
  operate like a bank for infrastructure projects................
Senator Portman. So could the infrastructure banks pick up some 
  of the gap that is left right now with regard to TIFIA funding? 
  In other words, is it helpful over and above TIFIA funding?....
Dr. Kile. I think we would have to look at the specifics of a 
  particular proposal to provide more information on that........
Senator Portman. On TIFIA, what would the economic incentives of 
  creating a national infrastructure bank do with regard to other 
  financing options, like tax-exempt bonds, which are used 
  regularly?.....................................................
Dr. Kile. So I think different entities would look at the options 
  available to them, recognizing that any loan needs to be repaid 
  with future tax revenue or user charges........................
The Chairman. Senator Portman, we are going to have to move on...
Senator Portman. Thank you, Mr. Chairman. I appreciate it. Thanks 
  for the information............................................
The Chairman. I look forward to working with you.................
Senator Cassidy?.................................................
Senator Cassidy. Thank you, Mr. Chairman.........................
I am going to pick up a little with where Senator Portman was. 
  Let me first go to Ms. Sheehan. I am told that PPPs typically 
  only work if you have an adequate volume of traffic. So for 
  example, Virginia and Maryland just had a PPP coming out in 
  which they are going to expand the Beltway, not using a dime of 
  Federal taxpayer dollars, because the volume is so great on 
  those roadways. But in the rural areas, or the not-so-rural 
  areas--in Louisiana, there are only one or two places I am told 
  that such a PPP driven by tolls could adequately self-fund.....
Is that kind of your impression as regards the limitations of a 
  PPP?...........................................................
Ms. Sheehan. While it is unlikely that a rural or a smaller-scale 
  project would generate adequate revenue to directly pay the 
  debt service associated with public-private partnership 
  financing, it is not always a deterrent in terms of pursuing 
  these options..................................................
The State DOTs are looking at their entire program, not just the 
  individual projects. There is still some opportunity. As an 
  example, the Pennsylvania DOT did embark on a P3 initiative to 
  address numerous structurally deficient bridges across the 
  State..........................................................
But you are correct. In the majority of cases, you need to have 
  that sustainable source of revenue to pay the debt service on 
  the financing. And so it is used much more heavily for toll 
  road investment, and for investment----........................
Senator Cassidy. Let me stop you. I do not mean to be rude, I 
  just have limited time.........................................
Dr. Kile, one thing that I have observed that has happened in 
  Australia is that the Federal Government would put up a pot of 
  money where a local or provincial government--I forget what 
  they have--could get an underwriting of an attempted PPP, with 
  the proviso that any sale of an asset, or lease of an asset, 
  that money would go back in to the infrastructure, setting up a 
  virtuous cycle.................................................
Are you familiar with what Australia did?........................
Dr. Kile. I have heard of it, but we have not studied it 
  carefully......................................................
Senator Cassidy. Got you. So in principle, knowing that this 
  would be kind of an intuition, and I do not hold it for you 
  otherwise, that if what we have heard from New Hampshire is 
  that there is a limit as to the applicability of PPPs on a more 
  rural setting, or a less urban setting I should say, if there 
  was a kind of underwriting by the Federal Government, that 
  would be a way to address that which we just heard would be a 
  limitation. A fair statement?..................................
Dr. Kile. So I think, yes; I think anything that draws on private 
  money is going to be drawing on investors who are expecting a 
  return of some sort. And that return ultimately would either 
  come from some sort of user fee or tolls or a future----.......
Senator Cassidy. I accept that. But if 30 percent of your overall 
  cost of the project is financed by something from the Federal 
  Government, the user fees only have to pick up the remaining 70 
  percent, which means that either a lower user fee or less 
  volume would still be adequate to give the return that the 
  investors expect to have. Does that make sense?................
Dr. Kile. Yes, that sounds right.................................
Senator Cassidy. Now let me then ask, what both apparently 
  Australia and China have observed is that, once you set up a 
  virtuous cycle in which the proceeds from a lease or sale are 
  obligated to go back into infrastructure, that in turn sets up 
  more infrastructure development, which in turn sets up more tax 
  revenue and more construction activity--again, a virtuous cycle 
  which builds upon itself.......................................
Is it intuitive to you that that would be the case?..............
Dr. Kile. So I guess I would come back to, any sort of recycling 
  of revenue is absolutely coming from either a future government 
  or users. I do take it that increased investment in 
  infrastructure would have generally a positive effect on the 
  economy........................................................
Senator Cassidy. So it would be more than zero sum. It would 
  actually be something which would again be like a souffle 
  rising, if you will. The more economic activity related to 
  infrastructure, if there is pent-up demand, would increase 
  economic activity. Does that make sense?.......................
Dr. Kile. Yes. And so I do think that we have--it has been long 
  said that increased investment in infrastructure would tend to 
  increase the capital stock, and that would----.................
Senator Cassidy. So what can we do to encourage--I guess my final 
  question--what can we do to encourage States and localities to 
  do so-called ``asset recycling''? And maybe I will ask you, 
  ma'am, Ms. Buch. What can we do to encourage States and 
  localities toward asset recycling if we can see that it can 
  establish a virtuous cycle in which it increases economic 
  activity because of reinvestment of leasing and sales proceeds?
Ms. Buch. Chair Wyden, Senator Cassidy, I have to say that I am 
  not fully familiar with the concept that you are working on, 
  because at the county level we do not necessarily work with 
  that program. But I am happy to work with the National 
  Association of Counties and get back to you....................
Senator Cassidy. Okay............................................
Senator Wyden, I am out of time, and I yield back. Thank you.....
The Chairman. Thank you, Senator Cassidy.........................
Senator Warner is next...........................................
Senator Warner. Thank you, Mr. Chairman. And I want to build on 
  my friend Bill Cassidy's souffles and the fact that, in 
  Virginia, we have been on the cutting edge, or bleeding edge, 
  of TIFIA, of P3s, of a whole series of public-private 
  partnerships. And you know, the record is generally good. We 
  have made some mistakes along the way, but we actually have, I 
  think, a very good record. It is one of the reasons why, 
  literally for close to 10 years now, starting with Kay Bailey 
  Hutchison and with Lindsey Graham, I have been working on 
  creating a national infrastructure financing authority. It is 
  called The Repair Act. My lead is Senator Blunt on the 
  Republican side. Senator Cornyn has been a long-time supporter.
And what this would set up--because we are the only major 
  industrial nation in the world that does not have this kind of 
  national infrastructure financing program. We have one-off 
  programs like TIFIA, or WIFIA, but we do not have a 
  comprehensive approach.........................................
The Repair Act, which would only go towards investment-grade 
  projects and initial appropriations of $10 billion, would 
  generate $300 billion in projects. Obviously, as has been 
  mentioned, this is--these dollars need to be repaid. But when 
  we are looking at record-low interest rates and the ability of 
  the full faith and credit of the United States to get 40- or 
  50-year money, I think we are making a huge mistake not taking 
  advantage of it. And I hope this will be a component part of 
  the President's plan. I know my Republican friends have raised 
  this with the President, and I hope it starts to get some 
  traction.......................................................
One of the things that I think is important--and I am going to go 
  to Ms. Sheehan and Commissioner Buch in a moment--is not only 
  the ability to do these projects, but the ability to bring in 
  to a central place at the Federal level the structuring 
  expertise that, candidly, TIFIA alone or WIFIA alone or some of 
  these side programs, do not have...............................
And I do think, if we can bring that expertise that can go toe-
  to-toe with Wall Street, that can go toe-to-toe with the 
  private-
  sector financiers, the chances of getting the public sector a 
  better deal go way up. I think too many times smaller 
  jurisdictions have turned down this proposal because they just 
  thought it was too complicated. But if we had that centralized 
  expertise, I think this would become available to many more 
  jurisdictions. And as a matter of fact, our Repair Act has a 
  rural set-aside................................................
So, Ms. Sheehan, and then Commissioner Buch, could you talk 
  about, particularly for smaller jurisdictions, if we had this 
  centralized expertise along with this long-term capital out 
  there at a market or below-market interest rate, how this could 
  be better used for smaller jurisdictions that right now are 
  bypassing some of these programs? Ms. Sheehan, we will start 
  with you.......................................................
Ms. Sheehan. So, Senator Warner, I really appreciate all of the 
  various financing mechanisms that are available to State DOTs, 
  and to the municipality that we work with. But these programs 
  are complex, and it can be challenging to understand which 
  financing mechanism would be the most advantageous for your 
  particular project.............................................
So this is an intriguing idea, to have available to both States 
  and localities a resource where they could ensure that they are 
  receiving appropriate guidance on how to most successfully 
  finance their projects and reduce the cost of borrowing and, 
  most importantly, increase the value of the investment that is 
  being made.....................................................
So I think it would be particularly beneficial to municipalities 
  that struggle even more than we do at the State level in terms 
  of getting access to resources, to understand the opportunities 
  available to them..............................................
Senator Warner. Commissioner Buch?...............................
Ms. Buch. Senator Warner, I find this concept extremely 
  appealing. From a county level, our public works department 
  that carries out many of these transportation projects is on a 
  fee-for-service model. And if permits are coming in, we are 
  able to pay for that staffing. If they are not, that staffing 
  is not there...................................................
So the technical expertise portion would be extremely helpful, 
  because there is no extra money in our general fund to add 
  staff for these larger projects, unless it is built into the 
  project design and pro forma...................................
Senator Warner. Well, I appreciate both of you. I do think we 
  sometimes look at these from a pro forma basis and we do not 
  factor in the expertise that we need to have to assist States 
  and localities. This is complicated stuff. Wall Street brings 
  their first team. We need to have an equal quality team........
And, Mr. Chairman, I think this is a tool that ought to be used. 
  It can be used for broadband. It could be used for financing 
  electric charging stations for electric vehicles. And my hope 
  is that--I know the President expressed some interest that this 
  will be part of a package going forward........................
Thank you, Mr. Chairman..........................................
The Chairman. I look forward to working with you.................
Senator Lankford is next.........................................
Senator Lankford. Mr. Chairman, thank you very much..............
Dr. Kile, let me ask you a couple of quick questions on some of 
  your testimony. You had mentioned that with general transfers 
  into infrastructure spending, or from things that have a pay-
  for from general transfer, that that has the potential to 
  actually slow our economy, when infrastructure construction 
  typically increases our economy. Adding additional debt, adding 
  just the transfers without pay-for has the potential to slow 
  that. Can you go into greater detail?..........................
Dr. Kile. Any investment in infrastructure is likely to build the 
  capital stock. And if those are well-selected projects, they 
  would tend to grow the economy as well.........................
As the government takes on more debt or general obligations, that 
  is debt that needs to be serviced in the future. So far, 
  interest rates have been low, and the question is whether and 
  how long that will be the case.................................
Senator Lankford. Because that could have the potential then of, 
  once interest rates continue to climb and the debt continues to 
  climb--so you seem to be affirming having something that is 
  paid for is very important rather than just a general transfer 
  in something that is not a pay-for, or having a pay-for that is 
  not legitimate.................................................
Dr. Kile. Well, so the general transfers obviously are partly 
  funded by debt, and increases in debt need to be serviced. So, 
  yes............................................................
Senator Lankford. Dr. Kile, there have been some questions about 
  electric vehicles. Currently electric vehicles get a tax credit 
  for the purchase of those vehicles, and then they also drive on 
  the roads for free. I know these are lighter-weight vehicles 
  typically, and so they are like other passenger cars as far as 
  the damage they do to the roads. But passenger cars do pay a 
  fee to be able to be on the road...............................
The electric vehicles--I think you quoted about $200 million in 
  income, which is no small amount, if they were just to be able 
  to pay their fair share. Now electric vehicles are 
  predominantly owned by the top 1 percent wealthiest Americans, 
  because they are incredibly expensive vehicles. And one of the 
  perks for being one of those wealthy Americans is also you get 
  to drive on the road and not pay a user fee if you buy an 
  electric vehicle...............................................
Do you anticipate over the next several years that user fee would 
  grow with the use of electric vehicles? Or do you anticipate 
  that $200 million a year that would come in if electric 
  vehicles paid the same as gas vehicles to be able to be on the 
  road, do you think there is an increasing amount of electric 
  vehicles coming, and so that amount of $200 million would 
  increase?......................................................
Dr. Kile. I think over time it probably would increase. Right 
  now, electric vehicles account for about 1 percent of the 
  vehicle fleet, and about 2 percent of sales. And as they grow 
  as a share of the vehicle fleet, any tax or fee applied to them 
  would tend to grow.............................................
Senator Lankford. What does CBO anticipate as the size of the 
  fleet growing over the next 10 years for electric vehicles?....
Dr. Kile. We would have to get back to you with specifics on 
  that. At the end of 10 years, it still would not--at current 
  growth rates, it would not be a huge share of the vehicle 
  fleet..........................................................
Senator Lankford. Less than 5 percent, you would anticipate?.....
Dr. Kile. That, I do not know....................................
Senator Lankford. Okay. Well, thank you..........................
Ms. Sheehan, let me ask you about other cost factors. Are there 
  regulatory issues that also increase the cost of construction--
  as you are tracking that as well--that we should also address 
  while we are dealing with the different ways of paying for 
  things? And are there also ways to decrease the costs that 
  would have an effect on you?...................................
Ms. Sheehan. For many years, Senator, AASHTO has been advocating 
  for further streamlining of the project development process. It 
  is challenging to navigate all of the Federal regulations and 
  deliver a project in a timely fashion. And so, we would welcome 
  any opportunities to continue looking at ways to shorten the 
  design phase of projects so that we can get them into 
  construction and make those improvements that communities and 
  stakeholder are eagerly awaiting...............................
Senator Lankford. The categorical exclusion issue of allowing 
  States more flexibility with those dollars, was that something 
  helpful to you in the past, or something that would be helpful 
  in the future?.................................................
Ms. Sheehan. It is very helpful to have some flexibility and to 
  allow State DOTs, where it is appropriate, to take on more 
  direct responsibility so that we have that ownership over the 
  environmental process. It does not mean that we are going to 
  circumvent the law in any way, but that we can help expedite 
  things by reviewing documents internally versus having to 
  submit them to Federal agencies for their consideration........
Senator Lankford. Thank you......................................
Ms. Bloomfield, let me ask a quick question about broadband. We 
  have some areas that are very remote so that it is 
  exceptionally expensive to be able to reach some of those 
  areas. Would you encourage the prioritization of some of the 
  highest-cost areas so that they would get satellite connection 
  in those areas, and that we would give fiber a new priority for 
  where we have more folks in rural areas?.......................
For instance, we may have a rural community with 50 people in it, 
  and that we could get fiber to, but then there is the last 3 or 
  4 people 10 miles out of town that may take up to $10 million 
  to get fiber to them. Would you encourage a blending of those 
  to get coverage?...............................................
Ms. Bloomfield. I will be very frank with you. I do think that 
  there are certain--every tool in the toolbox has to be put on 
  the table when we talk about connecting all Americans..........
I do think it is really important to think about making the 
  wisest use of Federal dollars. I would also say that people 
  jump to the fact of fiber and its cost factor, but using fiber 
  is actually cheaper in the long run over many technologies, 
  including those that are going to fuel 5G......................
I also think with satellite, we have to really be clear about the 
  capacity a satellite will be able offer, and the up-front cost. 
  And even with line-of-sight, you have some geographic issues...
So again, I think that every area has to be viewed, but I do 
  think we should be looking at least to see where we can put 
  that future-proof technology...................................
Senator Lankford. Thank you......................................
The Chairman. Thank you, Senator Lankford........................
Next will be Senator Daines......................................
Senator Daines. Thank you, Mr. Chairman. Thanks to our witnesses.
I would like to start off first by saying we should not be 
  looking to reverse the Tax Cuts and Jobs Act as a way to pay 
  for the infrastructure package. I also do not believe we should 
  be raising the gas tax, because that is disproportionately 
  harmful to rural States like Montana...........................
Personally, I think extending the cap on the State and local tax 
  deduction, which expires at the end of 2025, is something that 
  we should look at, because that raises hundreds of billions of 
  dollars. It should be a great pay-for. I hope it is seriously 
  considered as discussions move forward.........................
With that, I would like to turn briefly to the topic of broadband 
  access. Over the last year, we appropriated billions and 
  billions of dollars for broadband. In rural States like 
  Montana, increasing connectivity is critical. But at this 
  point, it is not necessarily just a money issue; it is an 
  access issue...................................................
All the money in the world means nothing if it takes 3 years to 
  get a permit or a license to cross Federal land. In States like 
  Montana, Arizona, and others, it is nearly impossible to lay 
  down fiber without having to call a Federal agency for access..
And that is why Senator Kelly and I have introduced the 
  bipartisan Accelerating Rural Broadband Deployment Act that 
  will help speed up the process for gaining access to Federal 
  right of ways to deploy broadband..............................
A question for Ms. Bloomfield. Your members know better than 
  anyone else how difficult it can be to build out in rural 
  States like Montana. Would you explain why my bipartisan bill 
  needs to be an important component of any broadband 
  infrastructure package?........................................
Ms. Bloomfield. Absolutely. So you know better than most people, 
  Senator, that high costs are enough of a barrier in deploying 
  broadband in some high-cost States like Montana. But I will 
  share with you--you know, the initiative that you and Senator 
  Kelly began, by introducing your Accelerating Rural Broadband 
  Deployment Act, is really critical. Because what we have found 
  is that, even these who are getting--whether they are using 
  universal service funds, whether they are using the USDA 
  ReConnect funds--we are finding that they are getting tied up 
  in that bureaucratic paperwork, you know, coordinating 
  different programs, not having shot clocks.....................
And it is amazing how things like railroad crossings or crossing 
  Federal lands really can tie up deployment. And that is 
  becoming even more critical as we are finding that supply chain 
  issues are coming to the forefront. Because you may have a 
  carrier out there ready to build. Suddenly their ReConnect 
  money is held up by 6 months, 9 months, going through some of 
  these reviews..................................................
They are not sure what is happening. And meanwhile, they have 
  lost the window to either build, if you are in a State like 
  Montana where your build time is a lot shorter than it is in 
  southern States, or you have lost the capacity to get access to 
  some CPE equipment, or to fiber................................
So what you have done with your legislation is really important. 
  We strongly support it. And I think that it is going to really 
  increase transparency in the regulatory process................
Senator Daines. Thank you, Ms. Bloomfield........................
I want to pivot and talk a bit about speed. There is a lot of 
  talk about speed. Some think 10/1 is too slow, or 25/3, the 
  upgrade. I will say those--if you are a Montana rancher with 0/
  0, there is no connectivity at all. They have been left behind 
  because Federal funding keeps going to upgrade under-served 
  communities instead of connecting those that are completely 
  unserved.......................................................
Ms. Bloomfield, do you agree that Federal dollars should 
  prioritize connecting the unserved rancher or community before 
  upgrading a home so they can stream three Netflix movies at the 
  same time, instead of just two?................................
Ms. Bloomfield. So I would like to think they are doing more 
  productive things than streaming. Maybe somebody is working on 
  a VPN. But I will say, absolutely. We have some work to do to 
  connect all Americans. And I think for new construction, using 
  Federal support, we absolutely should be using the mapping that 
  the FCC is coming down with now, consistently across all 
  States, to find those unconnected and make those the top 
  priority.......................................................
And then we can look to make sure that we continue to upgrade and 
  sustain the networks going forward.............................
Senator Daines. Ms. Bloomfield, thank you........................
And, Mr. Chairman, thank you as well.............................
The Chairman. Thank you, Senator Daines..........................
Senator Hassan is next...........................................
Senator Hassan. Well, thank you, Mr. Chair and Ranking Member 
  Crapo, again for having this hearing. And good afternoon, 
  Commissioner Sheehan. It is really nice to see you.............
I do want to ask you a question. You talk about the importance of 
  a long-term reauthorization of Federal surface transportation 
  programs for infrastructure projects in New Hampshire. Short-
  term extensions could disrupt these projects and impact our 
  workforce, our economy, and our road safety....................
So can you give us examples, Commissioner, of projects in New 
  Hampshire that would be disrupted by a short-term extension of 
  surface transportation programs, and how a short extension 
  would impact New Hampshire's economy?..........................
Ms. Sheehan. Well, thank you, Senator. It is great to see you as 
  well this morning..............................................
Any interruption in the Federal surface transportation program 
  would have devastating consequences, especially in a cold-
  weather State like New Hampshire with a relatively short 
  construction season. The inability to advertise projects in the 
  fall and winter can mean that we would lose the majority of the 
  entire construction season. So even a short-term extension 
  could have longer-term impacts.................................
We have projects of all types and sizes that we would plan to 
  advance, from important resiliency work like scour mitigation 
  on some of our critical bridges, to investments in intersection 
  safety improvements and guard rail upgrades. And then there are 
  numerous projects that are tremendously important to 
  communities. We have a lot of transportation alternative 
  funding that is anticipated to be utilized with projects being 
  advertised in the first quarter of the next Federal fiscal 
  year...........................................................
So we really want to be able to deliver on those commitments, 
  which is why a timely reauthorization is so important..........
Senator Hassan. Well, thanks so much. And again, thank you for 
  your leadership and for the work you do, and I look forward to 
  seeing you back home in person soon............................
I want to move to a question for Ms. Bloomfield. Ms. Bloomfield, 
  broadband is a necessity for families and small businesses in 
  the 21st century, and you have surely been making that point 
  this morning...................................................
Today I reintroduced the Broadband Financing Flexibility Act, a 
  bipartisan bill with Senator Capito, that would expand tax-
  advantaged financing tools for rural broadband projects. Our 
  bill would make it easier for State and local governments to 
  work with private partners and finance high-speed rural 
  broadband projects through tax-exempt bonds....................
How would these kinds of financing tools encourage private-
  sector deployment of high-speed broadband to rural areas?......
Ms. Bloomfield. I congratulate you on your initiative. I think it 
  is really--I think it is an exciting initiative. I think that 
  we have not seen a lot of our community-based providers 
  utilizing bonds, but I think that if there is the ability for 
  private providers, again community-based providers, to be able 
  to access some of these bond funds, I think that could be, 
  again, another piece of figuring out ways to actually make what 
  is a tough business model a go, particularly because we are 
  seeing in some areas a lot of partnerships where local 
  municipalities and governments are reaching out to our 
  community-based providers to say, ``We have a broadband void. 
  How can we work together to actually build a network, letting 
  the municipality potentially handle some of the financing and 
  work with the bonds, and letting the broadband provider 
  actually provide the broadband?''..............................
So I think that your initiative to focus on communities that need 
  broadband access is really critical. The fact that you are 
  looking to use funding for future-proof networks is really 
  another positive. And I think the bonds themselves will help up 
  front, with up-front deployment................................
I think the next question then becomes, how do you sustain it 
  after you've built it? But we can cross that bridge after we 
  get some of these networks built. So again, we commend you for 
  your leadership................................................
Senator Hassan. Well, thank you for that. I have one more 
  question for you which focuses on, again, rural broadband. The 
  year-end relief package contained my bipartisan bill with 
  Senator Grassley to extend the deadline for State and local 
  governments to use relief funds for broadband and other 
  infrastructure projects........................................
Through the American Rescue Plan, States and localities will soon 
  have access to additional assistance that can be used for rural 
  broadband projects.............................................
Ms. Bloomfield, how has the State and local relief fund to date 
  helped expand rural broadband connectivity? And what lessons 
  from the past year can we apply to supporting rural broadband 
  connectivity going forward?....................................
Ms. Bloomfield. Well, first of all, I have to thank you for 
  extending, because when the CARES Act went through, everybody 
  was very excited to see this additional funding coming out that 
  they could use on the State level, and so many States did agree 
  to allow the CARES Act funding to be used for broadband........
But suddenly that clock was ticking. And you know, if you were 
  not in line for fiber, you were not in line for some of the 
  equipment, that deadline just became a barrier. So extending it 
  became very helpful............................................
What I think some of those initiatives have done has really 
  prompted States that did not have State broadband programs to 
  now create their own programs. So that partnership, I think, is 
  really going to be important, having the Federal programs that 
  exist partnering with the State programs that probably, in a 
  lot of ways, know best where those gaps are within the State. 
  That is the way we are really going to bridge this digital 
  divide.........................................................
Senator Hassan. Thank you very much. I appreciate it.............
Thank you, Mr. Chair.............................................
The Chairman. Thank you. And thank you for your good work on 
  broadband, Senator Hassan. As Ms. Bloomfield knows, we put a 
  lot of work into trying to get that $50-a-month subsidy, and we 
  are seeing people step forward. The point is, in this country 
  we have to get to the point where broadband is like electricity 
  was years ago, where we said everybody has to have it. And we 
  are really glad that Senator Hassan is leading our committee on 
  that...........................................................
Next is Senator Barrasso.........................................
Senator Barrasso. Well, thanks so much, Mr. Chairman.............
You know, infrastructure is important to every State. It is 
  important to every community. It is important to every tribe in 
  the country. America's roads and bridges, highways, and tunnels 
  support the Nation's economic growth and our competitiveness...
Our economy is built on a well-functioning road system that 
  allows products from rural areas to get transported to our 
  population centers. We ship American-made products and goods 
  from one coast to the other. Interstates like I-80 in my home 
  State of Wyoming are critical arteries for commerce in the 
  country........................................................
Our roads create jobs. They move products. They keep our country 
  running and going strong. Roads and bridges have to keep pace. 
  The systems are vital to our country, and they need to be 
  maintained, and they need to be taken care of. We need to 
  maintain and upgrade and, where necessary, build new ones......
The highway trust fund is funded through user fees. Those who use 
  the roads pay for their upkeep. The most famous example of 
  course is the gas tax, which represented over 25 percent of the 
  highway trust fund tax receipts in 2019........................
A number of users of our roads, bridges, and highways do not pay 
  anything for their upkeep. And right now, electric vehicles do 
  not pay a cent to maintain America's roads. These vehicles do 
  not contribute because they do not buy gasoline................
The gas/electric/alternative fuel vehicles all use the same 
  roads. They put the same amount of wear and tear on those 
  roads. Every driver really should contribute to maintain our 
  highways.......................................................
My priority is to make sure these vehicles are contributing to 
  the maintenance of the roads, especially as their use continues 
  to increase from year to year. And you have seen the 
  predictions that by the end of this decade, 8 percent of 
  vehicles on the roads will be electric vehicles, but by 2040, 
  over 30 percent of the vehicles on the roads will be electric 
  vehicles.......................................................
So with the rapidly growing electric vehicle market, it is 
  necessary to make sure that drivers of these alternative fuel 
  vehicles are contributing to road maintenance. An electric 
  vehicle does as much damage to the highway as a traditional 
  gas-powered vehicle that has the same number of axles and 
  weighs the same................................................
Everyone who drives on the roads should contribute to the cost of 
  the maintenance. That is why I plan to introduce legislation to 
  ensure all users of our roads, bridges, and highways contribute 
  to the upkeep..................................................
So I have a question for the Congressional Budget Office, for Dr. 
  Kile. I appreciate your response to Senator Lankford regarding 
  an EV user's fee. I agree with him that $200 million is a 
  substantial amount, especially in rural America................
I would like to shift to getting your thoughts on the electric 
  vehicle tax credit. The Joint Committee on Taxation has said 
  that this credit disproportionately subsidizes higher-income 
  earners. Rather than subsidizing the wealthy, these funds might 
  better be utilized by investing in roads and bridges and 
  highways.......................................................
Can you speak to the possible revenue saved by repealing this 
  Federal tax credit for purchasing electric vehicles?...........
Dr. Kile. Senator, we would be happy to get back to you on that, 
  or work with our colleagues in the Joint Committee to come up 
  with an estimate of that. I do not have a number on that for 
  you this morning...............................................
Senator Barrasso. So, as far as funding our highways, couldn't 
  Congress direct these savings and future savings to fixing our 
  roads and bridges and highways?................................
Dr. Kile. Congress could do that, yes............................
Senator Barrasso. Thank you. You know, the chairman has released 
  a tax bill that would extend the electric vehicle tax credit 
  until electrical vehicles represent over 50 percent of vehicle 
  sales..........................................................
This extension could, I believe, cost lots of money that could be 
  used for actual infrastructure spending, instead of subsidizing 
  vehicles for the wealthy. Can you speak to the additional cost 
  of such massive extension of this tax credit to the point when 
  electric vehicles represent over 50 percent of vehicle sales?..
Dr. Kile. Again, Senator, we would be happy to work with our 
  colleagues on the Joint Committee on that, but I do not have an 
  estimate of that...............................................
Senator Barrasso. Okay. Thanks, Mr. Chairman.....................
The Chairman. Thank you, Senator Barrasso........................
Next will be Senator Cortez Masto................................
Senator Cortez Masto. Thank you, Mr. Chairman, and thank you to 
  all the panelists for this great conversation. Let me jump in 
  on the broadband conversation..................................
I am from Nevada. We definitely have under-served communities in 
  our urban and rural areas, and I want to thank so many of you 
  for really the good work that you are doing to make sure we are 
  bringing service to these communities..........................
Ms. Bloomfield, let me start with you. We have been talking about 
  the need for a strong oversight role to ensure that we are 
  properly investing billions into broadband access, as well as 
  sufficient coordination across all of our Federal agencies. And 
  I could not agree more.........................................
That is why I worked to pass the bipartisan ACCESS BROADBAND Act 
  in the year-end package last year. Can I get your support for 
  the proper and sufficient implementation of this legislation to 
  ensure that not only do we have an easier Federal broadband 
  funding system for our providers and communities, but that we 
  also track each dollar to ensure its efficient use?............
Ms. Bloomfield. Senator, you were like a visionary when you had 
  that passed. Little did you know all of these programs would be 
  coming down. So I would say that what you put together in your 
  legislative package, talking about streamlining these Federal 
  broadband programs--of which there are many--and improving the 
  Federal agency coordination, are really both very key efforts..
So I would share with you that we look forward to helping to work 
  with you, with Congress, with NTIA, anything that is needed to 
  make sure that all of these current existing and upcoming new 
  programs on broadband stay coordinated.........................
Again, we are seeing things happening on the State, on the 
  Federal level, all across these different agencies, and 
  ensuring that there is real operational coordination, I think 
  is really going to be the smartest use of Federal funding......
So again, absolutely we support your efforts. And we are eager to 
  get this up and running and to make it successful..............
Senator Cortez Masto. Thank you. And thank you again for your 
  partnership as we have worked together, particularly in the 
  State of Nevada, to really bring broadband into our 
  communities....................................................
And I have to thank NACo and the League of Cities. They have been 
  at the forefront in informing me on this legislation, based on 
  the needs in our communities. And let me just finally say to my 
  colleagues, in the 2018 farm bill we were able to pass a 
  bipartisan provision to really stand up an effective innovative 
  rural council that leverages beneficial investments across all 
  of our multiple departments....................................
That is intended to work through the permitting challenges that 
  we are talking about today. So I am hopeful that that gets set 
  up and we continue to work together. So thank you. Thank you so 
  much...........................................................
Commissioner Buch, thank you for being here. I am partial to our 
  cities and counties because I worked as an assistant county 
  manager in Clark County for a number of years. And my father 
  was a county commissioner. And so I always believe that you 
  guys are on the forefront and we should make it flexible for 
  you to utilize these dollars. You know better than anyone what 
  is needed in your communities..................................
Let me ask you this. I have introduced a bipartisan bill called 
  the Moving FIRST Act to create a Smart Communities Challenge 
  grant at the U.S. Department of Transportation. Listen, it is 
  an exciting time for us. We are going into an innovation 
  economy that includes taking this new technology that is going 
  to improve our communities, our transportation. As one of my 
  colleagues in Nevada has said, this technology is the new 
  asphalt for the future.........................................
And so, can you speak to what you are seeing at the local level, 
  and why you support expanding the transportation and technology 
  partnerships that we are seeing become more popular across the 
  country?.......................................................
Ms. Buch. Senator Cortez Masto, thank you. Thank you for the work 
  that you have done on that bill. Counties and NACo support the 
  bipartisan legislation of the Moving FIRST Act.................
Counties support transportation technologies that will help us 
  meet the transportation demands of the future and improve the 
  safety and efficiency of our local roads. Counties support 
  Federal incentives to promote nationwide energy conservation 
  efforts, including tax incentives, rebates, and promotions that 
  will promote the purchase of low- and no-emission vehicles by 
  both the public and the private sector.........................
Senator Cortez Masto. Thank you so much. I really appreciate this 
  conversation. And thank you to the chairman, again, and to the 
  ranking member. I yield the remainder of my time...............
The Chairman. Thank you, Senator Cortez Masto....................
Next will be Senator Warren, if she--there she is................
Senator Warren. I am here. Thank you, Mr. Chairman...............
So the COVID-19 pandemic has underscored how crucial 
  infrastructure is to making our economy and our communities 
  work. And that includes the roads and buses that Americans take 
  to work or to schools, but it also includes the child care that 
  allows parents to go to work, and the high-speed Internet that 
  our kids rely on for their studies.............................
And yet, our investments in all of that vital infrastructure have 
  been both inadequate and inequitable. So take our roads, which 
  earned a ``D'' on the most recent infrastructure report card 
  from the American Society for Civil Engineers. One out of every 
  five miles of American highways and roads is in poor condition.
So we are failing to adequately fund basic road maintenance and 
  repair, much less invest in transit modernization and 
  electrification. It holds back our economy. This contributes to 
  climate crisis. It harms public health, especially in minority 
  communities....................................................
Ms. Sheehan, you have worked for over a decade on public transit, 
  including bridges and highways in Massachusetts. So let me ask 
  you, would large-scale investments in transit electrification 
  help communities across the country?...........................
Ms. Sheehan. Well, thank you for that question, Senator. And the 
  answer is ``yes.'' Transit agencies and DOTs are embracing 
  electrification. I believe at this point transit agencies in 
  over 40 States have chosen to pursue electric bus purchases, 
  despite the higher initial purchase prices. The benefits 
  justify that additional investment, with significant cost 
  savings in terms of operation because of the increased fuel 
  efficiency. So, it's about a 78-percent lower lifetime fuel 
  cost compared to traditional vehicles. But most importantly, 
  these vehicles are quieter, and there is a 100-percent 
  reduction in emissions, which improves quality of life for 
  everyone who lives adjacent to public transit routes. So we are 
  continuing to pursue these investments.........................
Senator Warren. So thank you. That is very helpful, Ms. Sheehan. 
  Here we are falling behind on these investments. We need to go 
  big to combat climate change and to grow our economy...........
Now President Biden has proposed investing $174 billion in 
  vehicle electrification, which is a good start. The Build Green 
  Infrastructure and Jobs Act that I introduced with Senator 
  Markey and Representatives Levin and Ocasio-Cortez, would 
  invest $500 billion over 10 years to help us get to all-
  electric public vehicles and rail..............................
My forthcoming Buy Green Act with Congressman Levin will 
  establish a further $1.5 trillion in Federal procurement to 
  purchase American-made clean energy products for Federal, 
  State, and local use, and for export...........................
Ms. Buch, let me ask you, you work with local governments all 
  across the country. Can we rely on local government to generate 
  the revenue needed to make these big investments in transit 
  modernization and electrification? Or does the Federal 
  Government need to step up if we are going to make this happen?
Ms. Buch. Senator Warren, well, we are doing our part on the 
  local level. Counties are limited in a variety of ways from 
  raising any local revenue. We rely on the strength of the 
  intergovernmental partnership to deliver these critical 
  infrastructure projects that our residents need and expect.....
Counties urge Congress to direct funds to locally owned 
  infrastructure that will allow us to better meet the needs of 
  our community..................................................
Senator Warren. Good. Thank you. I agree with you on this........
President Biden has proposed raising taxes on the wealthy, and on 
  giant corporations, to pay for these vital investments in our 
  Nation's infrastructure. Meanwhile, Republicans have proposed 
  imposing user fees and fuel taxes, rather than raising taxes on 
  the wealthy and on big corporations............................
So, Dr. Kile, let me ask you a question around this. Let's assume 
  that a school teacher making the average teaching salary in 
  Massachusetts, and a CEO making millions of dollars a year, 
  both have the same distance to drive as their commute to work. 
  And they use the same number of gallons of gas a year. Which 
  one of them pays more as a share of their income when we pay 
  for infrastructure investments by imposing a gasoline tax?.....
Dr. Kile. Senator, gasoline taxes tend to be regressive, in that 
  they impose a larger burden in terms of share of income that 
  goes to pay for those taxes on people in the lower- and middle-
  income quintiles than they do on the upper-income quintiles....
Senator Warren. You just said in a fancier way that the school 
  teacher pays more as a share of his or her income than the 
  wealthy person does if you use these user fees? I hope I got 
  that right. Is that right, Dr. Kile?...........................
Dr. Kile. Yes. In the scenario you had, that is correct..........
Senator Warren. Good. You know, it is absurd to suggest that we 
  should finance this investment on the backs of school teachers 
  and firefighters and small business owners.....................
President Biden and I have both put forward full menus of options 
  for paying for these long-overdue investments in our shared 
  infrastructure options that are not going to hurt the very 
  people who are struggling the most to recover from this 
  pandemic.......................................................
My wealth tax, Real Corporate Profits Tax, and tax enforcement 
  plan, those three things would raise $6 trillion without 
  raising taxes on 99.9 percent of Americans by a single penny. 
  And that is enough to pay for every penny of President Biden's 
  American Jobs Plan, to pay for every single penny of his 
  American Families Plan, and to still have $2 trillion left 
  over...........................................................
Thank you, Mr. Chairman..........................................
The Chairman. Thank you, Senator Warren..........................
Senator Cantwell, with significant responsibilities in 
  transportation as the chair of the Commerce Committee, is next. 
  Senator Cantwell?..............................................
Senator Cantwell. Thank you, Mr. Chairman, and thanks to the 
  witnesses for this important hearing. I just want to clarify, 
  before I get to those transportation issues, you, Mr. Chairman, 
  and I and my colleagues Senator Young and Senator Portman, have 
  introduced legislation increasing the Low-Income Housing Tax 
  Credit. All our States face incredible shortages of affordable 
  housing, so continuing to push the tax credit increase to 50 
  percent over the next 2 years could help us deal with this 
  crisis. We are not really avoiding it; we are still having to 
  deal with a population without housing options and thereby 
  causing increased costs in health care and a whole variety of 
  issues.........................................................
So we have introduced legislation, and I wanted to ask the 
  witnesses--Ms. Buch particularly--do you consider a housing tax 
  credit part of critical infrastructure that we need to build in 
  the country? And would you support the funding of affordable 
  housing tax credit increases?..................................
Ms. Buch. Senator Cantwell, thank you so much for the question. 
  We appreciate your work to increase the supply of affordable 
  housing, and utilization of the low-income tax credit. Counties 
  support reducing the Private Activity Bonds threshold from 50 
  to 25 percent. And what I would like to add to that is that we 
  need to concurrently be able to increase the capacity of our 
  project developers to be able to fulfill the actual projects 
  that that pipeline will fill...................................
As a former project developer for an affordable housing provider 
  myself, I can tell you that there is not a streamlined 
  educational tool to train project developers. And so they 
  usually come in very green into an organization, and the 
  pipeline is very thin..........................................
Senator Cantwell. So we do have a backlog right now, right? I 
  mean, we have more projects that are on the books than we can 
  fund, correct?.................................................
Ms. Buch. The projects are available. The people that are 
  qualified as project developers and managers to actually 
  fulfill the work is where the pipeline squeezes................
Senator Cantwell. Okay...........................................
Ms. Buch. They need the extra training and the incentives to 
  build that particular industry base to fulfill those projects..
Senator Cantwell. Okay, so what are you thinking there as an 
  incentive on that? I mean, listen, I get it. If you are talking 
  about Seattle and you are trying to get--or you know, the whole 
  region, Puget Sound--and you're trying to get somebody to work 
  on those projects, there is enough construction work yet that 
  it is going to be challenging to get somebody to work on 
  affordable housing.............................................
Ms. Buch. Project developers are more of a liaison between the 
  provider that is actually wanting to develop the work and the 
  construction workers doing the work. These project developers 
  come up with the pro formas, the concept, write the grants, 
  everything that is needed inside the organization to actually 
  put the project forward........................................
That is the area where I find the most constraint in order to 
  fulfill the affordable housing needs...........................
Senator Cantwell. Well, I love what our--you know, there are 
  people all over Puget Sound trying to figure out what to do 
  about affordable housing. I know the same could be probably 
  said in Oregon, in the Portland area, but we are not going to 
  get out of this without the Federal tax incentive being 
  increased......................................................
The majority of affordable housing projects that get built get 
  built with the tax credit. So if we are not increasing the 
  available credit, no region is going to be able to successfully 
  get out of this predicament that we are in. And I definitely 
  think it is an issue of us not meeting demand. We have just, 
  for a bunch of different economic and demographic regions, have 
  had far more people falling into this category of needing this 
  kind of housing. And we just need to meet the demands..........
I think we are spending a lot of time discussing, well, how did 
  we get here? And in reality, we just have to meet demand. So I 
  hope that our colleagues will consider this. It obviously is 
  stimulative....................................................
I want to turn to Ms. Sheehan, or actually you, Commissioner 
  Buch. I think people think that, on transportation, we actually 
  can--you know, people have been talking about various things, 
  including user fees, but we really just do not have a 
  sustainable source for the future. Is that not correct, with 
  where we are on the highway trust fund?........................
I do not know how much this has come up, Mr. Chairman, already, 
  but I am just trying to get to the point of--we obviously want 
  to build back better, but the larger issue facing us is, we do 
  not have a sustainable fund for the future.....................
Ms. Buch. Senator Cantwell, I will take that. As we mentioned in 
  earlier testimony, counties are very concerned about the 
  looming insolvency of the highway trust fund. We encourage our 
  Federal partners to do as much as they can to find a 
  sustainable way to continue to fund that particular method that 
  we as counties rely on in order to fulfill all of the 
  transportation needs for our community.........................
Senator Cantwell. So, does any other witness want to take that 
  on? Ms. Sheehan, or----........................................
Ms. Sheehan. Senator, I would be happy to respond. Yes, AASHTO 
  acknowledges that we have a significant shortfall to overcome. 
  That is why we are willing to support this committee and 
  Congress, and to evaluate long-term sustainable solutions......
It has been mentioned a couple of times today, but any shortfall 
  or delay in Federal funding leads to serious cash flow problems 
  for States and local governments. And most importantly, we fail 
  to deliver on the projects and the commitments that we are 
  making as part of our public engagement processes..............
These are extremely important transportation investments that 
  impact the quality of life and provide economic opportunities, 
  and we need to find a sustainable way to pay for them..........
Senator Cantwell. Well, we have--I firstly, in a bipartisan way, 
  suggested cap and dividend in the past, just because the 
  dividend can keep consumers whole while you are making these 
  investments. And it helps you to mitigate the impact along the 
  way. It has picked up support from business roundtables and 
  chambers of commerce and various organizations. But I hope, Mr. 
  Chairman, that we will focus on this larger issue, because we 
  are on an unsustainable path. For us in the Northwest, we see 
  the incredible growth that is still there as a potential, even 
  post-pandemic, for us. We are seeing congestion at our ports, 
  on our highways. We need to make these investments to stay 
  competitive....................................................
And so, I hope that we will look not just at this very near term, 
  but this unsustainability that we have because the highway 
  trust fund will be, as the witnesses said, reaching a level of 
  insolvency.....................................................
So it is time to put us on a good stead for the future. So thank 
  you, Mr. Chairman..............................................
The Chairman. Thank you, Senator Cantwell, and particularly for 
  highlighting the importance of housing, both for our region and 
  the country....................................................
Our final Senator is our partner in this, Todd Young. So these 
  are bipartisan issues. And not only is Senator Cantwell right 
  about the Low-Income Housing Tax Credit, but I proposed 
  something called MIHTC, the Middle-Income Housing Tax Credit, 
  because I am not convinced, on our current path, that somebody 
  who is a firefighter, and somebody who is a nurse, is going to 
  have an opportunity to be part of the American Dream...........
So put me down as being in favor of Senator Cantwell and Senator 
  Young. And Senator Young will be our final questioner..........
Senator Young. Well, thank you, Mr. Chairman, and thank you for 
  highlighting the importance of housing affordability. And I 
  thank Senator Cantwell for her long-time leadership in this 
  area. It is a privilege to work with her.......................
Senator Cantwell also addressed briefly the issue of Private 
  Activity Bonds, which can serve an important role in financing 
  public projects. In fact, for infrastructure mega-projects over 
  the last 15 years, $12 billion in Private Activity Bonds led to 
  $45 billion in project activity. So we are looking at almost a 
  4 return there................................................
But under current law, our Nation's public buildings cannot 
  qualify for tax-exempt Private Activity Bonds when employing 
  public-private partnerships. Now there are certainly projects 
  beyond those that currently qualify for Private Activity Bonds 
  financing, which is why I recently reintroduced my Public 
  Buildings Renewal Act with Senator Cortez Masto. I am curious, 
  however, how we can further leverage private financing to fund 
  public projects................................................
Ms. Sheehan, are there opportunities to expand the use of Private 
  Activity Bonds in the transportation space? And do you believe 
  that it is a worthwhile financing mechanism for us to explore?.
Ms. Sheehan. So, thank you for that question. And yes, State DOTs 
  would be interested in extending any of the current financing 
  mechanisms that are available to us. As I have said in my 
  earlier testimony, we are really trying to, as you described 
  it, stretch the value of the investments that we are making and 
  be able to partner with the private sector to ensure that we 
  can invest at a greater level. And beyond what is available 
  with the revenues being provided, it is extremely important 
  that we can advance projects sooner and hedge against 
  inflation. And there is a strong economic climate for 
  borrowing......................................................
Senator Young. Well, thank you, Ms. Sheehan. I ask that because I 
  am looking for some more creativity as we try to identify ways 
  to either pay for or finance our infrastructure investments....
What we have seen from the Biden administration's proposals is 
  what we frankly might expect from a Democratic President--
  expensive tax-and-spend proposals. Instead of shackling our 
  free enterprise system with harmful tax hikes as we emerge from 
  a global pandemic, I believe--and I think most of the Hoosiers 
  I represent believe--that we really need to explore creative 
  proposals that are already out there to leverage private-sector 
  dollars........................................................
We should do that before we turn to increasing taxes as we emerge 
  from this pandemic.............................................
Ms. Sheehan, just as a follow-up, what are some public-private 
  partnership proposals you support or think would be useful in 
  improving and developing our transportation infrastructure?....
Ms. Sheehan. So State DOTs looked at our entire program on all of 
  the projects, in particular the large-scale projects, and tried 
  to determine what the most cost-effective funding and financing 
  solutions might be. And so certainly where public-private 
  partnerships are concerned, we are trying to identify projects 
  that both have a sustainable source of revenue to be able to 
  pay the debt service and support the financing, as well as that 
  reliable source of Federal funding into the future so that we 
  can embark on P3 projects where we use availability payments 
  and are committing our future State and Federal revenues from 
  traditional sources to pay that debt service...................
But it is all about delivering the projects sooner. And so we 
  want to make sure that every financing option is available to 
  us, that we have as many tools in the toolkit as possible, and 
  that it is about providing that value to the citizens by 
  advancing the projects to benefit communities and provide 
  economic opportunities.........................................
Senator Young. Thank you, Ms. Sheehan............................
I will give Dr. Kile an opportunity to answer the same question. 
  Dr. Kile, what do you support in the public-private partnership 
  space as it relates to transportation infrastructure?..........
Dr. Kile. Well, of course CBO does not have a particular policy 
  that we support or oppose. We just assess options for you. As 
  far as----.....................................................
Senator Young. Could you assess some options for me?.............
Dr. Kile. Sure. Sure. As far as public-private partnerships go, 
  or any of the financing mechanisms, they do allow an 
  opportunity for Federal money to be used to couple with money 
  from the private sector. That money from the private sector is 
  only coming with the expectation of a return at some point, 
  either by revenue from users of whatever system is being 
  financed, or by future payments from a government..............
Senator Young. Okay. So why don't we focus on the prior category, 
  as opposed to the latter category. Could you offer some more 
  specificity to some of those options that would yield revenue, 
  which would be used in turn to pay the investors over a number 
  of years?......................................................
Dr. Kile. Sir, I am not quite sure--you said the ``prior 
  category,'' and I am not sure what that is.....................
Senator Young. You seemed to break down public-private 
  partnerships into crowding in private investment on the belief 
  that either user fees of some sort, right, would pay back the 
  investors, or the government itself would pay it back through 
  taxation, presumably, right? Or it could be bonding, but 
  ultimately, you know, that would cost taxpayers................
So could you offer me some examples of the first area, where the 
  revenue alone, as you have seen through real-life examples, 
  pays back the private investors?...............................
Dr. Kile. So there are a bunch of projects, many of them tend to 
  be toll roads, that collect revenues from users, tolls, and 
  that contributes to part of the funding of the project. We 
  would have to get back to you with the specifics of how that 
  funding breaks down by project.................................
Senator Young. Okay. Well, there is much more to discuss here, 
  but I am already over time. The chairman has been quite 
  generous. So thank you all, and thank you, Mr. Chairman........
The Chairman. I thank my colleague. And we began almost 3 hours 
  ago with a real dose of strong bipartisanship. I see our 
  friend, the ranking member, Senator Crapo, here. Both of us 
  made it clear that we want to involve the private sector more 
  extensively in terms of infrastructure funding. That is what 
  Build America Bonds are all about. And I note that five members 
  of the United States Senate today were co-sponsors of our 
  original effort, which in the space of a year and a half sold 
  $183 billion worth of Build America Bonds......................
So the point that my colleagues most recently made in the last 
  few minutes--Senator Young mentioned a role for the private 
  sector, which has already been proven. So we are going to 
  pursue that and all options....................................
Just a couple of final comments, and then I want Senator Crapo to 
  have a chance to talk as well. The principle of fairness must 
  be front and center in this whole effort with respect to paying 
  for roads......................................................
And just yesterday, The Wall Street Journal reported that U.S. 
  companies have authorized $504 billion of share repurchases. 
  That is stock buybacks, which is the most during this period in 
  at least 22 years..............................................
So what we are going to be explaining to citizens, as working 
  people are trying to figure out how to come out of the 
  pandemic, The Wall Street Journal is telling us we are having a 
  record mega-corporation spree in terms of stock buybacks.......
So we have to find a way to embed deeply the principle of 
  fairness, because we are all making the point that we have to 
  come up with solutions that are fair. And that means everybody 
  is going to have to be part of that solution...................
One last point, and that is, the Finance Committee has some 
  history here, and too often opportunities have been missed. For 
  example, 4 years ago the committee had significant bipartisan 
  agreement that a portion of the hundreds of billions of dollars 
  in repatriated funds from multinational companies as part of 
  the tax bill would go to fund infrastructure...................
And we had debates about what percentage it ought to be, but 
  there was a clear bipartisan consensus. And the Trump 
  administration did not want to have any part of that. So I want 
  to invite my colleague from Idaho to say anything, should he 
  choose to do so, but I think this has been a good session......
We want to thank our guests. The testimony was very good. It 
  really stuck to the facts and the record, and I intend to work 
  very closely with Senator Crapo in a bipartisan way. We cannot 
  miss this moment. Too many Americans are depending on our 
  coming forward on infrastructure. Because, as we said 3 hours 
  ago, you cannot have big league economic growth with little 
  league infrastructure..........................................
Senator Crapo, would you like to add anything else?..............
Senator Crapo. Yes. Just briefly--and thank you again, Mr. 
  Chairman, for holding this hearing and for the bipartisan 
  effort that you want to work with us on........................
There is no disagreement. There is no bipartisan disagreement 
  about the need for a strong, robust effort to strengthen our 
  infrastructure in the United States. And thank you to our 
  witnesses. You have discussed very eloquently and effectively a 
  number of the different specific types of options that we have 
  to look at as we try to find ways to get capital committed to 
  infrastructure in the United States, whether that is through 
  direct spending from the Federal Treasury, whether that is 
  through our tax policy, whether that is through the public-
  private partnerships, or in other ways that we have discussed 
  today, to incentivize private capital to flow into 
  infrastructure spending and build out the infrastructure across 
  this Nation....................................................
Once again, I thank all of you for participating and for your 
  input from your expertise as to how this works, and how 
  Congress can most effectively accomplish this goal.............
And, Mr. Chairman, I will turn it back to you. Thank you again...
The Chairman. With that, the Finance Committee wants to thank our 
  guests. One week from today, questions for the record are due 
  from Senators. And with that, the Senate Finance Committee 
  thanks you all, and we are adjourned...........................
[Whereupon, at 12:58 p.m., the hearing was concluded.]...........

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


  Prepared Statement of Shirley Bloomfield, Chief Executive Officer, 
                 NTCA--The Rural Broadband Association
                              introduction
    Chairman Wyden, Ranking Member Crapo, and members of the committee, 
thank you for the opportunity to participate in today's hearing focused 
on funding and financing the Nation's infrastructure.

    I am Shirley Bloomfield, chief executive officer of NTCA--The Rural 
Broadband Association (``NTCA''). NTCA represents approximately 850 
rural, community-based carriers that offer advanced communications 
services throughout the most sparsely populated areas of the Nation. 
All NTCA members are fixed voice and broadband providers, and many of 
our members also provide mobile, video, and other communications-
related services to their communities. Operators like those in NTCA's 
membership serve less than 5 percent of the population of the United 
States, but cover approximately 37 percent of its landmass. As context, 
the average density of the areas that NTCA members serve is roughly 
seven subscribers per square mile--roughly the density of the State of 
Montana. These companies operate in rural areas left behind decades ago 
when communications networks were first being built out by other 
service providers because the markets were too sparsely populated, too 
high cost, or just too difficult to serve in terms of terrain.

    Despite these challenges, and driven largely by the commitment to 
the communities in which they serve and live, NTCA's small broadband 
providers have been leaders in deploying advanced communications 
infrastructure that responds to consumer and business demands and 
connects rural America with the rest of the world. In rural America, 
broadband infrastructure enables economic development and job creation 
not only in agriculture, but for any other industry or enterprise that 
requires advanced connections to operate in today's economy. Yet, for 
all their progress to date, we still have a lot more work to do in 
deploying and operating this critical infrastructure. Too many rural 
consumers still lack sufficient broadband connectivity.And, even where 
networks exist, operators still face the challenges of sustaining and 
upgrading them to keep pace with consumer demand and delivering 
affordable services.

    The good news is that NTCA members have led the charge in getting 
rural America connected. Nearly 70 percent of customers of NTCA's 
member companies have access to 100 Mbps or better broadband service; 
on average, roughly the same proportion of NTCA members' customers are 
connected by fiber despite the very rural nature of the areas in 
question. The bad news is that not every rural community is fortunate 
enough to have an NTCA member call it home--and even NTCA members still 
have work to do to realize their vision of delivering broadband to each 
and every consumer in the areas they serve. Nonetheless, the efforts of 
NTCA members and the programs that have supported their success offer 
important lessons as to what does and does not work when it comes to 
deploying and then sustaining broadband infrastructure and services. In 
the remainder of my testimony, I will offer principles and policy 
recommendations based upon this experience and with an eye toward the 
objective of ensuring that every American, rural or urban, has access 
to robust and affordable advanced communications services.
      a holistic view of and approach to broadband infrastructure
    President Biden expressly recognized the importance of advanced 
communications networks by including broadband within his broader 
infrastructure initiative. There appears as well to be bipartisan 
consensus in Congress that broadband should be considered a national 
infrastructure priority, and NTCA welcomes the opportunity to 
participate in a further discussion on how best to tackle this 
priority.

    This being said, it is important to consider what investing in 
infrastructure means. It is not a one-time act of building something 
and then moving on. The asset being built needs to be maintained, 
upgraded, and made useful over its entire life, or there is serious 
risk that the investment will be wasted. In the case of broadband more 
specifically, it does no good to build a network if the provider cannot 
afford to operate it and recover the capital used to construct it--and 
even the very best network is certainly of little use if no one can 
afford to pay for the services offered atop it. Broadband services must 
be activated and delivered, maintenance must be performed before 
troubles arise, customer trouble calls must be answered, ``middle 
mile'' capacity to reach distant Internet points of presence must be 
procured, and upgrades must be made to facilities and electronics to 
enable services to keep pace with consumer demand and business needs. 
In addition to these ongoing operating costs, networks are hardly ever 
``paid for'' once built; rather, they are often built leveraging 
substantial loans that must be repaid or the use of cash-on-hand that 
must be recovered over a series of years or even decades.

    All of these factors make the delivery of broadband in rural 
America an ongoing effort that requires sustained commitment, rather 
than a one-time declaration of ``success'' just for the very 
preliminary act of connecting a certain number of locations. 
Particularly when one considers that even where networks are available, 
many rural Americans pay more for broadband than urban consumers, and 
it becomes apparent that the job of really connecting rural America--
and, just as importantly, sustaining those connections--is far from 
complete. Federal law mandates that the Federal Universal Service Fund 
(USF) ensures reasonably comparable services are available at 
reasonably comparable rates in rural and urban areas alike. This 
mission cannot be lost as we focus on financing deployment. We must 
make sure the infrastructure is useful to and useable by the population 
it is intended to benefit. So while the rural broadband industry and 
our Nation as a whole have a great story of success in delivering 
services, we have much more work to do in both deploying and operating 
networks--and this is where public policy plays such an important role 
in helping both to build and then to sustain broadband in rural markets 
that would not otherwise justify such investments and ongoing 
operations.

    As this committee considers tax incentives and bonds to spur 
broadband deployment, it should keep in mind that while such measures 
may help in certain areas, it must also overcome how distance and 
density make it difficult, if not impossible, to justify a business 
case for infrastructure investment to start in many rural markets. No 
provider, whether it be cooperative or commercial, and regardless of 
size, can deliver high-speed, high-capacity broadband in rural America 
without the ability to justify and then recover the initial and ongoing 
costs of sustaining infrastructure investment in high-cost areas. If 
there is insufficient help in the first instance to enable the business 
case for ongoing operation of networks and providing affordable 
broadband in rural areas, tax incentives may not by themselves promote 
meaningful broadband deployment in many rural areas most in need of 
broadband.
                         future-proof networks
Meeting Consumer Demand in Decades to Come
    Any resources provided as part of an infrastructure plan should 
look to get the best return on such long-term investments. For networks 
with useful lives measured in decades--especially private investments 
that leverage Federal dollars--this should mean the deployment of 
infrastructure capable of meeting consumer demands not only of today 
and tomorrow, but for ten or 20 years. Putting resources toward 
infrastructure that needs to be substantially rebuilt in only a few 
years' time could turn out to be Federal resources wasted--and would 
still risk leaving rural America behind. Similarly, putting billions of 
Federal dollars into ``bets'' on emerging technologies that may deliver 
quality broadband if they turn out as promised is risky. The express 
intended use of these resources is to get Americans access to better 
broadband infrastructure, rather than speculate. These resources should 
be invested in technologies that have a proven track record of 
delivering for American consumers, rather than hanging hopes on 
marketing campaigns and equipment vendor promises as to capabilities to 
come.

    As our members look to future data needs of their customers and 
their communities, they have taken aggressive steps to focus on 
anticipated increases in usage. This ongoing phenomenon accelerated 
during the global pandemic that forced so many to learn, work, and get 
treated by doctors at home; OpenVault has found, for example, that 
upstream broadband traffic increased by 63 percent from December 2019 
to December 2020.\1\ In addition to continuing to deploy ``last mile'' 
fiber as fast as they can, measures taken by NTCA members to stay ahead 
of such demands include establishing robust and reliable connections to 
statewide fiber networks that provide ``middle mile transport'' between 
our local communities and the rest of the world, and adding redundant 
connections to separate Internet points-of-presence where possible.
---------------------------------------------------------------------------
    \1\ Dan O'Shea, Pandemic Drove Upstream Broadband Traffic Boom: 
OpenVault, Fierce Telecom (April 1, 2021, 12:46 PM), https://
www.fiercetelecom.com/telecom/pandemic-drove-upstream-broadband-
traffic-boom-openvault.
---------------------------------------------------------------------------
Importance of Symmetrical Speed
    Federally funded broadband programs should focus on the consumer 
experience and the long-term implications for rural communities by 
requiring the deployment of networks that in a decade or more will 
still deliver speeds and other performance capabilities that customers 
can rely upon. To this end, NTCA supports an increase in the minimum 
broadband deployment performance benchmark to at least a symmetrical 
speed of 100 Mbps/100 Mbps to ensure that federally supported networks 
will meet the future needs of consumers--in other words, any funding 
programs going forward should generally aim to ensure that new 
deployments perform at least at this speed threshold. Beyond the 
OpenVault findings noted earlier on pandemic-related traffic patterns, 
residential demand for symmetrical bandwidth has increased consistently 
at a rate of 20 to 25 percent annually for over two decades.\2\ 
Continued growth in demand is expected to increase significantly in 
coming years, such that peak demand for a family of four is projected 
to exceed 400 Mbps symmetric in just 7 years, with bandwidth needs 
accelerating in the years after that.\3\ These imminent increases are 
anticipated due to an array of new technologies that hold substantial 
promise for consumers and businesses alike, such as greatly improved 
virtual education, telemedicine, agriculture, business, security, and 
entertainment. Indeed, the Federal Communications Commission (FCC) has 
concluded that two users or devices simultaneously using one Internet 
connection for a ``basic'' function, such as checking email, and more 
than one high-demand application, like video conferencing or streaming 
HD video, can require at least 25 Mbps, while adding just one more user 
or device would necessitate an Internet connection exceeding 25 
Mbps.\4\
---------------------------------------------------------------------------
    \2\ See Comments of the Fiber Broadband Association at 9-10, GN 
Docket No. 20-269, at 15 (September 8, 2020) (``Comments of FBA'').
    \3\ See Comments of FBA at 9-10.
    \4\ See Household Broadband Guide, FCC, https://www.fcc.gov/
consumers/guides/household-broadband-guide (last visited May 13, 2021).

    Despite the clear need for better performance and higher quality 
broadband benchmarks, some claim an increased benchmark undermines the 
concept of ``technological neutrality.'' Congress should not sacrifice 
robust networks that meet the needs of Americans for the sake of 
``technological neutrality.'' If a particular technology cannot meet 
the standards of customers today and tomorrow, the proper answer is for 
innovators in that field to find ways of improving network performance 
(and establish they work in the field) rather than defining standards 
downward. Existing Federal programs employ competitive processes for 
considering applications that allow entities of all kinds to make 
proposals of all kinds using different technologies they want to 
deliver service. Lowering the bar simply so that all can play may make 
this process more competitive in a rudimentary sense, but it hardly 
serves the intended purpose of ``buying the best possible networks'' 
using taxpayer resources. Programs should aim higher with respect to 
minimum standards and uphold preferential scoring for higher-speed 
symmetrical and low latency performance, or risk leaving consumers with 
``just good enough'' network technologies that might only temporarily 
bridge the digital divide, leaving rural communities in the lurch as 
they look in only a few years' time at the better performance of 
networks in other areas.
Hold Providers Accountable
    The FCC's recent iterations of its High-Cost program support, 
through both the Connect America Fund and Rural Digital Opportunity 
Fund (RDOF), have utilized reverse auctions as its competitive bidding 
method. Despite proclamations of success when it comes to the use of 
such reverse auctions, there is little to no track record upon which to 
base such declarations as of yet. As of the date of preparation of this 
written testimony, the map depicting locations served through the FCC's 
programs indicates a grand total of 87 locations in three states that 
have been served leveraging auction support.\5\ Performance testing to 
confirm that providers are actually delivering what was promised in the 
auction will not begin until 2023. Undoubtedly more locations are 
coming online, of course, but it is clearly premature nonetheless to 
conclude that reverse auctions, especially in their current form, 
necessarily work to promote and sustain the availability of broadband.
---------------------------------------------------------------------------
    \5\ See Connect America Fund Broadband Map, FCC, https://
data.usac.org/publicreports/caf-map/ (last visited May 13, 2021).

    It is not too soon, however, to highlight serious concerns about 
the results of the recent RDOF Phase I auction--and in particular 
whether winning bidders will deliver on the services they have 
promised. Due to rules that allowed bidding on a confidential basis at 
speculative levels based upon unproven technologies, many have raised 
questions about the transparency and accountability within the RDOF 
auction. While there is serious concern that this may have undermined 
the effectiveness of the auction itself, we continue to hope at the 
very least that the FCC will prioritize vetting RDOF winners now in a 
more transparent and accountable way before funds flow--and ensure that 
in any future programs to award funds, there is greater transparency 
and vetting of would-be support recipients prior to allowing them to 
---------------------------------------------------------------------------
participate or claim the ability to deliver services in certain ways.

    The RDOF experience should inform how Congress directs agencies to 
distribute any broadband infrastructure funds moving forward. There 
should be clear standards for what will be expected of and achievable 
by providers looking to leverage any resources made available through 
such an initiative. Looking to providers with proven track records of 
operating in rural areas and delivering actual results makes the most 
sense, but whoever receives any support should be required to show 
clearly that they will use those resources to deliver better, more 
affordable broadband that will satisfy consumer demand over the life of 
the network in question. To ensure transparency, accountability, and 
the integrity of Federal broadband programs, agencies should 
stringently review and weight the technical, managerial, financial, and 
operational capabilities of applicants or bidders as part of the 
process of deciding on any award of funds to serve an area. There is 
far too much money at stake and far too many consumers on hold to 
gamble on confidential promises and untested technologies, and the real 
success of any such effort will be defined by the actual delivery of 
robust and reliable broadband to rural consumers.
                       promote local partnership
Leverage Community-Based Providers
    Based in the small rural communities they serve, NTCA members have 
deep long-standing relationships with their local governments and 
anchor institutions. They have seen that some of the best results can 
often be achieved when local commercial operators or cooperatives with 
significant experience in building networks and delivering 
communications services work with stakeholders in the community to 
identify and respond to specific needs. Creating programs that 
encourage and incentivize such partnerships and collaboration could 
unleash broadband investment and help sustain those networks once 
built.

    NTCA providers know their customers, they know the geography, and 
they know the business of delivering communications services in these 
areas. As policymakers look for solutions to deliver broadband in 
unserved parts of rural America, small businesses based in or near 
those areas offer the greatest promise for achieving results quickly 
and effectively. We strongly urge Congress and the Biden administration 
to ``look local'' when it comes to identifying broadband solutions--and 
to leverage the expertise and experience of smaller community-based 
providers, regardless of corporate form, in overcoming these 
challenges.
                          program coordination
Coordinate With and Leverage Existing Broadband Programs
    The prospect of creating a new program that will ``finally solve 
the digital divide'' is always exciting. But any new Federal broadband 
plan should leverage what is already in place and has worked before. 
Creating new programs from scratch is not easy, and if a new broadband 
infrastructure initiative conflicts with existing efforts, that could 
undermine our Nation's shared broadband deployment goals. Moreover, 
even as some existing programs may not have performed as hoped and 
intended, a number of these existing initiatives have worked very 
well--where this is the case, the successful programs in place already 
should be enhanced and built upon, rather than pushed aside for 
something new. Therefore, any new Federal broadband program should 
coordinate with Federal broadband programs at the FCC, United States 
Department of Agriculture (USDA), and National Telecommunications and 
Information Administration, and also State broadband programs.

    Furthermore, small, rural telecom providers have long used the 
FCC's High-Cost USF and USDA Rural Utilities Service (RUS) loans in 
concert to deploy advanced telecommunications services in the most 
rural areas of the United States. Many smaller providers have 
successfully leveraged a mix of funds from these programs and private 
investment to deploy broadband to millions of homes, businesses, farms, 
and anchor institutions. While RUS lending programs have helped to 
finance the substantial up-front costs of network deployment, the USF 
High-Cost Fund helps make the business case for construction and 
sustains ongoing operations at affordable rates. More specifically, USF 
by law aims to ensure ``reasonably comparable'' services are available 
at ``reasonably comparable'' rates. Not to be confused or conflated, 
RUS capital and ongoing USF support serve distinctly important, but 
complementary rather than redundant, purposes in furthering rural 
broadband deployment. Ensuring that sources of Federal and State 
support for broadband networks continue to work in concert not only 
avoids duplication and helps deliver high-speed reliable broadband to 
the consumer, it recognizes the hard realities of both deploying robust 
networks and then delivering high-quality affordable services in the 
most remote, sparsely-populated areas of the Nation.
Direct Funding for New Network Deployment to Unserved Areas
    Funding for new network construction should be targeted to unserved 
areas to limit overbuilding of existing networks that are meeting 
Federal broadband standards. We should focus funding on the areas most 
lacking in broadband and seek to build the best kinds of networks in 
those areas--and we can then turn our attention to the areas next most 
in need once that is complete. This iterative approach will ensure the 
best possible use of Federal resources in the form of targeting funds 
for new networks to the consumers that need help most and ensuring that 
the networks then built to serve those consumers will last for decades 
thereafter. It will also avoid funding two competing networks in an 
area where without support cannot support even one.
                   support ongoing network operations
    Robust broadband infrastructure is crucial to the current and 
future success of rural America. But the characteristics that enable 
the unique beauty and enterprise of rural America make it very 
expensive to deploy advanced communications services there. Deploying a 
communications network in a rural area requires a large capital outlay 
due to the challenges of distance and terrain. The number of rural 
network users, as compared with more densely populated urban areas, is 
too small to justify investment in many cases and pay the costs of 
deployment and ongoing operations through customer charges. Again, 
while so many focus on the upfront financing aspects of this debate--
which is important, to be sure--it is equally important that we not 
overlook the long-term viability of networks in these sparsely 
populated rural areas and the kinds of support mechanisms needed to 
sustain them and keep services affordable on them.
                         barriers to deployment
    While high costs are perhaps the most imposing obstacle to 
deploying and maintaining broadband in rural areas, other barriers 
remain too, such as time-consuming and expensive right of way and 
access delay issues and supply chain shortages.
Permitting Delays
    Infrastructure investment depends not only on financing but also on 
prompt acquisition or receipt of permissions to build networks. 
Roadblocks, delays, and increased costs associated with permitting and 
approval processes are particularly problematic for NTCA members, each 
of which is a small business that operates only in rural areas where 
construction projects must range across wide swaths of land. The review 
procedures can take substantial amounts of time, undermining the 
ability to plan for and deploy broadband infrastructure--especially in 
those areas of the country with shorter construction seasons due to 
climate. Additionally, obtaining reasonable terms and conditions for 
attaching network facilities to poles that are owned and operated by 
other entities can result in long delays and costly fees charged to 
providers seeking to build out networks to rural communities lacking 
service.

    Navigating complicated application and review processes within 
individual Federal land-managing and property-managing agencies can be 
burdensome for any network provider, but particularly the smaller 
network operators that serve the most rural portions of the country. 
The lack of coordination and standardization in application and 
approval processes across Federal agencies further complicates the 
deployment of broadband infrastructure. We have seen much agreement for 
some time now on solutions to simplifying the administrative barriers 
to deployment. Specifically, Congress should look to implement the 
recommendations of the FCC's Broadband Deployment Advisory Committee's 
Streamlining Federal Siting Working Group final report issued in 
January 2018.\6\ NTCA participated in the development of these 
recommendations, which address streamlining of environmental and 
historical reviews and application review periods, among other 
pertinent recommendations in removing further regulatory barriers to 
broadband deployment.
---------------------------------------------------------------------------
    \6\ See Broadband Deployment Advisory Committee, Streamlining 
Federal Siting Working Group, Final Report, FCC (January 23-24, 2018), 
https://www.fcc.gov/sites/default/files/bdac-federalsiting-
01232018.pdf.
---------------------------------------------------------------------------
Addressing Supply Chain Concerns
    In recent years, Congress has provided significant funding through 
several agencies to deploy broadband infrastructure with the goal of 
bridging the digital divide. However, as broadband providers construct 
these networks, it is important to monitor the status of the 
communications supply chain. NTCA members are beginning to report 
significant backlogs for critical communications equipment like fiber, 
routers, antennas, network terminals, and customer premise equipment--
ranging from several weeks to 1 year. Delays in production of necessary 
equipment appear to be related to both increased demand for broadband 
investment as well as ongoing effects of the pandemic. To ensure that 
existing and new infrastructure initiatives are as successful as 
possible in responding to consumer needs and demands, we believe it is 
important that the Federal Government work closely and directly with 
manufacturers, distributors, and other suppliers to avoid disruptions 
in the communications supply chain.

    For these reasons, while there has been a great deal of focus on 
the security of our supply chains, we strongly encourage Congress to 
consider supply chain continuity and reliability as key components of 
delivering on a successful broadband infrastructure agenda. As Congress 
is poised to make future investments to solve the digital divide once 
and for all, supply chain shortages must be addressed--including 
consideration of ways to spur domestic supply chain production and 
address any other shortcomings in the global supply chain. Without 
attention to continuity and reliability, we risk billions of dollars in 
funds intended for immediate broadband deployment being tied up in held 
orders and delayed shipments.
                               conclusion
    Rural America is difficult and costly to serve, with each rural 
area presenting unique challenges. An effective national strategy to 
achieve universal broadband requires a holistic and coordinated 
approach that looks to solve challenges of availability and 
affordability in all kinds of areas and for all kinds of consumers. 
NTCA members are deeply committed to the customers they serve and, 
given their experience and success in serving the most rural areas, 
these providers should be seen as critical components of any strategy 
seeking to achieve universal broadband in the United States.

    A legislative infrastructure initiative offers a unique opportunity 
to provide the resources needed to make these investments and 
mechanisms that ensure efficiency and accountability in the expenditure 
of funds already in place. Our industry is excited to participate in 
this conversation regarding broadband infrastructure initiatives, and 
we look forward to working with policymakers and other stakeholders on 
a comprehensive infrastructure strategy to ensure that all Americans 
will experience the numerous agricultural, economic, health, and public 
safety benefits of broadband.

    Thank you for the opportunity to testify, and for the committee's 
commitment to broadband infrastructure investment in rural America.

                                 ______
                                 
        Question Submitted for the Record to Shirley Bloomfield
                 Question Submitted by Hon. Todd Young
    Question. President Biden's American Jobs Plan includes a provision 
for $100 billion to support building out broadband for rural and 
underserved areas--hoping to ensure 100-percent coverage across the 
country.

    Last December, the FCC announced $9.2 billion in Phase 1 awards to 
expand rural broadband as part of their Rural Digital Opportunity Fund 
auction program. An additional $11.2 billion is on the table in Phase 
2, which will target underserved areas that did not receive funding in 
Phase 1. Furthermore, the FCC established a 5G fund for rural America 
that will distribute another $9 billion in funding over 10 years.

    Overall, the FCC will be awarding nearly $30 billion for broadband 
deployment, which is on top of broadband companies investing somewhere 
between $70 and $80 billion annually for more reliable infrastructure.

    As we work to bridge the digital divide, it seems more beneficial 
for the Biden administration to coordinate among agencies and 
stakeholders, and prioritize legitimate need instead of wasteful 
buildout of infrastructure. As with any program, overbuilding can 
result in expensive or overpriced services as the cost of unused 
infrastructure has to be recovered.

    Given the ongoing growth in private investments and the nearly $30 
billion in Federal funds, is an additional $100 billion in 
``infrastructure'' funding really necessary since we do not fully 
understand the impact of current investments?

    Answer. The FCC has previously estimated that roughly $80 billion 
is needed to connect all Americans to robust broadband that will stand 
the test of time, and NTCA believes a significant amount in that range 
will be necessary to close this longstanding gap in service for the 
most rural and hard to reach areas. This being said, we must also make 
the best use of finite funds to build broadband networks that last. 
Over the past decade, even as many telecom network funding programs 
have been reoriented to promote broadband deployment and 
sustainability, we have seen the errors of ``aiming too low'' with 
respect to the kinds of networks that must be built--setting speed 
targets that are quickly surpassed and deemed irrelevant, insufficient, 
and unresponsive in the face of escalating consumer demands. We must 
not repeat the same mistakes over and over again and hope for different 
results.

    NTCA, too, shares concerns about coordination. There are a number 
of programs in place today that have done and continue to do good work 
in advancing national broadband objectives, and it is essential that 
any new programs work in concert with and complement these existing 
efforts rather than creating conflicts with them in ways that undermine 
the sustainability of networks already in place. It is also important 
that funds for new future-proof networks are targeted to areas most in 
need, rather than overbuilding existing networks and making the 
hardest-to-serve pockets of rural America even harder to serve as a 
result.

    To make sure we expend new funds efficiently and effectively, NTCA 
believes four principles should guide any broadband infrastructure 
investment:

    1.  Identify the areas most in need and direct funding for new 
networks there first. Start by tackling areas lacking 25/3 Mbps 
broadband, for example. Once those areas are addressed, attention 
should then be turned to the next most-in-need areas, where consumers 
cannot perhaps access 50/5 Mbps broadband. This process should continue 
by moving the bar higher on what constitutes an ``unserved'' area until 
the funding available for deployment is expended.

    2.  Build the best possible networks in these areas in need. Rather 
than repeat the mistakes of the last decade and engaging in 
``incremental deployment'' that is far less efficient and far more 
frustrating for consumers, we should be building networks that are 
built to last. As the government helps to pay for these networks, it 
should be getting a return on that investment over decades rather than 
years or even just months. Even new networks built to deliver 100/20 
Mbps broadband are highly likely to be deemed unsatisfactory in just a 
few years' time due to escalating customer demands, meaning the 
government will have paid for networks that need to be rebuilt again in 
a short time frame--an inefficient result that risks wasting government 
resources and leaving customers with substandard service yet again in 
the future.

    3.  Coordinate among new and existing programs. As noted above, 
there are many programs in place that have enabled robust networks in 
rural areas. These efforts should be part of a comprehensive strategy, 
with new programs targeting funds to areas where existing programs are 
not already in the process of tackling and overcoming broadband 
challenges.

    4.  Leverage Community-Based Expertise. Private operators and 
cooperatives based in their communities have a tremendous track record 
of success in deploying rural broadband. Precisely because they live in 
the areas they serve, they are familiar with the challenges and have 
incentives to make sure their friends, family, and neighbors are well 
served. Any new infrastructure program should prioritize participation 
of these local experienced providers, rather than prioritizing 
providers based upon artificial distinctions such as corporate form.

                                 ______
                                 
Prepared Statement of Heather Buch, Subcommittee Chair, Transportation 
          Steering Committee, National Association of Counties
    Chair Wyden, Ranking Member Crapo and distinguished members of the 
committee, thank you for the opportunity to testify today on the 
importance of restoring our Nation's infrastructure and what tools 
counties need to help advance our shared infrastructure goals.

    My name is Heather Buch, and I serve as the District Five 
Commissioner in Lane County, OR. Lane County is home to nearly 400,000 
residents to whom we provide critical services, including road and 
bridge operation and maintenance, public safety and emergency services, 
public housing, health and human services, and more. We predominantly 
rely on local property taxes to ensure our many infrastructure 
responsibilities are met; however, due to constraints on local revenues 
that are enforced at the State level, a strong intergovernmental 
partnership is critical as we work to meet the challenges of today and 
the future.

    Lane County is in a unique area of the country, ranging from rural 
to urban and stretching from the Cascade Range mountains to the Pacific 
coast. In fact, all of America's counties are highly diverse and vary 
immensely in geography and natural resources, social and political 
systems, cultural, economic and structural circumstances, public health 
and environmental responsibilities. Of the Nation's 3,069 counties, 
approximately 70 percent are considered rural with populations of less 
than 50,000, and 50 percent of these counties have populations below 
25,000. At the same time, there are more than 120 major urban counties, 
where essential services are provided locally to more than 130 million 
county residents each day.

    Collectively owning and operating 44 percent of public road miles 
and 38 percent of the National Bridge Inventory, counties are leaders 
in the Nation's transportation system.\1\ In addition to providing safe 
and efficient options for passenger vehicles and heavy trucks moving 
people and goods along our Nation's roadways, counties also directly 
support 78 percent of public transit systems and 34 percent of public 
airports. Transportation and infrastructure are core public sector 
responsibilities that impact everything from our daily commutes to 
driving commerce around the globe. From building and maintaining roads 
and bridges to providing efficient transit options, counties are a 
driving force connecting communities and strengthening economies.
---------------------------------------------------------------------------
    \1\ http://www.magnetmail.net/actions/
email_web_version.cfm?ep=uo1VB8smspitsBH_2-1mu5d
fsRxmnCw45L2pd1bBAdDc-IzzmpwguMf2-je02BYOuCQQ57cIGa-
vjwChnZJ5dGzPL_zReZH_2zL
T9qnVp42BXmUpFxQirvBDqSOXj6NQ.

    At the county level, our infrastructure duties extend far beyond 
transportation. Counties annually invest $134 billion in the 
construction of infrastructure and the maintenance and operation of 
public works that includes essential community infrastructure, such as 
airports, schools, hospitals, jails, courthouses, parks, broadband 
---------------------------------------------------------------------------
deployment, and water purification and sewage systems.

    Counties are pleased to see that infrastructure continues to be a 
bipartisan topic of discussion. We believe that now is the time to 
seize this exceptional moment and deliver investments that will enhance 
the quality of life for Americans across the country and help improve 
our global competitiveness from the bottom up. To this end, counties 
offer the following considerations:

      Our Nation's infrastructure is in need of immediate, significant 
investments, and now is the time to act.

      Counties play a significant role in the national infrastructure 
network but understand that improving our Nation's infrastructure 
relies on a strong Federal-State-local partnership.

      Given our unique position to support America's infrastructure, 
counties call on our Federal partners to implement additional financing 
tools and dedicated funding streams that will allow us to continue 
providing excellent public services to support our residents and 
communities.

    Our Nation's infrastructure is in need of immediate, significant 
investments, and now is the time to act.

    Counties believe that, given the billion-dollar infrastructure 
backlogs at every level of government that have been further 
exacerbated by the COVID-19 pandemic, Congress must seize this 
opportunity and provide historic investments in our Nation's 
infrastructure.

    The American Society of Civil Engineers recently estimated in the 
2021 Report Card for America's Infrastructure \2\ that, assuming 
Federal infrastructure spending continues at its current rate, a $2.6-
trillion investment gap will emerge over the next 10 years between the 
funding level needed to return our Nation's infrastructure assets to 
states of good repair and the amount actually being invested. This is 
extremely concerning for counties, who along with other local 
governments, are responsible for the vast majority of America's 
transportation network, including 3.1 million public road miles.
---------------------------------------------------------------------------
    \2\ https://www.asce.org/infrastructure/.

    Off-system bridges (OSBs) are of particular concern to counties, 
who collectively own 62 percent--or 227,995--of these often-compromised 
structures. In Oregon, counties are responsible for 55.5 percent \3\ of 
the State's share of OSBs. Representing vital cogs in the national 
system, nearly 50 percent of the National Bridge Inventory is comprised 
of off-system bridges.\4\ Due to their placement off Federal-aid 
highways, these bridges have experienced consistent underinvestment 
resulting in a current backlog of $17.3 billion in deferred maintenance 
and repair needs, as well as serious safety concerns. Safety is always 
at the forefront of local decision-making, and when county officials 
are forced to choose one project over another because of a lack of 
resources, the security of our residents and the many urban travelers 
whose daily commutes take them on our local roads each day is 
compromised.
---------------------------------------------------------------------------
    \3\ https://ce.naco.org/
%2Fapp%2Fprofiles%2FBridges%2FBridges_41000.pdf.
    \4\ https://www.naco.org/sites/default/files/documents/
Bridge%20Profile_National_05.15.19.
pdf.

    This concern extends far beyond just urban counties as 45 percent 
of the Nation's traffic fatalities occur \5\ on rural roadways, though 
only 19 percent of the U.S. population resides here. According to the 
U.S. Department of Transportation, 34 percent of fatalities at public 
at-grade rail crossings occur in rural communities, a factor that is 
contributed to heavily by the 80 percent of railroad crossings in these 
areas that lack active warning devices. Needless to say, the demand for 
investment in safety across local communities, urban, suburban and 
rural, is great.
---------------------------------------------------------------------------
    \5\ https://www.bts.gov/rural.

    Counties play a significant role in the national infrastructure 
network but understand that improving our Nation's infrastructure 
---------------------------------------------------------------------------
relies on a strong Federal-State-local partnership.

    America's counties appreciate recent action by Congress to include 
water, sewer and broadband projects as eligible uses of the direct 
funds provided to counties by the American Rescue Plan Act (Pub. L. 
117-2). However, significant infrastructure needs and backlogs existed 
at the local level prior to COVID-19 and remain today. As we work to 
meet those challenges, new obstacles have been borne from battling the 
global pandemic and come at a time when the charge of county officials 
to protect the health and safety of our residents has grown at a rapid 
rate.

    As owners of more roads and bridges than any other entity and home 
to where the majority of daily commutes both begin and end, counties 
are leading the way in transportation. In total, 1.8 million road miles 
are owned and maintained by counties. In 2019, local resources 
contributed 34 percent of total national funding for public transit--
second only to directly generated revenues, which provided just under 
36 percent. To truly understand the county role in infrastructure,\6\ 
however, it is important to look beyond the ownership stake we have in 
roads and bridges and, instead, holistically view the wide variety of 
other community infrastructure needs county officials are tasked with 
meeting. Counties support over 900 hospitals and invest in the 
construction, operation and maintenance of 90 percent of jails that see 
11 million individuals cycled in and out each year. Annually, we spend 
more than $100 billion on community health centers and hospitals; $61 
billion in the construction of public facilities, like schools and 
libraries; and $22.6 billion on sewage and wastewater management.
---------------------------------------------------------------------------
    \6\ https://naco.sharefile.com/share/view/
s5be17ae6bc4f4e1da050a5e29228fdef.

    More than statistics, counties have real world examples of our 
infrastructure needs that, in some cases, can mean life or death. Last 
year, on Labor Day, the State of Oregon experienced a not uncommon 
scenario--exceedingly high winds coupled with extremely dry conditions. 
It was a perfect recipe for wildfire, and by the end of the day, there 
were seven counties with wildfires that endured through October. In 
Lane County, the Holiday Farm Fire eventually consumed 173,000 acres in 
and around the McKenzie River and destroyed over 400 homes, with one 
individual losing their life. Residents fled the fire with literally 
the clothes on their back. As Lane County continues to recover from 
this devastating event, one of the most important takeaways for our 
counties was uncovering significant vulnerabilities within our 
emergency and community communications system. Prior to the fire, fiber 
was installed on utility poles running along the main highway serving 
our region, and a few microwave towers existed on several mountain and 
ridge tops. Every single pole was destroyed by the fire, as were all 
the mountain top sites, rendering communication and Internet access 
completely nonexistent. While a FIRST Net portable tower was deployed, 
the system is intended for use by first responders, and given the 
terrain of the region, was limited even further to the firefighting 
effort. The Federal Emergency Management Agency deployed to our 
community, but because their efforts are limited to replacing what was 
there prior to the disaster, we remain extremely vulnerable to future 
emergency communication issues. Access to reliable broadband is not a 
concern distinctive to Lane County--65 percent of counties have average 
connection speeds \7\ beneath the Federal Communications Commissioner 
definition of broadband. Any Federal infrastructure package should 
provide considerable additional investments in broadband, a service 
important now more than ever as Americans rely on an Internet 
connection to attend work, school and social events.
---------------------------------------------------------------------------
    \7\ https://ce.naco.org/
?dset=Broadband%20Connections&ind=Download%20Speed.

    While we are doing our part at the local level, 45 states limit the 
ability of counties to raise revenue \8\ in various ways, making the 
intergovernmental partnership vital to meeting our public-sector 
responsibilities. In Oregon, \9\ the ability of counties to levy 
property taxes is restricted by the State, who has imposed an overall 
property tax rate limit of $15 per $1,000 of value. The rate may not 
exceed $5 per $1,000 of value for public school purposes and $10 per 
$1,000 of value for general government purposes. If the property tax 
rate on any piece of property exceeds this limit, the county must 
reduce proportionally the taxes for that property to the limit through 
a process called ``compression.'' Alongside this limitation, the state 
constitution imposes another limit that the assessed value of a 
property unit may not increase by more than 3 percent annually. Since 
counties may not levy any sales taxes in Oregon, we rely heavily on 
property taxes; as such, these limits on property tax revenue 
significantly impact our county budget. Our inability to raise revenue, 
coupled by the extreme loss in revenue due to the COVID-19 pandemic, 
further limits our ability to invest in critical infrastructure 
projects and services.
---------------------------------------------------------------------------
    \8\ https://ce.naco.org/
?dset=State%20Limits%20and%20Mandates&ind=State%20Limits%20
and%20Mandates%20Profiles.
    \9\ https://ce.naco.org/%2Fapp%2Fprofiles%2FDMWL%2FDMWL_41000.pdf.

    For western counties, State restrictions on local revenues can be 
even more impactful, as much of the land within our boundaries is 
considered Federal land, thus removing our ability to collect property 
taxes in these areas. This committee well knows the role that Federal 
forest revenues play in supporting the development and maintenance of 
roads and bridges across the West, and we appreciate the action of the 
chair and ranking member on this matter. Unfortunately, the Secure 
Rural Schools Act has sunset and divisions over Federal forest 
management policies remain. Consequently, Lane County expects to see 
declining amounts from national forest receipts over our coming 
planning horizons, further depleting the availability of our local 
resources to make investments in our community. Until a permanent 
revenue solution for public lands counties can be implemented, we urge 
---------------------------------------------------------------------------
final passage of S. 435, the Secure Rural Schools Reauthorization Act.

    Given our unique position to support America's infrastructure, 
counties call on our Federal partners to implement additional financing 
tools and dedicated funding streams that will allow us to continue 
providing excellent public service.

    Counties, States, and other localities are the main funders of 
infrastructure in the United States. Municipal bonds enable local 
governments to build essential infrastructure projects, such as 
schools, hospitals, and roads. In fact, over the past decade, 90 
percent of infrastructure muni bond financing went to schools, 
hospitals, water and sewer facilities, public power utilities, roads, 
and mass transit. Municipal bonds, along with other Federal financing 
tools, are a key resource for counties in need of infrastructure 
financing. As counties continue to face hundreds of billions of dollars 
in budgetary shortfalls \10\ as a result of our frontline response to 
COVID-19, the tools available to us to make badly needed investments in 
local infrastructure should be expanded, not restricted at a time when 
we need Federal resources most.
---------------------------------------------------------------------------
    \10\ https://www.naco.org/resources/press/fiscal-impacts-covid-19-
could-reach-202-billion-counties-direct-and-flexible-funding.

    We appreciate the work of members of this committee to reintroduce 
the American Infrastructure Bond Act that will provide local 
governments additional financing tools and the flexibility to fulfill a 
wide range of community infrastructure needs. To build on this 
---------------------------------------------------------------------------
progress, America's counties offer the following recommendations:

      Restore the tax exemption for advance refunding bonds: Before 
January 1, 2018, municipal issuers were able to issue single tax-exempt 
advance refunding bonds prior to 90 days before call. This critical 
tool allowed State and local governments to effectively refinance their 
outstanding debt in order to take advantage of more favorable interest 
rate environments or covenant terms. Advance refunding bonds frequently 
provided issuers with the flexibility to lower debt servicing charges 
that would otherwise be a fixed cost. The Government Finance Officers 
Association (GFOA) found that, between 2007 and 2017, there were over 
12,000 tax-exempt advance refunding issuances nationwide which 
generated over $18 billion in savings for tax and ratepayers over the 
10-year period. Prior to their elimination in the Tax Cuts and Jobs Act 
(Pub. L. 115-97), advance refunding bonds made up approximately 27 
percent of issues in 2016. Restoring this important tax exemption would 
require an act of Congress, but it would prove to be one of the most 
effective actions to provide State and local governments with more 
financial flexibility to weather downturns and increase infrastructure 
investment.

      Fully restore the State and Local Tax (SALT) deduction: The SALT 
deduction has been a bedrock principle since the first three-page 
Federal income tax in 1913, and the deduction supports local school 
funding, home ownership, lower middle-income taxes, tailored social 
services, infrastructure development, and local job creation efforts. 
By capping SALT deductibility, Congress shifted the intergovernmental 
balance of taxation and limited State and local control of tax systems. 
Eliminating the $10,000 cap on SALT deductions would improve counties' 
ability to deliver essential public services, such as emergency 
response, public health services and infrastructure development. In 
Lane County, 91 percent of middle-income taxpayers benefited from the 
SALT deduction,\11\ and 63.7 percent of all SALT deductions benefited 
middle income households.
---------------------------------------------------------------------------
    \11\ https://ce.naco.org/%2Fapp%2Fprofiles%2FSALT%2FSALT_41039.pdf.

      Return long-term solvency to the highway trust fund (HTF): 
Returning our Nation's transportation and infrastructure assets to 
states of good repair and beginning to build back better is a tall task 
and a responsibility too large and complex for any single level of 
government to undertake alone. For many areas of the country, the use 
of innovative financing mechanisms and attracting private capital is 
---------------------------------------------------------------------------
simply not possible.

       As such, counties believe that among one of the most critical 
actions the committee can undertake to advance our Nation's 
infrastructure is to provide a permanent fix for the HTF. Counties 
depend on the long-term certainty and solvency of the HTF to deliver 
critical infrastructure projects for our many residents and urge 
Congress to enact a meaningful solution that will counteract the fund's 
looming insolvency. HTF revenue sources that better account for all 
users of the road will be critical as transportation technologies that 
are not reliant on motor fuel continue to be increasingly integrated 
into the national network.

       The State of Oregon, where a vehicle-miles-traveled (VMT) pilot 
has been underway for several years, is currently considering codifying 
the VMT program to require owners of new electric or highly fuel-
efficient vehicles to pay into the State's HTF based on their distance 
driven beginning in 2026. Counties believe that this pilot is 
replicable on a national scale and that Congress should seriously 
consider transitioning toward a VMT that will better account for all 
users of the road and help to shore up the ailing HTF.

       Finally, counties utilize a variety of Federal financing tools 
to build or repair our local transportation assets, including 
Transportation Infrastructure Finance and Innovation Act (TIFIA) loans, 
qualified tax credit bonds, infrastructure banks and public-private 
partnerships. As such, we recommend lawmakers strengthen and increase 
these opportunities that help counties leverage Federal financing for 
capital projects.

      Direct Federal funds to locally owned infrastructure: As the 
form of government closest to the people and the level of government 
responsible for a vast majority of our Nation's infrastructure, 
counties know how to put Federal dollars to work where they are needed 
the most. While we understand the importance of the intergovernmental 
partnership, the ``trickle down'' effect simply does not work for many 
counties, who lack access to both public and private capital for 
infrastructure. Counties agree that transportation and infrastructure 
projects should not be carried out in a silo and should contribute to 
regional connectedness; however, when already isolated communities are 
further cut off from resources by the outage of a local bridge, rural 
communities suffer greatly. As a result of the 47 percent of heavy 
truck vehicle miles traveled that occur on local rural roads, the 
impact of this closed bridge is felt far beyond local economies when 
trucks are forced to travel up to three times longer distances to find 
a passable bridge. Nearly 60,000 bridges in rural communities have 
weight limits or are closed entirely. This is not just a rural issue, 
however, and we urge lawmakers to provide all of America's counties, 
parishes and boroughs with access to direct Federal funds for 
transportation projects.

      Support small issuers: Counties urge Congress to include a 
temporary extension and permanent restoration of proven financing tools 
utilized by State and local governments, schools, hospitals, airports, 
special districts, and other public sector entities to provide 
efficient and low-cost financing for critical investments in 
infrastructure that will move the country forward. Specifically, we 
urge you to increase the bank-qualified borrowing limit from $10 
million to $30 million, and apply the limit at the borrower level, 
which would ensure that small local governments could provide access to 
capital for immediate infrastructure.

      Support resilient energy systems: Counties support Federal 
incentives to promote nationwide energy conservation efforts. To 
facilitate decentralized energy conservation activities, the Federal 
Government should seek input from local government on implementation 
and continue to adequately fund all conservation and fuel assistance 
programs. We support incentives to research and develop renewable 
energy technologies, including wind, solar, geothermal, biomass, 
electricity from landfill gas, and other forms of waste-to-energy which 
will achieve the objective of clean and safe forms of energy. Lastly, 
we support incentives to research and develop energy storage 
technology.

       Local governments support tax incentives, rebates and promotions 
to increase the purchase of lower pollution vehicles by private 
businesses and all levels of government. Federal policy must be 
established to ensure the availability of a refueling infrastructure 
and of competitively priced, reliable alternative fuel and alternative 
fuel vehicles, and such policy should consider its impact on gas tax 
revenues and the HTF before requiring conversion of motor vehicles.

    Importantly, to successfully advance our shared infrastructure 
goals, counties firmly believe that increased or expanded Federal 
financing opportunities cannot come in lieu of direct Federal funding 
streams for locally owned and operated infrastructure.
                               conclusion
    Chair Wyden, Ranking Member Crapo, and members of the committee, 
thank you again for inviting me to testify here today.

    With additional Federal aid and resources, counties across America 
will be able to strengthen our communities and enhance local, regional, 
and State economies by investing in infrastructure.

    We appreciate the bipartisan efforts thus far to invest in 
infrastructure. As you consider further Federal resources, counties ask 
that you provide the tools we need to meet the demands of today and to 
build back better.

                                 ______
                                 
           Questions Submitted for the Record to Heather Buch
                Questions Submitted by Hon. Rob Portman
    Question. According to the Federal Highway Administration, 36 
States have passed public-private partnership-enabling legislation, yet 
the use of this financing tool is still quite small. As Commissioner 
Sheehan noted in opening testimony, CBO states that P3s have accounted 
for only 1-3 percent of spending for highway, transit, and water 
infrastructure since 1990.

    How can we on the Federal level better encourage the use of P3s?

    Answer. On behalf of America's 3,069 counties, the National 
Association of Counties (NACo) offers the following the 
recommendations: positively weighting grant applications that utilize 
private investment; providing technical assistance to mitigate the 
complexities of the process; engaging local organizations, including 
development districts and chambers of commerce, to better facilitate 
the creation of P3s; decreasing the administrative burden of applying 
for Federal grant programs, whether by reducing paperwork and other 
requirements, or by providing the necessary resources for local 
governments to hire additional staff; and increasing public awareness 
of P3s.

    In some instances, rural or more isolated counties are simply 
unable to attract private capital; therefore, in these cases, the 
Federal Government should provide funding opportunities, such as 
through direct competitive grants.

    Question. From 2007-2016, the average annual financing for highway 
infrastructure provided by State Infrastructure Banks amounted to $200 
million, or about 1 percent of new financing by State and local 
governments.

    Can you speak to how we can address the underutilization of State 
infrastructure banks? What makes this form of financing unpalatable for 
State and local infrastructure projects?

    Answer. The Oregon Transportation Infrastructure Bank appoints an 
advisory committee that is comprised of both State and local officials 
and other community stakeholders, which helps ensure counties and other 
local governments are actively involved in project selection--a 
critical factor in the ultimate success of a State infrastructure bank-
financed transportation project.

    Question. In your testimony you listed infrastructure banks as a 
tool that counties utilize for financing infrastructure projects that 
could be strengthened by Congress. While 33 States have authorized the 
creation of an infrastructure bank, I recognize their utilization on 
projects is a small fraction of the current financing for local 
transportation projects.

    Could you go into further detail on your thoughts regarding the 
creation of a Federal infrastructure bank?

    Answer. Counties support an ``all tools in the toolbox'' approach 
to Federal financing and funding of infrastructure projects. A national 
infrastructure bank (NIB) is one such tool. As adopted by the NACo 
Transportation Policy Steering Committee, the NIB resolution states:

    Adopted Policy: The National Association of Counties (NACo) urges 
Congress to enact legislation to create a new National Infrastructure 
Bank (NIB) system in the tradition of George Washington, John Quincy 
Adams, Abraham Lincoln, and Franklin Roosevelt. This proposed bill has 
the following critical points:

    1.  It would create a new NIB by exchanging existing Treasury debt 
for preferred stock in the bank. The proposal is to raise $500 billion, 
out of the $23 trillion in Treasury debt, and put it in the bank. This 
would require no new Federal debt.
    2.  The NIB would pay 2 percent interest above the Treasury yield 
to the investors, with all transactions being federally insured. The 2 
percent would be included in the U.S. budget and not go through 
appropriations. This model has been used in the past, initiated by the 
first Treasury Secretary Alexander Hamilton.
    3.  The NIB would perform as a traditional commercial bank and be 
able to provide financing in the form of loans. The bank would loan $4 
trillion to States, cities, counties, authorities, and multistate 
entities to address the infrastructure crisis in the Nation. Loans 
would be long-term, at Treasury rates and for infrastructure projects 
only.
    4.  There would be a board of directors composed of mainly 
engineers and infrastructure experts, with State, local, and county 
officials with experience in infrastructure construction to assist in 
the implementation of the projects. The bank would report all banking 
transactions to Congress on a regular basis.
    5.  The NIB would create 25+ million new high-paying jobs, which 
would increase the tax base and increase the productivity of the entire 
economy. Previous such entities have increased real GDP by 3-5 percent 
per year, and payback multiples have been anywhere from 2-10 times the 
investment.

                                 ______
                                 
                Prepared Statement of Hon. Mike Crapo, 
                       a U.S. Senator From Idaho
    Thank you, Mr. Chairman, for holding this timely hearing on funding 
and financing options for our Nation's infrastructure.

    Infrastructure investment has traditionally been bipartisan and 
accomplished through regular order. I am encouraged by the productive 
meeting I had last week with President Biden and some of my Republican 
Senate colleagues about the need to modernize and expand our 
transportation system and broadband network in a bipartisan manner.

    The framework Republican Senators discussed with President Biden 
included: roads and bridges, transit, rail, airports, drinking water 
and wastewater infrastructure, port and inland waterways, water 
storage, and broadband infrastructure. Consideration of offsetting the 
cost of infrastructure with a corporate tax rate increase or increases 
in international taxes, especially coming out of the largest negative 
shock to the economy on record, is counterproductive and a non-starter 
on my side of the aisle.

    With the FAST Act extension expiring at the end of September, 
reauthorization of our surface transportation programs should be the 
basis of any infrastructure conversations. As our witnesses will 
discuss, Congress must provide long-term stability and certainty for 
these programs so that transportation agencies, cities, counties, and 
States across the country can make responsible long-term transportation 
planning decisions.

    For the last few transportation authorizations, Congress has made 
the decision to spend more than the receipts going into the highway 
trust fund. In order to advance a comprehensive, long-term 
reauthorization bill, it is important that we do so in a fiscally 
responsible manner. There is no silver bullet for how to pay for 
transportation infrastructure, but historically it has been paid for by 
user fees, which makes sense.

    For many years, the users of transportation infrastructure paid 
fees for that use through the gas and diesel taxes which were deposited 
into the highway trust fund, and then distributed to pay for our 
Nation's roads, bridges, and transit systems. There have been many 
changes to the transportation landscape since Congress last raised the 
gas tax in 1993, such as increased fuel efficiency and a significant 
increase in electric vehicles, or EVs, on the road. With this 
evolution, Congress needs to ensure all users of the transportation 
infrastructure are paying into the highway trust fund.

    To make up the projected $195-billion 10-year shortfall of the 
highway trust fund, Congress needs to think creatively of ways to 
ensure EVs are paying in their fair share. If we are able to identify a 
top-line spending number and go through a bipartisan FAST Act 
reauthorization process, I am ready to work with my colleagues on the 
other side of the aisle to do the hard work of addressing the solvency 
of the highway trust fund. With that, the United States will have the 
funding we need to maintain and modernize our transportation system to 
meet the rapidly evolving landscape of today and in the future.

    To maximize use of taxpayer dollars, we should consider proposals 
to attract private capital for infrastructure projects, repurpose 
unused Federal funds, and improve and expand upon existing 
infrastructure loan programs. We should consider how public-private 
partnerships can fit into our comprehensive infrastructure funding and 
financing approach.

    The Transportation Infrastructure Finance and Innovation Act 
(TIFIA), Railroad Rehabilitation and Improvement Financing Act (RRIFA), 
and Water Infrastructure Finance and Innovation Act (WIFIA) are good 
examples of financing tools that can leverage Federal resources, and we 
should consider ways those programs should be improved and expanded. 
Private Activity Bonds (PABs) for transportation projects have proven 
so attractive that the program is oversubscribed, with the $15-billion 
cap having been met and additional applications outstanding.

    We should consider how PABs and other bond programs can be used to 
help States and localities move their infrastructure projects forward. 
There are hundreds of billions of dollars in unspent funds from COVID 
relief packages. Those funds should be put to work and repurposed to 
fund infrastructure projects.

    Mr. Chairman, the word ``infrastructure'' itself has become 
somewhat of a fluid term lately. As this hearing demonstrates, there is 
bipartisan support for finding long-term funding and financing 
solutions for transportation infrastructure, as well as increasing 
access to broadband connections, particularly in rural America. 
Americans rely heavily upon broadband technology for business, 
government, education, and personal activities.

    Efforts have been underway for some time to address a ``digital 
divide'' in broadband deployment between rural, urban, and suburban 
areas to ensure communities, regardless of size, can access 
technological advancements. The pandemic magnified the importance of 
expansive and reliable broadband technology as so many Americans found 
themselves working and learning from home.

    Mr. Chairman, thank you again for holding this hearing. Let's get 
to work in a bipartisan way to maintain, modernize, and expand 
America's infrastructure.

    I thank the witnesses for their willingness to participate in 
today's hearing.

                                 ______
                                 
         Prepared Statement of Joseph Kile, Ph.D., Director of 
          Microeconomic Analysis, Congressional Budget Office
    Chairman Wyden, Ranking Member Crapo, and members of the committee, 
thank you for inviting me to today's hearing. I will discuss the status 
of the highway trust fund, approaches to paying for highway spending, 
and Federal subsidies for State and local borrowing for highway 
spending.
                                summary
    Federal spending on highways (or, synonymously, roads) totaled $47 
billion in 2019.\1\ Most of those outlays were for grants to State and 
local governments to support their spending on capital projects. (Those 
governments typically spend roughly three times as much of their own 
funds on highways each year, not only on capital projects but also to 
operate and maintain roads.) That $47 billion also included spending 
for Federal programs that subsidize State and local governments' 
borrowing for highway projects; other subsidies for State and local 
borrowing are provided through the tax code.
---------------------------------------------------------------------------
    \1\ That is the latest year for which detailed data are available 
about different types of spending for highways by the Federal 
Government.

    Most Federal spending for highways is paid for by revenues credited 
to the highway account of the highway trust fund, largely from excise 
taxes on gasoline, diesel fuel, and other motor fuels. For more than a 
decade, those revenues have fallen short of Federal spending on 
highways, prompting transfers from the Treasury's general fund to the 
---------------------------------------------------------------------------
trust fund to make up the difference.

    The Congressional Budget Office projects that balances in both the 
highway and transit accounts of the highway trust fund will be 
exhausted in 2022. If the taxes that are currently credited to the 
trust fund remained in place and if funding for highway and transit 
programs increased annually at the rate of inflation, the shortfalls 
accumulated in the highway trust fund's highway and mass transit 
accounts from 2022 to 2031 would total $195 billion, according to CBO's 
baseline budget projections as of February 2021.\2\
---------------------------------------------------------------------------
    \2\ See Congressional Budget Office, ``Details About Baseline 
Projections for Selected Programs: Highway Trust Fund Accounts'' 
(February 2021), www.cbo.gov/publication/51300. CBO's baseline budget 
projections incorporate the assumption that current laws generally do 
not change. Some of the taxes that are credited to the highway trust 
fund are scheduled to expire on September 30, 2022, including the taxes 
on tires and all but 4.3 cents of the Federal tax on motor fuels. 
However, under the rules governing baseline projections, these 
estimates reflect the assumption that all of the expiring taxes 
credited to the fund will continue to be collected after fiscal year 
2022.

    The current authorization for Federal highway programs expires on 
September 30, 2021. As they consider reauthorization, policymakers have 
many decisions to make about how much to spend on highway programs, how 
to pay for them, and the extent to which they want to provide 
additional Federal subsidies for State and local borrowing for highway 
spending.
Revenues Credited to the highway trust fund
    The highway trust fund has two accounts--one for highways and the 
other for mass transit--to which certain fuel and other vehicle-related 
excise tax collections are credited. In CBO's February 2021 baseline 
projections, revenues credited to the highway trust fund in 2022 total 
$43 billion, and outlays from the fund exceed revenues by about $13 
billion.

    Currently, users of highways impose many costs that they do not 
fully pay for, including wear and tear on roads and bridges; delays 
caused by traffic congestion; injuries, fatalities, and property damage 
from accidents; and harmful effects from exhaust emissions. A 
combination of taxes on fuel and mileage that made users pay for more 
of those costs would make use of the system more efficient.

    Policymakers have a number of options to increase the resources 
available in the highway trust fund:

        Policymakers could increase the existing fuel taxes. The tax 
on gasoline has been 18.4 cents per gallon, and the tax on diesel fuel 
24.4 cents per gallon, since October 1993. Increasing those taxes would 
boost the trust fund's revenues. For example, increasing them by 15 
cents per gallon in October 2022 and adjusting them for inflation 
thereafter would raise an estimated $291 billion more in revenues for 
the highway trust fund from 2023 to 2031 than projected in CBO's 
February baseline. Increases of that amount would eliminate the fund's 
shortfall and provide $95 billion for additional spending by 2031. 
However, those increases in fuel taxes would reduce taxable business 
and individual income, resulting in reductions in income and payroll 
tax receipts that would offset about one-quarter of the increase in 
fuel tax receipts.

        Policymakers could institute new taxes or fees, such as taxes 
on vehicle miles traveled (VMT) or a tax or fee on electric vehicles 
(EVs). One option would be to impose a VMT tax on commercial trucks. 
CBO has estimated, using data from 2017, that if such a per-mile tax 
was applied to all commercial trucks on all roads and all of the 
practical steps necessary to implement it were in place, each cent of 
tax would generate $2.6 billion per year. The Federal Government's 
costs of implementing such a tax and ensuring compliance could, 
however, be substantial. Another option, an annual tax on EVs, would 
not have a substantial effect on the trust fund's shortfall over the 
next 10 years because the number of such vehicles is small.

        Alternatively, policymakers could transfer money from the 
Treasury's general fund. Under that option, the Federal Government 
would, in effect, pay for a portion of highway spending in the same way 
that it funds other programs and activities.

    Among the considerations for policymakers is that implementing new 
taxes would probably be more costly for the government than increasing 
current taxes. And some approaches would raise concerns about privacy, 
especially if applied to personal vehicles.

    New approaches to taxing highway use, such as a VMT tax, could be 
assessed through demonstration projects. Those projects could take 
different approaches to key components of a tax, allowing lawmakers to 
assess which approaches were most effective. For example, the projects 
might tax different vehicles and roads, apply different taxes at 
different times of day, and assess or collect tax in different ways.
Federal Support for State and Local Borrowing for Highway Spending
In addition to providing grants from the highway trust fund, the 
Federal Government supports investment in highways by State and local 
governments through several financing programs that subsidize the cost 
that those governments incur when borrowing to pay for that spending. 
From 2007 to 2016, the Federal Government subsidized an average of $20 
billion (in 2019 dollars) per year of new financing for highways that 
State and local governments obtained through tax-preferred bonds, 
direct loan and loan guarantee programs, and funds used to capitalize 
State infrastructure banks (SIBs). Tax-exempt bonds accounted for about 
three-quarters of that borrowing.

    Federal policymakers could offer new programs or expand current 
programs to subsidize State and local governments' borrowing to build 
more roads:

        Policymakers could authorize State and local governments to 
issue more tax-exempt bonds to fund projects undertaken primarily by 
private entities.

        They could introduce a Federal tax credit bond program. 
Depending on its design, such a program could subsidize the same amount 
of borrowing by State and local governments that tax-exempt bonds do, 
but at a lower cost to the Federal Government, by effectively 
eliminating some of the benefits of tax-
exempt bonds that go to higher-income bondholders.

        Or they could extend more Federal loans to State and local 
governments to finance transportation projects.

    In addition, policymakers could allow States to collect tolls on 
Interstate highways, which would constitute an additional revenue 
stream to borrow against.
                    status of the highway trust fund
    The Federal Government's surface transportation programs are 
financed mostly through the highway trust fund, an accounting mechanism 
in the Federal budget that comprises two separate accounts, one for 
highways and one for mass transit. The trust fund records specific cash 
inflows from revenues collected through excise taxes on the sale of 
motor fuels, trucks and trailers, and truck tires; taxes on the use of 
certain kinds of vehicles; and interest credited to the fund. The 
highway trust fund also records cash outflows for spending on 
designated highway and mass transit programs, mostly in the form of 
grants to States and local governments.

    In 2019, $45 billion in revenues and interest were credited to the 
highway trust fund--$39 billion to the highway account and $6 billion 
to the transit account. Most of those revenues came from taxes on 
gasoline and other motor fuels.

    According to CBO's February baseline projections, if the excise 
taxes are continued at their current rates and current funding for 
highway and transit programs increases annually at the rate of 
inflation, the revenues and accumulated balances of the highway trust 
fund will be insufficient to cover spending from either the highway 
account or the transit account, starting in 2022 (see Figure 1). In 
those projections, revenues and interest credited to the highway trust 
fund in 2022 total $43 billion, and outlays exceed revenues and 
interest earnings by about $13 billion.

[GRAPHIC] [TIFF OMITTED] T1821.001


.eps[GRAPHIC] [TIFF OMITTED] T1821.002


    .epsTo cover the shortfalls recorded in the fund's accounts, 
lawmakers have enacted legislation that since 2008 has transferred more 
than $150 billion--mostly from the Treasury's general fund--to the 
highway trust fund. This year, lawmakers transferred $14 billion from 
the general fund--more than $10 billion to the highway account and $3 
billion to the transit account. Such intragovernmental transfers have 
allowed the fund to maintain a positive balance, but they have not 
changed the amount of receipts collected by the government.
                         spending for highways
    Almost all spending on highway infrastructure and transit projects 
in the United States is funded publicly. Although the private sector 
participates in building, operating, and maintaining projects, the 
Federal Government and State and local governments typically determine 
which projects to undertake and how much to spend on them.

    In 2019, the most recent year for which data about highway spending 
by all levels of government are available, the Federal Government spent 
$47 billion on highways--an amount equal to 0.23 percent of gross 
domestic product (GDP). Such spending's share of total economic output 
has, in general, been stable over the past 30 years, though it is only 
half as large as it was in the 1960s, when construction of the 
Interstate highway system expanded (see Figure 2).

    State and local governments spent more than three times as much as 
the Federal Government on highways in 2019--$150 billion, or 0.72 
percent of GDP. Like Federal spending on highways, State and local 
governments' spending as a share of GDP peaked in the 1950s and 1960s, 
when it accounted for about twice the share it has in recent years.

    Two characteristics of the ways that the Federal Government 
typically spends on highways stand out. First, most Federal highway 
funding takes the form of grants to State and local governments, which 
own most public roads in the United States and have broad discretion, 
with some constraints, to spend those Federal funds. Second, Federal 
spending on highways is almost entirely dedicated to capital projects 
that are intended to expand or rehabilitate eligible Federal-aid 
highways (which consist of the Interstate Highway System and most other 
roads except for local roads).

    In 2019, most of the $47 billion that the Federal Government spent 
on highways took the form of grants to State and local governments, 
which own almost all highways. Federal agencies own less than 1 percent 
of public roads (typically, those in national parks and forests, on 
Indian reservations, or on other federally owned land).

    In general, State and local governments decide which projects to 
undertake and, as construction proceeds, receive reimbursements from 
the Federal Government for projects that meet Federal eligibility 
criteria for various programs. Most Federal highway programs set a cap 
on the portion of a project's total costs that a Federal grant may 
cover--typically 80 percent. State and local governments must cover the 
remaining costs with nonfederal funds, such as tax revenues or proceeds 
from issuing municipal bonds.

    Federal highway programs are dedicated almost entirely to capital 
projects rather than to the operation and maintenance of roads. In 
2019, $45 billion (or 96 percent) of Federal spending for highways went 
to capital investment. That spending includes outlays for the purchase 
of structures (such as new highways and bridges) and equipment as well 
as expenditures that improve or rehabilitate structures and equipment 
already in place. Such an allocation between capital and operation and 
maintenance has been typical of Federal spending for highways since the 
1950s.

    Because the Federal Government does not generally own highways, the 
responsibility to operate and maintain them falls to State and local 
governments. Spending patterns reflect that: Operation and maintenance 
accounted for 58 percent of State and local governments' spending on 
highways, net of Federal grants, in 2019. Operation and maintenance 
costs include the costs of providing necessary operating services (such 
as snow removal) and maintaining and repairing existing capital (such 
as filling potholes) as well as the costs of funding other highway-
related programs (such as education about highway safety).

    Unless additional funds are provided to the highway trust fund 
(either through an increase in revenues credited to the fund or through 
additional transfers from general revenues), the disparity between the 
receipts credited to the fund and outlays from the fund will require 
the Department of Transportation to delay its reimbursements to States 
for the costs of construction. CBO estimates that, starting in the 
first half of 2022, balances in the highway account of the trust fund 
will fall to zero, and the department will be unable to reimburse 
States in a timely fashion for the bills presented to the fund. The 
department may choose to more closely manage the timing of 
reimbursements to States before balances reach zero. For example, 
measures considered in the past have included partially reimbursing 
States to align total reimbursements with semimonthly receipts. The 
possibility of delays in payments from the Federal Government increases 
uncertainty among States when they plan transportation projects.
              revenues credited to the highway trust fund
    The Federal Government collects revenues for the highway trust fund 
primarily from taxes on motor fuels. Lawmakers could increase revenues 
by raising those taxes or by instituting new ones.
Sources of Revenues
    Of the revenues credited to the highway trust fund in 2019, $36 
billion (or 82 percent) stemmed from excise taxes on gasoline, diesel 
fuel, and other motor fuels (see Figure 3). Receipts from the tax of 
18.4 cents per gallon on gasoline and ethanol-blended fuel contributed 
the largest amount--$26 billion, or nearly 60 percent of the fund's 
revenues. Receipts from the tax of 24.4 cents per gallon on diesel and 
other fuels totaled $10 billion, or about one-quarter of the fund's 
revenues. The taxes on gasoline and diesel fuel have been in place 
since 1993, and the rates have not been adjusted since then. All but 
4.3 cents of the per-gallon Federal tax on motor fuels are scheduled to 
expire on September 30, 2022.\3\
---------------------------------------------------------------------------
    \3\ In accordance with the rules governing baseline projections 
specified in the Balanced Budget and Emergency Deficit Control Act of 
1985, CBO's baseline revenue estimates reflect the assumption that all 
the expiring taxes credited to the fund will continue to be collected 
after fiscal year 2022.

    If those taxes were extended at their current rates, revenues from 
gasoline and diesel-fuel taxes would decline at a rate of less than 1 
percent per year through 2031 following an economic recovery after the 
disruptions caused by the 2020-2021 coronavirus pandemic, CBO projects. 
Factors contributing to that decline include the rising fuel economy of 
vehicles and the slow rate of growth of the total number of miles 
---------------------------------------------------------------------------
traveled by vehicles.

    Not all of the receipts from the excise taxes on motor fuels are 
dedicated to highway spending. A portion of those receipts--2.86 cents 
per gallon, which amounted to about $6 billion in 2019--goes to the 
transit account of the highway trust fund. In addition, 0.1 cent per 
gallon goes to the Environmental Protection agency's leaking 
underground storage tank trust fund, which supports programs run by 
State and local governments that prevent and clean up leaks from 
underground petroleum storage tanks.

[GRAPHIC] [TIFF OMITTED] T1821.003


    .epsRevenues from three other taxes, which are specific to heavy 
vehicles, are also credited to the highway trust fund. The excise tax 
on trucks and trailers--equal to 12 percent of the sales price of 
tractors, trucks, and trailers that exceed certain weights--accounted 
for 12 percent of the trust fund's revenues in 2019. A tax on the use 
of heavy vehicles (a $100 to $550 annual tax on trucks over 55,000 
pounds) and an excise tax on certain tires for heavy trucks contributed 
smaller amounts to the fund. (That excise tax on tires is scheduled to 
expire on September 30, 2022.)

    In addition to those taxes, various fees and interest on invested 
balances, totaling about $1 billion per year, are credited to the trust 
fund.
Options
    Lawmakers have several options for increasing resources in the 
highway trust fund. One option is to increase existing taxes on 
gasoline and diesel fuel. Alternatively, lawmakers could impose new 
taxes on vehicle miles traveled, on freight movement, or on electric 
vehicles. Finally, the Congress could make additional transfers from 
the Treasury's general fund to the highway trust fund.

    Increase Existing Fuel Taxes. CBO analyzed two options that would 
increase Federal excise tax rates on gasoline and diesel fuel by 15 
cents or 35 cents per gallon and adjust them to grow with inflation 
thereafter.

    According to estimates by the staff of the Joint Committee on 
Taxation (JCT), increasing the tax rates on fuel by 15 cents in October 
2022 and indexing them to the consumer price index thereafter would 
increase revenues to the highway trust fund by $26 billion in 2023. 
Over the 2023-2031 period, cumulative fuel-tax receipts credited to the 
highway trust fund would exceed the amount in CBO's February baseline 
projections by $291 billion. An increase of that amount would eliminate 
the projected cumulative shortfall in the highway trust fund and 
provide an additional $95 billion in revenues to the fund by 2031. 
Interest payments on any accumulated balances would further increase 
the resources available in the trust fund.

    Increasing the tax rates on fuel by 35 cents in October 2022 and 
indexing them to the consumer price index thereafter would increase 
revenues to the highway trust fund by $60 billion in 2023. The 
cumulative fuel-tax receipts credited to the highway trust fund over 
the 2023-2031 period would total an estimated $627 billion more than 
the amount in CBO's February baseline projections.

    However, those increases in fuel taxes would reduce Federal income 
and payroll tax receipts by decreasing taxable business and individual 
income. As a result, the net budgetary effects through 2031 would be 
smaller: deficit reductions of $224 billion and $485 billion, 
respectively.

    Institute New Taxes or Fees. Another option is to impose new taxes 
or fees that better align what people pay for using roads with the cost 
of building those roads. The most recent national study of how 
different types of vehicles contribute to the highway costs that 
Federal programs pay for was published by the Federal Highway 
Administration (FHWA) in 2000. Passenger vehicles constituted the 
largest group of vehicles in use and were estimated to account for 
about 60 percent of Federal highway costs in 2000, even though their 
estimated cost per mile of highway use was the lowest at 0.8 cents.

    Costs attributed to trucks accounted for the remaining 40 percent 
of Federal highway costs, but trucks provided about one-third of the 
highway trust fund's revenues. For each mile they traveled in 2000, 
combination trucks (that is, tractors pulling one or more trailers) 
were estimated to impose a cost of 8.4 cents. For all trucks, the 
estimated cost per mile traveled ranged from 2.2 cents for the trucks 
carrying the lightest loads to 20.3 cents for those with the heaviest 
loads.\4\
---------------------------------------------------------------------------
    \4\ See Federal Highway Administration, Addendum to the 1997 
Federal Highway Cost Allocation Study Final Report (May 2000), Tables 4 
and 6, www.fhwa.dot.gov/policy/hcas/addendum.cfm.

    More recently, some States have calculated cost shares for 
different types of vehicles that are similar to the estimates in the 
FHWA study. In 2019, Oregon estimated that light vehicles (mainly cars 
and other passenger vehicles) would account for about two-thirds of 
State highway costs in 2020 and heavy vehicles for about one-third.\5\ 
As the Oregon report noted, however, highway spending by State 
governments includes maintenance costs, such as snow removal and 
pothole patching, whereas Federal spending does not.
---------------------------------------------------------------------------
    \5\ See Oregon Department of Administrative Services, Office of 
Economic Analysis, Highway Cost Allocation Study, 2019-2021 Biennium 
(prepared by ECONorthwest, 2019), www.
oregon.gov/das/OEA/Pages/hcas.aspx.

    In recent years, revenues credited to the highway trust fund have 
declined. Because of improvements in fuel efficiency, drivers use less 
fuel and therefore pay less in fuel taxes to travel the same distance. 
Policymakers would have to make a number of decisions about how to 
design and implement new taxes in order to reach intended revenue 
targets and address highway users' equity and privacy concerns in the 
---------------------------------------------------------------------------
administration of those taxes.

    Impose a VMT Tax. Instituting a tax on vehicle miles traveled would 
charge all vehicles for their highway use regardless of the vehicle's 
fuel efficiency or energy source. Such a tax could help allocate 
resources efficiently by making users pay for the costs they impose. 
However, it would present several challenges. A VMT tax would be more 
costly to administer than the current excise taxes on fuels. In 
addition, such a tax would raise privacy concerns if calculating and 
collecting the tax required the government to track people's movement 
and use of vehicles. Apart from those challenges, a VMT tax would have 
implications for equity that are similar to those of fuel taxes--
namely, the burden, relative to income, would be greatest for lower-
income households because the money paid in taxes for highway use would 
constitute a larger share of their total income than of higher-income 
households' total income.

    Limiting a VMT tax to only commercial trucks would raise fewer of 
those concerns. Because many trucking companies already track their 
vehicles, implementing a VMT tax on only commercial trucks would 
require overcoming fewer administrative and privacy hurdles than 
implementing such a tax on all vehicles would.

    To establish a truck VMT tax, lawmakers would have to consider 
three sets of questions:

          Which types of trucks would be subject to the tax, and 
        travel on which roads would be subject to the tax?

          What would the rates be for different trucks and for 
        different roads?

          How would the tax be assessed, and how would payments be 
        made?


 Table 1.--Estimated Annual Revenues From a VMT Tax of 5 Cents per Mile
                    if One Had Been in Place in 2017
                        Billions of 2017 Dollars
------------------------------------------------------------------------
                                                           Combination
                                            All Trucks      Trucks \1\
------------------------------------------------------------------------
All Roads                                         12.8              8.0
 
Interstates and Arterial Roads                    10.1              7.0
 
Interstates                                        5.3              4.2
------------------------------------------------------------------------
Data source: Congressional Budget Office. See www.cbo.gov/publication/
  57206#data.
 
VMT = vehicle miles traveled.
 
\1\ Tractors pulling one or more trailers.


    Establishing and operating a program to collect a VMT tax on 
commercial trucks would entail not only costs to set up the program, 
including capital costs for new equipment, but also ongoing 
administrative and enforcement costs that are likely to be higher than 
the costs to administer fuel taxes. Whereas gasoline and diesel-fuel 
taxes can be administered at low cost because they are collected from a 
small number of firms (the taxes are assessed at roughly 1,300 fuel 
distribution terminals nationwide, and the number of distinct firms is 
smaller), a VMT tax would be collected from truck owners and thus would 
have a larger share of its gross revenues offset by implementation 
costs.\6\
---------------------------------------------------------------------------
    \6\ Internal Revenue Service, ``Terminal Control Number (TCN)/
Terminal Locations Directory'' (accessed May 12, 2021), https://
go.usa.gov/xV5PB.

    In a 2019 analysis, CBO considered the effects on revenues of 
several possible formulations of a VMT tax on commercial vehicles.\7\ 
One example suggested that if a 5-cent tax per mile traveled by trucks 
had been in place in 2017, it would have generated between $4 billion 
and $13 billion in revenues that year, depending on the types of trucks 
and roads that the tax applied to. If a per-mile tax was applied to all 
commercial trucks on all roads, each cent of tax would generate $2.6 
billion. Taxing all trucks, including box and large pickup trucks, 
would raise more revenues than taxing only combination trucks. 
Similarly, revenues would be greater if the tax applied to travel on 
all public roads than they would be if it applied only to travel on 
Interstates or on Interstates and arterial roads (see Table 1).
---------------------------------------------------------------------------
    \7\ See Congressional Budget Office, Issues and Options for a Tax 
on Vehicle Miles Traveled by Commercial Trucks (October 2019), 
www.cbo.gov/publication/55688.

    Those estimated revenues do not include any offset to account for 
reduced revenues from income and payroll taxes. Such an offset, which 
CBO and JCT employ when estimating the effects of legislative proposals 
that would raise excise tax revenues, would vary over time, depending 
on tax rates and economic projections. In calendar year 2021, the 
offset is 21 percent.\8\
---------------------------------------------------------------------------
    \8\ Joint Committee on Taxation, Updated Income and Payroll Tax 
Offsets to Changes in Excise Tax Revenues for 2021-2031, JCX-11-21 
(February 23, 2021), www.jct.gov/publications/2021/jcx-11-21/.

    More recently, JCT has estimated the change in Federal revenues 
that would result from imposing a new excise tax of 30 cents per mile 
on freight transport by heavy trucks, starting January 1, 2022. Such a 
tax, applied only to certain heavy trucks while carrying freight, would 
increase net revenues to the Federal Government by $33 billion in 2023, 
the first full year it would be in place. From 2022 through 2031, 
---------------------------------------------------------------------------
Federal revenues would increase by $337 billion.

    Those estimates, which are net of reductions in income and payroll 
tax receipts that would partially offset the increase in excise taxes, 
reflect an assumption that an effective administrative framework is in 
place when the tax goes into effect. That would be challenging, 
however. Such a framework would require that an electronic device that 
was either acquired by taxpayers or built into vehicles by 
manufacturers be used to track miles. Furthermore, the information 
logged by the device would need to be securely and accurately 
transmitted to the Internal Revenue Service (IRS), and an independent 
verification system would be required for successful collection of the 
tax. If the IRS did not have an effective and automated way to match 
individual trucks and railcars to particular taxpayers and verify that 
the miles reported were accurate, some taxpayers might underreport 
their mileage or fail to report any mileage at all. If effective 
electronic data matching was not implemented, discrepancies would only 
be caught by auditing, which requires significant resources. At 
present, those systems do not exist, and their development would take 
both time and government resources.

    Furthermore, the number of taxpayers and vehicles subject to the 
tax would be substantial. Many of those taxpayers would have no prior 
excise tax filing requirement and no experience with the excise tax 
system. As a result, the IRS would need to undertake significant 
outreach to educate them about the new tax and the recordkeeping it 
would require. The amount of revenues collected from a tax on vehicle 
miles depends greatly on the extent of compliance, and JCT's estimate 
should be viewed as entirely conceptual, because it does not take into 
account those factors.

    Institute a Tax or Fee on Electric Vehicles. Under current law, 
drivers of EVs pay little or no Federal or State fuel taxes. (EVs 
include plug-in hybrid vehicles, which combine a gasoline engine with a 
battery-powered electric motor that can be recharged by plugging it 
into an external electricity source, as well as all-electric vehicles, 
which run solely on battery power.) However, many States have begun 
charging owners of EVs an annual fee, typically from $50 to $200.

    In 2019, total Federal gasoline taxes paid for each light-duty 
vehicle averaged about $100. If the Congress imposed an annual tax of 
$100, starting in October 2021, on all light-duty electric vehicles, 
the revenues generated by that tax would average about $0.2 billion per 
year from fiscal years 2022 through 2026. That amount would equal 1.6 
percent of the highway trust fund's cumulative shortfall over that 5-
year period, according to CBO's baseline budget projections as of 
February 2021.\9\ Such a tax would be similar to the existing annual 
use tax on heavy vehicles in that it would apply to all vehicles with a 
certain characteristic--in this case, that they run on electricity.\10\ 
If the tax was not applied to plug-in hybrids, the amount of money 
collected would be smaller, and operators of those vehicles would not 
have to pay both that tax and gasoline taxes.
---------------------------------------------------------------------------
    \9\ Congressional Budget Office, ``Details About Baseline 
Projections for Selected Programs: highway trust fund Accounts'' 
(February 2021), www.cbo.gov/publication/51300.
    \10\ See Joint Committee on Taxation, Overview of Selected 
Provisions and Options Relating to Funding and Financing Infrastructure 
Investments, JCX-2-20 (January 27, 2020), www.jct.gov/publications/
2020/jcx-2-20.

    Those estimates rely on the Energy Information Administration's 
projections of the number of light-duty electric vehicles and on the 
FHWA's estimates of fuel consumption by light-duty vehicles.\11\ CBO's 
estimate of revenues from a tax on electric vehicles does not account 
for two factors, however. One is that imposing such a tax would reduce 
taxable business and individual income, resulting in decreases in 
income and payroll tax receipts that would not affect the highway trust 
fund but would, in the overall budget, partially offset the amount of 
money collected from the new tax. In addition, the estimate does not 
account for the cost of the administrative and auditing systems that 
would have to be in place once the tax went into effect. The 
development of such a framework would take time and funding. Outreach 
to owners of electric vehicles would be necessary as well.
---------------------------------------------------------------------------
    \11\ U.S. Energy Information Administration, Annual Energy Outlook 
2021 (February 2021), Table 39, www.eia.gov/outlooks/aeo/; and Federal 
Highway Administration, Office of Highway Policy Information, ``Highway 
Statistics 2019'' (November 2020), Table VM-1, https://go.usa.gov/
xHdwq.

    Establish a Highway Freight Tax. An alternative option for raising 
highway revenues would be to institute a new tax on freight traveling 
by highway that was similar to the taxes currently collected on freight 
transported by plane or by ship. Taxes on freight transportation could 
raise a substantial amount of money relative to the shortfall in the 
highway trust fund, but the amount of revenues generated would depend 
on what was taxed and what rate was set. Implementing a highway freight 
tax would require policymakers to make decisions about which freight 
shipments would be taxed and to design and implement a system to 
collect those taxes. Those choices would determine the capital costs of 
setting up the system as well as the ongoing costs to administer it and 
---------------------------------------------------------------------------
enforce collections.

    The taxes on freight transported by plane and by ship provide two 
different models of how a tax on freight transported by trucks might 
work. The tax on domestic cargo transported by air is one of several 
sources of revenues credited to the airport and airway trust fund--the 
primary funding source for the Federal Aviation Administration and for 
Federal grants to airports. If policymakers used that tax as a model 
for designing a freight tax on cargo transported by truck, they would 
need to decide which shipments to include and which shipping fees to 
tax. A trucking industry association reported that total revenues for 
the industry were about $800 billion in calendar year 2019, though that 
includes only primary shipments (that is, the first movement of freight 
from an origin to a destination), not secondary shipments by truck.\12\
---------------------------------------------------------------------------
    \12\ American Trucking Association, ``Economics and Industry Data'' 
(accessed May 10, 2021), www.trucking.org/economics-and-industry-data.

    Cargo transported by ship is taxed differently. The freight tax on 
ship cargo, which through the harbor maintenance trust fund provides 
half of the funds for Federal spending on harbor maintenance, is 
assessed on the value of domestic and imported cargo moving through 
ports on the coasts and Great Lakes. (Exports are not subject to the 
tax because the Constitution forbids the taxation of exports.) 
Policymakers seeking to implement a similar tax on freight shipped by 
trucks over the Nation's highways would face decisions about which 
cargo would be subject to such a tax and about how to value those 
shipments. In 2017, the value of shipments sent by truck in the United 
States--including intermediate and finished goods and imported and 
exported goods--totaled nearly $10.5 trillion.\13\
---------------------------------------------------------------------------
    \13\ Census Bureau, ``CFS Preliminary Report: Shipment 
Characteristics by Mode of Transportation: 2017'' (accessed May 10, 
2021), https://go.usa.gov/xvuZG.

    Transfer General Revenues. Since 2008, lawmakers have transferred 
more than $150 billion from general revenues to the highway trust fund. 
Most recently, in October 2020, the Continuing Appropriations Act, 2021 
and Other Extensions Act (Public Law 116-159) authorized a transfer of 
more than $10 billion to the highway account and $3 billion to the 
transit account. Further transfers could supplement the revenues 
collected from the excise taxes dedicated to highway and transit 
programs. In CBO's 10-year baseline projections, which reflect the 
assumptions that excise taxes are continued at their current rates and 
that current funding for highway and transit programs increases 
annually at the rate of inflation, outlays from the highway account 
exceed accumulated balances and annual cash inflows in 2022, as do 
outlays from the transit account. In the highway account, the 
cumulative shortfall over the 2022-2031 period is projected to be $141 
billion; the cumulative shortfall in the transit account over the 2022-
---------------------------------------------------------------------------
2031 period is projected to be $55 billion.

    Using general revenues to fund Federal highway spending on an 
ongoing basis would have the effect of decoupling spending from the 
user charges that pay for that spending, but that approach has two 
advantages. First, if taxes were increased to pay for highway programs, 
the incremental costs of collection would be negligible because income 
taxes and other broad-based taxes are already in place. In addition, 
compared with several of the other options for increasing the amounts 
credited to the highway trust fund, funding highways through broad-
based taxes would have the advantage of not imposing a larger burden, 
relative to income, on lower-income households.

    Funding highway programs with general revenues instead of taxes on 
highway users would also have some disadvantages. If spending on other 
programs was reduced to pay for highway programs, the benefits of 
highway investments would be at least partially offset by a reduction 
in the benefits that would have been provided by that other spending. 
If, instead, lawmakers chose to pay for highway programs by taking on 
additional debt, such a policy would tend to slow the economy in the 
long term by reducing the amount of money available for private 
investment.\14\ Finally, if highway spending was less connected to 
highway-use taxes, users would have a reduced incentive to drive less 
or to conserve fuel, and any gains in fairness and efficiency from a 
system in which users pay for the benefits they receive would be 
reduced or eliminated.
---------------------------------------------------------------------------
    \14\ See Congressional Budget Office, The Macroeconomic and 
Budgetary Effects of Federal Investment (June 2016), www.cbo.gov/ 
publication/51628.
---------------------------------------------------------------------------
   federal support for state and local borrowing for highway spending
    In addition to providing grants to State and local governments to 
pay for highway capital projects, the Federal Government also supports 
State and local investment in highways through a variety of mechanisms 
that reduce the cost of their borrowing. In some cases, that Federal 
support comes through forgone Federal tax revenues. Other mechanisms 
appear as spending in the Federal budget. The Federal cost of each 
dollar of financing provided to State and local governments varies for 
the different mechanisms.

    To finance investments in highways, State and local governments 
issue bonds to obtain funds that they repay over time; to a lesser 
extent, they also borrow from the Federal Government. Financing allows 
State and local governments to pay for highways and other 
infrastructure over a period that more closely matches the useful life 
of that infrastructure. Financing can be particularly attractive when a 
government does not have the resources on hand that are required to 
fund a desired investment. However, financing is not a source of 
revenues; it is a means of making future State and local revenues 
available to pay for projects sooner. Future revenues committed to 
paying back funds that are borrowed today will not be available to pay 
for projects in the future.

    Of the available federally supported financing mechanisms, tax-
preferred bonds are the one that States and localities have used most 
frequently to finance highway infrastructure. Most of those tax-
preferred bonds are tax-exempt bonds, but tax credit bonds, which are 
no longer authorized to be sold, have been used in the past and still 
affect the Federal budget. Another financing mechanism, direct Federal 
credit programs, offers loans or loan guarantees to State and local 
governments for highway projects. Finally, States can establish 
infrastructure banks to finance highway projects, but the use of that 
financing mechanism for such purposes is not widespread.

    From 2007 to 2016, CBO estimates, an average of $20 billion (in 
2019 dollars) each year, or about one-fifth of the public sector's 
total capital spending on highways, involved federally supported 
financing.\15\ That federally supported financing accounted for 37 
percent of the $54 billion (in 2019 dollars) that State and local 
governments spent, on average, each year for highway capital projects 
from funds other than Federal grants over that period.
---------------------------------------------------------------------------
    \15\ See Congressional Budget Office, Federal Support for Financing 
State and Local Transportation and Water Infrastructure (October 2018), 
www.cbo.gov/publication/54549.
---------------------------------------------------------------------------
Tax-Preferred Bonds
    State and local governments frequently issue bonds, which they sell 
to investors, to raise money to pay for capital investments in highways 
and other infrastructure. Tax-exempt bonds are the most frequently used 
federally supported financing mechanism. The interest paid on such 
bonds is generally exempt from Federal income tax, so issuers can pay a 
lower interest rate than private bonds would pay and still attract 
investors. But to attract enough investors, issuers must pay a higher 
interest rate than they would need to pay to attract some investors. 
Some of the Federal subsidy goes to those investors who would have 
purchased the bonds at a lower interest rate and thus does not provide 
a benefit to the issuer.

    Although the Federal Government does not currently authorize State 
and local governments to issue tax credit bonds, when such bonds were 
issued in the past, the Federal subsidy was paid either as an annual 
credit against bondholders' Federal income tax liability (instead of, 
or sometimes in addition to, the interest that typically would be paid) 
or as a direct payment to the bonds' issuer that was equal to a portion 
of the interest paid to the bondholder. All of the benefit of the 
Federal subsidy for tax credit bonds could, therefore, go to the State 
or local government issuing the bond.

    Federal subsidies for tax-preferred bonds are paid through 
reductions in taxes or spending from the general fund, so neither tax-
exempt bonds nor tax credit bonds affect outlays from the highway trust 
fund.

    Tax-Exempt Bonds. From 2007 to 2016, State and local governments 
issued an average of $15 billion (in 2019 dollars) of new tax-exempt 
bonds for highway projects per year (see Table 2). Such bonds accounted 
for about three-quarters of the new federally supported highway 
financing in those years.\16\ State and local governments rely on 
several different sources of funds to repay that borrowing, including 
general revenues and fuel and vehicle-related taxes. In addition, some 
highway projects generate revenues to repay bondholders from tolls. 
State and local governments may also issue grant anticipation revenue 
vehicle (GARVEE) bonds, which are backed by expected future Federal 
grants. All of those financing options provide State and local 
governments substantial latitude in choosing which public-purpose 
projects to finance with bond proceeds.
---------------------------------------------------------------------------
    \16\ That amount does not include the issuance of ``refunding'' 
bonds, which are used to pay off bonds that have already been issued.

    Another type of tax-exempt bond, qualified private activity bonds 
(QPABs), may be used to finance projects that are undertaken mainly by 
private entities. The State or local government issues such bonds on 
the private entity's behalf after receiving approval from the Federal 
Department of Transportation. The total amount authorized to be issued 
---------------------------------------------------------------------------
as highway QPABs nationwide is currently capped at $15 billion.

    For every dollar of tax-exempt bonds with a 20-year repayment 
period issued in 2021, Federal tax revenues would be reduced by 23 
cents, CBO estimates, because the interest paid on those bonds would be 
exempt from Federal taxes. If the average annual amount of new bond 
financing from 2021 to 2025 was the same as it was from 2007 to 2016, 
the Federal revenues forgone for those bonds would be about $3 billion 
per year.


 Table 2.--Selected Federally Supported Mechanisms That State and Local
            Governments Use to Finance Highway Infrastructure
------------------------------------------------------------------------
                                     Estimated
                                  Federal Cost of
                Average Annual    New  Financing
                Amount of New       Provided in     Type of
  Mechanism    Financing, 2007   Fiscal Year 2021   Federal    Examples
              to 2016 (billions     (cents per      Support
               of 2019 dollars)       dollar
                                   financed) \1\
------------------------------------------------------------------------
Tax-Exempt                  15   23                Forgone    Traditiona
 Bonds                                              tax        l tax-
                                                    revenues   exempt
                                                               governmen
                                                               t bonds;
                                                               grant
                                                               anticipat
                                                               ion
                                                               bonds;
                                                               qualified
                                                               Private
                                                               Activity
                                                               Bonds
 
Tax Credit               4 \2\   28 percent less   For        Build
 Bonds                            than tax-exempt   traditio   America
                                  bonds providing   nal tax    Bonds
                                  the same          credit
                                  subsidy to        bonds,
                                  issuers \3\       forgone
                                                    tax
                                                    revenues
                                                    ; for
                                                    direct-
                                                    pay
                                                    bonds,
                                                    such as
                                                    Build
                                                    America
                                                    Bonds,
                                                    mandator
                                                    y
                                                    spending
Direct                       2   1 (FCRA           Discretio  TIFIA
 Federal                          accounting); 24   nary       program
 Credit                           (fair-value       appropri
 Programs                         accounting) \4\   ations \
                                                    5\
------------------------------------------------------------------------
Data source: Congressional Budget Office. See www.cbo.gov/publication/
  57206#data.
FCRA = Federal Credit Reform Act of 1990; TIFIA = Transportation
  Infrastructure Finance and Innovation Act.
\1\ The estimate for tax-exempt bonds is based on 20-year financing; the
  estimate for direct Federal credit programs is for loans from the
  TIFIA program, which commonly have terms of 30 to 35 years. All
  estimates are discounted present values--that is, they express related
  current and future cash flows as an equivalent lump sum paid when the
  financing is provided.
\2\ The average reflects the Build America Bonds that were issued for
  highway projects in 2009 and 2010, the only 2 years in which those
  bonds were authorized to be sold.
\3\ No current program allows such bonds to be issued for transportation
  infrastructure.
\4\ These estimates are for direct loans from the TIFIA program. The
  FCRA estimate is from the Office of Management and Budget. CBO's fair-
  value estimate reflects the market value of the financial risk
  associated with the program.
\5\ The largest direct Federal credit program for transportation, the
  TIFIA program, is formally funded by contract authority, which is a
  form of mandatory budget authority. However, use of that contract
  authority is controlled by limitations on obligations contained in
  annual appropriation acts.


    Much of that Federal cost represents benefits to the State and 
local governments that issue the bonds (by allowing them to offer a 
lower interest rate on their bonds), but some of that cost goes to 
benefits that accrue only to certain bondholders. Bondholders with 
higher marginal tax rates save more than those with lower marginal tax 
rates. To appeal to some investors whose tax rates are lower or who 
find the bonds less attractive for other reasons, bond issuers must 
offer interest rates that are higher than those required to attract 
investors with higher tax rates. The benefits received by those 
bondholders who save more in taxes than is necessary to compensate them 
for the lower interest rates of the tax-exempt bonds represent costs to 
the Federal Government that do not benefit the bond issuers.

    Tax Credit Bonds. The Federal Government has also supported the 
issuance of tax credit bonds by State and local governments at certain 
times. Most recently, State and local governments were authorized to 
issue Build America Bonds in 2009 and 2010. Those direct-pay tax credit 
bonds required the Federal Government to make cash payments to the 
bonds' issuer equal to a portion of the interest that the issuer paid 
to bondholders. That allowed the issuer to offer a higher rate of 
return on the bonds, which was necessary to offset the tax liability 
that bondholders would incur on the interest they received. For every 
$100 in interest paid to holders of Build America Bonds, an issuer 
would receive $35 from the Federal Government, resulting in a credit 
rate of 35 percent. For tax credit bonds that were authorized in 
earlier periods, the form of Federal support differed: An annual 
Federal income tax credit was provided to bondholders instead of, or in 
addition to, the interest that would typically be paid on the bonds.

    The cost to the Federal Government of tax credit bonds depends on 
the amount of subsidy that is authorized. Tax credit bonds could, 
however, provide the same amount of support to their issuers as tax-
exempt bonds at a Federal cost that is 28 percent lower than that of 
tax-exempt bonds, CBO estimates. That difference exists because the 
entire Federal cost of a tax credit bond benefits the issuer, whereas 
part of the cost of tax-exempt bonds provides a subsidy to bondholders 
with high marginal tax rates.
Direct Federal Credit Programs
    The Transportation Infrastructure Finance and Innovation Act 
(TIFIA) program provides credit assistance to State and local 
governments primarily for highway and mass transit infrastructure, 
although it can be used for a broad range of surface transportation 
projects. Spending for the TIFIA program comes out of the highway trust 
fund.

    The Department of Transportation must approve a State or local 
government's application for TIFIA assistance. To qualify, a project 
generally must cost at least $50 million, though the minimum cost is 
lower for rural or local projects ($10 million) and for intelligent 
transportation system projects ($15 million). Projects receiving TIFIA 
assistance are expected to attract other public and private investment 
in addition to the Federal support. Examples of TIFIA-funded projects 
include the Central 70 Project in Colorado, which is redesigning, 
reconstructing, and adding capacity to a section of Interstate 70 in 
Denver; the Monroe Expressway toll road in North Carolina; and the 
Portsmouth Bypass in Ohio.

    The TIFIA program lends at Treasury bond rates for up to 35 years. 
In addition, repayment is deferred until 5 years after a project is 
substantially complete, and TIFIA loans have a subordinated status, 
meaning that a project's other lenders and equity investors retain 
rights to be repaid before the Federal Government (unless the borrower 
defaults and enters bankruptcy, in which case the TIFIA loan takes a 
priority equal to that of the project's senior debt). In practice, 
TIFIA loan amounts have typically been limited to about 33 percent of a 
project's eligible costs, though borrowers may apply for loans of up to 
49 percent of eligible costs.

    The budgetary cost of TIFIA loans depends on the riskiness of the 
loans made and thus varies from year to year. In 2019, TIFIA provided 
about $1.5 billion in loans; to do so, it used $98 million of its 
budget authority at an estimated subsidy rate of 6.3 percent, or a 
Federal cost of 6.3 cents per dollar financed.\17\ To estimate the 
subsidy rate for loans made in a given year, the Department of 
Transportation uses a model that it recently updated in consultation 
with the Treasury Department and the Office of Management and Budget 
(OMB). Using that model, OMB estimates that the subsidy rate of loans 
made in 2021 will be 1 percent.\18\
---------------------------------------------------------------------------
    \17\ Budget authority is the authority provided by law to incur 
financial obligations that will result in immediate or future outlays 
of Federal Government funds. The subsidy rate is an estimate of how 
much a type of credit assistance from a given program costs the Federal 
Government per dollar disbursed; it is calculated according to the 
method specified in the Federal Credit Reform Act of 1990. For 
budgetary purposes, the subsidy rate is calculated by the Office of 
Management and Budget and is applied to the amounts appropriated to a 
Federal credit program to determine the volume of loans the program can 
provide. See Office of Management and Budget, Budget of the U.S. 
Government, Fiscal Year 2020: Analytical Perspectives (March 2019), 
Table 22-2, www.govinfo.gov/app/details/BUDGET-2020-PER/; and Federal 
Highway Administration, Center for Innovative Finance Support, 
``Transportation Infrastructure Finance and Innovation Act (TIFIA)'' 
(accessed May 10, 2021), https://go.usa.gov/xvJxs.
    \18\ Office of Management and Budget, Budget of the U.S. 
Government, Fiscal Year 2021: Credit Supplement (February 2020), Table 
1, www.govinfo.gov/app/details/BUDGET-2021-FCS.

    Those official budgetary estimates do not reflect the cost of 
market risk--the risk that arises because borrowers are more likely to 
default on their debt obligations when the economy is performing 
poorly.\19\ Taking that risk into account, CBO estimates that the loans 
made under the program in 2021 will have a subsidy rate of 24 percent. 
Those rates may increase in subsequent years when Treasury interest 
rates are projected to rise as the economy recovers from the 
disruptions caused by the pandemic.
---------------------------------------------------------------------------
    \19\ Market risk is the component of financial risk that remains 
even after investors have diversified their portfolios as much as 
possible; it arises from shifts in macroeconomic conditions, such as 
productivity and employment, and from changes in expectations about 
future macroeconomic conditions. An approach that takes that risk into 
account is called a fair-value approach. See Congressional Budget 
Office, Measuring the Cost of Government Activities That Involve 
Financial Risk (March 2021), www.cbo.gov/publication/56778, and 
Estimates of the Cost of Federal Credit Programs in 2021 (April 2020), 
www.cbo.gov/publication/56285.
---------------------------------------------------------------------------
State Infrastructure Banks
    State infrastructure banks are financial institutions that State 
governments create and run to lend money to fund infrastructure 
projects. SIBs established for highway and mass transit projects do not 
receive designated Federal grants each year, but State governments may 
decide to use some of the Federal formula grants that they receive for 
highways and mass transit to capitalize them. Some banks choose to 
increase their current lending capacity by issuing tax-exempt bonds, 
thus receiving a second form of Federal support. Most of the financial 
support that SIBs have provided has gone to highway projects.

    Of the 33 States that have established SIBs, only about a dozen 
have actively used them. From 2007 to 2016, average annual financing 
for highway infrastructure provided by SIBs amounted to $200 million 
(in 2019 dollars), or about 1 percent of the total amount of new 
financing by State and local governments that the Federal Government 
subsidized each year. The data necessary to estimate the Federal costs 
of financing SIBs are unavailable.\20\
---------------------------------------------------------------------------
    \20\ In 2018, CBO estimated that the Federal cost of direct loans 
and leveraged loans (those made using the proceeds of bond issues) made 
in 2023 by the Clean Water State Revolving Funds program and the 
Drinking Water State Revolving Funds program would be 23 cents and 43 
cents per dollar financed, respectively. See Congressional Budget 
Office, Federal Support for Financing State and Local Transportation 
and Water Infrastructure (October 2018), www.
cbo.gov/publication/54549. If those costs were estimated today, they 
would reflect very different interest rates for Treasury bonds and tax-
exempt bonds from those that were anticipated in 2018. How well such 
estimates would correspond to the costs of loans from transportation 
SIBs is unclear.
---------------------------------------------------------------------------
Options
    Changes to Federal programs that support the financing of State and 
local highway capital projects could expand the amount of investment in 
Federal-aid highways by making State and local investments less costly 
to finance. Policymakers could expand the use of tax-exempt bonds. Or 
they could establish a new program to provide State and local 
governments with the opportunity to issue new tax credit bonds. In 
addition, they could increase the use of TIFIA loans. Another option 
Federal lawmakers could pursue is to allow more tolling on Interstate 
highways, thereby providing States with a revenue stream they could 
borrow against. If any of those options were implemented and State and 
local governments expanded their use of the financing mechanisms, the 
Federal costs would, in most cases, take the form of forgone Federal 
revenues. TIFIA outlays, however, are paid out of the highway trust 
fund, so expansions of that program would affect the shortfall in the 
trust fund.

Raise the Cap on Highway QPABs. Of the $15 billion in Qualified Private 
Activity Bonds allowed to be issued for highway and other surface 
transportation projects, about $13.5 billion in such bonds had been 
issued as of April 2021, and another $1.2 billion in such bonds had 
been approved by the Department of Transportation but had not yet been 
issued. (In the past, some projects that received a QPAB allocation 
switched to other forms of financing, so some of those bonds that have 
had funds allocated for them but that have not been issued may never be 
issued.)\21\
---------------------------------------------------------------------------
    \21\ See Department of Transportation, ``Private Activity Bonds'' 
(April 19, 2021), https://go.usa.gov/xv6NQ.

    Giving private entities access to the tax-exempt bond market 
through QPABs lowers the cost of capital for those borrowers and can 
promote infrastructure projects when State and local governments have 
self-imposed limits on borrowing. Development of large, complex 
infrastructure projects often takes years, so the limit on the use of 
QPABs for funding highway and surface transportation projects reduces 
the certainty that the bonds would still be available if developers 
---------------------------------------------------------------------------
chose to apply for them in the future.

    If the availability of QPABs increased and their use became more 
widespread, Federal costs would go up. Like tax-exempt bonds, QPABs 
result in forgone Federal revenues. Private funding might be available 
to some developers without QPABs (albeit at a higher cost); if so, the 
projects that would be unable to receive financing without them would 
be those of marginal value.

    Institute a Tax Credit Bond Program. Instituting a new tax credit 
bond program that was similar to the Build America Bonds program that 
was active in 2009 and 2010 would provide State and local governments 
with an additional option for issuing debt to finance capital spending. 
Tax credit bonds could offer State and local governments the same 
Federal subsidy as tax-exempt bonds at a lower cost to the Federal 
Government.

    Whereas CBO estimates that 20-year tax-exempt bonds issued by State 
and local governments in 2023 would cost the Federal Government 26 
cents for each dollar financed, tax credit bonds issued that same year 
(with the same maturity and the same Federal subsidy of a 22-percent 
reduction in interest costs) would cost the Federal Government 19 cents 
per dollar financed. In other words, for the same Federal cost as 
traditional tax-exempt bonds, the Federal Government could, by 
authorizing tax credit bonds, provide State and local governments with 
a subsidy that was almost 40 percent larger, thereby reducing their 
financing costs more than tax-exempt bonds would. Ultimately, the 
Federal cost of such a program would depend on the amount of subsidy 
that lawmakers authorized and the amount of bonds that State and local 
governments issued.

    Tax credit bonds might offer one further advantage over tax-exempt 
bonds--they might appeal to a broader set of investors, particularly 
those with little or no tax liability, such as pension funds and other 
tax-exempt organizations.

    Expand the TIFIA Program. From 2015 through 2019, 19 highway and 
bridge projects received financing through the Transportation 
Infrastructure Finance and Innovation Act program. The average total 
cost per project was $1 billion, and each received, on average, $314 
million in TIFIA loans. The smallest project to receive assistance had 
a total cost of $127 million; the TIFIA loan for that project totaled 
$47 million.

    The financing assistance provided through TIFIA is paid for with 
outlays from the highway trust fund, so expanding the program would 
increase the trust fund's shortfall if no changes were made to the 
revenues credited to the fund.

    Lawmakers have at least two options for expanding TIFIA financing:

        Increase the maximum Federal share of eligible projects' 
costs. By law, the maximum share of costs that can be financed through 
the program is 49 percent, but in practice, the Department of 
Transportation has not provided more than about one-third of a 
project's cost in TIFIA assistance. At the end of 2019, TIFIA 
assistance accounted for an average of 28 percent of the total cost of 
each of the active projects funded by the program.
        Extend TIFIA assistance to a wider variety of projects. To be 
eligible for TIFIA assistance, a project's costs must generally exceed 
$50 million, though lower minimums are set for rural or locally 
sponsored projects. In practice, however, no projects with estimated 
costs of less than $50 million have received TIFIA assistance.

    Allow States to Collect Tolls on Interstate Highways. With a few 
exceptions, Federal law does not permit States to collect tolls on 
existing Interstate highways. Allowing them to do so would offer a new 
source of revenues that State and local governments could use to back 
bonds for capital projects or to attract private developers that would 
provide financing for a public-private partnership. If any of the 
financing mechanisms supported by the Federal Government were used for 
such projects, Federal costs would increase, either through lending 
programs, such as TIFIA, or through the Federal subsidies provided for 
financing mechanisms, such as tax-exempt bonds.

                                 ______
                                 
      Questions Submitted for the Record to Joseph Kile, Ph.D.\1\
---------------------------------------------------------------------------
    \1\ See testimony of Joseph Kile, Director of Microeconomic 
Analysis, Congressional Budget Office, before the Senate Committee on 
Finance, ``Options for Funding and Financing Highway Spending'' (May 
18, 2021), www.cbo.gov/publication/57206.
---------------------------------------------------------------------------
                Questions Submitted by Hon. Rob Portman
                          infrastructure banks
    Question. You noted in your testimony that only about a dozen 
States use their infrastructure banks despite 33 having enabling 
legislation on the books. Further, you indicated that from 2007-2016, 
the average annual financing for highway infrastructure provided by 
State infrastructure banks amounted to $200 million, or about 1 percent 
of new financing by State and local governments.

    Can you discuss what barriers exist to increased use of State 
infrastructure banks?

    Answer. State infrastructure banks and revolving funds--financial 
institutions that State governments create and run to lend money for 
infrastructure projects--are used less often for surface transportation 
than for water utilities. One reason is that State infrastructure banks 
do not receive Federal grants that are specifically designated to 
capitalize them, unlike revolving funds for water infrastructure. As a 
result, infrastructure banks for water utilities typically offer more 
favorable loan terms than infrastructure banks for highways. Meanwhile, 
States must choose between allocating Federal grant money to capitalize 
a State infrastructure bank for highways or funding highway projects 
directly with that grant money. Another reason is that when State 
infrastructure banks issue loans to local governments, the local 
governments must repay the loans. Local governments can repay loans 
made for water projects with fees from users of the water utility. But 
highway projects often lack such revenue streams. Therefore, State and 
local governments frequently draw on the municipal bond market for 
highway projects rather than on State infrastructure banks.

    State infrastructure banks are attractive sources of financing for 
local highways and transit projects when the financing is cheaper for 
local entities than the cost of issuing their own bonds, such as when 
local entities want to finance relatively small amounts of capital. 
State banks can generally issue bonds on a larger scale; therefore, 
costs for underwriting, legal fees, and marketing are typically lower 
for them than for local entities.

    State infrastructure banks for transportation have also proved 
advantageous when financing has needed to be executed quickly. After 
some natural disasters, loans provided by those banks have provided 
temporary funding for relief, allowing recovery efforts to start before 
Federal grant money for disaster relief was received.

    Question. There have been several congressional proposals for the 
creation of a Federal infrastructure bank. While often there is an 
appropriation to start the bank, many of these proposals assume a 10:1 
debt-to-equity ratio and an ability to leverage $100 billion or more in 
infrastructure investment.

    Could you describe the way leverage in a national infrastructure 
bank could be used to stretch the Federal dollars? That is--to get more 
investment in infrastructure at a smaller Federal price tag?

    Answer. The Federal Government can provide grants, loans, and other 
credit assistance, and tax preferences to help State and local 
governments (or the private sector) build infrastructure. Loans and tax 
preferences for borrowing cost the Federal Government less than grants 
because loans and borrowed funds are eventually repaid and grants are 
not. Infrastructure projects that generate user fees, tolls, or another 
form of revenue are better candidates for loans than projects that do 
not generate funds that could be used to repay the loan.

    Spending by a national infrastructure bank that was funded and 
controlled by the Federal Government would be included in the Federal 
budget. Because of the Federal Credit Reform Act of 1990, such a 
national infrastructure bank would not be able to revolve loans (that 
is, relend loan repayments) in the same way that State infrastructure 
banks can. Alternatively, spending by a national infrastructure bank 
that was independent of Federal control would be outside the Federal 
budget. However, to attract additional capital to leverage the initial 
funding by the Federal Government, an independent bank--one that the 
Federal Government was not obliged to support--would have to subsidize 
providers of additional capital to compensate them for the increased 
risk of losing money on their investments. Such subsidies are an 
additional cost for the Federal Government.

    Some State and local infrastructure banks issue tax-preferred debt 
to leverage their Federal funding, which increases the Federal 
Government's costs by reducing the amount of taxes it collects. To 
illustrate the impact on the Federal Government, CBO projected that 
loans from State infrastructure banks will cost the Federal Government 
23 cents in 2023 (as a representative future year) for every dollar 
financed; if those banks leveraged their Federal funds by issuing tax-
exempt bonds, the cost to the Federal Government would rise to 43 cents 
for every dollar financed.\2\
---------------------------------------------------------------------------
    \2\ See Congressional Budget Office, Federal Support for Financing 
State and Local Transportation and Water Infrastructure (October 2018), 
www.cbo.gov/publication/54549.

    Some Federal programs that serve particular kinds of infrastructure 
have many of the characteristics of a national infrastructure bank. For 
instance, the Transportation Infrastructure Finance and Innovation Act 
(TIFIA) program provides loans, loan guarantees, and lines of credit to 
help finance transportation projects. In 2019, TIFIA provided about 
$1.5 billion in loans. TIFIA loans, which cover up to half of a 
project's costs, provide flexible repayment terms and more favorable 
interest rates than applicants could secure in private capital markets. 
Demand for TIFIA loans is limited, however, because the Federal 
Government requires borrowers to have a source of funding for 
---------------------------------------------------------------------------
repayment.

                  airports' passenger facility charges
    Question. The passenger facility charge that helps fund airport 
maintenance and improvement is currently capped at $4.50 per flight 
segment with a maximum of two PFCs charged on a one-way trip or four 
PFCs on a round trip, for a maximum of $18 total.

    Does CBO have an estimation of how much revenue could be generated 
for airport maintenance if the passenger facility charge (PFC) was 
indexed to inflation starting from 2000? Starting from 2021?

    Answer. Although PFCs are authorized by Federal law, they are 
collected by commercial airports that are controlled by nonfederal 
public agencies. Because the fees are not paid to the Federal 
Government, increasing them would not increase Federal revenues. 
Indeed, CBO and the staff of the Joint Committee on Taxation (JCT) 
expect that increasing the maximum allowable PFC would result in an 
increase in tax-exempt financing and a subsequent loss of Federal 
revenues.

    If PFCs had been indexed to inflation beginning in 2000, the 
maximum charge per flight segment would be $6.79 in 2022.\3\ If that 
indexing continued through 2031 and airports charged the maximum fee, 
CBO estimates that airports would collect an additional $25.7 billion 
from 2022 through 2031.
---------------------------------------------------------------------------
    \3\ CBO calculated inflation by using the chained consumer price 
index for all urban consumers.

    If PFCs were instead indexed to inflation from the current $4.50 in 
2021, CBO projects that the maximum fee per flight segment would be 
$4.61 in 2022. If indexing of the 2021 amount continued through 2031 
and airports charged the maximum fee, CBO estimates that airports would 
---------------------------------------------------------------------------
collect an additional $5.1 billion from 2022 through 2031.

    Question. How much revenue could be generated by an increase of the 
PFC by $1.00? By $2.00?

    Answer. CBO estimates that increasing the maximum allowable PFC per 
flight segment by $1 in 2022 would yield airports an additional $8.5 
billion in collections from 2022 through 2031. CBO projects that an 
increase of $2 would yield $17 billion in additional collections for 
airports over the same period.
                       fees on electric vehicles
    Question. In your testimony, you note that an annual fee on light-
duty electric vehicles would generate revenues averaging about $0.2 
billion per year over the next 5 years. I recognize that electric 
vehicles make up only 2 percent of the vehicles on the road today. 
However, the electric vehicle industry estimates a 30-percent growth 
rate in EV adoption over the next 10 years.

    What would the implication of this growth be on annual fee revenue?

    Answer. CBO's estimate of the revenues from an annual fee on light-
duty electric vehicles relied on the Energy Information 
Administration's projections of the number of light-duty electric 
vehicles. In those projections, the stock of electric vehicles in the 
United States grows by about 55 percent between 2022 and 2026, and 
sales of electric vehicles increase by about 15 percent a year, on 
average. If electric vehicles were adopted more quickly, those fee 
revenues would be higher. If annual sales growth was 30 percent, the 
number of electric vehicles would roughly double over the 2022-2026 
period, and revenues would be about 20 percent more than CBO projected 
(that is, an average of $0.3 billion per year, taking rounding into 
account).

    Two additional factors would affect the net amount the government 
collected from an annual fee on electric vehicles. One, that fee would 
reduce taxable business and individual income. Those reductions and the 
decreases in income and payroll tax receipts that would follow would 
not affect the highway trust fund, but they would partially offset the 
amount of money the Federal Government collected from the new tax. Two, 
the administrative and auditing systems necessary to collect such a fee 
or tax might be challenging to implement. A system to identify owners 
of electric vehicles, assess a tax or fee, and collect it would have to 
be developed and would need to be funded.

                                 ______
                                 
               Questions Submitted by Hon. John Barrasso
                           electric vehicles
    Question. Chairman Wyden has introduced legislation to provide a 
$7,500 refundable tax credit for electric vehicles that will not begin 
to phase out until electric vehicles represent half of all U.S. vehicle 
sales.

    Because electric vehicles do not support the highway trust fund, 
what impact will electric vehicles' representing 50 percent of U.S. 
vehicle sales have on the highway trust fund?

    Answer. As electric vehicles become a larger share of the light-
duty vehicle fleet, the highway trust fund's revenues will decline 
because drivers of electric vehicles do not pay fuel taxes. The Energy 
Information Administration projects that electric vehicle sales will 
account for about 7 percent of vehicle sales in 2031. If the Federal 
Government offered a $7,500 refundable tax credit on electric vehicles 
and fuel-cell vehicles (fuel cells, another new technology, use 
hydrogen as an energy source), JCT projects that sales of those 
vehicles would account for 10 percent to 20 percent of light-duty 
vehicle sales by 2031. JCT did not project that electric vehicles would 
account for 50 percent of vehicle sales by 2031. If electric vehicles 
were adopted more rapidly than JCT projected, the highway trust fund's 
revenues would be lower than those in CBO's most recent baseline 
projections. If sales of electric vehicles were half of all sales of 
U.S. vehicles from 2028 to 2031, the trust fund's revenues would be 
roughly $4 billion lower in 2031 than CBO projects. However, sales of 
electric vehicles would need to grow by 66 percent a year, on average, 
between now and 2028 to represent half of all vehicles sold annually.

    Question. What are the estimated job losses within the auto 
manufacturing, auto parts, auto sales, and auto repair industries if 
electric vehicles represent 50 percent of all U.S vehicle sales 
annually?

    Answer. CBO has not analyzed the impact on employment of increases 
in sales of electric vehicles. That analysis would depend on where the 
electric vehicles and their key components were manufactured and 
whether their production was more or less labor-intensive than 
production of vehicles with internal combustion engines. (The National 
Highway Traffic Safety Administration assesses the domestic 
manufacturing content of different vehicle models each year.)\4\ 
Because electric vehicles generally require less maintenance than 
conventional vehicles, employment in the auto repair industry would 
probably decline if sales of electric vehicles increased.
---------------------------------------------------------------------------
    \4\ See National Highway Traffic Safety Administration, ``Part 583 
American Automobile Labeling Act Reports'' (accessed August 2, 2021), 
https://go.usa.gov/xFXrs.
---------------------------------------------------------------------------
       funding for the transit account of the highway trust fund
    Question. Currently, the mass transit account within the highway 
trust fund receives revenues equivalent to 2.86 cents per gallon of 
highway motor fuels excise taxes.

    Given the significant investment needed to modernize America's 
roads and bridges, what options are available for mass transit to 
create the necessary revenue stream to provide for future investments 
and maintenance of their own systems, rather than relying on 
allocations from the highway motor fuels excise taxes?

    Answer. About two-thirds of the funding for public transit comes 
from subsidies provided by Federal, State, and local governments. At 
the Federal level, the highway trust fund's transit account receives 
revenue from the excise taxes on motor fuels and from the trust fund's 
highway account (an estimated $1.2 billion is transferred from the 
highway account to the transit account each year). Those two sources of 
funds total $64 billion over the 2022-2031 period, or 46 percent of the 
anticipated $140 billion shortfall between spending and revenues in the 
highway account over that period, according to CBO's baseline 
projections from July 2021.

    Additional funds for transit systems could come from State and 
local governments, transit users, or Federal sources other than excise 
taxes on motor fuels. States and localities, which account for about 
one-half of public transportation funding, could raise the taxes 
received by transit systems or impose new taxes. New taxes for State 
and local areas might include value capture strategies such as taxes on 
businesses or properties located near transit stations, which typically 
benefit most from the transit service. Such taxes could include sales 
taxes on goods sold within special districts, land value taxes (a levy 
on the value of unimproved land), and tax increment financing (in which 
a share of the revenues from real estate taxes is dedicated to 
transit), among others.\5\ Transit agencies could also increase user 
fees. In 2019, before the pandemic, transit agencies' operating 
receipts (most of which come from passenger fares) totaled about $20 
billion. However, with fewer riders as a result of the coronavirus 
pandemic, raising fares may not increase revenues by much, and how much 
ridership will rebound is unclear. Additional funds could also be 
transferred from the Treasury's general fund; between 2008 and 2018, 
the Congress authorized $29 billion in transfers to the transit 
account.
---------------------------------------------------------------------------
    \5\ For more information on value capture strategies, see Federal 
Highway Administration, ``Value Capture'' (accessed August 2, 2021), 
www.fhwa.dot.gov/ipd/value--capture/.

    Alternatively, the Congress could prompt transit systems to reduce 
their use of Federal grants. About two-thirds of Federal outlays for 
transit are for capital spending. The Federal Government could limit 
its grants for capital spending to projects that rehabilitate existing 
facilities or replace worn-out or unsafe equipment, or it could stop 
making grants for capital spending and instead make grants only for 
operation and maintenance of transit systems. The Federal Government 
could also replace capital grants with Federal loans to transit systems 
---------------------------------------------------------------------------
or direct pay tax credit bonds.

                                 ______
                                 
    Prepared Statement of Victoria F. Sheehan, President, American 
       Association of State Highway and Transportation Officials
                              introduction
    Chairman Wyden, Ranking Member Crapo, and members of the committee, 
thank you for the opportunity to appear today and speak to the critical 
need to provide stable and predictable funding for the Federal 
transportation program, while also providing additional financing tools 
for States and local governments to access.

    My name is Victoria Sheehan, and I serve as Commissioner of the New 
Hampshire Department of Transportation (NHDOT) 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 Granite 
State and AASHTO, which represents the State departments of 
transportation (State DOTs) of all 50 States, Washington, DC, and 
Puerto Rico.

    First, allow me to express the State DOTs' collective and utmost 
appreciation for you--the members of the Senate Finance Committee. Your 
leadership on several important issues affecting State DOTs must be 
commended: the repeal of the $7.6-
billion rescission of highway contract authority in 2019; the extension 
of surface transportation programs through fiscal year 2021, while 
providing necessary funds to shore up the Federal highway trust fund 
for the duration of the extension; the $10 billion in COVID-19 relief 
funding for State DOTs to help replace lost revenue in December 2020; 
and just as important, your firm commitment to getting the Federal 
surface transportation bill done on time and possibly providing 
infrastructure funding as part of a future economic stimulus and 
recovery package.

    I would like to emphasize the following issues as part of my 
testimony today: the importance of a timely reauthorization of Federal 
surface transportation programs; the need for a long-term funding 
solution for the highway trust fund; financing mechanisms can 
supplement, but not replace direct Federal funding; and the tangible 
economic benefits of investing in highway, transit, and other 
transportation infrastructure--both as part of the reauthorization 
effort and as part of any investment in the recovery from the current 
pandemic.
             the importance of a timely reauthorization of 
                federal surface transportation programs
    States like New Hampshire rely heavily upon the Federal surface 
transportation program in order to enable the necessary infrastructure 
investments for our citizens. A stable Federal surface transportation 
program has become even more crucial as New Hampshire and States across 
the county continue to recover from the impacts of the pandemic. Any 
delay in the reauthorization process--or even worse, a series of short-
term extensions--would wreak havoc across the country and would impact 
not just State DOTs, but our partners such as local governments and the 
construction industry.

    In New Hampshire it would impact projects in every county, with 
projects of all types and sizes being vulnerable, including roadway 
safety improvements, State of good repair work, as well as capacity 
improvements, and active transportation investments. Due to our 
inability to complete work in the winter months, even a short-term 
delay could have longer term impacts, especially if the timing was such 
that we could not confidently advertise projects and maximize the 
summer construction season.

    While this committee is not generally responsible for developing 
surface transportation policies, you have the unenviable task of 
identifying and securing funding to pay for these programs. AASHTO 
members acknowledge the difficulty of the job ahead of you in the 
coming months, but we stand ready to work with this committee and 
others in Congress to find a funding solution that addresses the 
growing infrastructure investment needs across the country.
    need for a long-term funding solution for the highway trust fund
    For many years, Congress has struggled with how to address the 
insolvency of the Federal highway trust fund (HTF). Since 2008, 
Congress has had to transfer over $150 billion from the general fund of 
the Treasury to the highway trust fund in order to maintain funding 
levels. While AASHTO is very grateful for this committee and Congress's 
unwillingness to reduce surface transportation investments, we 
recognize that general fund transfers do not provide the long-term 
solution needed to stabilize these important programs.

    According to recently released baseline projections from the 
Congressional Budget Office, in order to simply maintain the current 
HTF spending levels adjusted for inflation after the current extension 
of the Fixing America's Surface Transportation (FAST) Act, Congress 
will need to identify $74.8 billion in additional revenues for a 5-year 
bill through 2026; $97.2 billion would be needed to support a 6-year 
bill through 2027 for both the highway and transit accounts.

    At the same time, the purchasing power of HTF revenues has declined 
substantially mainly due to the flat, per-gallon motor fuel taxes that 
have not been adjusted since 1993, losing over half of their value in 
the last 28 years. This loss of purchasing power is especially stark 
when compared to cost of other basic goods and services during the same 
time period.


   Exhibit 1: Purchasing Power Loss of the Gas Tax Relative to POther
                           Household Expenses
------------------------------------------------------------------------
   Item         Desciption        1993        2015       Percent Change
------------------------------------------------------------------------
College     Average Tuition       $1,908      $9,145               379%
 Tuition     and Fees at
             Public 4-year
             Universities
------------------------------------------------------------------------
Health      National              $3,402      $9,523               180%
 Care        Expenditure Per
             Capita
------------------------------------------------------------------------
House       Median New Home     $118,000    $292,000               147%
             Price
------------------------------------------------------------------------
Gas         Per Gallon             $1.08       $2.56               137%
------------------------------------------------------------------------
Beef        Per Pound of           $1.97       $4.38               122%
             Ground Beef
------------------------------------------------------------------------
Movie       Average Ticket         $4.14       $8.43               104%
 Ticket      Price
------------------------------------------------------------------------
Bread       Per Pound of           $0.75       $1.48                98%
             White Bread
------------------------------------------------------------------------
Income      National Median      $31,241     $56,516                81%
             Household
------------------------------------------------------------------------
Stamp       One First-Class        $0.29       $0.49                69%
             Stamp
------------------------------------------------------------------------
Car         Average New Car      $16,871     $25,487                51%
------------------------------------------------------------------------
Federal     Per Gallon             $0.18       $0.18                 0%
 Gas Tax
------------------------------------------------------------------------
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.


    Every State is required to have a Statewide transportation 
improvement program which identifies funded priorities for the next 4 
years. In order to do this, States must make assumptions about what 
might happen to Federal funding when programs expire on September 30, 
2021. Any shortfall or delay in Federal funding will lead to serious 
cash flow problems for States and local governments. A lack of stable, 
predictable funding from the HTF makes it nearly impossible for State 
DOTs to effectively plan--and this is especially true for large 
projects that need a reliable flow of funding over multiple years. 
Projects that State DOTs undertake connect people, enhance the quality 
of life for our citizens, and just as important, stimulate economic 
growth in each community where they are built.

    States have answered the call to action for increasing 
transportation investments, with more than two-thirds of all States 
having successfully enacted transportation revenue packages over the 
past decade--including in the Granite State.

    In 2014 the New Hampshire House and Senate approved Senate Bill 
367, a 4.2 cents per gallon increase in the State gas tax, which is 
known as the road toll in New Hampshire. The bill was structured so 
that the additional revenue could be used across the roadway network. 
Twelve percent of the revenue collected is returned to cities and 
towns, a portion is also committed to municipally owned bridges, but 
the majority of the funding was pledged to the reconstruction of 
Interstate 93 from the border with Massachusetts to Manchester, the 
largest city in the State. The intent being to complete the final 
phases of this $800 million project without reducing the investments 
being made in other parts of the State.

    It should be noted that Federal transportation funding does not 
displace or discourage State and local investment. In fact, as 
evidenced by significant transportation infrastructure investment 
needs, further strengthening and reaffirmation of the federally 
assisted, State-implemented foundation of the national program is even 
more critical now than in the past.

    In order to provide additional HTF receipts to maintain or increase 
current Federal highway and transit investment levels, there is no 
shortage of technically feasible tax and user fee options that Congress 
could consider. Potential revenue solutions for the HTF fall into three 
main categories: raising the rate of taxation or fee rates of existing 
Federal revenue streams into the HTF--examples include motor fuel taxes 
on gasoline and diesel (including indexing), user fees on heavy 
vehicles, and sales taxes on trucks, trailers, and truck tires; 
identifying and creating new Federal revenue sources for the HTF--
examples include a mileage-based user fee, per-barrel oil fee, and 
freight user fee; and redirecting current revenues (and possibly 
increasing the rates) from other Federal sources into the HTF--examples 
include Customs duties, income taxes, and other revenues from the 
general fund.

    The matrix below illustrates the breadth of potential HTF revenue 
mechanisms, including a column that shows an illustrative rate or 
percentage increase and the associated revenue yield estimated.


                    Exhibit 2: Matrix of Illustrative Surface Transportation Revenue Options
----------------------------------------------------------------------------------------------------------------
                                                                                          $ in Billions
                                  Illustrative                                 ---------------------------------
  Existing highway trust fund       Rate or        Definition of  Mechanism/                      Total Forecast
      Funding Mechanisms           Percentage               Increase             Assumed  2018     Yield  2019-
                                    Increase                                       Yield \1\           2023
----------------------------------------------------------------------------------------------------------------
Existing HTF Funding Mechanisms
----------------------------------------------------------------------------------------------------------------
Diesel Excise Tax                   20.0 cents    cents/gal increase in                   $8.8            $42.2
                                                  current rate
----------------------------------------------------------------------------------------------------------------
Gasoline Excise Tax                 15.0 cents    cents/gal increase in                  $21.8           $102.1
                                                  current rate
----------------------------------------------------------------------------------------------------------------
Motor Fuel Tax Indexing of                        cents/gal excise tax                                     $3.7
 Current Rate to CPI (Diesel)
----------------------------------------------------------------------------------------------------------------
Motor Fuel Tax Indexing of                        cents/gal excise tax                                     $8.8
 Current Rate to CPI (Gas)
----------------------------------------------------------------------------------------------------------------
Truck and Trailer Sales Tax              20.0%   increase in current revenues,            $0.6             $4.2
                                                  structure not defined
----------------------------------------------------------------------------------------------------------------
Truck Tire Tax                           20.0%   increase in current revenues,            $0.1             $0.5
                                                  structure not defined
----------------------------------------------------------------------------------------------------------------
Heavy Vehicle Use Tax                    20.0%   increase in current revenues,            $0.2             $1.2
                                                  structure not defined
----------------------------------------------------------------------------------------------------------------
Other Existing Taxes
----------------------------------------------------------------------------------------------------------------
Minerals Related Receipts                25.0%   increase in/reallocation of              $0.6             $3.4
                                                  current revenues, structure
                                                  not defined
----------------------------------------------------------------------------------------------------------------
Harbor Maintenance Tax                   25.0%   increase in/reallocation of              $0.4             $1.9
                                                  current revenues, structure
                                                  not defined
----------------------------------------------------------------------------------------------------------------
Customs Revenues                          5.0%   increase in/reallocation of              $1.9            $10.3
                                                  current revenues, structure
                                                  not defined
----------------------------------------------------------------------------------------------------------------
Income Tax--Personal                      0.5%   increase in/reallocation of              $5.3            $28.4
                                                  current revenues, structure
                                                  not defined
----------------------------------------------------------------------------------------------------------------
Income Tax--Business                      1.0%   increase in/reallocation of              $1.7             $8.9
                                                  current revenues, structure
                                                  not defined
----------------------------------------------------------------------------------------------------------------
License and Registration Fees
----------------------------------------------------------------------------------------------------------------
Drivers License Surcharge                $5.00   dollar assessed annually                 $1.1             $6.1
----------------------------------------------------------------------------------------------------------------
Registration Fee (Electric             $100.00   dollar assessed annually                 $0.0             $0.2
 Light Duty Vehicles)
----------------------------------------------------------------------------------------------------------------
Registration Fee (Hybrid Light          $50.00   dollar assessed annually                 $0.2             $1.3
 Duty Vehicles)
----------------------------------------------------------------------------------------------------------------
Registration Fee (Light Duty             $5.00   dollar assessed annually                 $1.3             $6.8
 Vehicles)
----------------------------------------------------------------------------------------------------------------
Registration Fee (Trucks)              $100.00   dollar assessed annually                 $1.2             $6.3
----------------------------------------------------------------------------------------------------------------
Registration Fee (All                    $5.00   dollar assessed annually                 $1.3             $7.1
 Vehicles)
----------------------------------------------------------------------------------------------------------------
Weight and Distance Based Fees
----------------------------------------------------------------------------------------------------------------
Freight Charge--Ton (Truck          10.0 cents    cents/ton of domestic                   $1.1             $5.8
 Only)                                            shipments
----------------------------------------------------------------------------------------------------------------
Freight Charge--Ton (All            10.0 cents    cents/ton of domestic                   $1.3             $7.1
 Modes)                                           shipments
----------------------------------------------------------------------------------------------------------------
Freight Charge--Ton-Mile             0.5 cents    cents/ton-mile of domestic             $10.1            $54.2
 (Truck Only)                                     shipments
----------------------------------------------------------------------------------------------------------------
Freight Charge--Ton-Mile (All        0.5 cents    cents/ton-mile of domestic             $21.6           $115.9
 Modes)                                           shipments
----------------------------------------------------------------------------------------------------------------
Transit Passenger Miles              1.0 cents    cents/passenger mile                    $0.6             $3.2
 Traveled Fee                                     traveled on all transit
                                                  modes
----------------------------------------------------------------------------------------------------------------
Vehicle Miles Traveled Fee           1.0 cents    cents/LDV vehicle mile                 $29.1           $155.7
 (Light Duty Vehicles)                            traveled on all roads
----------------------------------------------------------------------------------------------------------------
Vehicle Miles Traveled Fee           1.0 cents    cents/truck vehicle mile                $2.9            $15.7
 (Trucks)                                         traveled on all roads
----------------------------------------------------------------------------------------------------------------
Vehicle Miles Traveled Fee           1.0 cents    cents/vehicle mile traveled            $32.0           $171.5
 (All Vehicles)                                   on all roads
Sales Taxes on Transportation Related Economic Activity
----------------------------------------------------------------------------------------------------------------
Freight Bill--Truck Only                  0.5%   percent of gross freight                 $3.8            $20.2
                                                  revenues (primary shipments
                                                  only)
----------------------------------------------------------------------------------------------------------------
Freight Bill--All Modes                   0.5%   percent of gross freight                 $4.6            $24.8
                                                  revenues (primary shipments
                                                  only)
----------------------------------------------------------------------------------------------------------------
Sales Tax on New Light Duty               1.0%   percent of sales                         $2.8            $14.9
 Vehicles
----------------------------------------------------------------------------------------------------------------
Sales Tax on New and Light                1.0%   percent of sales                         $4.2            $22.4
 Duty Vehicles
----------------------------------------------------------------------------------------------------------------
Sales Tax on Auto-related                 1.0%   percent of sales                         $2.7            $14.4
 Parts and Services
----------------------------------------------------------------------------------------------------------------
Sales Tax on Diesel                       2.0%   percent of sales (excluding              $1.5             $7.9
                                                  excise taxes)
----------------------------------------------------------------------------------------------------------------
Sales Tax on Gas                          2.0%   percent of sales (excluding              $5.2            $28.0
                                                  excise taxes)
----------------------------------------------------------------------------------------------------------------
Tire Tax (Light Duty Vehicles)            1.0%   of sales of LDV tires                    $0.3             $1.4
----------------------------------------------------------------------------------------------------------------
Sales Tax on Bicycles                     1.0%   percent of sales                         $0.1             $0.3
----------------------------------------------------------------------------------------------------------------
Other Excise Taxes
----------------------------------------------------------------------------------------------------------------
Container Tax                           $15.00   doller per TEU                           $0.7             $4.0
----------------------------------------------------------------------------------------------------------------
Imported Oil Tax                         $2.50   dollar/barrel                            $4.5            $23.9
----------------------------------------------------------------------------------------------------------------
\1\ Assumed yield in 2018 or the latest year data is available.


    We fully recognize the ongoing funding challenge is not merely 
technical. To that end, after much deliberation, our board of directors 
in May 2019 coalesced around four specific revenue mechanisms with 
substantial estimated yield that could address the HTF shortfall:

        Motor fuel tax increase and indexing.
        Freight-based user fee.
        Per barrel oil fee.
        Mileage-based user fee (MBUF) or vehicle-miles-traveled (VMT) 
fee.

    Specifically on the MBUF/VMT, this committee and others in Congress 
will play a critical role in deciding how best or if to proceed at the 
Federal level in implementing this mechanism to meet long-term needs. 
Given the growing interest in this topic in Congress, let me offer some 
insights.

    The FAST Act established the Surface Transportation System Funding 
Alternatives (STSFA) program to provide grants to States or groups of 
States to demonstrate user-based alternative revenue mechanism. Since 
2016, the STSFA program has provided $73.7 million to 37 projects in 
States across the Nation funding projects that test the design, 
implementation, and acceptance of user-based systems, such as a vehicle 
mileage-based user fee.

    And just last week, AASHTO's board of directors that I chair 
adopted a policy resolution on development of a national framework for 
MBUF implementation. In it, we call for the following:

        The national MBUF pilot program should focus on the 
development of protocols such that the public may give consideration to 
mileage-based user fees as a potential replacement of motor fuel taxes;
        A national mileage-based user fee pilot program should focus 
on the development of national policies and standards related to data 
collection, interoperability, and administrative structure and cost;
        A national mileage-based user fee program should take into 
consideration both tax and social equity principles so it is no more 
burdensome than the motor fuels tax program currently in place;
        A national education campaign to inform public understanding 
and consideration of vehicle mileage-based user fees as an equitable 
way to pay for highways is an essential part of a national effort; and
        A national mileage-based user fee pilot program must build on 
the leadership and expertise of State departments of transportation.

   financing mechanisms can support, but not replace direct federal 
                                funding
    The State DOTs continue to support a role for Federal financing 
tools given their ability to leverage scarce dollars that allow needed 
projects to benefit communities sooner. I want to recognize the work of 
you, Mr. Chairman, and others on this committee to develop and pursue 
additional financing tools to help meet transportation needs.

    Financing tools can play an important and specific role--and AASHTO 
has supported many such financing options in the past especially the 
Build America Bonds from 2009 that States very much appreciated. 
AASHTO's members appreciate the ability to access capital markets and 
many States already rely on various forms of financing ranging from 
traditional tax-exempt bonds, tax-credit bonds, State infrastructure 
banks, and private equity, among other financing options.

    When State DOTs are advancing larger-scale projects, we carefully 
examine which funding and financing mechanisms will be most 
advantageous, given the type of the work and the status of other 
projects in our construction program. We strive to find the most cost 
effective way to advance large scale projects, without limiting our 
capacity to continue making investments statewide. As an example, while 
the 2014 State gas tax increase was intended to fund the final phases 
of the reconstruction of Interstate 93 from Salem to Manchester, NHDOT 
also pursued a Transportation Infrastructure Finance Innovation Act 
(TIFIA) loan, backed by the State gas tax increase. The goal was to 
stretch the value of the new revenue, with the TIFIA loan structured so 
that New Hampshire is paying interest only for the first 10 years of 
the 20-year loan, allowing us to pledge the additional new revenue 
collected to rural paving and bridge work. The result was the 
completion of a regionally significant project, savings of over $20 
million in financing, as well as improved pavement and bridge condition 
across New Hampshire, due to the ability to pave 1,400 miles of roadway 
and replace 23 structurally deficient bridges during the interest only 
period of the loan.

    With all this said, however, AASHTO strongly believes that Federal 
surface transportation funding must continue to be focused on direct 
formula-based apportionments from the highway trust fund to States and 
transit agencies--which in turn relies on user fee and tax revenues 
deposited into the HTF. And the HTF can only be fixed with real revenue 
solutions, and not be substituted by financing tools such as the 
Transportation Infrastructure Finance and Innovation Act (TIFIA) 
program, infrastructure banks, or any program that provides direct 
loans or loan guarantees to support transportation projects. These 
loans require repayment from an identified revenue stream--i.e., a 
funding source.

    While innovative transportation finance has evolved significantly 
over the last 20 years, the simple fact remains that the use of 
financing tools that leverage existing revenue streams are typically 
not viable for the vast spectrum of publicly valuable transportation 
projects. To this day, 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 
equity holders. According to the CBO, for example, P3s have accounted 
for only one to three percent of spending for highway, transit, and 
water infrastructure since 1990.
        the tangible economic benefits of investing in highway, 
            transit, and other transportation infrastructure

    Fortunately, infrastructure investment is again one of the top 
national policy agenda items. This year, both Congress and the Biden 
administration are discussing potential infrastructure investment 
legislation. An infrastructure package, coupled with a robustly funded 
surface transportation bill, provides a unique window of opportunity to 
make much-needed improvements to this Nation's transportation system.

    Achieving both of these goals--infrastructure investment and a 
robustly funded surface transportation bill--demands bold action to 
invest in our transportation systems at the appropriate level to 
guarantee the success of our Nation's future as we recover from the 
impacts of the COVID-19 pandemic. This action has the clear support of 
the American public and is one of the few areas of possible bipartisan 
agreement.
                               conclusion
    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 
FY 2021.

    Congress can take the action now to address the projected annual 
shortfalls by boosting much-needed revenues. Whichever revenue tools 
are utilized, AASHTO looks forward to assisting you and the rest of 
your Senate colleagues in finding and implementing a viable set of 
revenue solutions that will renew our national heritage of investment 
in our country and our future through transportation.

    Thank you for the opportunity to provide the perspective of the 
Nation's State DOTs.

                                 ______
                                 
       Questions Submitted for the Record to Victoria F. Sheehan
                Questions Submitted by Hon. Rob Portman
    Question. According to the Federal Highway Administration, 36 
States have passed public-private partnership-enabling legislation, yet 
the use of this financing tool is still quite small. As Commissioner 
Sheehan noted in opening testimony, CBO states that P3s have accounted 
for only 1-3 percent of spending for highway, transit, and water 
infrastructure since 1990.

    How can we on the Federal level better encourage the use of P3s?

    Answer. Public-private partnerships (P3s) can play a role in 
helping to finance infrastructure investments. State DOTs have become 
more sophisticated when it comes to evaluating whether or not a P3 
makes sense for a particular project.

    One of the key challenges to the utilization of P3s is the ability 
to identify a project that can generate the revenue needed to ``pay 
back'' the private-sector investment. This can be particularly 
challenging in rural areas.

    Financing tools such as P3s are important options for State DOTs to 
consider--but they do not replace the need for actual revenue or 
funding.

    Question. From 2007-2016, the average annual financing for highway 
infrastructure provided by State infrastructure banks amounted to $200 
million, or about 1 percent of new financing by State and local 
governments.

    Can you speak to how we can address the underutilization of State 
infrastructure banks? What makes this form of financing unpalatable for 
State and local infrastructure projects?

    Answer. Because State infrastructure banks (SIB) provide loans or 
financing for particular projects, many of the same challenges that 
exist to secure private-sector investment also exist for projects 
financed through a SIB.

    Given all of the transportation investment needs that States 
currently face, requiring a State to use its regular apportionments to 
capitalize the SIBs may prove to be an insurmountable obstacle. 
Additionally not all State owned assets are eligible for Federal 
funding, which means that regular apportionment cannot always be 
leveraged. If additional Federal funds were provided that specifically 
encouraged States to capitalize SIBs there would be an incentive to 
increase utilization.

    Question. I understand that States weigh the financing options for 
major projects through a tool known as a Value for Money analysis in 
which the private financing option for an infrastructure project is 
compared against a public financing option. States are not currently 
required to conduct these analysis to obtain Federal funding for 
projects or for those projects included on their State transportation 
improvement plans.

    If we were to require a State to conduct a Value for Money analysis 
for projects of a certain size, what sort of size, scope, or type of 
project makes the most sense to conduct this sort of analysis on?

    Answer. Project sponsors use the Value for Money (VfM) analysis 
process on a case-by-case basis to compare the aggregate benefits and 
costs of a P3 procurement against those of a traditional project 
delivery model. While VfM analysis can aid in decision-making, it is 
just one of several factors to consider in determining how to proceed 
with a procurement. AASHTO would not support a mandate for this type of 
analysis for potential P3 projects, but rather efforts to incentivize 
the use of this type of analysis. The process of assessing the public-
sector and private-sector costs of a project demands extensive time and 
resources.

    Question. In a comparison of federally supported and solely State-
funded transportation projects, I often hear that the Federal 
requirements and other regulatory hurdles present additional costs and 
can make federally supported projects more costly for States.

    Is there a particular cost increase, on average, that New Hampshire 
and other AASHTO experience when utilizing Federal funds to support a 
project in comparison to State-funded projects?

    Answer. There is limited research on the cost and benefit of 
Federal requirements, with the most authoritative study being ``Federal 
Requirements for Highways May Influence Funding Decisions and Create 
Challenges, but Benefits and Costs Are Not Tracked'' by the Government 
Accountability Office in 2008 (https://www.gao.gov/assets/gao-09-
36.pdf).

    This report does say, ``According to transportation officials and 
contractors, administrative tasks associated with the Federal 
requirements pose challenges. For example, analyzing impacts and 
demonstrating compliance with NEPA requires extensive paperwork and 
documentation. State officials also said that coordinating with 
multiple government agencies on environmental reviews is challenging, 
in part because these agencies may have competing interests. 
Furthermore, according to State DOTs, some provisions of the Federal 
requirements may be outdated.''

                                 ______
                                 
    Prepared Statement of Hon. Ron Wyden, a U.S. Senator From Oregon
    These days you'd have trouble getting members of Congress to agree 
on the proper way to butter toast, but just about everybody agrees on 
upgrading America's infrastructure. The sorry state of our 
infrastructure is a danger to individuals. For example, you cannot 
cross the Mississippi River on a bridge that's cracked in half. It's 
also a recipe for national decline if the U.S. continues to fall behind 
China and other countries on broadband, roads, highways, ports, rail 
networks, airports, housing, and other areas. The tougher question on 
infrastructure is how to go about paying for it.

    In my judgment, there's an obvious answer. It's long past time for 
mega-corporations to pay a fair share for building and repairing roads 
and bridges. They drive trucks across America's roads and highways. 
They send products to market through the airports and waterways. They 
rely on our power grids and communication systems. They ought to pitch 
in for the infrastructure that makes America an economic superpower.

    The hard evidence, however, shows that these mega-corporations have 
never contributed less to Federal revenues in modern American history 
than they do now. Data from the independent Congressional Budget Office 
show that in the wake of the Trump tax law, corporate income tax 
revenue is down nearly 40 percent from the 21st-century average. Many 
of the largest corporations pay nothing--zero.

    New reports out just this week say that corporations flush with 
cash are also gearing up for new rounds of stock buybacks that 
overwhelmingly benefit wealthy shareholders. It's not any kind of cash 
crunch that's kept big corporations from pitching in. Asking the 
largest of the large corporations to pitch in a fair share will not 
sacrifice America's competitiveness. Competitiveness does not mean the 
biggest corporations pay zero tax. Paying for infrastructure and 
creating high-wage, high-skill jobs are not mutually exclusive.

    Now, there's lots of talk about how it's got to be user fees that 
pay for infrastructure, but that's not a step toward fairness. The 
suggestion is, middle-class workers are going to pay what mega-
corporations will not.

    Middle-class budgets are already hard-pressed, and if you don't 
think Americans keep track of the cost of driving, you haven't watched 
the TV news much in the last week.

    The fact is, the infrastructure tab has been growing for decades 
due to Congress's negligence and corporations failing to pitch in 
fairly. I'm not going to tell a rancher in eastern Oregon or a home 
health aide on the coast that they've got to make up the shortfall. 
Working people driving long distances are willing to pay their fair 
share--they've been doing so every time they pull up to the pump. They 
aren't going to support immunizing mega-corporations from paying 
anything at all.

    Prior to 2017, there was also bipartisan interest in bringing back 
cash trapped overseas as the best way to fund a major infrastructure 
bill. Study after study showed that corporations had trillions of 
dollars parked around the world. Senators even had the repatriation 
bills ready to go. In 2017, however, Republicans went a different 
direction and plowed that cash into even bigger corporate tax goodies 
as part of the Trump tax law. That was a major lost opportunity, and 
the infrastructure tab has only grown in the years since then.

    Today the Congress also ought to be looking at smart financing 
tools to help draw private dollars off the sidelines and into 
infrastructure. It worked a decade ago with Build America Bonds. 
Initially, projections said that only a few billion dollars' worth of 
those bonds would sell. The number wound up being more than $180 
billion. So that's clearly an approach the Congress must return to as 
it works on infrastructure.

    I want to thank our witness panel for joining the committee today. 
The outcome of this debate has the potential to change the course of 
our economy for generations to come. I'm more optimistic today than I 
have been in years that the Congress will be able to go big on 
infrastructure. I'm looking forward to discussing all these issues 
today.

                                 ______
                                 

                             Communications



                   American Council of Life Insurers

                  101 Constitution Ave, NW, Suite 700

                       Washington, DC 20001-2133

                            (202) 624-2400 t

                          [email protected]

                         https://www.acli.com/

March 23, 2021

The Honorable Joseph R. Biden Jr.
President
The White House
Washington, DC 20500

The Honorable Nancy Pelosi          The Honorable Charles Schumer
Speaker                             Majority Leader
U.S. House of Representatives       U.S. Senate
H-232, The Capitol                  S-221, The Capitol
Washington, DC 20515                Washington, DC 20510

The Honorable Kevin McCarthy        The Honorable Mitch McConnell
Republican Leader                   Republican Leader
U.S. House of Representatives       U.S. Senate
Room H-204, The Capitol             S-230, The Capitol
Washington, DC 20515                Washington, DC 20510

Dear Mr. President, Madam Speaker, Majority Leader Schumer, Leader 
McCarthy, and Leader McConnell:

It has been a year since the country was gripped by the coronavirus 
pandemic. Far too many Americans have lost loved ones and the fragility 
of the economy has caused financial stress for those facing uncertainty 
about the future. Vaccinations have provided hope for the end of COVID-
19, but the fact remains that the pandemic left an economic crisis in 
its wake. We share your concern for the nation's economy and the effect 
it continues to have on American workers and families in our 
communities.

In the midst of the country's racial, health, and economic turmoil in 
2020, life insurers are meeting the moment with ACLI's Economic 
Empowerment and Racial Equity Initiative. With special focus on our 
role in helping families financially, and the economy overall, we came 
together in our shared commitment to expand access to financial 
security and education, target investment in underserved communities, 
and advance diversity and inclusion in the financial services industry.

One important policy that addresses economic empowerment and racial 
equity is the nation's infrastructure. For the last few years, leaders 
on both sides of the aisle have focused on the need to improve the 
nation's infrastructure and investment in our local communities. As 
investors who will play a critical role in the recovery ahead and as 
financial security providers to families, we believe a bipartisan 
approach to an infrastructure policy will be an important step in the 
nation's economic recovery.

In the ongoing important work on the country's infrastructure needs, we 
support policy initiatives that focus on broad economic growth, as well 
as investments at the local level, including underserved communities, 
through direct payment bonds. We also support the effort to address 
affordable housing needs through the Low-Income Housing Tax Credit 
(LIHTC) program.

Through the industry's $6.9 trillion investment into the nation's 
economy, we have long played an important role to meet the 
infrastructure needs in states and local communities. For example, our 
industry invested more than one-third of the 2009 Build America Bonds 
which allowed state and local governments to finance more than $150 
billion of infrastructure investment. Life insurers also continue to 
prioritize affordable housing with more than $5 billion in 2019 in the 
LIHTC program. Investments like this help keep our long-term guaranteed 
promises to our consumers and will continue to help with the nation's 
economic recovery.

We also stand ready to partner with you to address our nation's 
caregiving needs including paid family leave, a problem which has been 
exacerbated by the pandemic. As providers of paid leave solutions for 
workers, providing over 47 percent of policies in the market, we 
believe there is an opportunity to build upon the current Family and 
Medical Leave Act (FMLA) standards to include a paid component, drawing 
from the experience and expertise we have built over decades of 
providing paid leave benefits to America's workers.

Thank you for your consideration and for your continued service to our 
nation. There are many difficult choices and opportunities in this 
unique moment in our history. We ask you to keep in mind the vital role 
that life insurers play through the industry's commitment to provide 
financial security to Americans of all walks of life, through the 
investments in our local communities, in our economy and our shared 
commitment to our country. We welcome the opportunity to partner with 
you as we meet the moment together for our country.

Sincerely,

Susan K. Neely
President and CEO

The American Council of Life Insurers (ACLI) appreciates the 
opportunity to submit this statement for the record on ``Funding and 
Financing Options to Bolster American Infrastructure.'' We thank 
Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) for 
holding this important hearing to help address our country's 
infrastructure needs.

The American Council of Life Insurers (ACLI) is the leading trade 
association driving public policy and advocacy on behalf of the life 
insurance industry. 90 million American families rely on the life 
insurance industry for financial protection and retirement security. 
ACLI's member companies are dedicated to protecting consumers' 
financial well-being through life insurance, annuities, retirement 
plans, long-term care insurance, disability income insurance, 
reinsurance, and dental, vision and other supplemental benefits. ACLI's 
280 member companies represent 95 percent of industry assets in the 
United States.

ACLI fully supports the critical work that Congress is undertaking on 
the country's infrastructure needs (attached is ACLI's March 23rd 
letter to the Administration and congressional leadership). As 
investors who will play an important role in the recovery ahead, we are 
keenly interested in broad economic growth that bolsters needed 
investments at the local level, with an emphasis on assisting 
underserved communities.

Life Insurance Companies' Investments in Infrastructure

Life insurers are a bedrock of financial and retirement security to 
millions of Americans, paying out 2.1 billion dollars every day to 
American families through our products. We provide peace of mind for 
people who lose their spouses and we help people at all stages build 
secure financial futures.

Life insurers make long-term promises and our liabilities stretch over 
decades. Given this long-term perspective and commitment, we look for 
stable, lengthy investments in projects whose duration and return 
support the guarantees that are the hallmark of the financial security 
and protection we provide.

In addition to investing prudently, stringent state-based insurance 
regulation directs us to high-quality, long-term investments. 
Infrastructure investments are understandably an excellent match for 
the character of our investment needs. They deliver predictable returns 
over decades.

Focusing on long-term value, and acting as patient investors, life 
insurers serve policy holders and strengthen the nation and its 
economy. In fact, the $6.9 trillion invested by our industry in the 
U.S. economy makes us one of the largest sources of investment capital 
in the nation.

We back up our guarantees, as required by state insurance regulators, 
through ``asset-liability matching,'' meaning the investment duration 
and returns need to be closely matched with the obligations we take on, 
while we provide stability and liquidity in the U.S. marketplace. It is 
a ``win-win'' situation.

Through the industry's $6.9 trillion investment into the nation's 
economy to date, we have long played an important role in helping to 
meet the infrastructure priorities in states and local communities. In 
fact, life insurers invested in more than one-third of total Build 
America Bonds issued in 2009 and 2010 to support infrastructure, 
totaling nearly $60 billion by year-end 2010. Our industry also 
continues to prioritize affordable housing. In 2019, we held more than 
$5 billion in investments benefiting from the LIHTC program. 
Investments like this help us keep our long-term guaranteed promises to 
our consumers and will continue to help with ensuring the nation's 
economic recovery.

Taxable Direct Payment Infrastructure Bond Programs

Based on this contribution to America's strength and well-being, we 
encourage Congress in its work on infrastructure to consider our 
industry's partnership in investing in infrastructure. Specifically, 
Congress should prioritize taxable financing solutions to maximize 
limited federal resources and reduce the debt burden on state and local 
governments by authorizing a permanent taxable direct payment 
infrastructure bond program, with a special focus on underserved 
communities.

We were pleased to support the American Infrastructure Bonds Act, a 
bipartisan measure recently introduced by Senators Michael Bennet and 
Roger Wicker. The proposed legislation would create a taxable direct 
bond program that will allow state and local governments to issue 
taxable bonds for any public purpose expenditure that is eligible to be 
financed with tax-exempt bonds, thereby supporting the unique needs of 
all communities across the country--including underserved communities, 
which aligns with ACLI's Board-led economic empowerment and racial 
equity initiative (EERE).

Conclusion

The U.S. infrastructure challenge is real and meeting it will be 
costly. Current levels of U.S. investment are falling short. Innovative 
approaches to providing funding is essential to infrastructure 
improvement that will help to fuel economic growth. A plan that 
complements public dollars with taxable direct payment bonds would help 
attract greater capital from long-term investors to narrow America's 
infrastructure investment gap. This, in turn, would create investment 
opportunity that would allow us to continue to do what we do best--
provide financial products that bring peace of mind to Americans and 
their families.

We believe that the nation's infrastructure is key to advancing 
economic empowerment and racial equity. Policymakers from both parties 
have discussed the importance of improving our infrastructure while 
investing in local communities, creating jobs and ensuring rewards are 
shared fairly.

Helping people care for their loved ones--regardless of their race, 
gender, or economic status--is our core mission. That mission has never 
been more important. We welcome the opportunity to partner with 
lawmakers and help our nation find a better, more equitable path to 
prosperity for all Americans in the 21st century. We stand ready to 
work together with Congress as an infrastructure proposal moves 
forward.

                                 ______
                                 
                 American Public Gas Association (APGA)

                201 Massachusetts Avenue, NE, Suite C-4

                          Washington, DC 20002

                           [email protected]

May 27, 2021

The Honorable Ron Wyden             The Honorable Mike Crapo
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
Washington, DC 20510                Washington, DC 20510

Re: May 18, 2021 Hearing on ``Funding and Financing Options to Bolster 
American Infrastructure''

Dear Chairman Wyden and Ranking Member Crapo,

APGA is the trade association for approximately 1,000 communities 
across the U.S. that own and operate their retail natural gas 
distribution entities. They include municipal gas distribution systems, 
public utility districts, county districts, and other public agencies, 
all locally accountable to the citizens they serve. Public gas systems 
focus on providing safe, clean, reliable, and affordable energy to 
their customers and support their communities by delivering fuel to be 
used for cooking, clothes drying, and space and water heating, as well 
as for various commercial and industrial applications.

APGA appreciates the Committee holding this important discussion 
regarding how to pay for much needed investments in America's 
infrastructure. Public natural gas utilities are good stewards of the 
environment and their communities and take seriously their role in 
providing safe, clean, reliable, and affordable energy. That requires 
making important investments in keeping their pipeline infrastructure 
modern and safe, which is why we would like to take this opportunity to 
express our support for Senator Wicker and Senator Bennet's legislation 
that would create a new class of American Infrastructure Bonds.

Infrastructure projects have, in many cases, been delayed or canceled 
as state and local governments grapple with the economic effects of the 
COVID-19 pandemic. This has been especially problematic in rural areas, 
where many of our members are located, which are especially likely to 
have aging infrastructure that requires more resources to maintain.

Because our members are municipally owned, they cannot turn to 
shareholders for an infusion of capital when their infrastructure needs 
to be upgraded. That is why we are strong supporters of Senator Wicker 
and Senator Bennet's American Infrastructure Bonds Act that would 
create a new class of taxable, direct-pay municipal bonds. As 
communities continue to recover from the economic impact of the 
pandemic, these bonds would provide an additional financial tool to 
power investment in local infrastructure, including public natural gas 
systems.

The bill would allow states and localities to issue debt via taxable 
bonds in order to fund new projects, which could include things like 
expanding or replacing utility infrastructure. Because the Treasury 
Department would pay a certain percentage of the bond's interest, this 
type of bond issuance has the advantage of keeping costs low for the 
issuing state or local government. The other advantage of direct-pay 
bonds is a larger pool of potential capital. The market for taxable 
bonds is much larger than that for tax-exempt bonds, and it allows 
state and local governments to attract capital from a wider range of 
investors, such as large pension funds and international investors.

As the Chairman referenced in his opening statement, this type of 
financing tool has a proven record of success. Senators Wicker and 
Bennet have modeled their legislation on the popular, but now expired, 
Build America Bonds (BAB) program. That program far exceeded 
expectations, bringing in more than $180 billion of investment to help 
aid in America's recovery from the last recession. This legislation 
represents an excellent opportunity to learn from and build on our past 
success with BAB.

A new funding stream like this would allow our members to do things 
like expand their infrastructure and bring safe, clean, reliable, and 
affordable energy to currently underserved communities. It would also 
provide funding to help finance replacing older pipeline with newer 
materials that could help reduce leaks and improve safety. The bottom 
line is, if passed, the bill would create a funding tool that would 
allow more investment in infrastructure without passing on the bill to 
American taxpayers.

APGA supports the Committee's work to ensure America can make much 
needed investments in modernizing and improving the country's aging 
infrastructure. State and local governments can and should be 
invaluable partners as the Committee considers how to best make those 
investments. They are best positioned to know what infrastructure 
improvements are most critical at a local level. Allowing them to have 
access to the taxable bond market would empower them to attract the 
capital they need to make infrastructure investments for the benefit of 
their communities.

APGA members are proud to provide safe, clean, reliable, and affordable 
energy to their communities. Advancing this legislation would allow the 
state and local governments our members are a part of to continue to 
invest in the infrastructure that makes that possible. We thank you 
again for fostering this important conversation and for the opportunity 
to submit this input. APGA stands ready to work together in this 
effort.

Dave Schryver
President and CEO

                                 ______
                                 
                 American Securities Association (ASA)

                 1455 Pennsylvania Ave., NW, Suite 400

                          Washington, DC 20004

                        American/Securities.org

                              202-621-1784

                ASA Priorities for Infrastructure Reform

The ASA is a trade association that represents the retail and 
institutional capital markets interests of regional financial services 
firms who provide Main Street businesses with access to capital and 
advise hardworking Americans how to create and preserve wealth. The 
ASA's mission is to promote trust and confidence among investors, 
facilitate capital formation, and support efficient and competitively 
balanced capital markets. The ASA has a geographically diverse 
membership base that spans the Heartland, Southwest, Southeast, 
Atlantic, and Pacific Northwest regions of the United States. Municipal 
bonds, issued by state and local governments, provide funding for 
hospitals, schools, bridges, highways, affordable housing, water and 
energy facilities all across America. Municipal bonds provide jobs and 
economic opportunities in local communities and enable upgrades to 
failing facilities and investment in new, clean energy alternatives. 
Support for municipal bonds is especially important as state and local 
governments are facing unprecedented challenges due to the COVID-19 
pandemic.

Maintain the municipal tax exemption.
Generally, the interest paid on municipal bonds is exempt from federal 
taxes and sometimes state and local taxes as well. There is strong 
economic justification for the tax exemption of municipal bonds as it 
encourages state and local governments to invest in infrastructure 
projects that create benefits for their communities. This exemption has 
been in place for over 100 years.

Allow for infrastructure plans that can be customized at the state/
local levels, rather than a nationwide ``infrastructure bank.''
While infrastructure banks support long-term investments in 
infrastructure projects, ASA believes that they take away the 
opportunity for local and state governments to control their own 
infrastructure projects. Instead of a federal infrastructure bank, ASA 
strongly supports allowing local communities to decide how they want to 
spend money in their own backyards.

Reinstate tax-exempt advance refundings for municipal bonds.
Tax-exempt advance refunding bonds allowed states and localities to 
refinance existing debt with the greatest flexibility, resulting in 
substantial reductions in borrowing costs. Advance refunding refers to 
the withholding of a new bond issue's proceeds for longer than 90 days 
before using them to pay off an outstanding bond's obligations. 
Municipalities typically use advance refunding to lower borrowing costs 
and to take advantage of lower interest rates. The elimination of tax-
exempt advance refundings in the 2017 Tax Cuts and Jobs Act (TCJA) 
limited the options for state and local governments to refinance debt, 
and has resulted in higher costs that trickle down to the taxpayers.

Ensure Municipal Bonds Continue to Promote Environmental and Social 
Objectives.
Municipal bonds have always promoted sustainable development and the 
public good by funding environmental and social projects in communities 
across the country. Important examples of these financings include 
public health, clean water, affordable housing, food security, 
renewable energy, and public education, among other things. Municipal 
bonds provide a gateway to local socially responsible investing for 
long-term investors. Our members have played a leading role in the 
financing of these projects and they will continue to support them as 
America's infrastructure is modernized.

Congress should update the tax code to allow for more bank-qualified 
bonds.
Historically, banks were the major purchasers of tax-exempt bonds. 
Banks' demand for municipal bonds changed in 1986 with the passage of 
the Tax Reform Act of 1986, which says banks may not deduct the 
carrying cost of tax-exempt municipal bonds. For banks, this provision 
has the effect of eliminating the tax-exempt benefit of municipal bonds 
unless they are deemed as ``bank qualified'' bonds. In order to meet 
the requirements for ``bank qualification,'' a municipal bond must meet 
several criteria and the issuer must not expect to issue more than $10 
million of bonds in the calendar year. ASA believes the $10 million 
amount should be modernized to reflect the passage of time, as many 
organizations support a minimum of a $30 million threshold.

Expand Private-Activity Bonds (PABs).
While tax-exempt municipal bonds are geared toward infrastructure 
projects with a public benefit, PABs are directed at projects for 
private entities that also serve some public purpose, such as an 
apartment complex that may allow low-income housing. The 1986 Tax Act 
imposed a limit on how many private-activity bonds can be issued in a 
state each year and a number of eligibility restrictions dictate the 
way public- and private-sector partners can work together. ASA strongly 
supports expanding eligibility and state allowances for PABs.

Reinstate the Build America Bonds (BABs) Program (2009-2010).
Created during the 2009 financial crisis, Build America Bonds (BABs) 
functioned like municipal bonds, except that BABs were taxable bonds 
that gave either a 35 percent direct federal subsidy to the borrower or 
a federal tax credit worth 35 percent of the interest owed to the 
investor. From 2009-2010, over $180 billion BABs were issued, and the 
program was extremely attractive to a wide range of investors. ASA 
believes a new BABs program, that is not subject to sequestration 
reductions, would be extremely beneficial for infrastructure 
investment.

                                 ______
                                 
                         American Truck Dealers

                   412 First Street, SE, First Floor

                          Washington, DC 20003

                             (202) 547-5500

Chairman Wyden and Ranking Member Crapo, the American Truck Dealers 
(ATD), a division of the National Automobile Dealers Association, 
appreciates the opportunity to submit comments for the record regarding 
our strong support for repeal of the federal excise tax (FET) on heavy-
duty trucks and trailers. ATD represents over 1,700 franchised 
commercial truck dealerships who employ more than 122,000 people 
nationwide and leads the Modernize the Truck Fleet coalition.\1\
---------------------------------------------------------------------------
    \1\ The Modernize the Truck Fleet coalition is a broad coalition of 
trade groups, equipment manufacturers and businesses representing broad 
sectors of the trucking industry that have come together to repeal the 
FET. There are six official members of the Modernize the Truck Fleet 
Coalition: the American Truck Dealers, National Tank Truck Carriers, 
National Trailer Dealers Association, The Association for the Work 
Truck Industry, the Truck Renting and Leasing Association, and the 
Truck and Engine Manufacturers Association.

As Congress considers comprehensive infrastructure legislation, ATD 
respectfully requests that Congress repeal the 12% FET on new heavy-
duty trucks and trailers and replace it with a more consistent revenue 
source for the highway trust fund (HTF). Repeal of the FET would 
immediately spur the purchase of newer, safer and cleaner heavy-duty 
trucks and trailers and help support the 1.3 million jobs related to 
Class 8 truck and trailer manufacturing and the 7.95 million Americans 
in 
trucking-related jobs.\2\
---------------------------------------------------------------------------
    \2\ Economics and Industry Data. American Trucking Associations, 
https://www.trucking.org/economics-and-industry-data.

Repealing the FET and replacing it with a user-based revenue source 
relevant to today's economy will help protect trucking-related jobs, 
provide environmental benefits by replacing older trucks with newer 
cleaner trucks, and speed the modernization of America's truck fleet.

FET First Imposed to Pay for World War I

The FET was first imposed in 1917 to help pay for World War I. 
Originally 3%, the tax is 12% today,\3\ making the FET the highest tax 
Congress imposes on a percentage basis on any product. This tax 
routinely adds over $20,000 to the price of a new heavy-duty truck and 
is imposed on top of the nearly $40,000 in recent federal emissions and 
fuel-economy regulatory mandates. This tax coupled with recent 
regulatory costs makes it more difficult for small businesses to afford 
a new truck.
---------------------------------------------------------------------------
    \3\ Since its inception at 3%, the tax has been briefly eliminated, 
raised twice prior to World War II, increased again and rolled into the 
highway trust fund in 1956, repealed by the Senate in 1975, and 
increased to 12% in 1982. That was the last time Congress had any 
substantive debate or made any changes to this tax. See attached The 
History of the Federal Excise Tax on Heavy-Duty Trucks, American Truck 
Dealers (January 2019), https://www.nada.org/WorkArea/
DownloadAsset.aspx?id=21474858078.

Congress has not revisited whether the FET is the most effective and 
efficient way to raise revenue from the commercial transportation 
sector since 1982. Since that time, the FET has been extended six 
times, and will expire at the end of September 2022.\4\
---------------------------------------------------------------------------
    \4\ Pub. L. 114-94.
---------------------------------------------------------------------------

Congressional Support Grows to Change the FET Last Year

When heavy-duty trucks sales plummeted in the second quarter of last 
year due to the coronavirus pandemic, the trucking industry united 
behind temporarily repealing the FET, which would have brought 
immediate relief to the vital trucking industry. Rep. Chris Pappas (D-
NH) spearheaded a letter signed by 54 House Democrats to House leaders 
requesting suspension of the FET through 2021. Included among the 
signers were six Democratic members of the House Ways and Means 
Committee. This effort was supported by ATD, the United Auto Workers, 
the American Trucking Associations, and over 200 other trucking-related 
organizations. In addition, FET suspension and repeal have received 
bipartisan support in Congress.\5\
---------------------------------------------------------------------------
    \5\ Last Congress, Reps. Doug LaMalfa (R-CA) and Collin Peterson 
(D-MN) introduced H.R. 2381, the ``Modern, Clean, and Safe Trucks Act 
of 2019,'' which would repeal the FET. The bill had 35 bipartisan 
cosponsors, and a Senate companion FET repeal bill (S. 1839) was 
introduced by Sen. Cory Gardner (R-CO). Additionally, Sen. Joe Manchin 
(D-WV) sent a letter on December 21, 2019 to the leadership of the 
Senate Finance Committee asking that FET repeal be considered as 
infrastructure funding issues are deliberated in the context of 
reforming the highway trust fund.
---------------------------------------------------------------------------

FET Discourages Modernizing America's Truck Fleet

More than half of the Class 8 trucks on the road are over 10 years old. 
New trucks have made significant environmental gains due to recent 
federal emissions and fuel-economy mandates and industry innovation. 
For example, cleaner fuel and engines utilizing advanced technologies 
have combined to reduce nitrogen oxide (NOx) emissions by 
97% and particulate matter (PM) emissions by 98%. To put that in 
perspective, it would take 60 new trucks to generate the same level of 
emissions as a single truck manufactured in 1988. Since 2007, new 
trucks have also achieved significant carbon dioxide reductions and 
fuel-efficiency improvements, which have saved 296 million barrels of 
crude oil.\6\
---------------------------------------------------------------------------
    \6\ 43 Percent of U.S. Commercial Trucks Now Powered by Newest-
Generation Near-Zero Emissions Diesel Technology, Delivering 
Significant Emissions Reductions and Fuel Savings. Diesel Technology 
Forum, October 22, 2019.

However, the investments in new technologies required to fulfill new 
environmental and regulatory mandates have added nearly $40,000 to the 
price of a new truck, and these regulatory costs are also subject to 
the FET.\7\ As a practical matter, the FET taxes the environmental 
technologies the federal government has mandated, so its repeal would 
benefit the environment by ensuring speedier deployment of cleaner and 
more fuel-efficient trucks.
---------------------------------------------------------------------------
    \7\ The FET is on top of the nearly $40,000 on average per truck 
cost of these regulatory mandates, which include since the early 2000s 
tailpipe emissions rules, greenhouse gas emissions standards and fuel 
efficiency standards. The aggregate costs of these mandates result in 
an additional $4,700 FET, on average.
---------------------------------------------------------------------------

 FET Repeal Would Spur the Sale of New Safer Trucks and Increase 
                    Highway Safety

Roadway safety and crash avoidance are top priorities for the trucking 
industry. While new commercial trucks and trailers are the safest they 
have ever been, deployment of new safety equipment can be delayed due 
to the high cost of a new truck, which includes the 12% FET that 
Congress levies on new trucks and trailers. New trucks and trailers 
have several mandated safety features to help the driver maintain 
control of the vehicle and prevent a collision, such as anti-lock 
braking systems and electronic stability control. Additionally, new 
truck buyers can choose from an array of innovative, new safety 
technologies like adaptive cruise control, automatic emergency braking 
systems, and other advanced driver assistance systems that help reduce 
crashes.

The FET deters the selection of additional safety features that could 
be purchased because the tax is applied to the cost of each safety 
feature the customer may decide to add to the vehicle at the point of 
sale. Repealing this 12% tax through 2021 will help spur the sale of 
new trucks, which offer the latest safety options, such as: automatic 
emergency braking; adaptive cruise control with braking; lane departure 
warning, and lane-keeping assist (with intervention); forward collision 
mitigation; blind spot warning; traction control; tire pressure 
monitoring, automatic tire inflation; automatic wipers and headlamps; 
and side airbags for rollovers.

FET repeal would also help the trucking industry accelerate the 
purchasing cycle for heavy-duty truck fleets which will result in a 
faster replacement rate that will improve highway safety. Since more 
than half of the Class 8 trucks on the road are over 10 years old, many 
trucks in service today lack the benefits offered by nearly a decade of 
technological advancements in safety. Congress should encourage the 
sale of new heavy-duty vehicles, which utilize the significant 
improvements from earlier generations in safety technology and will 
help reduce roadway crashes and related injuries and fatalities.

 The FET Creates Considerable Administrative Burdens and Costs for 
                    Small Businesses

The FET is a difficult tax to administer. Truck dealers, who are 
responsible for collecting and remitting the tax, incur considerable 
costs when navigating the complex IRS regulations that apply to this 
tax. One challenge to administering the FET is that today's heavy-duty 
truck, unlike a 1917 truck, is highly customizable.

As each modification or customized truck or trailer is made, dealers 
must determine on a part-by-part basis whether FET applies and manage 
assessment of the tax for every truck sold. These custom purchase 
options require careful calculations when determining what is and what 
is not exempt from FET. For example, one dealer with truck dealerships 
in Alabama, Florida, and Georgia calculated that 2,820 employee-hours 
are spent to administer and comply with the FET, along with $200,000 IT 
costs annually.

As an excise tax, the FET should be a relatively straightforward levy 
to collect. However, with customization and a complex and vague set of 
rules, many truck sales need to be uniquely calculated, and it is often 
unclear whether certain trucks or their components are subject to FET. 
The complexity of this excise tax is such that one industry group, the 
Association for the Work Truck Industry, produces a 165-page guide for 
their members on how to comply with the FET.\8\ FET repeal would 
eliminate the administrative burden of collecting the FET, eliminate 
the significant financial risk if the IRS auditor disagrees with the 
tax liability, and allow small business dealers to hire or retrain 
employees for more productive pursuits.
---------------------------------------------------------------------------
    \8\ Federal Excise Tax Guide for the Work Truck Industry 2011. The 
Association for the Work Truck Industry, https://www.ntea.com/
ItemDetail?iProductCode=2266.
---------------------------------------------------------------------------

The FET Revenue Stream into the Highway Trust Fund Is Volatile

The FET has been the most inconsistent source of revenue to the HTF 
over the past 20 years. Because FET revenue is dependent on volatile 
annual truck sales, the tax has contributed to the overall instability 
of the HTF. In 2008, FET receipts contributed 4.0% of total HTF. In 
2017 FET revenue as a percentage of HTF revenue dropped from 11.2% in 
2015 to 7.6% and increased to 12.2% in 2019.\9\ Revenues for 2020, 
which are currently not public, are also likely to fluctuate as 
trucking sales essentially came to a standstill in April and May due to 
the pandemic.
---------------------------------------------------------------------------
    \9\ See Attachment: Volatility in FET Revenue as a Percentage of 
Total HTF Revenue 1957-2019. American Truck Dealers (American Truck 
Dealers, Washington, DC) March 2021.

Because FET revenue, with an average annual revenue of $3.33 billion 
from 2005-2019, is dependent on fluctuating annual truck sales, the 
volatility of this revenue contributes to the instability of the 
HTF.\10\ To establish long-term stability for the HTF, the FET should 
be replaced with a more consistent revenue source.
---------------------------------------------------------------------------
    \10\ See Attachment: Summary of highway trust fund (HTF) Revenues 
2005-2019. American Truck Dealers (American Truck Dealers, Washington, 
DC) March 2021.

Another drawback of the FET is that it is not equitable, as it is not 
based on road usage. Unlike a fuel or vehicle miles traveled tax, the 
FET is a flat rate, meaning the purchaser is taxed the same amount 
whether the vehicle is driven 500 or 50,000 miles. Modernize the Truck 
Fleet, a large nationwide industry coalition led by ATD, is working to 
identify viable funding options to replace the FET with an equitable 
revenue source, with a preference that the amount of the tax is based 
on actual road usage.

Conclusion

We urge Congress to repeal the 12% FET on heavy-duty trucks and 
trailers and replace it with a more consistent revenue source for the 
highway trust fund to protect trucking-related jobs, provide 
environmental benefits by replacing older trucks with newer cleaner 
trucks, and modernize America's truck fleet. Over the past few decades, 
the trucking industry has made significant strides in green technology 
and safety that make new heavy-duty trucks cleaner and safer than ever 
before. With an aging fleet, FET repeal would help speed the 
replacement of older trucks with new green trucks.

Additionally, heavy-duty trucks and trailers are almost entirely made 
in North America and these trucks and trailers are designed, tested, 
and assembled across the U.S. Repeal of the FET would also help protect 
the 1.3 million American manufacturing, dealership, supplier and heavy-
duty trucking and trailer-related jobs nationwide.

ATD stands ready to work with Congress to modernize our nation's truck 
fleet, and to replace the FET with user-based funding options that will 
provide long-term solvency for the highway trust fund. Thank you again 
for the opportunity to submit testimony.

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                                                                      ATTACHMENT A
                                                 Summary of highway trust fund (HTF) Revenues 2005-2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                   Average Percentage of
  HTF Federal Excise Taxes           Tax Amount/Rate                          Applicability                     Revenue Average      HTF Revenue (2005-
                                                                                                                  (2005-2019)              2019)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Gasoline Excise Tax           18.4 cents per gallon \11\    Most gasoline except for fuel used by rail, or        $24.75 billion            63.61% \12\
                                                             off-road equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Diesel Excise Tax \13\        24.4 cents per gallon \1\     Most diesel except for fuel used by rail, or off-      $9.27 billion             23.84% \2\
                                                             road equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Truck and Trailer Excise Tax  12% of retailer's sale price  New trucks and tractors weighing greater than          $3.33 billion                  8.57%
 (FET)                                                       33,000 lbs. GVW
--------------------------------------------------------------------------------------------------------------------------------------------------------
Truck and Trailer Excise Tax  12% of retailer's sale price  New trailers weighing greater than 26,000 lbs.         $3.33 billion                  8.57%
 (FET)                                                       GVW
--------------------------------------------------------------------------------------------------------------------------------------------------------
Heavy Vehicle Use Tax (HVUT)  $100 plus $22 per 1,000 lbs.  Trucks weighing 55,000 lbs. GVW or greater              $1.1 billion                  2.84%
                               (in excess of 55,000 lbs.)
                               annually--$550 maximum
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tire Excise Tax               9.45 cents per 10 lbs. of     Tires with a capacity over 3,500 lbs.                $442.09 million                  1.14%
                               tire load (in excess of
                               3,500 lbs.)
--------------------------------------------------------------------------------------------------------------------------------------------------------
GVW = Gross Vehicle Weight
 
Source: Federal Highway Administration (https://www.fhwa.dot.gov/policyinformation/statistics.cfm) using latest available data.
\11\ Value represents total fuel excise tax. Of this amount, 2.86 cents per gallon are transferred to the Mass Transit Account.
\12\ Percentages and totals derived from money flowing solely to highway account and not to the mass transit account.
\13\ On average, $580 million dollars of diesel tax revenue is refunded annually to aviation users who pay diesel tax. This total reflects this refund
  difference.


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  .eps[GRAPHIC] [TIFF OMITTED] T1821.008
  

                                 .eps__
                                 
                        Center for Fiscal Equity

                      14448 Parkvale Road, Suite 6

                          Rockville, MD 20853

                      [email protected]

                      Statement of Michael Bindner

Chairman Wyden and Ranking Member Crapo, thank you for the opportunity 
to submit our comments on this topic. We submitted comments to the Ways 
and Means Committee in 2019, on ``Our Nation's Crumbling 
Infrastructure'' and the House Budget Committee in January 2020 
regarding ``Why Federal Investments Matter,'' as well as in recent 
comments to the Appropriations, Ways and Means and Finance Committees.

Our recommendations on funding infrastructure with a motor fuel tax are 
still valid. We could also use a carbon value-added tax to provide 
receipt visibility for more informed consumer choice. The key to making 
such taxes adequate, aside from recognizing the inelastic nature of 
gasoline prices, is to bring back ``pork barrel'' spending.

We submitted testimony to the Energy and Water Projects Appropriation 
regarding fusion power and electric vehicles on dedicated roads with 
computer control. These are attached.

A key part of any infrastructure plan is to encourage household 
spending, which is helped by government action and results in 
industrial spending on plant and equipment.

As we commented to Ways and Means last month regarding Trade 
Infrastructure:

Recent changes to the Child Tax Credit are the best (trade) 
infrastructure we can hope for, although a higher minimum wage is even 
more desirable. People need more money to buy imported goods and to go 
back into the labor force. There are many discouraged workers, some of 
which turn to less than legal means to earn an income. It is time to 
allow them back into the light. Work does not meet the needs of many 
workers. Now is the time to change this.

On the government side, the Internal Revenue Service has been tasked 
with distributing the CTC before the end of this tax year. July is the 
current goal. We can do better. Rather than relying on payments from 
the IRS, families who already receive some form of government benefit 
should receive a refundable CTC through their current benefit stream. 
We can start this today. Computers can be programmed and cash 
delivered.

Part of the need for economic infrastructure must be an immediate COLA 
for Social Security beneficiaries. Of late, food prices have gone 
through the rough. Now that stimulus payments have been spent, many of 
us will be very hungry, very soon. We cannot even by cola without a 
COLA.

Benefits to workers are even easier to set up. Simply promise employers 
that they can take any additional credits paid due to refundability 
(they can already manage adjusting normal withholding) as a credit to 
their quarterly payments to the Internal Revenue Service. Easy.

Last month, I told my story as a stay at home parent who had gone back 
to work, adding an analysis of sick leave and child care infrastructure 
issues.

Not requiring sick leave has been justified by the reactionary sector 
that claims that in the end, the market will sort everything out. 
Keynes would respond that in the long run, we are all dead. Let me add 
that one should not have to wait to die for a day off. Marx would 
agree. For the market to work, there must be both perfect information 
and no barriers to entry or exit, no black lists, no private salary 
information. No such luck.

The perception that doing the right thing makes a business non-
competitive is the reason we enact minimum wage laws and should require 
mandatory leave. Because the labor product is almost always well above 
wages paid, few jobs are lost when this occurs. Higher wages simply 
reduce what is called the labor surplus, and not only by Marx. Any CFO 
who cannot calculate the current productive surplus will soon be 
seeking a job with adequate wages and sick leave.

The requirement that this be provided ends the calculation of whether 
doing so makes a firm non-competitive because all competitors must 
provide the same benefit. This applies to businesses of all sizes. If a 
firm is so precarious that it cannot survive this change, it is 
probably not viable without it.

Childcare is best provided by the employer or the employee-owned or 
cooperative firm. On-site care, with separate spaces for well and sick 
children, as well as an on-site medical site for sick employees, will 
uncomplicate the morning and evening routine. Making yet another stop 
in an already busy schedule adds to the stress of the day. Knowing 
that, if problems arise, parents can be right there, will help workers 
focus on work.

Larger firms and government agencies can more easily provide such 
facilities. Indeed, in the Reeves Center of the District Government, 
such a site already exists. When the crisis is over, a staff visit 
would prove illuminating.

Smaller firms could make arrangements with the landlord of the building 
where offices or stores are located, including retail districts and 
shopping malls. For security reasons, these would only serve local 
workers, but not retail customers.

A tax on employers would help society share the pain for requiring paid 
leave. Firms that offer leave would receive a credit on their taxes 
(especially low wage firms). Tax rates should be set high enough for 
that.

From January 2020 Comments to the House Budget Committee:

Our main tool in providing for human services is an employer-paid 
subtraction value-added tax. This levy would be used more to channel 
tax expenditures to employees rather than through categorical or block 
grants. The most important feature is an expanded refundable child tax 
credit, which would be distributed with pay and set to provide income 
at middle class levels.

The S-VAT could be levied at both the state and federal levels with a 
common base and tax benefits differing between the states based on 
their cost of living (which would be paid with the state levy). The 
federal tax would be the floor of support so that no state could keep 
any part of its population poor, including migrants. It is time to end 
the race to the bottom and its associated war on the poor.

The S-VAT will also facilitate human capital expenditures, with credits 
to support tuition, wages and benefits for low-skill workers from ESL 
and remedial education to apprenticeship. These benefits can be used in 
cooperation with existing workforce investment boards, community 
colleges and economic development agencies.

Private education providers should also be included in the mix, 
including and especially the Catholic education system. Blaine 
Amendments need repeal, opposition to unions ended and a focus on non-
college bound students encouraged.

Medicaid for senior citizens and the disabled is a huge contingent 
liability for some states. In his New Federalism proposals, President 
Reagan offered to assume these costs in exchange for state funding of 
all other federal support. The first half of this proposal should be 
implemented in the form of a new Medicare Part E with no requirement 
for local funding.

The remainder of health costs would be paid through employer subsidies 
to low-wage trainees, as described above through an S-VAT, with state 
goods and services taxes (invoice VAT) covering cash, food and health 
benefits for unattached non-workers until they can be placed in the 
appropriate employment or disability program (including substance abuse 
intervention).

Increasing the general wage level, through higher minimum wages, will 
remove workers from poverty. The concept of being a member of the 
working poor should be banished from the national conversation with an 
eventual $18 (changed from $20) minimum wage for both employment and 
training program participation, starting with $10 (changed from $15) 
immediately. This wage level should adjust for inflation automatically. 
The best support for state budgets is to make sure that everyone is 
trained up to their potential.

Tax credit support for families is a better recession circuit breaker 
than waiting for the Congress and state legislatures to act, although 
increasing the child tax credit (which should be inflation adjusted) is 
the best way to provide immediate stimulus, as do higher Food Stamps 
(which would be mostly repealed by a higher CTC).

The other circuit breaker in a recession is increased income taxation 
on the wealthy. Recessions do not happen, as Marx and Schumpeter 
posited, from overproduction or a business cycle. They come about 
because the wealthy have received tax breaks which encourage asset 
inflation and questionable investment (often with an assist from the 
Federal Reserve so that such investments may be migrated to Main 
Street). Higher income tax rates take money from the savings sector so 
that the consumption sector can recover (even without government 
subsidies).

Higher taxes on the wealthy are beneficial to the economy, now and in 
the next recession, because they take money out of asset inflation in 
the savings sector and can then be used to increase spending on the 
elements of GDP: government purchases, household consumption, net 
exports and plant and equipment investment (which is not part of asset 
speculation, as supply side economists falsely assert).

We submitted testimony on the Financial Services and General Government 
Appropriation regarding our proposed asset value added tax, which 
includes ending the exemption for mutual funds, and our current 
analysis on an upcoming recession and how to deal with it. This is also 
attached. Most of what we said in January 2020 is still current more 
than a year later, including that a new financial panic and recession 
is pending. The pandemic response by the federal reserve was a life 
preserver for the speculation sector. This time, we need to go beyond 
Wall Street.

Finally, we have attached our analysis of who owes and owns the 
national debt as a form of class warfare. Claims that the deficit is a 
vital issue are true, but the solution is not foregoing infrastructure, 
it is taxing the holders of the debt. Interestingly enough, President 
Biden identifies correctly those who are in that class. Their taxes 
should go up, but not to fund infrastructure. We will get more traction 
from the donor class once we demonstrate both who owns and who owes the 
national debt.

Thank you for the opportunity to address the committee. We are, of 
course, available for direct testimony or to answer questions by 
members and staff.

 Attachment--Our Nation's Crumbling Infrastructure, March 6, 2019

For most states and localities, infrastructure is funded with federal 
fuel taxes, state fuel taxes, tolls and property taxes for neighborhood 
roads. Many states have increased their fuel taxes to fund 
infrastructure deficits. States that belong to the Legislative Exchange 
Council are less likely to take this step, which is perilous. Our 
federal system allows states to mess themselves up, so we will not 
address this problem except to say that states who do not charge 
adequate taxes do not deserve an extra subsidy from federal funds 
because of their folly.

In the short term, tolls could be considered for states who will not 
responsibly increase their fuel taxes. The nature of these projects 
precludes their adoption on a national basis. Their use is hardly 
universal. Local High Occupancy Toll or HOT lanes are created using 
local entrepreneurs, however are virtually empty most of the time.

HOT lanes have become transportation for the wealthy, leaving the 
working class to deal with the crowded main highway system. While HOT 
lane providers do upgrade the infrastructure to adjacent lanes as well, 
their rush hour pricing and general disuse will not maintain public 
favor for long. These roads may help fund immediate infrastructure 
deficits, but their pricing structure may not return promised revenue, 
which will end their usefulness.

For the present, the answer must be higher fuel taxes. They must also 
remain a direct excise rather than a proportion of fuel prices because 
prices vary from state to state. This would violate Article I, Section 
8's prohibition requiring equal national excise taxes, although 
individual states could explore the idea. Regardless, the coalition for 
a higher national excise collapsed long ago, causing our infrastructure 
crisis.

The reason for this collapse is the end of earmarking. The late Senator 
John McCain (God rest his soul), was a driving force in the elimination 
of this funding tool, while Congressman Bud Schuster was its champion.

Earmarks lost favor because of the bad publicity on Alaska's Bridge to 
Nowhere, which was necessary to reach a vital airport destination. 
Ironically, the road to the bridge was built and became the road to 
nowhere because it was part of the overall plan. Governor Sarah Palin's 
lack of courage in defending the project led to the downfall of 
earmarks and the coalition for higher fuel excise taxes.

Earmarks simply codified agreements by the local members of Congress 
and the Senate, the Federal Highway Administration and state and local 
government to plan specific projects rather than leave their planning 
solely up to the Department of Transportation. Without these 
constituencies, the natural constituency for higher fuel taxes could 
not hold out against general anti-tax sentiment. In essence, government 
stopped doing its job to represent the interest of society rather than 
its vocal anti-tax minority.

Bring back earmarks and projects will go forward and fuel taxes can be 
raised with little heartburn.

Attachment--FY 2022 Energy and Water Development Appropriation

In 2007, I was employed as a contract administrator at the Department 
of Energy. During this time, a new energy bill was signed. Soon after, 
fusion research was cut. This was not our finest moment.

Fusion is a game changer and should be funded on a crash basis before 
we have to turn out the lights to avoid treading water. Helium-3 is 
promising and there is even some noise about cold fusion on a larger 
scale. Energy companies like how cheap coal is and how much cheaper and 
more popular natural gas is.

Utilities (and even coal producers) need to be offered a way to hedge 
their bets. To move fusion, set up a public-private partnership to sink 
in more money in exchange for the right of first use. Any practical use 
of fusion will be big-industry. It was never going to be any other way. 
Funds should be increased for fusion now, with a promise of ever 
greater funding once industrial partnerships are created.

One use for such cheap power is a new transportation system. We can 
pilot this now, in cooperation with the Departments of Commerce and 
Transportation, automobile manufacturers, utility companies and 
eventually selected local governments. I described the project in my 
CJS testimony.

To best utilize clean energy (even natural) automated cars with central 
control (rather than their own AI) and energy distribution (rather than 
being hampered by economically damaging battery development). The 
latter is old technology, i.e., electric trains and buses.

The same consortia that fund the project can be the backbone for 
implementing it. Individuals could own cars, while some would be for 
hire (with monitoring, but not drivers). Debit cards or a link to 
checking accounts would pay for the car itself (either to rent or own), 
the roadway and the use of energy and computer services.

Prices would vary based on congestion and vehicles could be taken to a 
public transportation hub (which might be located at their children's 
school), with the vehicle returning home empty or going to the next 
fare. If congestion is low, it may be affordable to drive to work. If 
it is high, prices for public transit and commuting would be adjusted 
accordingly.

Energy infrastructure to power the system and facilitate communication 
would also carry energy and data services, so add Xfinity and Cox to 
the consortium.

This also gives us the incentive to improve the grid and to redesign 
highways with driverless cars that won't crash into trees and explode.

We only need willingness to do this. The technology is already there.

 Attachment--FY 2022 Financial Services Appropriation

Asset Value-Added Tax (A-VAT). A replacement for capital gains taxes, 
dividend taxes, and the estate tax. It will apply to asset sales, 
dividend distributions, exercised options, rental income, inherited and 
gifted assets and the profits from short sales. Tax payments for option 
exercises and inherited assets will be reset, with prior tax payments 
for that asset eliminated so that the seller gets no benefit from them. 
In this perspective, it is the owner's increase in value that is taxed.

As with any sale of liquid or real assets, sales to a qualified broad-
based Employee Stock Ownership Plan will be tax free. These taxes will 
fund the same spending items as income or S-VAT surtaxes. This tax will 
end Tax Gap issues owed by high income individuals. A 26% rate is 
between the GOP 24% rate (including ACA-SM and Pease surtaxes) and the 
Democratic 28% rate. It's time to quit playing football with tax rates 
to attract side bets.

Taxes on salaries can be collected by employers without having to file 
because taxes on capital income and gains would be funded separately. 
Rental and capital gains on real property would be collected by states 
and capital gains and income from financial assets would be collected 
by the federal government, with funds remitted by brokers or trading 
platforms directly to the Securities and Exchange Commission. Our 
proposed rate is 26%.

The biggest tax shelter is the use of money market funds to accumulate 
capital gains and income without taxation. This practice must end if 
salary surtaxes no longer include non-salaried income. 75% of such 
funds are held by the top 10% of households as measured by the 2019 
Survey of Consumer Finance by the Federal Reserve. I suspect the other 
20% are held by high income retirees. The working class will not be 
harmed.

This ratio affirms what Pareto found, except his ration was 80% of 
wealth held by 20% of asset holders. Clearly, things have gotten worse 
for the 80th to 89.9th percentile. If you apply the Pareto rule to 
higher levels of income, and with Berkshire Hathaway there is no reason 
not to, the top 1450 households hold roughly 30% of all wealth in 
mutual funds. This ratio also applies to bond holdings, but this is a 
topic for another day.

We have left a loophole on Asset Value-Added Taxes that some will be 
able to fly a 757 through, which is trading stock overseas to avoid 
taxation. The only way out of this is an internationally negotiated 
asset VAT rate, or at least the same range. This ends the need for a 
minimum tax on corporate income (note that corporate income taxes will 
be discontinued under this proposal).

2021 Recession

A recession is inevitable because tax cuts and monetary policy are 
fueling asset speculation while fiscal policy is not. The current 
speculative toy is crypto-currency, especially Bitcoin. Bitcoin is 
starting to attract poor people. Coin collection machines now allow 
being paid in Bitcoin rather than in store credit or cash. Criminals 
also love it too. It is being sold as a way to invest and grow rich. 
There is even a fancy name for it: quantum finance. Even Goldman Sachs 
is investing in Bitcoin. This is not a good sign.

Dealer claims that Bitcoin has big rises and smaller crashes simply 
proves the point that we are dealing with a legal Ponzi scheme. When 
the top of the food chain cashes out and everyone else realizes that 
they own a worthless product.

In the current bond market, commercial properties and properties that 
have been seized in foreclosure have been purchased with private equity 
and are so heavily leveraged that they cannot be sold until the holding 
company files for bankruptcy in the next Great Recession. See 
Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, 
Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their 
Homes and Demolished the American Dream by Aaron Glantz.

The long and short of it is that many now have to rent or own leveraged 
properties. Our absentee landlords have cashed out and left others to 
bled us dry. They essentially own us because we have to work harder and 
longer to have a place to live while those who have cashed out live in 
gated and high-end assisted living communities. Before the pandemic, 
Exchange Traded Funds have been all the rage. Who wants to bet on where 
the latest pool of junk is hiding?

The Dodd-Frank Act provides for liquidity when crashes, such as the 
upcoming disaster, occur. However, neither the law nor the Federal 
Reserve provide any relief to the renters, homeowners and credit card 
customers whose debts are being purchased by the Federal Reserve and 
remarketed.

In 2009, home values plummeted. Even borrowers (such as my family) who 
did everything right (except buying at the top of the market), found 
themselves unable to sell our homes. Bankruptcy and divorce followed. 
Job loss in the 2011 debt deal did not help matters either. Had the 
Federal Reserve or the Virginia Housing Development Agency marked these 
properties to market, what can only be called an Economic Depression 
would not have occurred.

When the Fed marks bonds to market, M3 is reduced. The money vanishes 
in the same way it was created, with a keystroke. This also deflates 
the financial markets. Experience has shown that simply throwing money 
out of the window of the Central Banks did nothing to improve the 
economy. Forgiving debt would have.

Let us not repeat (or rather continue to repeat) the bad practices that 
left the economy in the doldrums. During the pandemic, the Federal 
Reserve has purchased bad paper, but without benefit to those whose 
debts are held in those bonds.

This time around, credit card balances and back rent should be forgiven 
when the Federal Reserve buys the bonds that hold the debt. Loans could 
also be written down, which would stop bondholders from benefiting from 
issuing bonds that should never have been issued in the first place. 
Renters of both commercial and residential property should be offered 
the chance to purchase their locations and homes, with assistance from 
Government Sponsored Enterprises, with their paper replacing the debt 
paper that has been securitized in Exchange Traded Funds.

In 2009, the United States aided and abetted those who created the 
crisis. We are currently repeating the mistake. When the inevitable 
crisis occurs again, doing the right thing will also be the right 
medicine for the economy. In 2008, the bill passed with the promise 
that borrowers would be helped. Mr. Paulson lied. Let us act truthfully 
this time around.

Attachment--Debt Ownership as Class Warfare, September 24, 2020

Visibility into how the national debt, held by both the public and the 
government at the household level, sheds light on why Social Security, 
rather than payments for interest on the public debt, are a concern of 
so many sponsored advocacy institutions across the political spectrum.

Direct household attribution exists through direct bond holdings, 
income provided by Social Security payments and secondary financial 
instruments backed with debt assets. Using the Federal Reserve Consumer 
Finance Survey and federal worker and Social Security payment and tax 
information, we have calculated who owes and who owns the national debt 
by income quintile. Federal Reserve and Bank holdings are attributed 
based on household checking and savings account sizes.

Responsibility to repay the debt is attributed based on personal income 
tax collection. Payroll taxes create an asset for the payer, so they 
are not included in the calculation of who owes the debt. Calculations 
based on debt held when our study on the debt was published, 
distributed based on the latest data (2017) from the IRS Data Book show 
a ratio of $16.5 of debt for every dollar of income tax paid.

This table shows a summary level distribution of income, national debt 
and debt assets in three groupings based on share of Adjusted Gross 
Income received, rather than by number of households. This answers the 
perennial question of who is in the middle class.

[GRAPHIC] [TIFF OMITTED] T1821.009


.epsThe bottom 75% of taxpaying units hold few, if any, public debt 
assets in the form of Treasury Bonds or Securities or in accounts 
holding such assets. Their main national debt assets are held on their 
behalf by the Government. They are owed more debt than they owe through 
taxes.

The next highest 20% (the middle class), hold few bonds, a third of 
bond-backed financial assets and a quarter of government held 
retirement assets.

The top 5% (roughly 8.5% of households) own the vast majority of non-
government retirement holdings and collect (and roll-over) most net 
interest payments. This stratum owns very little of retirement assets 
held by the government, hence their interest in controlling these 
costs. Their excess liability over assets is mostly attributable to 
internationally held debt. Roughly $4 Trillion of this debt is held by 
institutions, with the rest held by individual bond holds, including 
debt held by members of this stratum in off-shore accounts.

Source: Settling (and Squaring) Accounts: Who Really Owes the National 
Debt? Who Owns It? available from Amazon at https://www.amazon.com/dp/
B08FRQFF8S.

                                 ______
                                 
               Global Infrastructure Investor Association

                        1 Chamberlain Square CS

                   Birmingham, B3 3AX, United Kingdom

28 May 2021

The Honorable Ron Wyden
Chairman
U.S. Senate
Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Wyden,

On behalf of the members of the Global Infrastructure Investor 
Association (GIIA), we write to provide our views for inclusion in the 
hearing record of the United States Senate Committee on Finance/
Committee on Ways and Means (``the Committee'') in relation to its 
Hearing on ``Funding and Financing Options to Bolster American 
Infrastructure/Leveraging the Tax Code for Infrastructure Investment'' 
held on Tuesday, May 18, 2021/Wednesday, May 19, 2021.

GIIA's members represent many of the leading international investors in 
infrastructure including a significant number of US-based fund managers 
and retirement systems among others. Our members own or manage over 
US$800bn worth of existing infrastructure assets around the world and 
control substantial further sums ready for investment in infrastructure 
across the U.S. economy. They are experts in deploying capital and 
managing assets to deliver world class infrastructure--from transport 
to energy, broadband to hospitals--across 55 countries on six 
continents.

It has long been recognised that the US requires substantial investment 
in its infrastructure: the challenge has always been how to get 
investment moving. GIIA and its members believe that utilising private 
capital represents the best means by which to help this element of the 
economy get moving. Increasing the involvement of private capital 
reduces the strain on federal and state budgets while leveraging the 
private sector to deliver new infrastructure projects that can drive 
employment and economic growth.

GIIA's member companies know well the benefits of private investment in 
providing a wide range of infrastructure projects that are essential 
for economic growth. With case studies ranging from the Northwest 
Parkway in Colorado, the Oswegatchie River Hydroelectric Project in New 
York, to Fullerton's FiberCity in California, to the Caruna energy 
network in Finland, and the Port of Melbourne in Australia--we stand 
ready to demonstrate how private investment can constructively augment 
public investments to increase the value of infrastructure to 
communities, cities and states.

Specifically, in the context of the Committee's recent hearing on 
``Funding and Financing Options to Bolster American Infrastructure/
Leveraging the Tax Code for Infrastructure Investment'' we strongly 
believe the following initiatives would drive growth in U.S. 
infrastructure, both spurring economic growth and creating jobs:

    1.  Evaluate best practice programs from around the globe for 
adoption in the United States to accelerate private investment and 
leverage scarce public dollars. For example, in Australia, Provinces 
and Premiers successfully used $3bn in federal incentives to support 
lease programs that netted $20bn in additional infrastructure 
investment.

       We believe that a similar program could help state and local 
governments in the U.S. generate new revenues for investing in 
infrastructure. By entering into long term leases or concessions with 
the private sector for the operation of existing assets, governments 
could invest the proceeds from those arrangements into other 
infrastructure. Contractual terms can be designed to provide certainty 
to governments and reassurance to local communities, with ultimate 
ownership remaining in public hands. Crucially, the lease proceeds 
create a new revenue stream for governments which, when supplemented by 
targeted federal incentive grants, provide a new infrastructure funding 
mechanism without placing additional pressure on already stretched 
federal, state or local budgets.

       As a complement to federal investment incentives, regulatory and 
statutory tax changes to expand the permitted use of tax-exempt debt 
would further expand this opportunity to boost infrastructure 
investment.

    2.  Implement targeted tax measures to incentivise new investment, 
thereby creating jobs and enhancing sustainability. Making tax changes 
allows for stimulus to be measured and focused where it will have most 
impact. Examples of specific changes include:

       (a)  Amending the US business interest deduction limitations 
under Section 163(j) such that they only apply a cap based on a 
taxpayer's EBITDA for all future years. Current law will reduce the cap 
to 30% of EBIT for tax years beginning on or after 1 January 2022. 
Infrastructure assets generate substantial depreciation deductions 
making the proposed amendment an important change to incentivise 
financing for new and existing assets. This has immediate consequences 
as without the change, the impact of applying Section 163(j) to EBIT in 
the future would perversely disadvantage investors who make significant 
capex investments now (as well as in the future).

      (b)  Encouraging new infrastructure investment by broadening the 
scope of infrastructure businesses excluded from the business interest 
limitation cap under Section 163(j).

      (c)  Introducing a (potentially transferable) credit for capex on 
infrastructure projects spent within a certain ``COVID-19 economic 
recovery'' time period. Such a credit already exists for railroad 
maintenance. Having a similar credit apply more broadly to other 
classes of infrastructure would spur capital investment and jobs 
growth.

To summarise, there are highly investible assets in all US states 
across multiple sectors, including transport (ports, airports, roads 
railways), water/wastewater, renewables (particularly wind, solar and 
biomass), and the roll out of high-speed broadband networks. Targeted 
use of limited federal incentives, combined with thoughtful changes to 
the Tax Code will unlock outsized investment at the state and local 
level. A meaningful number of these projects may be accelerated to 
offer positive near-term economic impact. However, as was experienced 
after the 2008 financial crisis, achieving this requires significant 
work and often takes longer than it should. Much good work has been 
done to streamline permitting over recent years, but more is needed.

We believe the ideas outlined above can be swiftly brought to bear, 
helping to deliver economic stimuli, with minimal call on the federal 
purse, while creating jobs and spurring economic activity that will 
have far-reaching benefits in local and national economic terms.

We would welcome the opportunity to discuss our thoughts with you and 
would be happy to organise virtual meetings in the coming weeks to help 
facilitate discussions.

Yours sincerely,

Lawrence Slade                      Naz Klendjian
Chief Executive                     hair, GIIA Tax Working Group
Global Infrastructure Investor 
Association

                                 ______
                                 
                Government Finance Officers Association

                  660 North Capitol Street, Suite 410

                          Washington, DC 20001

June 3, 2021

The Honorable Ron Wyden             The Honorable Mike Crapo
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
Washington, DC 20510                Washington, DC 20510

Dear Chairman Wyden, Ranking Member Crapo, and distinguished members of 
the Committee:

Thank you for holding the hearing Funding and Financing Options to 
Bolster American Infrastructure. The Government Finance Officers 
Association (GFOA) represents over 21,000 public finance officers from 
state and local governments, schools and special districts throughout 
the United States.

GFOA is dedicated to the professional management of governmental 
financial resources by advancing fiscal strategies, policies and 
practices for the public benefit, including issues related to issuing 
tax exempt bonds and investing public funds. Additionally, GFOA 
supports a strong network of public sector issuers in Washington, DC, 
called the Public Finance Network. Together with issuer organizations, 
the public finance network is able to issue letters of support from 
millions of public sector entities throughout the year. But on behalf 
of the GFOA and its members, we appreciate the opportunity to provide 
comments for this public hearing focusing on the tax tools that are so 
critical at the local level.

Our system of federalism requires a strong federal, state and local 
partnership to achieve our shared goals. One of the best examples 
embodying that federal partnership is the tax-exempt municipal bond. 
Tax-exempt bonds are the primary mechanism through which state and 
local governments raise capital to finance a wide range of essential 
public projects. The volume of municipal bond issuance for the period 
from 2009 to 2019 amounted to $4.2 trillion.

Communities across the country depend on strong, substantive federal 
tax policy for state and local governments to meet their capital needs. 
For over 100 years, the municipal bond market has worked fairly and 
efficiently to address these needs, whether it is in our largest states 
and cities or the rural areas across the United States. We urge 
Congress to not only protect this vital tool, but to act swiftly and 
adopt a number of provisions to further enhance the effectiveness of 
this tool.

As Congress deliberates the important topic of supporting 
infrastructure investment, we wish to broadly outline a few key points 
and recommendations for your consideration.

Preserve the Tax Exemption for all Municipal Securities: A top, 
longstanding priority for the nation's state and local public finance 
officers is the full preservation of the tax exemption on municipal 
bond interest. Elimination, reduction or capping of the tax exemption 
would pose immediate increased costs to the critical projects financed 
by state and local issuers. Added costs to capital projects would force 
state and local governments, already budget-strained by the ongoing 
pandemic, to make difficult and pro-recessionary choices. Furthermore, 
increased costs would ultimately be borne by the American taxpayer.

Reinstate the Tax Exemption for Advance Refunding Bonds: Before January 
1, 2018, municipal issuers were able to issue single tax-exempt advance 
refunding bonds prior to the 90 days before the call date. This 
critical tool allowed state and local governments to effectively 
refinance their outstanding debt in order to take advantage of more 
favorable interest rate environments or covenant terms. Advance 
refunding bonds frequently provided issuers with the flexibility to 
lower debt servicing charges that would otherwise be a fixed cost. GFOA 
found that between 2007 and 2017, there were over 12,000 tax-exempt 
advance refunding issuances nationwide which generated over $18 billion 
in savings for tax and ratepayers over the ten-year period.

Prior to their elimination in the Tax Cuts and Jobs Act (``TCJA'') 
(Pub. L. 115-97), advance refunding bonds made up approximately 27 
percent of issues in 2016. Restoration of this tax exemption would 
require an act of Congress, but would be one of the most effective 
actions to provide state and local governments with more financial 
flexibility to weather downturns and increase infrastructure 
investment. We strongly support bipartisan measures like S. 479, the 
LOCAL Infrastructure Act, that seeks to restore this vital, cost-saving 
tool.

Increase Access to Capital for Small Borrowers: For many thousands of 
small issuers and governmental and nonprofit borrowers, increasing the 
bank qualified borrowing limit from $10 million to $30 million, and 
having it apply at the borrower level would provide access to low cost 
capital to thousands of small local governments and non-profit 
hospitals and healthcare systems for immediate project needs.

Bank qualified bonds are particularly useful to smaller governments, as 
they have historically enabled these jurisdictions to finance 
infrastructure at lower costs than traditional bond financing. Bank 
qualified bond issuers save between 25 and 40 basis points on average. 
For example, on a 15-year, $10 million bank qualified debt financing, 
an issuer could expect to save between $232,000 and $370,000. Raising 
the bank qualified debt limit to $30 million, would save issuers 
between $696,000 and $1.1 million on a $30 million bank qualified bond 
issue. This is a substantial savings for our nation's smaller 
governments, which can be used to maintain and improve valuable 
community services and finance other much-needed capital improvement 
projects.

Restore and Expand the Use of Direct-Pay Bonds: While not currently 
permitted to be issued, in the past, Congress authorized governments to 
issue taxable direct subsidy bonds. These bonds allowed the government/
issuing entity to receive a payment from the Federal Government for the 
life of the bond, covering a percentage of the interest costs. Bonds 
under previous programs could be issued for most governmental purposes, 
and the subsidy generally provided the issuer with a lower net interest 
cost on the financing compared with conventional tax-exempt bonds. 
Restoring and expanding the use of direct-pay type bonds and ending 
their subsidy exposure to sequestration, would immediately create an 
attractive investment option globally while funding thousands of state 
and local projects, particularly while the municipal bond market is 
recovering from the initial effects of the COVID-19 pandemic.

Accordingly, we support bipartisan measures like S. 1308, the American 
Infrastructure Bonds Act, that would provide another important tool 
among the resources available to state and local governments to address 
our infrastructure needs.

GFOA will continue to support your efforts and appreciate your 
attention as you begin this important conversation on the vital tools 
that would provide substantial support to local governments in their 
effort to build the infrastructure our country so desperately needs. We 
look forward to working with you and supporting your efforts on this 
and other public finance matters of mutual interest.

Emily Swenson Brock
Director of the Federal Liaison Center
Email: [email protected]
(p) 202-393-8467
                                INCOMPAS

                      1100 G Street, NW, Suite 800

                          Washington, DC 20005

May 17, 2021

U.S. Senate
Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510

         Re: May 18, 2021 Hearing on ``Funding and Financing Options to 
Bolster American Infrastructure''

Dear Chairman Wyden and Ranking Member Crapo:

In representing many small broadband Internet access service and 
communication providers across the United States, INCOMPAS, the 
Internet and competitive networks association, believes that ``Internet 
for All'' should be a call-to-action as a result of COVID-19 and the 
digital divide in this country. As our lives continue to adapt and rely 
more heavily on broadband services to meet the challenges of the 
coronavirus pandemic and beyond, the commitment to reach all Americans 
with better, faster, more affordable broadband connectivity must be 
embraced.

We applaud the work of Congress and the Biden Administration in 
recognizing with the American Rescue Plan Act that, despite our 
nation's best efforts and significant investment by the public and 
private sectors, we still face serious challenges in connecting all 
Americans. This includes homes and businesses of all sizes to reliable 
high-speed broadband. We also commend the efforts of Congress and the 
FCC to address the needs of low-income Americans through the Emergency 
Broadband Benefit program and of school children, teachers, and library 
patrons through the Emergency Connectivity Fund. While competition is 
the key to affordable service, many Americans need financial assistance 
to get connected.

Many Americans have faced significant challenges during the COVID-19 
pandemic due to the fact they do not have broadband network 
availability in their communities. Achieving universal broadband 
availability is an ambitious but essential goal. The American Rescue 
Plan tackles head-on the deployment needs by allocating $10 billion 
specifically for broadband infrastructure investment by the states. In 
addition, it also permits states and localities to use the State and 
Local Recovery Funds for broadband infrastructure, among other 
projects. It is important that states and localities consider their 
communities' broadband needs today as well as in the future. However, 
that funding is not sufficient to address all of the nation's broadband 
needs.

COVID-19 has exposed deep gaps in Americans' ability to access the 
Internet, and it is time for our nation's leaders and for Congress to 
take action. Millions remain disconnected--either because they do have 
a broadband network available to them or they cannot afford the 
service. Now more than ever, our communities want and need universal 
broadband coverage for their students, small businesses, and heath care 
workers. Unfortunately we hear too often about kids doing homework in 
parking lots because they lack access to fast, affordable broadband at 
home. This is a national tragedy. To meet this challenge, we ask the 
federal government to help enable solutions that will make a 
significant difference in the lives of all Americans. It is very 
important that robust broadband capability be deployed to government 
agencies, residences, businesses, and town centers.

Congress should prioritize building new, faster networks that can meet 
our nation's needs today and in the future. INCOMPAS supports a 
significant investment in broadband infrastructure deployment so we can 
compete with other nations who have 1 gigabit speed and fiber goals. To 
enable more scalable, robust, and reliable networks to be deployed in 
areas that are lacking adequate service, investment in backbone, middle 
mile, and/or last mile networks may be necessary. New network builders 
can deliver 1 gigabit and above speeds today that will be able to scale 
as demand increases, and Congress should require that funding be used 
for such capability as much as possible. We believe fiber is a critical 
component in delivering reliable broadband infrastructure and 1 gigabit 
speeds. Everyone in the broadband ecosystem needs access to fiber--
including fixed broadband, cable, cellular (mobile), and satellite 
companies.Building more fiber helps all, and fiber densification 
throughout the U.S. is critical for winning the race to 5G.

In addition, funding assistance should be directed to local 
jurisdictions to help hire, train, and/or expand their capability to 
process broadband infrastructure permitting and approval processes. We 
urge you to incentivize state and local governments to adopt speedy 
review processes of those projects when broadband providers seek 
authorization to access public rights-of-way and obtain construction 
permits and to charge cost-based fees for those processes. These 
actions will spur faster and more efficient deployment which will 
benefit consumers who are desperately waiting for new networks to reach 
them. We also urge you to build upon the FCC's Emergency Broadband 
Benefit and Emergency Connectivity Fund programs and extend assistance 
to every American household that cannot afford a home connection so 
that they are not left behind in the digital economy.

We have the ability and responsibility as Americans to go big and bold 
on broadband. To harness the power of an Internet for All that powers 
the streaming and cloud-driven economy. Now is the time to take steps 
toward achieving a future of connectivity, faster speeds, and 
affordable prices in the U.S. We are looking to your leadership and 
Congress for creating new infrastructure goals and urging your 
colleagues to have targeted broadband policies that enable all 
Americans to access high-speed Internet, and we hope to have your 
continued support.

Thank you for your consideration.

Sincerely,

Chip Pickering
CEO

                                 ______
                                 
                      Municipal Bonds for America

                      1909 K Street, NW, Suite 510

                          Washington, DC 20006

                              202-204-7900

                           www.bdamerica.org

U.S. Senate
Committee on Finance

Introduction

The Municipal Bonds for America Council (MBFA) appreciates this 
opportunity to offer its views regarding the critical issue of 
municipal bond financing in the context of infrastructure investment. 
MBFA commends the Committee for its work to address the massive and 
growing infrastructure deficit our country is currently facing. We 
believe expanding the use of municipal bonds to finance state and local 
investment in infrastructure must be a key component of a comprehensive 
infrastructure initiative.

The MBFA is a coalition of municipal market leadership working together 
and in concert with state and local governments to promote and advance 
the $4 trillion municipal bond market in the context of infrastructure. 
The coalition is committed to advancing initiatives that improve the 
municipal securities market while protecting the interests of 
taxpayers, investors, and issuers.

As the Committee continues work on details of a federal infrastructure 
plan, we urge you to ensure bond financing is a cornerstone to any 
federal infrastructure package. This includes maintaining the tax 
exemption for municipal bonds, utilizing green bonds for state and 
local governments to invest in sustainable infrastructure, and 
restoring the ability of issuers to refinance their debt, among other 
provisions.

We call on the Committee to follow guidance provided in H.R. 2632, the 
Local Infrastructure Financing Tools Act, and H.R. 2, the Moving 
Forward Act of the 116th Congress. That legislation included provisions 
that would allow the federal government to further invest in 
infrastructure at little cost to the tax-payer.

These include:

      Restoring the ability of state and local governments to save 
taxpayer dollars and generate additional funds for infrastructure and 
other key initiatives by restoring tax-exempt advanced refundings 
(ARs);
      Expanding the use of tax-exempt private-activity bonds (PABs);
      Raising the Bank Qualified debt limit from $10 million to $30 
million and tie to inflation;
      Creating a direct pay bond similar to the former Build America 
Bond (BAB) program exempt from sequestration; and
      Expanding the use of environmental, social and governance (ESG) 
and green bonds.

The Role of Municipal Bonds in Infrastructure Finance

Borrowing by state and local government in the capital markets is the 
single biggest and most important source of funding for infrastructure 
investment in America. Approximately 75 percent of the infrastructure 
in the US is financed, maintained and owned by state and local 
governments. Approximately 75 percent of state and local infrastructure 
was financed in whole or part with municipal securities. And more than 
90 percent of that borrowing was using tax-exempt bonds.

The tax-exemption for municipal bond interest is the single most 
important federal infrastructure investment program. Because investors 
know they will not face a tax liability for the municipal bond interest 
they earn, they accept a lower rate of return on their investment. This 
translates into huge interest cost savings for state and local 
governments who issue tax-exempt bonds and provides accessible 
infrastructure at the lowest cost for all Americans that they 
represent. The tax-exemption has existed in federal law since the very 
first income tax after the 16th Amendment was ratified.

Depending on market conditions and the specifics of the transaction, 
state and local governments save around two percentage points on their 
borrowing relative to what they would pay if they issued taxable bonds. 
Applied to the municipal market overall, state and local governments 
save around $80 billion per year in interest cost as a result of the 
federal tax- exemption for municipal bond interest.

Bonds finance a wide variety of projects including schools, water and 
sewer systems, highways and roads, bridges and tunnels, airports, 
public buildings, public and nonprofit colleges, universities and 
hospitals, and many more.

In addition to cost savings for bond issuers, tax-exempt finance for 
infrastructure provides several other benefits.

      It is an effective, three-way partnership between the state or 
local issuer, the federal government providing the tax-exemption, and 
investors providing capital.
      Bond financing imposes a market test on infrastructure projects. 
Investors need to know that the projects they finance are viable and 
sustainable in order to ensure the return of their investment.
      The tax-exempt bond market attracts capital from a wide variety 
of investors, including individuals, mutual funds, commercial banks, 
property and casualty insurance companies, and others.
      Municipal bonds are very safe investments. The default rate for 
municipal bonds issued for infrastructure projects is near zero.
      Tax-exempt bonds ``leverage'' the federal contribution towards 
the cost of infrastructure. Every dollar in federal cost results in 
around four dollars of infrastructure investment.

Despite the success of tax-exempt finance for over 100 years, there are 
steps Congress can take to expand the market and provide additional 
opportunities for state and local infrastructure investment. We are 
pleased to present some options.

Restore Advance Refundings

State and local governments routinely refinance their outstanding debt 
obligations just as corporations and homeowners do. The advance 
refunding (AR) technique allows state and local government issuers to 
refinance, and thus benefit from lower interest rates, when the 
outstanding bonds are not currently callable.

While a municipal refunding transaction is analogous to refinancing a 
mortgage, a key difference is that a homeowner typically can refinance 
a mortgage at any time. Most tax-exempt bonds are issued with a call 
option that allows the issuer to redeem bonds at face value only after 
a lock-out period, typically ten years. But what happens when interest 
rates fall before the old bonds are callable? An advance refunding 
occurs when interest rates have fallen sufficiently that an issuer can 
achieve their targeted debt service savings but before the outstanding 
high interest bonds are callable.

In advance refundings that were permitted before 2018, issuers would 
sell new, low interest bonds and invest the proceeds in an escrow. 
Those escrow investments would cover debt service on the old, high 
interest bonds until they become callable and would cover the cost of 
redemption at that time.

The Tax Reform Act of 1986 imposed significant restrictions on ARs. 
Before 1986 state and local governments could advance refund their 
bonds as many times as they liked. There were examples of issuers 
conducting ARs when interest rates had fallen just a bit and having 
multiple refunding bonds outstanding at the same time for the same 
project, all generating tax-exempt interest. Congress responded by 
restricting ARs to one per bond issue. ARs became a limited option for 
state and local governments, and most devised debt service savings 
targets they must have been able to achieve in order to justify using 
their single AR opportunity. The restrictions imposed in 1986 represent 
a reasonable balance between offering refunding opportunities and 
protecting the federal government's fiscal interest.

As interest rates currently rise from historic lows, state and local 
governments will acutely feel the effects of the loss of advance 
refunding. The inability to lock in lower interest rates when they are 
available will result in increased costs to these governmental entities 
and increased tax burdens on their residents. Moreover, at a time of 
relatively low, but steadily increasing, interest rates, state and 
local governments have lost an important means of restructuring their 
outstanding debt to respond to short- or long-term fiscal issues (which 
can include both paying off their debt more quickly or restructuring 
debt to deal with short term financial difficulties).

There are no alternatives to advance refundings that are as effective 
in terms of cost or risk. State and local governments are sometimes 
hesitant to use interest rate swaps or other derivates to ``simulate'' 
the benefits of advance refundings. Similarly, other alternatives are 
more costly than ARs and will not be able to provide an effective 
replacement for advance refunding bonds. In 2020 interest rates for 
taxable municipal securities were so low that it was possible for some 
issuers to advance refund outstanding tax-exempt bonds with taxable 
bonds. However, market movements in recent months have begun to close 
those opportunities. Tax-exempt advance refundings will soon be the 
only option for issuers.

In the House Representative Terri Sewell (D-AL) has introduced the 
Local Infrastructure Financing Tools (LIFT) Act (H.R. 2634), which 
would, among other provisions restore tax exempt advance refundings to 
their pre-2018 status, allowing state and local governments to 
refinancing outstanding debt at the current lower interest rates. In 
the Senate Senators Roger Wicker (R-MS) and Debbie Stabenow (D-MI) 
recently introduced the Lifting Our Communities through Advance 
Liquidity for Infrastructure (LOCAL) Act (S. 479) with strong 
bipartisan support. The MBFA calls on the Committee to ensure this tool 
is reinstated fully to its pre-2018 status.

Expand the Use of Private Activity Bonds

Sometimes it makes sense for a state or local government to partner 
with private infrastructure investors or operators on a project. These 
public-private partnerships can often result in efficient financing 
plans for complex projects.

Bonds issued by state and local governments may be classified as either 
governmental bonds or Private Activity Bonds (PABs). Governmental bonds 
are bonds where there is no significant involvement of private entities 
in a project. PABs are bonds where more than ten percent of the 
proceeds of an issue are used by a private entity and more than ten 
percent of the debt service on the bonds is paid or secured by a 
private entity. The Internal Revenue Code significantly restricts the 
use of PABs, since the subsidy provided by the tax-exemption is 
intended to be directed to projects which have a discernable public 
benefit.

There are two general restrictions on PAB issuance. The first imposes 
overall limits on the volume of PABs that can be issued in each state. 
Although some very big-ticket projects like airports are exempt from 
the volume caps, states must treat their annual volume allocation of 
PABs as a scarce resource and allocate it to only the most worthy 
projects. The second restriction is on which types of projects are 
eligible for PAB financing. In general PABs are limited to 
infrastructure projects such as water and sewer systems, airports, 
transit system, solid waste disposal facilities and others. There is a 
separate, nationwide volume cap on PABs issued for highway projects 
which is administered by the Department of Transportation. Other uses 
of PABs include single- and multi-family housing for targeted 
populations and financing for small manufacturing companies and first-
time farmers.

PABs are an important tool for public-private partnerships in 
infrastructure finance and development, since that is often the only 
way to obtain tax-exempt financing for projects with equity investors. 
Public-private infrastructure partnerships can often deliver projects 
faster, more efficiently, and at a lower cost than purely public 
projects.

Towards that end, MBFA strongly supports expanding PABs. For projects 
defined as publicly accessible infrastructure, the Tax Code should be 
indifferent as to whether the project is public, private, or some mix. 
If a state or local government determines that the best approach to 
building a new airport terminal, sewage treatment plant, or other 
infrastructure project is to work with a private developer, they should 
not lose access to tax-exempt financing. The benefits to taxpayers are 
the same whether the project is public or private.

Raise the Bank Qualified Debt Limit

Small state and local governments sometimes have more difficulty 
accessing the capital markets than bigger governments. Not as many 
banks ``cover'' small issuers, and they may not be as well known among 
investors. In recognition of these issues, Congress in the Tax Reform 
Act of 1986 provided a special means for small communities to place 
their bonds with commercial banks.

Section 265 of the Internal Revenue Code generally prohibits banks from 
taking an interest deduction on borrowing to finance investments in 
tax-exempt bonds. However, as a way to encourage banks to buy the bonds 
of small communities, Congress permitted banks to continue to deduct 80 
percent of the interest cost associated with buying bonds issued by 
local governments who issue less than $10 million per year, now known 
as ``bank qualified'' (BQ) bonds. Since 1986, inflation has eroded the 
value of the $10 million BQ exemption. The exemption is worth only $4.2 
million in 1986 dollars.

Representative Sewell's LIFT Act includes provisions to expand BQ 
bonds. The legislation would raise the annual BQ limit to $30 million 
while tying increases to inflation, something that the 1986 tax law 
failed to implement. The legislation also applies the bank qualified 
debt limit on a borrower-by-borrower basis, rather than aggregating all 
bank qualified bonds issued by a conduit issuer, so that schools, 
hospitals and other community organizations can more easily access 
capital. This legislation is an effective solution to make rural 
municipal debt a more attractive investment, in turn, lowering the cost 
to issuers. We call on the Committee to include this provision in any 
infrastructure draft. Representatives Sewell and Tom Reed (R-NY) in the 
previous Congress introduced the Municipal Bond Market Support Act 
(H.R. 3967) which would have made the same changes.

Reinstate Direct Pay Bonds

The MBFA calls on the Committee to pass legislation that would create a 
new 
direct-pay taxable bond, but ensure the new bond is exempt from 
sequestration. This new tool, much like BABs, would be an effective way 
to drive infrastructure investment at the state and local level.

The American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5), 
enacted in response to the 2008 financial crisis, provided authority 
for Build America Bonds (BABs). BABs gave state and local governments 
an alternative to tax-exempt financing. Instead of issuing tax-exempt 
bonds, issuers were able to issue bonds where the interest was taxable 
to investors and then receive a reimbursement from the federal 
government for a portion of their interest expense. During the 2009-
2010 period before BABs authority expired, state and local governments 
issues $181 billion to finance infrastructure investment. BABs were 
successful in part because they attracted investors like pension funds 
and foreigners who, because they pay little or no federal income tax, 
have no use for federally tax-exempt income. By drawing issuance volume 
away from the tax-exempt market, direct-pay bonds can lower tax-exempt 
yields and provide benefits to state and local issuers who do not even 
use them. However, the usefulness of BABs was limited by the Budget 
Control Act of 2011 (Pub. L. 112-25), which imposed sequestration on 
the interest reimbursement payments that state and local governments 
were promised at the time the bonds were issued.

According to a recent House Transportation and Infrastructure Committee 
report titled ``Moving America and the Environment Forward: Funding Our 
Roads, Transit, Rail, Aviation, Broadband, Wastewater and Drinking 
Water Infrastructure,'' the $181 billion in Build America Bonds that 
were issued in the two years they were available supported nearly 2,300 
projects around the country. This influx of capital helped ensure a 
prosperous recovery from the devastation of the great recession. 
Importantly, the existence of a direct pay bond option for issuers will 
act as a borrowing rate ``governor'' of sorts for them. They will have 
an option to issue potentially less costly taxable bonds if in the 
future if tax-exempt borrowing rates spike to levels above historic 
relative spreads to taxable debt. This will serve to lower their 
borrowing cost and reduce the annual sum of lost revenue to the 
Treasury resulting from the existence of the tax-exempt expenditure.

Legislation in both the House and Senate has been introduced this 
Congress that would create a new direct-pay bond program. The American 
Infrastructure Act in the Senate and the LIFT Act in the House both 
create a new direct-pay bond the American Infrastructure Bond (AIB). 
The AIB is styled after the prior generation BAB, but there are several 
key differences in the House and Senate packages. The Senate AIB calls 
for a direct pay bond, exempt from sequestration, with a flat federal 
reimbursement rate to issuers set at a revenue neutral 28 percent. The 
House companion, while offering a tiered, more generous descending 
reimbursement schedule, is subject to sequestration.

When Congress revives direct-pay bonds, continuing to apply 
sequestration to interest subsidy payments would me a major 
discouragement for issuers to adopt the product. It is essential that 
when Congress revives direct-pay bonds, the interest subsidy payments 
no longer be subject to sequestration.

ESG and Green Bonds

It is essential that climate and environmental considerations be a 
central component of any infrastructure initiative. Here again, tax-
exempt finance can help. We ask that as you look at these important 
issues, consider Environmental, Social and Governance (ESG) or ``green 
bond'' financing to support these endeavors to ensure they can 
withstand current and future changes due to change in climate, and 
additional needed mitigation efforts at low cost to the federal tax-
payer.

State and local governments have an important role to play in 
addressing climate change. States and localities own and operate 
virtually all the nation's water, sewer and solid waste disposal 
facilities. Power authorities owned by states and localities generate a 
significant portion of the nation's electricity. State and local 
governments own and operate many thousands of cars, trucks and other 
equipment that run on fossil fuels. State and local governments have 
been turning to tax-exempt bonds to finance decarbonization efforts. 
While ESG and green bonds continue to be a growing portion of public 
finance issuance, enactment of new tax-exempt financing authority by 
Congress would address this issue effectively.

Some potential ESG bond federal policy remedies include:

      Private Activity Bonds (PABs) for electric vehicle 
infrastructure: A proposal included in last year's H.R. 2 would permit 
PAB financing for facilities ``used to charge or fuel zero-emissions 
vehicles.''
      Remove PABs for water and sewer facilities from volume cap 
requirement. Currently private activity bonds issued for water and 
sewer facilities must obtain volume cap allocation. They would be 
exempt from the volume cap under a proposal included in last year's 
H.R. 2.

Conclusion

For over 100 years, municipal bonds have served as the primary 
financing mechanism for public infrastructure. Three-quarters of the 
nation's core infrastructure is built and financed by state and local 
governments. Restrictions such as prohibiting advance refundings and 
limiting the use of PABs for infrastructure ties the hands of local 
governments and discourages capital investment in new infrastructure 
projects.

As your Committee continues work on details of a federal infrastructure 
plan, we ask that you work to ensure bond financing is a cornerstone to 
any federal infrastructure package. This includes maintaining the tax 
exemption for municipal bonds, the utilization of green bonds for state 
and local governments to invest in resilient infrastructure and 
restoring the ability for issuers to refinance their debt amongst other 
provisions.

The MBFA appreciates the Committees work on addressing the 
infrastructure needs of the country, and reaffirming support for the 
cornerstone of infrastructure financing, tax-exempt municipal bonds.

                                 ______
                                 
                   NAFA Fleet Management Association

                180 Talmadge Road, IGO Bldg., Suite 558

                            Edison, NJ 08817

                              www.nafa.org

                              609-720-0882

Chair Wyden, Ranking Member Crapo, and members of the Committee, thank 
you for providing the opportunity to submit a statement for the record 
of the hearing entitled ``Funding and Financing Options to Bolster 
American Infrastructure.''

NAFA Fleet Management Association (NAFA) appreciates the Committee on 
Finance's efforts to examine the current state of our nation's 
infrastructure and discuss methods of federal involvement to bring 
about infrastructure improvements and funding stability.

NAFA has more than 2,000 individual fleet manager members from 
corporations, universities, government agencies (federal, state, and 
local), utilities, and other entities that use vehicles in their 
operations. NAFA members control more than 4.2 million vehicles and 
manage assets in excess of $92 billion. These vehicles travel more than 
84 billion miles each year.

The fleets managed by NAFA's Members run the gamut from light- to 
heavy-duty vehicles. Depending on the employer's mission, these fleets 
may be contained to one specific geographic area, dispersed among 
multiple regions or states, or be in multiple countries. In addition, 
NAFA is supported by more than 1,000 associate members who represent 
companies that support fleet managers in their jobs. These include 
vehicle manufacturers, leasing companies, aftermarket equipment 
suppliers, telematics firms, service providers, etc.

Comments

NAFA shares your concern about the current state of U.S. 
infrastructure, especially regarding the future challenges of funding 
the maintenance, repair, and expansion of our nation's highway system. 
The highway trust fund (HTF) has faced repeated projected funding 
shortfalls due to its reliance on revenues from the federal motor fuel 
excise tax. These past shortfalls are underscored by the Congressional 
Budget Office's recent report predicting the HTF's highway account's 
insolvency in 2022.\1\
---------------------------------------------------------------------------
    \1\ Congressional Budget Office. (February 2021). highway trust 
fund Accounts--CBO's February 2021 Baseline. Retrieved from https://
www.cbo.gov/system/files/2021-02/51300-2021-02-highwaytrustfund.pdf.

NAFA recognizes that transfers from the U.S. Treasury's general fund 
may be the most practical method to resolve the near-term solvency 
issues facing the HTF. However, NAFA believes that innovative 
alternative funding solutions are also necessary to provide for the 
---------------------------------------------------------------------------
long-term stability of the HTF.

Establishing a national vehicle-miles-traveled (VMT) pilot program to 
test alternative user-based funding mechanisms would provide invaluable 
insights into the feasibility of a national VMT fee as an alternative 
to the federal motor fuels excise tax. As you know, the federal-level 
VMT pilot program concept has been included in several past legislative 
proposals but has yet to be realized.

While a VMT fee may be a part of the long-term changes needed in the 
HTF's funding structure, there are still hurdles regarding equity, 
payment evasion, technology, administration, and public acceptance that 
could be addressed using the results generated from the federal pilot 
program. NAFA believes a federal pilot program is a necessary first 
step for determining whether a VMT fee is a viable future funding 
solution.

NAFA offers the following comments regarding the potential structure 
and implementation of a federal VMT pilot program.

Federal VMT Pilot Program Scale & Participation--A representative 
cross-
section of vehicles must be recruited to participate in the program. 
Nonfreight commercial and government fleet participants are one key 
sector of roadway users, alongside the motor freight community and, 
most importantly, the motoring public. These roadway user 
classifications should be well represented in a federal pilot program. 
Congress should consider incentives or other benefits that may be 
needed to encourage pilot participation.

VMT Fee Rate Setting Processes & Equivalency to Current User Fees--
Pilot program fee rates should be set at levels that would be revenue-
neutral to current excise taxes based on average driver mileage and 
other relevant metrics. Imposing a rate-setting scheme that increases 
tax burdens will disincentivize organizational and individual pilot 
participation.

Data Collection Systems & Costs Associated with a Federal VMT Pilot 
Program--The program should be open to the spectrum of technologies 
available for VMT data collection. Permitting a multitude of data 
collection technologies in the pilot will help determine which 
mechanisms are most effective in achieving the goals of a future VMT 
program. Giving participants a choice in how they transmit VMT data 
will attract a larger pool of participants. This will help ensure that 
the results of a pilot program are representative of the nation's 
fleet.

Fleet vehicles can generate highly detailed and granular-level data, 
which could be extremely useful in a federal VMT pilot program. 
However, collecting and analyzing this data does come at a cost to 
fleets who often rely on third-party vendors as partners in their 
business operations.

While larger fleets may already have vehicles equipped with appropriate 
data collection systems that could facilitate the application of a VMT 
fee, many smaller sized fleets do not utilize these technologies. 
Additionally, they do not have the resources to acquire and implement 
these tools into their operations. Fleet size thresholds or exemptions 
should be considered in applying any VMT fee program as well as any 
associated data collection technology requirements.

Accounting for Varied Driving Environments--A federal VMT pilot program 
should be structured to consider the varied driving environments U.S. 
drivers encounter--urban, suburban, and rural. A mile driven on a rural 
road should not be regarded as equivalent to a mile driven on an urban 
road, and NAFA believes VMT fee rates should be adjusted accordingly. 
Provisions should be included in a federal pilot program to allow a 
segment of the study participants who utilize more advanced VMT 
tracking systems to pay variable VMT fee rates based on location or 
road congestion levels.

Conclusion

NAFA appreciates your leadership in ensuring the maintenance and 
improvement of the country's infrastructure by looking forward at the 
future of funding highway programs. The interstate highway system 
enables the free flow of goods and people across the nation. The 
country's crumbling roadway system not only endangers the safety of 
drivers but imposes a significant economic burden by slowing the flow 
of goods and services throughout the country. The cost of inaction on 
infrastructure only grows greater by the day, so we look forward to 
Congress seizing this window of opportunity to act on behalf of the 
American people.

While there have been discussions regarding a near-term imposition of a 
federal VMT tax on certain commercial vehicles weighing over 10,000 
lbs., NAFA urges caution and does not support these proposals. Nor do 
we support suggestions to impose a VMT tax on certain commercial 
vehicles based on fleet size thresholds. There are numerous unresolved 
issues related to implementing such a tax and pushing ahead before a 
federal-level evidence base is established threatens to create a half-
baked system.

Thank you again for your consideration of this critical issue. If you 
or your staff have any questions or need additional information, please 
feel free to contact me or Patrick O'Connor, NAFA's U.S. Legislative 
Counsel, at 703/351-6222 or [email protected].

Sincerely,

Bill Schankel
Chief Executive Officer

                                 ______
                                 
                  National Association of Health and 
               Educational Facilities Finance Authorities

U.S. Senate
Committee on Finance

May 18, 2021

Respectfully submitted by:

Charles A. Samuels
R. Neal Martin
NAHEFFA Advocates
ML Strategies, LLC
701 Pennsylvania Avenue, NW, Suite 900
Washington, DC 20004
(202) 434-7311
[email protected]
[email protected]

The National Association of Health and Educational Facilities Finance 
Authorities (NAHEFFA) respectfully submits this statement to the Senate 
Finance Committee for the hearing ``Funding and Finance Options to 
Bolster American Infrastructure'' held on May 18, 2021.

NAHEFFA is the national association representing conduit issuers of 
federally tax-exempt bond debt on behalf of nonprofit institutions for 
health care, education, cultural and other charitable purposes. 
Federally tax-exempt conduit bond financing for not-for-profits is a 
proven private-public financing tool, an established delivery system 
for quantifiable economic and social benefits under the federal tax 
code with decades-long record of success of lowering the cost of 
essential public benefits and strengthening communities.

Bond issuance for charities, such as nonprofit hospitals and 
universities, is the function of a government bond conduit issuer, 
generally an authority, which is authorized by state law. Under the 
conduit structure, a discrete federal economic tax benefit, exemption 
of interest from federal income tax on long-term debt, is delivered 
through a state or local governmental conduit issuer accountable to 
local voters and local public officials. The nonprofit borrowers, not 
the governmental issuers or state/local taxpayers, are obligated to 
repay this conduit debt and use conduit bond proceeds to finance and 
refinance mission-critical capital infrastructure and improvements such 
as medical clinics, sheltered workshops, hospitals, and academic 
buildings including research and STEM buildings, residence halls, 
modern energy plants as well as other energy efficiency improvements, 
and museums.

The conduit lenders are either funds or individuals that buy conduit 
bonds through the capital markets or banks so that conduit lending is 
subject to market discipline as well as federal and state regulation. 
The lower the cost of funds, the more money is available for front-line 
purposes and workers such as medical professionals, teachers, and STEM 
researchers. Due to their longstanding success, federally tax-exempt 
conduit bonds have traditionally enjoyed decades of bipartisan support.

NAHEFFA and our member authorities support the following policy changes 
to improve and restore American infrastructure.

Restore Advance Refunding Municipal Bonds

The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated tax-exempt advance 
refunding bonds which had allowed states, localities and 501(c)(3) 
entities to refinance existing debt with the greatest flexibility, 
resulting in substantial reductions in borrowing costs. Prior to the 
TCJA, governmental bonds and 501(c)(3) bonds issued by state and local 
governments were permitted a single advance refunding. This allowed 
borrowers to take advantage of favorable market conditions and reduced 
interest rates, leading to billions of dollars in savings, which 
ultimately benefitted taxpayers and the millions of users of charities, 
including students, patients, as well as ordinary citizens protected by 
our police and fire first responders.

NAHEFFA supports the restoration of advance refunding as outlined in 
bipartisan legislation recently introduced by Senators Stabenow (D-MI) 
and Wicker (R-MS), S. 479, the Lifting Our Communities through Advance 
Liquidity for Infrastructure (LOCAL Infrastructure) Act of 2021. As the 
nation continues to recover from the economic challenges of the past 
year of the COVID-19 pandemic, the restoration of advance refunding 
would enable state and local governments and nonprofits to manage bond 
debt and reduce borrowing costs for sorely needed public and charitable 
projects. By reducing the cost of capital for public and nonprofit 
borrowers, restored advance refunding would also free up scarce dollars 
to support essential workers such as doctors, nurses, researchers, and 
teachers, as well as police and fire first responders.

Enhancement of Small Borrower Rules

We also support enhancing the small borrower, also referred to as 
``bank qualified'', rules which will benefit many small nonprofit 
health and educational institutions and other small charities, as well 
as many small local governments. We support increasing the maximum bond 
issuance of eligible bonds to $30 million from the current level of $10 
million. Further, applying the cap to the borrower instead of the 
issuer will allow our governmental conduit issuers to issue these 
conduit bonds on behalf of small institutions. The point of the cap is 
to limit the benefits of the small borrower/bank qualified bonds to 
smaller governments and charities. The limitation should not apply to 
the governmental conduit issuer, which is not the borrower and does not 
benefit from the financing, but rather to the small charitable 
borrower.

In addition to also restoring advance refunding, legislation recently 
introduced in the House of Representatives by Representative Sewell (D-
AL)--H.R. 2634, the Local Infrastructure Financing Tools (LIFT) Act--
would enhance bond financing opportunities for state and local 
governments and nonprofit organizations through increased limits on 
bank qualified debt and by applying the maximum dollar limit to the 
borrower.

Direct Subsidy Bonds

The LIFT Act also includes the creation of a new American 
Infrastructure Bond similar to the previous Build America Bonds 
program. The previous Build America Bonds were limited to governmental 
bonds and did not apply to nonprofit institutions. There is interest in 
the nonprofit and charitable sectors to include these vital 
institutions in this program.

If 501(c)(3) entities are included, it is critical that appropriate 
legislative language be used so that their inclusion is effectively 
implemented at both the federal and state level as well as to allow for 
local decision-making consistent with basic precepts of federalism. 
There are federal tax and securities requirements that will apply, 
similar to those that apply to conduit tax-exempt financings, and 
numerous state and local legal and policy considerations. This would be 
accomplished by making clear that, just as with federally tax-exempt 
conduit bonds, a state law authorized issuer for these financings is 
required. The following language provides this result:

        ``c) AMERICAN INFRASTRUCTURE BOND.--
        ``(1) IN GENERAL.--For purposes of this section, the term 
        `American infrastructure bond' means any obligation if--
        ``(A) the interest on such obligation would (but for this 
        section) be excludable from gross income under section 103,
        ``(B) the obligation is not a private activity bond unless the 
        obligation is a qualified 501(c)(3) bond, and
        ``(C) the issuer makes an irrevocable election to have this 
        section apply.

Therefore, in order for a bond to be a qualified 501(c)(3) bond 
excludable from income under section 103, it would need to have a 
governmental conduit issuer accountable to state and local voters, 
would need to have the opportunity for local concerns to be raised 
through a TEFRA hearing, and would need to meet the other requirements 
for tax exemption. NAHEFFA's members, government conduit issuers 
created by state and local law, are accountable to their legislators 
and executives, including governors, under their respective state 
constitutions. Local decision making through the local issuer and TEFRA 
process has long been integral to the issuance of federally tax-exempt 
conduit bonds. Local decision making in the existing conduit bond 
sector has worked very well for decades. The same federalist template 
should also be applied to any new direct subsidy bonds for nonprofits 
if Congress makes this policy choice.

NAHEFFA applauds Chair Wyden and Ranking Member Crapo for convening 
this important hearing to discuss funding and financing options for 
infrastructure, and thanks the Committee for its consideration of our 
views. On behalf of all of our members, NAHEFFA looks forward to 
continuing to work with the Chair, the Ranking Member, and all of your 
congressional colleagues to develop and implement an effective 
infrastructure plan that our nation so desperately needs.

                                 ______
                                 
                 National Association of Manufacturers

                     733 10th Street, NW, Suite 700

                          Washington, DC 20001

                             P 202-637-3178

                             F 202-637-3182

                          https://www.nam.org/

Robyn M. Boerstling
Vice President
Infrastructure, Innovation and Human Resources Policy

                                                       June 1, 2021

The Honorable Ron Wyden             The Honorable Mike Crapo
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
Washington, DC 20510                Washington, DC 20510

Dear Chairman Wyden and Ranking Member Crapo,

    The National Association of Manufacturers (NAM), the largest 
manufacturing association in the United States representing 
manufacturers in every industrial sector and in all 50 states, 
appreciates your Committee's leadership and recent efforts to support 
much-needed infrastructure investment. Manufacturers are particularly 
appreciative of your committee's work to advance vital infrastructure 
funding needs. The recent hearing held on May 18, 2021, titled, 
``Funding and Financing Options to Bolster American Infrastructure'' 
set the stage for next steps to advance broad, bipartisan 
infrastructure investment legislation this year.

    Manufacturers want bold federal action to rebuild and rejuvenate 
America's aging infrastructure because the benefits and the competitive 
advantages to be gained from these improvements are well-documented and 
well-understood by workers, plant managers and other manufacturing 
leaders. The NAM has long advocated for policies that identify new 
funding resources for these projects and programs, and for the 
expansion of federal opportunities that could promote private 
investment into our nation's roads, bridges, airports, water 
infrastructure and other physical systems. The NAM's Building to Win 
plan highlights many of the areas where investment is needed and offers 
funding options for the Finance Committee to consider as sources of 
future revenue. The funding proposals in Building to Win would not 
require new taxes that could lead to diminishing competitiveness for 
American manufacturers.

    We hope that you will continue to review alternative funding 
options for infrastructure investment and consider reforms to user fee 
programs that can still successfully generate infrastructure revenue. 
We note that when tax reform was enacted in 2017, manufacturers 
responded by hiring more workers, increasing wages and investing more 
in their business. For example:

        In 2018, manufacturers added 263,000 new jobs. That was the 
best year for job creation in manufacturing in 21 years.
        In 2018, manufacturing wages increased 3% and continued going 
up--by 2.8% in 2019 and by 3% in 2020. Those were the fastest rates of 
annual growth since 2003.
        Manufacturing capital spending grew by 4.5% and 5.7% in 2018 
and 2019, respectively.
        Overall, manufacturing production grew 2.7% in 2018, with 
December 2018 being the best month for manufacturing output since May 
2008.

    A shift to a less-competitive tax code would reverse these gains 
and result in significant job losses and great harm to the economy. A 
recent NAM-commissioned analysis by economists from Rice University 
found that adopting tax policy changes such as increasing the corporate 
tax rate to 28% and raising the tax burden on pass-through businesses 
(which includes many small and medium manufacturers) would cost the 
United States 1 million jobs in the two years after enactment and 
result in an average loss of 600,000 jobs each year over the next 
decade with wages, investment and GDP all declining.

    Moreover, additional analysis calculating the effects of raising 
the corporate tax rate to 25% along with other harmful tax increases 
shows that these policies would shrink the U.S. economy and cost 1 
million jobs in the first two years after implementation, plus a loss 
of 500,000 jobs on average each year over the next decade. These tax 
changes would run counter to the productive benefit of renewing federal 
infrastructure investment for the betterment of the nation.

    The recent hearing on the future of American infrastructure 
investment and serious discussions around alternative financing options 
instead of tax increases will help support the needed momentum to get 
infrastructure legislation accomplished this year. Manufacturers are 
proud of their footprint in American communities, representing millions 
of American workers and $2.35T in contributions to the U.S. economy. As 
the manufacturing industry prospers, so does the nation and 
infrastructure investment is key to our long-term prosperity. We look 
forward to continuing to work with you and your colleagues to achieve 
bold, transformative investment in our nation's infrastructure and urge 
you to continue your bipartisan efforts into the weeks ahead.

            Sincerely,

            Robyn M. Boerstling

                                 ______
                                 
             Owner-Operator Independent Drivers Association

                            1 NW OOIDA Drive

                         Grain Valley, MO 64029

                Tel: (816) 229-5791 Fax: (816) 427-4468

May 18, 2021

The Honorable Ron Wyden             The Honorable Mike Crapo
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
219 Dirksen Senate Building         219 Dirksen Senate Building
Washington, DC 20510                Washington, DC 20510

RE: Funding and Financing Options to Bolster American Infrastructure

Chairman Wyden and Ranking Member Crapo,

Since 1973, the Owner-Operator Independent Drivers Association (OOIDA) 
has been advancing and protecting the rights of small-business motor 
carriers and professional drivers. OOIDA is a critical stakeholder for 
all issues affecting trucking, with a unique focus on those directly 
impacting small-business truckers. We have over 154,000 members, all of 
whom make their living on America's highways.

Robust investment in our nation's infrastructure is naturally a 
priority for our members. A modern, reliable, and efficient highway 
system not only supports their businesses, but also ensures their 
safety. With the nation's roads and bridges deteriorating and 
congestion increasing, truckers are willing to contribute more to the 
expansion and preservation of this system, so long as user fees remain 
equitable among all highway users. However, they will not accept 
funding mechanisms that are discriminatory towards our industry.

Due to the vast resources needed to adequately update and maintain our 
highways, OOIDA supports efforts to increase dedicated highway trust 
fund (HTF) revenues. Professional drivers continue to favor the current 
user fee structure and prefer reasonable increases to the federal 
gasoline and diesel fuel taxes. These user fees are the most equitable 
and efficient means for supporting our nation's highway needs. We 
understand many elected officials believe increasing fuel taxes is 
politically untenable, but this approach remains the most sensible and 
effective option for funding our infrastructure in the near-term.

Transitioning from the traditional user fee structure to a vehicle 
miles traveled (VMT) program has recently gained significant attention 
among lawmakers in Washington. However, truckers have many unanswered 
questions about the implementation and administration of a national VMT 
program. Our members, who have experienced excessive operating costs in 
states that currently levy VMT taxes, also have serious concerns about 
the equity of a national program. OOIDA is open to further discussion 
about VMT and other possible alternative HTF funding methods, but any 
proposed system must be fair and efficient.

Most importantly, any VMT proposal to fix the HTF must not be limited 
to commercial motor vehicles (CMVs). Truckers already pay more than 
their fair share into the HTF and any VMT system must not single out 
truckers. Not only is our industry currently paying more than its fair 
share, a report by the Congressional Budget Office found HTF revenues 
derived from motor carriers through the heavy-vehicle and tire taxes 
will increase from 2019 to 2029.\1\ Between the current diesel tax and 
these supplemental taxes that other highway users do not pay, the 
trucking industry is estimated to increase its contributions to the HTF 
over the same period of time.
---------------------------------------------------------------------------
    \1\ CBO, Issues and Options for a Tax on Vehicle Miles Traveled by 
Commercial Trucks (2019).

Implementing a truck-only VMT is also nowhere near as simple as some 
proponents have claimed. Current law prohibits the use of Electronic 
Logging Devices (ELDs) for anything other than monitoring hours of 
service. Furthermore, many trucks are not required to use ELDs because 
of either industry or operational exemptions--some put in place by 
Congress. To implement a truck-only VMT, Congress would need to 
---------------------------------------------------------------------------
dramatically increase the mandated use and scope of ELDs.

OOIDA has also consistently opposed any federal expansion of tolling 
policies. Research has shown that tolling is an extremely wasteful 
method of funding compared to fuel taxes. Additionally, toll roads 
consistently fail to meet revenue projections, creating unanticipated 
funding shortfalls, inevitable rate increases, and traffic diversion to 
non-tolled routes. As the Committee considers options to fund our 
highways, it must avoid any expansion of tolling, including congestion 
pricing.

Congestion pricing would lead to the tolling of existing highways, 
which amounts to double taxation for truckers who have already paid in 
to the HTF through the diesel fuel tax and other industry-specific 
fees. Because truckers often have very little control over their 
schedules, congestion pricing is also particularly problematic for 
owner-operators and independent drivers. Due to the rigidity of current 
federal hours of service requirements, truckers routinely have no other 
choice than to drive through metropolitan areas during periods of high 
congestion. Shippers and receivers also have little regard for a 
driver's schedule, frequently requiring loading and unloading to occur 
at times when nearby roads are most congested.Additionally, unlike 
other highway users, truckers often lack the ability to choose 
alternate routes to avoid congestion due to size and weight 
restrictions, heavy vehicle prohibitions, and other limitations on 
ancillary roads.

Congress must recognize that conditions beyond the control of 
professional drivers, including federal and state rules, often 
contribute to their inability to avoid areas or times of high 
congestion. Without changes to these conditions, congestion pricing may 
have little to no effect on CMVs other than to squeeze even more 
revenue out of small-business truckers. If Congress takes steps to 
expand congestion pricing, accommodations must be made for the trucking 
industry.

We appreciate your interest in exploring funding and financing options 
to bolster American infrastructure. A modern, reliable, and efficient 
highway system is critically important to the success and safety of our 
nation's small-business truckers. We hope the Committee will consider 
the views of owner-operators and professional drivers when determining 
how to invest in the roads and bridges where they work.

Thank you,

Todd Spencer
President and CEO

                                 ______
                                 
                   The Real Estate Roundtable et al.
    The Nation's commercial real estate industry welcomes the 
opportunity to provide input on proposals put forward by the 
Administration to finance infrastructure investment. New investments 
that seek to rebuild our physical and social infrastructure could 
greatly improve U.S. competitiveness and create more-inclusive economic 
opportunities for all Americans. As Congress considers options to pay 
for these investments, however, we urge policymakers not to erode 
longstanding tax rules that support job creation, capital formation and 
productive risk taking. Real estate--which directly supports 13 million 
jobs in the United States and generates three quarters of local tax 
revenue--is taxed primarily through the tax code's individual and pass-
through provisions. Tax reforms should be undertaken with caution, with 
a focus foremost on supporting the nascent economic and jobs recovery 
and the capital investment that will drive our economic growth for 
years to come.

    Several of the tax proposals in the Administration's infrastructure 
and human capital initiatives, unfortunately, would reduce real estate 
investment and diminish opportunities for startup businesses and those 
less advantaged. These proposals include:

        Limiting taxpayers' ability to defer gain that is reinvested 
in property of a like-kind;
        Doubling the tax rate on long-term capital gains;
        Limiting capital gains treatment to invested cash and 
disregarding other forms of risk taken by partners; and
        Making death a taxable event at far lower levels of income and 
potentially taxing the unrealized gain on appreciated assets not once 
but twice when an individual dies.

    Collectively, these proposals will undermine the very goals the 
Administration seeks to achieve by reducing opportunities and economic 
rewards for cash-poor business owners. They will undercut the tax base 
in localities throughout the country that rely on real estate taxes to 
finance schools, police, and other first responders. Moreover, they 
will diminish the incentive for private investment of capital in 
riskier projects, such as affordable housing and redevelopment in 
struggling communities.

    To be clear, our industry supports bold actions to invest in 
infrastructure needs. The quality of infrastructure is one of the most 
important factors that influences real estate development decisions. 
Real estate and infrastructure have a synergistic, two-way relationship 
as growth in one of these asset classes spurs growth in the other. Safe 
and reliable infrastructure enhances the value of the properties it 
serves. A holistic approach to expand and modernize our aging 
infrastructure and increase the supply of affordable housing will 
create well-paying American jobs, help address climate threats, and 
improve the quality of life in all regions of the country.

    We agree on the importance of developing revenue streams that can 
sustain the highway trust fund, the nation's main funding source for 
roads, bridges, and mass transit, for the long term. At the same time, 
taxpayers alone cannot foot the entire bill for all of the country's 
infrastructure needs. Policies that encourage appropriate public-
private partnerships (P3s) can unleash private investment, improve 
budget certainty, accelerate project delivery, and achieve greater 
efficiencies and innovations in project design and construction. 
Policies to encourage P3 deployment for infrastructure include 
restoring the federal tax exemption for certain state and local 
construction incentives (section 118); streamlining and improving the 
underwriting process for low-interest TIFIA loans; and raising the 
federal ``volume cap'' on private activity bonds issued by state and 
local governments for surface transportation. We recommend that 
Congress updates the real estate investment trust (REIT) rules to allow 
REITs to invest in and operate more types of infrastructure 
investments, including renewable energy. We also recommend modernizing 
outdated tax rules, such as the Foreign Investment in Real Property Tax 
Act, that prevent U.S. businesses from partnering with sources of 
foreign capital for infrastructure investments. Policymakers can help 
mobilize private capital to increase the supply of affordable housing 
by: enacting incentives for states and localities to streamline 
permitting and regulatory processes that discourage development and 
rehabilitation efforts, enhancing the low-income housing tax credit 
(LIHTC), and establishing a middle income housing tax credit (MIHTC). 
Additionally, Congress should consider potential tax incentives to spur 
reinvestment in properties so they can be repositioned for the most 
productive use in their communities

    As the Committee examines how best to finance these long-term 
needs, however, we encourage you to carefully consider both the current 
state of the real economy, as well as the role that tax provisions 
serve in promoting long-term investment and encouraging the private 
sector to put capital at risk. Many businesses and communities are 
still straining to emerge from the COVID-19 pandemic. In the case of 
real estate, throughout the pandemic, property owners, managers, 
investors and lenders have focused on mitigating the impact of the 
crisis on their residential and business tenants. The industry has: (a) 
restructured leases with tenants under stress; (b) advocated for 
federal rental and other assistance; (c) helped educate tenants on how 
to access relief; (d) encouraged much needed troubled-debt 
restructuring relief that allowed lenders to provide borrowers with 
mortgage relief; and (e) implemented new building protocols, invested 
in health-related improvements (ventilation systems, etc.), and issued 
detailed guidance to ensure a safe building reentry process. Real 
estate lenders and owners have undertaken these actions at the same 
time that they have had to call in lines of credit, use their reserves, 
cut their personal and employee compensation, provide mortgage relief, 
and restructure debt.

    Today, major questions and challenges remain for America's 
commercial real estate. What will the demand for retail space be in the 
future? Will more individuals work from home and will employers shrink 
their office needs? Has the pandemic permanently changed the need for 
business travel, and what are the implications for urban hotels? Will 
apartment property owners be forced to write off substantial portions 
of rental arrearages due to protracted eviction moratoriums and overly 
burdensome state and local requirements that impede access to emergency 
rental assistance funds? Will lenders be required to write down loans, 
reposition properties, or provide further relief to borrowers.

    It is with this backdrop and context squarely in mind that 
policymakers should evaluate any new and potentially disruptive tax 
increases. Tax changes often have unintended consequences--the 
commercial real estate depression and economic recession that followed 
the Tax Reform Act of 1986 is a clear case in point. Well-
intended provisions went too far and led to an exodus of capital from 
real estate markets, which reduced property values and threatened the 
solvency of real estate lenders. Optimism regarding the underlying 
economy is clearly rising throughout the country, and policymakers 
should tread carefully to avoid suffocating the nascent recovery and 
job boom with anti-growth tax increases that discourage risk taking, 
investment, and capital formation.

    Below are specific comments regarding certain individual and pass-
through tax proposals in President Biden's American Families Plan.

 Limiting businesses' ability to defer gain reinvested in property of a 
                    like kind

    Since 1921, the tax code has recognized that it is appropriate to 
defer capital gain when real property used in a trade or business, or 
held for investment, is exchanged for another property of a like kind. 
The American Families Plan proposes to limit the deferral of gains 
greater than $500,000. Seeking to raise revenue or modify the 
distribution of the tax burden by putting a cap on like-kind exchanges 
would be counterproductive to the Administration's own stated goals. It 
would eliminate an engine of job creation, reduce state and local 
taxes, and create new headwinds for the economic recovery. The proposed 
cap would remove a ladder of economic opportunity for small and 
minority-owned businesses, reduce the supply of affordable housing, and 
undercut the environmental conservation of land and resources.

    In short, like-kind exchanges, now codified under section 1031, 
should be preserved in their entirety without new limitations.

    The rules for like-kind exchanges are narrowly tailored and well-
designed. Over the last four decades, Congress has thoughtfully 
modified and improved section 1031. Since 1984, laws have eliminated 
potential abuses, created strict and uniform rules and procedures for 
an exchange, and tightened section 1031 to avoid unintended results. As 
a result of these efforts, like-kind exchanges are now a deeply 
ingrained and beneficial feature of commercial real estate markets. 
Research by Professors David Ling (Univ. Fla.) and Milena Petrova 
(Syracuse U.) estimates that 10 percent to 20 percent of commercial 
real estate transactions involve a like-kind exchange.

    Like-kind exchanges are an engine of job creation. Research by EY 
estimates that like-kind exchanges support 568,000 jobs generating over 
$55 billion of annual value added, including $27.5 billion of labor 
income. Employment directly and indirectly supported by exchanges 
includes jobs for skilled tradesmen, architects, designers, building 
material suppliers, movers, building maintenance and cleaning staff, 
security, landscapers, qualified intermediaries, real estate brokers, 
title insurers, settlement agents, attorneys, accountants, lenders, 
property inspectors, appraisers, surveyors, insurers, and contractors. 
By encouraging the reinvestment of capital and stimulating property 
improvements, exchanges create a more dynamic, job-creating real estate 
market.

    Like-kind exchanges help small and minority-owned businesses expand 
and grow. Veteran-owned, women-owned, and minority-owned businesses use 
like-kind exchanges to expand and build equity in their companies 
without having to rely on bank loans and other third-party lending that 
can be difficult to obtain. Small firms and entrepreneurs lack access 
to the deep capital markets that finance the activities of large 
corporations. Like-kind exchanges help small and minority-owned 
businesses grow organically, without overreliance on unsustainable 
levels of debt and leverage. Because owners are able to reinvest their 
proceeds on a tax-deferred basis, properties acquired in a like-kind 
exchange carry less overall debt--30 percent less than similar real 
estate acquired outside of a like-kind exchange.

    Increasing the supply of affordable rental housing requires like-
kind exchanges. Like-kind exchanges can fill gaps in the housing supply 
not covered by other incentives for the development of affordable 
housing. Multifamily housing transactions represent nearly 40 percent 
of the dollar volume of like-kind exchanges. Expanding workforce 
housing will require significant investment of private capital. 
However, tax incentives like the low-income housing tax credit do not 
apply to land acquisition costs. Investors can use section 1031 to 
acquire land for the development of new housing. New limits on like-
kind exchanges would increase the cost of rental housing, meaning 
owners would have to raise rents significantly on tenants to offset the 
tax consequences of repealing section 1031.

    Like-kind exchanges promote land conservation and environmental 
protection. Land conservation organizations rely on like-kind exchanges 
to preserve open spaces for public use or environmental protection. 
Land conservation transactions often involve the exchange of 
environmentally sensitive areas for other less-sensitive privately held 
property, which can be put into production. These transactions protect 
environmentally significant land and open space for the future while 
enabling private landowners to preserve capital for expansion or 
diversification of existing operations, retirement, or other needs.

    States and localities depend on like-kind exchanges for tax 
revenue. The more frequent turnover of real estate attributable to 
section 1031 generates property transfer and recording fees, as well as 
property reassessments that increase the tax base. Significantly, 
because of lower debt and greater capital investment rates, the taxes 
paid on the subsequent sale of these properties are appreciably 
greater.

    Real estate businesses that engage in a like-kind exchange begin 
repaying the federal government for the tax deferral benefit on day 
one. Real estate owners typically pay some federal tax at the time of 
the exchange due to differences in the value of the relinquished 
property and replacement property (``boot''). In addition, the basis of 
the relinquished property is carried over and reduces the taxpayer's 
basis in the replacement property. The result in smaller depreciation 
deductions on the property--these reduced depreciation deductions are 
less than the actual rate of economic depreciation for the asset.

    Perhaps most importantly, like-kind exchanges are accelerating the 
economic recovery from the pandemic by preventing real properties from 
languishing, underutilized and underinvested. Like-kind exchanges 
helped stabilize commercial real estate markets during the COVID-19-
induced economic crisis, and they will continue to do so in its 
aftermath. During periods of economic stress, exchanges stimulate 
commerce and facilitate needed price discovery when buyers, sellers, or 
lenders are otherwise reluctant to engage in market transactions. By 
allowing property owners to defer capital gain when one property is 
exchanged for another, like-kind exchanges help get real estate into 
the hands of new owners with the time, resources, and desire to restore 
and improve them. This is particularly critical given the need to 
repurpose or renovate many properties, particularly in the office, 
retail and hotel sectors, to meet post-pandemic needs.

Doubling the long-term capital gains tax rate

    In 105 of the 108 years since Congress created the modern federal 
income tax, the United States has taxed long-term capital gains at a 
lower rate than ordinary income. The only exception was a brief three-
year period following enactment of the Tax Reform Act of 1986. The 
American Families Plan proposes to raise the top long-term capital 
gains rate to 39.6 percent, establishing parity with the proposed top 
tax rate on ordinary income. Including the 3.8 percent net investment 
income tax pushes the tax rate on investments to 43.4 percent. If 
successful, the rate would be over 40 percent higher than it was the 
last time there was tax parity between ordinary income and capital 
gains at a rate of 28 percent. Policymakers should preserve a 
meaningful, reduced tax rate on long-term capital gains income.

    The return on risk capital is a demonstrably different type of 
income than wages and other forms of guaranteed compensation. Treating 
the return on risk taking the same as salary income, or the same as the 
interest payment on a government bond, would undermine a fundamental 
tenet of the American economic system. The United States values, 
celebrates, and rewards people who take chances and risks, embrace 
opportunities, create new businesses, and aspire to achieve great 
economic accomplishments that advance our Nation's collective well-
being.

    On a macroeconomic level, the lower tax rate on capital income 
reduces the cost of capital, drives patient, long-term investment, and 
encourages productive entrepreneurial activity. In the case of real 
estate, the reduced tax rate on capital gains partially offsets the 
higher risk associated with illiquid, capital-intensive projects.

    A low tax burden on capital can help draw investment from around 
the world, increase the productivity of the American workforce, and 
improve U.S. competitiveness. Relative to our peers, the United States 
levies a heavy tax burden on capital income. According to the Tax 
Foundation, 30 of the 36 developed countries in the OECD have a lower 
maximum tax rate on individual capital gain than the United States.

    Congress should be taking steps to encourage and reward risk-taking 
and investment--particularly in communities where it is most needed--
not punishing it. Opportunity Zones, for example, were created just a 
few years ago and have mobilized $85 billion in new investment in low-
income communities. The capital is being deployed to create new and 
vibrant commercial centers, rental housing, office space and job 
opportunities for local residents. The entire premise of the 
Opportunity Zone idea is that those taking the risk will be rewarded 
with a lower capital gains tax. The popularity of Opportunity Zones is 
clear and convincing evidence that real estate capital responds to 
incentives related to capital income.

    Many of our country's great cities are facing significant 
challenges. They have aging infrastructures that can only be 
regenerated with a sustained infusion of capital investment. Public 
spending alone will be insufficient. Real and sustainable 
infrastructure modernization is going to require partnering with the 
private sector and private capital. If policymakers raise taxes on 
capital income, it is going to make it much harder to attract the 
private investment we need to rebuild our urban centers.

    The return on risk capital differs in meaningful ways from wage 
compensation. The entrepreneur who foregoes a traditional job with a 
salary in favor of starting a business and building a capital asset 
forfeits most protections and benefits offered to employees. These 
benefits include nontaxable employer-provided health care, tax-favored 
and employer-provided retirement contributions, workers compensation, 
the accumulation of Social Security benefits, and most importantly the 
comfort and security of a pre-negotiated salary. The entrepreneur, in 
contrast, enjoys none of these benefits, just risk, uncertainty, and 
the potential of a complete loss on the investment of their time and 
capital. The reduced tax rate on capital gains only partially offsets 
the many advantages that favor the salaried employee.

    Two structural features of the tax code further penalize risk 
capital over wages. First, a significant share of long-term capital 
gains liability does not relate to actual economic income, but rather 
reflects the effects of inflation. For example, assuming an asset is 
purchased for $100 and sold five years later for $110, but inflation 
rises 15 percent during the same five-year period, the taxpayer has 
actually lost money on his or her investment. He or she would need $115 
just to maintain their original purchasing power. Nonetheless, the 
taxpayer will still owe capital gains tax in year five on the $10 of 
nominal appreciation. The individual is paying tax on ``noneconomic'' 
income. The capital gains preference partially offsets this unfair 
taxation of noneconomic income that otherwise results. Second, unlike 
ordinary losses, such as casualty or net operating business losses, 
losses on capital assets are generally nondeductible and must be 
carried forward to future years (with a small $3,000 exception). In 
other words, the government collects tax immediately on capital gains, 
but does not allow taxpayers to apply their capital losses against 
their ordinary income. It is unclear whether taxpayers would be able to 
deduct their capital losses against their ordinary income in a system 
with rate parity.

 Limiting capital gains treatment to invested cash and disregarding 
                    other forms of risk taken by partners

    The American Families Plan calls on Congress to permanently change 
the tax treatment of carried interest, presumably by treating all 
carried interest as ordinary income and subjecting it to self-
employment taxes. If enacted, the proposal would result in a huge, 
retroactive tax increase on countless Americans who use partnerships in 
businesses of all types and sizes. It would discourage individuals from 
pursuing their business vision, encourage debt rather than equity 
financing, tax sweat equity invested in businesses, and slow economic 
growth. The proposal would limit capital gains treatment to invested 
cash, creating additional economic barriers for cash-poor 
entrepreneurs, and it would reduce the propensity to take on projects 
with the greatest risk, such as affordable housing and new commercial 
developments in struggling neighborhoods. Policymakers should preserve 
the current and longstanding tax treatment of carried interest.

    A carried interest is the interest in partnership profits a general 
partner receives from the investing partners for managing the 
investment and taking on the entrepreneurial risk of the venture. 
Carried interest may be taxed as ordinary income or capital gain 
depending on the character of the income generated by the partnership. 
The carried interest is not compensation for services. General partners 
receive fees for routine services like leasing and property management. 
Those fees are taxed at ordinary tax rates. The carried interest is 
granted for the value the general partner adds to the venture beyond 
routine services, such as business acumen, experience, and 
relationships. It is also recognition of the risks the general partner 
takes with respect to the general partnership's liabilities. These 
risks can include funding predevelopment costs, guaranteeing 
construction budgets and financing, and exposure to potential 
litigation over countless possibilities.

    In the Tax Cuts and Jobs Act of 2017, Congress created a three-year 
holding period requirement for carried interest to qualify for the 
reduced long-term capital gains rate.

    Taxing all carried interest as ordinary income would limit capital 
gain treatment only to taxpayers who have cash to invest. Those who 
invest entrepreneurial innovation, risk taking, and sweat equity would 
no longer receive capital gain treatment. This would reduce economic 
mobility by increasing the tax burden on less-advantaged entrepreneurs 
who want to retain an ownership interest in their business. Perversely, 
the proposal would encourage real estate owners to borrow more money to 
avoid taking on equity partners.

    The American Families Plan asserts the change is needed ``so that 
hedge fund partners will pay ordinary income tax rates on their income 
just like every other worker.'' The proposal reinforces the false 
narrative surrounding the carried interest issue--that it targets only 
a handful of hedge fund billionaires and Wall Street executives. The 
carried interest legislation is far broader and would apply to real 
estate partnerships of all sizes--from two friends owning and leasing a 
townhome to a large private real estate fund with institutional 
investors. The reality is that the majority of carried interest is 
likely earned by general partners in the nation's two million real 
estate partnerships.

    Eliminating capital gains treatment for carried interest would have 
profound unintended consequences for main streets of cities all across 
our country. A 2013 study by Douglas Holtz-Eakin, former director of 
the nonpartisan Congressional Budget Office, found that carried 
interest legislation could result in reduced construction activity, 
lower property values, and decreased wages in the real estate industry.

    The main carried interest legislative proposal, the Carried 
Interest Fairness Act, would apply retroactively to transactions after 
December 31, 2020--unfairly raising taxes on sales that have already 
occurred. Moreover, the legislation would capture and apply to 
partnership agreements executed years--often decades--earlier. These 
negotiated agreements between the partners were based on well-
established tax law as it existed at the time. By changing the tax 
results years later, the bill would undermine the predictability of the 
tax system and discourages the long-term, patient investment that moves 
our economy forward.

 Taxing the unrealized gain on appreciated assets not once but twice 
                    when an individual dies

    The American Families Plan proposes to tax unrealized capital gains 
at death. The plan would exclude up to $2.5 million per couple when 
part of the unrealized gain is attributable to a principal residence. 
Additional, undefined rules would defer taxes to protect heirs who 
continue to run family-owned businesses and farms.

    The proposal would have extremely negative, unintended consequences 
for taxpayers, the real estate industry, and the economy. The tax 
system already levies a tax on appreciated gains when an individual 
dies through the estate tax. The estate tax has an economic effect 
similar to imposing income tax on appreciated gains at death--it 
actually reaches further than potential income tax liability by 
applying the tax to both the appreciated amount and the underlying, 
adjusted basis of an asset. The President's proposal would double-tax 
appreciated gains that exceed the estate tax exemption amount.

    Two principles should guide any change to the taxation of assets at 
death. First, stepped-up basis should continue to apply to family-owned 
businesses, particularly when the gains relate to highly illiquid 
assets like real estate where the burden of the tax otherwise could 
force the dismantling of a family's livelihood. Second, policymakers 
should avoid imposing two layers of tax on the same income. Unrealized 
gains should not be subject to both income tax and estate tax at death.

    Effect on Taxpayers. At the taxpayer level, death would become a 
taxable event at $1.25 million for single filers with a primary 
residence (assuming there is at least $250,000 of unrealized gain in 
the home) and at $2.5 million for married taxpayers with a primary 
residence (if there is at least $500,000 of gain in the home). Contrast 
this to the far higher asset levels ($11.7 million for single filers 
and $23.4 million for married filers) at which the estate tax is 
currently imposed. The last year estate taxes were imposed at an asset 
level of less than $1.25 million for a single filer or $2.5 million for 
a married filer was 2003. There is little reason to make death a 
taxable event at the lower asset levels contemplated by the American 
Families Plan.

    The American Families Plan also includes a proposal to nearly 
double the capital gains tax rate for those with income above $1 
million per year. When combined with the net investment income tax of 
3.8 percent, which the Plan also proposes to apply to more taxpayers, 
the top rate would be 43.4 percent, not including any state tax.

    In the case of taxpayers subject to the taxation of unrealized 
gains at death and the estate tax, the combined marginal tax rate would 
rise from the top current law estate tax rate of 40 percent to 66.04 
percent (provided the tax on unrealized capital gains is deductible 
from the estate tax). The last time estates were taxed at such high 
levels was 1981.

    Effect on Real Estate Industry. By making death a taxable event at 
far lower asset levels than under current law, the American Families 
Plan potentially imposes capital gains tax before an asset is actually 
sold by the heir. This is a reversal of a tax policy principle that 
dates to the beginning of the modern Internal Revenue Code. If tax on 
unrealized gains is imposed on the decedent's estate, many estates will 
likely not have the cash to pay the tax due. This could force an estate 
to sell the property the decedent desired to be left to an heir just to 
pay the tax. In some cases, if a partnership interest is inherited 
representing a property interest, such a sale may not even be possible 
without the consent of other partners. Even if the funds to pay the tax 
are available, little might be left over to improve and upgrade the 
property. This could have negative consequences for many commercial 
real estate assets, including apartments and affordable rental housing, 
office buildings, and shopping centers. The bottom line is that 
property owners should decide when it is the right time to sell, not 
the government.

    Consider the following example to illustrate this point: Joe, a 
single individual, purchased an apartment building with 150 units in 
1995 for $5 million before passing away in 2022, leaving the property 
to his nephew, Bryan. At the time of Joe's death, the property is worth 
$15 million and, due to depreciation of $6 million and improvements of 
$2 million, has a tax basis of $1 million. The property has annual 
operating net income of $1.05 million. Assume this is the only capital 
asset in Joe's estate. However, Joe also has unrelated debts of $5 
million.

    Under current law, when Bryan inherits the apartment building, the 
$1 million in tax basis would be stepped-up to $15 million. Tax would 
only be imposed when Bryan sells the asset and would be based on the 
difference between the value of the property at time of sale and the 
$15 million in tax basis (plus any post-
inheritance adjustments).

    Under the proposal, a capital gain of $13 million would be 
recognized, presumably by Joe's estate. (This is calculated as $15 
million in fair market value, less $1 million in basis, less a $1 
million exclusion). The taxpayer would face a sizable tax liability 
that depends on the capital gains rate (two assumptions are presented 
given that Congress could choose to consider proposals in the American 
Families Plan on an individual basis):

        Assumption 1: Present-Law Capital Gains Rate: Under current 
law, the maximum rate on capital gains is 20 percent. Thus, Joe's 
estate would face a tax of $2.9 million assuming a capital gains rate 
of 20 percent, which would exceed the annual operating income of the 
underlying property by $1.85 million. (This is calculated as .20 
(capital gains tax rate under present law for taxpayers managing an 
active trade or business)  $7 million plus .25 (depreciation recapture 
tax rate)  $6 million.)

        Assumption 2: Capital Gains Taxed at Top Ordinary Income Tax 
Rate: Under the American Families Plan, the maximum rate on capital 
gains would rise to 39.6 percent. Joe's estate would be subject to this 
increased tax rate given that the net income of his multifamily 
property exceeds $1 million. Under this scenario, Joe's estate would 
face a tax of $5.148 million, which would exceed the annual operating 
income of the underlying property by $4.098 million. (This is 
calculated as .396 (capital gains tax rate under the American Families 
Plan for taxpayers managing an active trade or business)  $13 million 
(depreciation recapture is assumed to be taxed at 39.6 percent)). 
Finally, should Congress choose to apply the 3.8 net investment income 
tax to active capital gains, Joe's estate could instead be subject to a 
tax of $5.642 million, which would exceed the annual operating income 
of the underlying property by $4.592 million. The American Families 
Plan alludes to imposing the current-law 3.8 percent Medicare tax 
``consistently to those making over $400,000,'' but the exact extent of 
this proposal is unclear.

These examples illustrate that Joe's estate would face a tax increase 
of at least $2.9 million if the capital gains tax rate remains 
unchanged and as much as $5.148 million if the capital gains tax rate 
increases to 39.6 percent. Both amounts far exceed the annual operating 
income of the underlying asset, likely forcing its sale just to pay the 
tax. Even if Bryan had the necessary funds available, far less money 
would be available to upgrade and improve the property.

    The American Families Plan contemplates enabling family-owned 
businesses to defer the payment of tax until an inherited asset is 
sold. This approach is also be problematic. An heir could inherit a 
property with little or no basis and sizeable debt. If it is 
subsequently sold, the heir will face significant depreciation 
recapture and capital gains taxes. This would discourage heirs from 
investing further capital to maintain it. Ultimately, housing and 
especially affordable housing, office buildings, and shopping centers 
will languish, underinvested and unimproved, eventually becoming 
obsolescent and unproductive. Moreover, the proposal does not address 
situations where the heir may wish to diversify into other business 
assets or when there are multiple heirs who wish to go separate ways 
with their businesses.

    Effect on the Economy: On a macroeconomic level, an April 2021 EY 
study prepared for the Family Business Estate Tax Coalition estimates 
that imposing tax on transferred assets at death would cost 80,000 jobs 
in each of the first 10 years and 100,000 jobs each year thereafter. 
Gross Domestic Product relative to the U.S. economy would also fall by 
$10 billion annually and $100 billion over 10 years. Workers' wages 
would decline by $32 for every $100 collected in tax.

    Taxing capital gains at death would pull long-term capital 
investment out of the economy at a time when it is most needed. Even 
more so than many industries, commercial real estate has been hard hit 
by the pandemic. Structural changes are underway related to how retail, 
hospitality, and office space is used. In the next few years, buildings 
throughout the country will need to be reimagined, repurposed, and 
converted to a new use. This is going to demand extraordinary amounts 
of new capital. Yet this proposal pulls capital out of private real 
estate markets just at the moment when we should be mobilizing capital 
and investment for future needs.

    The American Jobs Plan and American Families Plan offer credible 
initiatives to address many of our Nation's most pressing needs, such 
as a modernized infrastructure, a more comprehensive approach to 
climate-related matters, and increased investments in housing, 
education, and childcare. We support aggressive steps to finance 
infrastructure needs, increase the supply of affordable housing, expand 
the economy, and promote job growth. Regrettably, some of the tax 
proposals accompanying the plans would reduce economic activity and 
opportunities and be completely counterproductive to the goals of the 
President's initiatives. As this process moves forward, we will 
continue to share our data, research, and recommendations with you to 
advance sound tax policy that is fair, productive and provides equal 
opportunities for all Americans.

            Sincerely,

            The Real Estate Roundtable
            American Hotel & Lodging Association
            American Resort Development Association
            American Seniors Housing Association
            Building Owners and Managers Association (BOMA) 
            International
            CCIM Institute
            CRE Finance Council
            Institute of Real Estate Management
            International Council of Shopping Centers
            Manufactured Housing Institute
            Mortgage Bankers Association
            NAIOP, Commercial Real Estate Development Association
            National Apartment Association
            National Association of Home Builders
            NATIONAL ASSOCIATION OF REALTORS
            National Multifamily Housing Council
            REALTORS Land Institute

                                 ______
                                 
                   Reinsurance Association of America

                  1445 New York Avenue, NW, 7th Floor

                          Washington, DC 20005

                           Tel: 202-638-3690

                           Fax: 202-638-0936

The Reinsurance Association of America (RAA) appreciates Chairman Ron 
Wyden, Ranking Member Mike Crapo, and other Committee on Finance 
(Committee) members' interest in the U.S. property casualty 
(re)insurance industry. Thank you for holding today's hearing entitled, 
``Funding and Financing Options to Bolster American Infrastructure.''

The RAA is the leading trade association of property and casualty 
reinsurers doing business in the United States. RAA membership is 
diverse, including reinsurance underwriters and intermediaries licensed 
in the U.S. and those that conduct business on a cross border basis. 
The RAA also has life reinsurance affiliates and insurance-linked 
securities fund managers and market participants that are engaged in 
the assumption of property/casualty risks. The RAA represents its 
members before state, federal and international bodies.

The RAA supports improving America's community resilience in the face 
of climate and natural disaster risks. We specifically recommend that 
infrastructure legislation establish Community Disaster Resilience 
Zones (CDRZ) and direct public and private sector resources to help 
improve infrastructure resilience, including housing resilience, for 
CDRZ communities that are the most in need and most at risk of natural 
disaster(s). Our CDRZ proposal is described in more detail below.

Climate Change and Natural Disaster Risks

The RAA has had a longstanding policy on climate change and is 
committed to working with policymakers, regulators, and the scientific, 
academic and business communities to assist in promoting awareness and 
understanding of the risks associated with climate change. A copy of 
RAA's policy can be found on our website.\1\ It is especially critical 
that at the federal, state, and local levels, the public sector in 
partnership with the private sector address significant natural 
disaster risks well in advance of the next significant flood, 
earthquake, or other devastating natural disaster event. Addressing 
these risks urgently is particularly important as the frequency, 
severity, devastation, and costs of many natural disasters continue to 
increase due to climate change.
---------------------------------------------------------------------------
    \1\ https://www.reinsurance.org/Advocacy/RAA_Policy_Statements/.

In the financial services sector, property casualty insurers are the 
most exposed to natural disasters, especially those impacted by climate 
and weather. Within the insurance sector, reinsurers have the greatest 
financial stake in appropriate risk assessment. The industry is at 
great financial risk if it does not understand global and regional 
climate impacts, variability and developing scientific assessment of a 
changing climate. Integrating this information into the insurance 
system is an essential function. Insurance is a critical component for 
economic and social recovery from the effects of extreme weather and 
climate driven events. Open market insurance pricing is also a 
mechanism for conveying the consequences of decisions about where and 
how we build and where people chose to live. In this regard, it must be 
proactive and forward looking in a changing climate/weather 
---------------------------------------------------------------------------
environment.

Our industry is science based. Blending the actuarial sciences with the 
natural sciences is critical to providing the public with the financial 
resources needed to recover from natural catastrophic events. As the 
scientific community's knowledge of climate change continues to 
develop, it is important for our communities to incorporate that 
information into the exposure and risk assessment process and that it 
be conveyed to stakeholders, policyholders, the public and public 
officials that can or should address adaptation and mitigation 
alternatives. Developing an understanding about climate and its impact 
on various risks--for example, droughts, heat waves, the frequency and 
intensity of tropical hurricanes, thunderstorms and convective events, 
rising sea levels and storm surge, more extreme precipitation events 
and flooding--is critical to our role in translating the 
interdependencies of weather, climate risk assessment and pricing.

Climate-related and natural disaster risk exposure is broad-ranging. 
These risks are widespread, geographically diverse, and include a range 
of natural disaster perils impacting homeowners and renters, property 
owners, servicers, mortgage investors, taxpayers, and communities. It 
is important to ensure that these risk exposures are addressed and 
mitigated. Mitigation includes physical enhancements and insurance to 
better protect residential properties and other infrastructure against 
damage caused by natural disasters. For government programs, 
government-sponsored enterprises, private sector financial 
institutions, and taxpayers, financial mitigation also is important to 
protect against any mortgage credit default risk associated with 
natural disaster risk.

The RAA believes a variety of solutions should be used to improve 
community resilience to the benefit of all those in the value chain of 
climate and natural disaster risk exposure. The RAA also believes that 
it is important to address geographic, natural disaster peril, and 
socioeconomic diversity. Some traditional solutions, like property 
insurance protections for homeowners certainly can and should be 
utilized, but new analytical capabilities that increasingly and 
intelligently can help reduce risk and direct resources to achieving 
that goal also should be pursued.

 Investing in Resilience for America's Communities is Critical, 
                    Logical, and Smart

In December 2019, the National Institute of Building Sciences issued 
its ``Natural Hazard Mitigation Saves'' report, which was funded by the 
U.S. Department of Housing and Urban Development.\2\ The report 
describes that federal disaster mitigation has saved $6 for every $1 
invested since 1995 and other mitigation-related activities, such as 
updating building codes to ensure resilient structures, and investments 
can save between $4 and $11 for every $1 spent. According to NOAA, 
``Each state has been affected by at least $1 billion-dollar disaster 
since 1980.''\3\ There is demand, but the supply is inadequate.
---------------------------------------------------------------------------
    \2\ https://www.nibs.org/projects/natural-hazard-mitigation-saves-
2019-report.
    \3\ https://www.climate.gov/news-features/blogs/beyond-data/2010-
2019-landmark-decade-us-billion-dollar-weather-and-climate.

Reducing the impact of climate and natural disaster risk in the first 
place, followed by other protections like traditional insurance and 
risk transfer, particularly to benefit low-income and minority 
homeowners and renters should be the top public and private-sector 
priority for climate and natural disaster resilience and risk 
management. That can be achieved by, first, identifying the communities 
that are most in need and most at risk of significant natural 
disasters. And second, it can be achieved by creating statutory and 
regulatory structures and incentives that direct public and private 
---------------------------------------------------------------------------
sector investments in infrastructure resilience.

This Committee and other committees in Congress are considering ideas 
to direct more public and private sector funds toward infrastructure 
resilience, which includes housing, in this way. The Federal Emergency 
Management Agency's (FEMA) Building Resilient Infrastructure and 
Communities (BRIC) program, U.S. Department of Housing and Urban 
Development housing programs, the U.S. Department of the Treasury's 
Capital Magnet Fund, and other federal programs should direct funding 
resources toward achieving housing climate and natural disaster 
resilience for ``extremely low- and very low-income households'' that 
face significant natural disaster risk and particularly that expose 
taxpayer-backed federal housing programs to climate and natural 
disaster risks.\4\ In general, RAA recommends that the Financial 
Stability Oversight Council (FSOC) and all of its members prioritize 
climate and natural disaster resilience efforts for federally funded 
and federally-backed residential properties in these most in need and 
most at risk areas.
---------------------------------------------------------------------------
    \4\ https://www.hudexchange.info/programs/htf/; https://
www.cdfifund.gov/programs-training/programs/cmf.
---------------------------------------------------------------------------

The RAA's Community Disaster Resilience Proposal

Low-income and minority neighborhoods are disproportionately impacted 
by natural disasters.\5\ This fact should be a priority consideration 
for policymakers and the public and private sectors as we work to 
understand and address the climate and natural disaster-related risks 
facing communities across America. The RAA has developed an innovative 
approach to addressing climate and natural disaster resilience, 
specifically to improve infrastructure resilience in the face of 
natural disasters and address socio-economic disparities. The RAA urges 
Congress to include our proposal as part of the infrastructure 
legislation and other legislation that may be under consideration by 
this Committee and other committees in Congress.
---------------------------------------------------------------------------
    \5\ https://www.americanprogress.org/wp-content/uploads/2013/08/
LowIncomeResilience-2.pdf.

The RAA developed an analytical tool and legislative proposal that 
aligns with the President's plan \6\ and congressional interests to 
rebuild America's infrastructure, enable green initiatives and smart 
building to address the impact of climate change, create needed jobs 
and fuel the economic recovery, support historically underserved 
communities where the need is often greatest, and provide sources of 
much-needed resilience project funding to states and localities. The 
RAA's data analytics tool utilizes publicly available data to very 
clearly, by county, congressional district, and census tract in each 
state, understand where natural perils, older housing stock, and 
disadvantaged populations converge. The data in RAA's analytical tool 
is from FEMA's National Risk Index (NRI) supplemented with data from 
the U.S. Census Bureau's American Community Survey (ACS). We urge 
policymakers to use the same information, particularly to understand 
the U.S. landscape and pinpoint and prioritize communities that are 
most in need and most at risk of significant natural disasters, 
diversified by state, congressional district, and natural disaster 
peril.\7\
---------------------------------------------------------------------------
    \6\ https://www.whitehouse.gov/briefing-room/statements-releases/
2021/03/31/fact-sheet-the-american-jobs-plan/.
    \7\ https://hazards.geoplatform.gov/portal/apps/MapSeries/
index.html?appid=ddf915a24fb24
dc8863eed96bc3345f8; https://www.census.gov/programs-surveys/acs.

Appendix A of this statement includes examples from RAA's tool, 
visualizing how FEMA's NRI and data from the Census Bureau's ACS can be 
---------------------------------------------------------------------------
used to understand vulnerability and risk for the:

      State of Oregon, represented by Chairman Wyden; and

      State of Idaho, represented by Ranking Member Crapo.

In general, the RAA's proposal would create a federal structure that 
directs public and private-sector funding for resilience projects to 
communities most in need and most at risk from significant natural 
disaster(s). More specifically, it would:

    (1)  Address the impact of climate change through data-driven 
analysis;

    (2)  Establish community disaster resilience zones, or CDRZ, for 
communities most in need and most at risk of significant natural 
disaster(s); and

    (3)  Direct and incentivize public and private-sector investment in 
the CDRZ to improve infrastructure resilience.

RAA's legislative proposal has a few core components to help achieve 
these objectives:

 I.  The first generally would codify, enhance, and utilize the FEMA's 
NRI data to find the intersection of risk, vulnerability, and low 
community resilience scores, as the basis to identify and establish the 
CDRZ that reflect diversity among the states by geography and type of 
peril, such as fire storm/wildfire, tornado, hurricane, flooding, ice 
storms, earthquake, wind, hail, and drought.

II.  The second would, within CDRZ, coalesce a variety of funding 
mechanisms, providing a menu of financing enhancements and tax 
incentives that can focus federal, state, local, charitable, and 
private-sector investment in resilience projects. For example, to help 
fund resilience projects in CDRZ the proposal would establish:

        CDRZ taxable direct pay bonds, like Recovery Zone Economic 
Development Bonds, which were one of three types of Build America Bonds 
that Congress created in 2009 as part of financial crisis economic 
recovery legislation;

        CDRZ tax-exempt facility private activity bonds subject to a 
separate volume cap, like Recovery Zone Facility Bonds (also in the 
2009 recovery legislation), and provide for life and property/casualty 
insurers' exclusion from proration for investments in these CDRZ bonds;

        Federal transferrable tax credits for individuals for 
resilience improvements to housing in CDRZ;

        Federal tax credits for charitable contributions for 
resilience projects in CDRZ; and

        Federal tax credits for community-level projects in CDRZ that 
are tradeable, transferrable, and do not expire, and allow proceeds 
from the sale of certified tax credits to be used to, for example, meet 
matching requirements for federally funded resilience projects.

III.  The third would prioritize, set aside, and unlock federal program 
funding to invest in resilience projects in CDRZ. This could include 
waiving, reducing, or allowing other forms of financing, such as the 
proceeds from the sale of tax credits mentioned above and in-kind and 
charitable donations, to qualify for matching funds for resilience 
projects in CDRZ. Allowing a variety of resources to contribute to and 
invest in resilience projects in CDRZ, as they relate to federal 
program matching fund requirements, could significantly unlock 
resources for CDRZ resilience projects. For example, with more 
flexibility to meet matching fund requirements, CDRZ resilience 
projects could more likely benefit from FEMA's BRIC program funding and 
funding from other programs that fall under the jurisdiction of this 
Committee.

In addition, the RAA's proposal has been favorably mentioned during 
three recent congressional hearings:

      May 19, 2021, House Committee on Ways and Means hearing on 
``Leveraging the Tax Code for Infrastructure Investment,'' during which 
the proposal was mentioned by Congresswoman Gwen Moore;\8\
---------------------------------------------------------------------------
    \8\ https://waysandmeans.house.gov/legislation/hearings/ways-and-
means-committee-hearing-leveraging-tax-code-infrastructure-investment.

      May 18, 2021, Senate Committee on Banking, Housing, and Urban 
Affairs hearing on, ``Reauthorization of the National Flood Insurance 
Program, Part I,'' during which the witness representing The Pew 
Charitable Trusts mentioned the proposal specifically, and witnesses 
representing Taxpayers for Common Sense and the Association of State 
Floodplain Managers mentioned it in concept;\9\ and
---------------------------------------------------------------------------
    \9\ https://www.banking.senate.gov/hearings/05/11/2021/
reauthorization-of-the-national-flood-insurance-program-part-i.

      March 18, 2021, House Transportation and Infrastructure 
Subcommittee on Economic Development, Public Buildings, and Emergency 
Management hearing on ``Building Smarter: The Benefits of Investing in 
Resilience and Mitigation,'' in which the proposal was mentioned by 
witnesses representing the Insurance Institute for Business and Home 
Safety and The Pew Charitable Trusts.\10\
---------------------------------------------------------------------------
    \10\ https://transportation.house.gov/committee-activity/hearings/
building-smarter-the-benefits-of-investing-in-resilience-and-
mitigation.
---------------------------------------------------------------------------

Housing is Infrastructure

Congress also has an important leadership role to play in prioritizing 
and directing federal program funding toward housing resilience. 
Housing, especially affordable housing, that can withstand the most 
significant disaster(s) that communities across the country face is an 
investment in critical infrastructure. To that end, the RAA supports 
language that House Financial Services Committee Chairwoman Maxine 
Waters included in her ``Housing is Infrastructure Act of 2021'' 
discussion draft legislation that was noticed by the House Financial 
Services Committee for its April 14, 2021, legislative hearing that: 
prioritizes applications for the $70 Billion authorized for public 
housing that include ``climate and natural disaster resilience and 
water and energy efficiency'' plans and authorizes nearly $17 billion 
for ``climate and natural disaster resilience and water and energy 
efficiency'' for each of eleven federally funded housing programs. The 
discussion draft also prioritizes public housing applications and sets 
aside federal grant funds for housing in areas of persistent 
poverty.\11\ The RAA is continuing to work on this and other 
legislation that committees may consider as part of the forthcoming 
infrastructure package so that it most impactfully can help communities 
that are most in need and most at risk of natural disaster(s) to become 
more resilient.
---------------------------------------------------------------------------
    \11\ https://financialservices.house.gov/calendar/
eventsingle.aspx?EventID=407532.
---------------------------------------------------------------------------

Conclusion

The RAA looks forward to continuing to work with Chairman Wyden, 
Ranking Member Crapo, and other members of the Committee on legislation 
to improve America's housing and community resilience in the face of 
climate and natural disaster risks by prioritizing and directing public 
and private sector resources to communities that are the most in need 
and most at risk of natural disaster(s). Thank you for your 
consideration of our recommendations.

                               APPENDIX A

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                                 .eps__
                                 
         Securities Industry and Financial Markets Association

                        120 Broadway, 35th Floor

                           New York, NY 10271

                         https://www.sifma.org/

Chairman Wyden, Ranking Member Crapo:

We applaud your leadership of the Senate Finance Committee. Your 
direction in making infrastructure investment, including municipal bond 
financing, a priority for the committee is timely and prudent during 
these challenging times. We thank you for convening this important 
hearing and our members stand ready to continue their supporting role 
as the economy recovers.

Introduction

The Securities Industry and Financial Markets Association 
(``SIFMA'')\1\ and its member firms \2\ strongly support increased 
investment in this country's infrastructure, which will help spur job 
creation and economic growth. To that end, we believe it is critical to 
support the great work states and localities do in building and 
maintaining our infrastructure. A partnership among federal, state, and 
local governments and private investors will ease the burden on the 
cash-strapped federal government by leveraging our capital markets to 
create expanded financing options. We believe that this partnership is 
especially important during this difficult fiscal environment as states 
and local governments seek to lower their costs and also finance much-
needed infrastructure such as schools, roads, and hospitals.
---------------------------------------------------------------------------
    \1\ SIFMA is the leading trade association for broker-dealers, 
investment banks and asset managers operating in the U.S. and global 
capital markets. On behalf of our industry's nearly 1 million 
employees, we advocate for legislation, regulation and business policy, 
affecting retail and institutional investors, equity and fixed income 
markets and related products and services. We serve as an industry 
coordinating body to promote fair and orderly markets, informed 
regulatory compliance, and efficient market operations and resiliency. 
We also provide a forum for industry policy and professional 
development. SIFMA, with offices in New York and Washington, DC, is the 
U.S. regional member of the Global Financial Markets Association 
(GFMA). For more information, visit http://www.sifma.org.
    \2\ In 2020, SIFMA members underwrote over 90% of the volume of new 
issues of municipal securities.

At SIFMA, we believe it is critical to close the infrastructure 
financing gap by restoring and creating additional vehicles to assist 
in resolving these needs. We hope that you agree that increased 
investment in our infrastructure has a critical role to play as our 
nation will continue to grapple with the economic impact of the COVID-
19 pandemic for years to come. Further, the provisions outlined in this 
testimony will facilitate the more efficient leveraging of our capital 
---------------------------------------------------------------------------
markets for the benefit all Americans.

After decades of underinvestment, the U.S. faces an extraordinary 
infrastructure deficit. In their most recent report card,\3\ The 
American Society of Civil Engineers (ASCE) estimates a $2.59 trillion 
investment gap over 10 years between what we are currently projected to 
spend on infrastructure and what must be spent to fully address the 
deficiencies in our aging infrastructure. They also estimate that by 
2039, a continued underinvestment in our nation's infrastructure at 
current rates will cost $10 trillion in GDP, more than 3 million in 
American jobs, and $2.4 trillion in exports over the next 30 years. 
With existing federal infrastructure programs failing to meet current 
demand, the U.S. is continuing the troubling trend of underinvestment 
in this area and risks substantially adding to the financial burdens of 
state and local governments. This will only lead to further delays of 
investment in and maintenance of critical public projects, including 
highways, bridges, hospitals, airports, schools, water, and sewer 
systems.
---------------------------------------------------------------------------
    \3\ https://infrastructurereportcard.org/.

Specifically, SIFMA strongly supports providing incentives to rebuild 
our nation's infrastructure including: (1) preserving the tax exemption 
for interest earned by investors on state and local bonds; (2) 
reinstating the tax exemption on the advance refunding of municipal 
bonds; (3) expanding private activity bonds (PABs); (4) reinstating a 
direct pay bond program; and (5) expanding the small issuer exception 
so that states and municipalities have a variety of additional tools to 
finance their local projects. It is important to note that all of these 
priorities were included in some form in H.R. 2, the Moving Forward 
Act, which SIFMA publicly supports.

 Preserve Tax Exemption for Interest Earned by Investors on State and 
                    Local Bonds

State and local governments bear responsibility for financing and 
building a significant portion of the nation's public infrastructure, 
including schools, roads, water and sewer systems, transportation 
facilities and other public projects. The bulk of these projects have 
been financed using tax-exempt bonds, wherein the interest earned by 
investors is generally exempt from federal income tax. As a result, the 
state or local government pays a significantly lower interest rate to 
investors than other borrowers in the capital markets. The tax-
exemption on state and local bond interest is one of the most important 
forms of federal assistance for infrastructure investment, and the tax-
exempt bond market has successfully provided trillions of dollars of 
financing for public works over decades.

Recommendations

Preserving the tax-exemption for interest earned by investors on state 
and local bonds, which is the financing mechanism for the clear 
majority of infrastructure projects that state and local governments 
undertake, is crucial.

Reinstate the Tax Exemption on Advance Refunding Municipal Bonds

Advance refundings provided states and localities with an important 
tool for refinancing outstanding debt at lower rates and have generated 
many billions of dollars of interest savings over decades. By reducing 
their debt service expenses through advance refundings, states and 
localities were able to free up their borrowing capacity for new 
investments in infrastructure and other important public projects, in 
turn boosting their local economies with the creation of new jobs and 
making public services more affordable. This tool operates much like 
homeowners refinancing mortgages to a lower interest rate.

State and local governments can no longer access cost savings through 
this valuable financial tool. The Tax Cuts and Jobs Act of 2017 
eliminated the ability of state and local governments to execute tax 
exempt advance refundings of outstanding municipal bonds by making the 
interest on advance refunding bonds taxable.

Tax-exempt bonds were first written into the tax code in 1913 and have 
since then remained an important financing tool. Eliminating advance 
refundings removed an important financial management tool that allowed 
state and local governments to save billions on interest costs. When 
interest rates fall, states and localities seek to take advantage of 
lower rates. However, bonds can only be paid off early on or after 
certain specified times known as ``call dates.'' Before 2018, if an 
issuer wanted to refund their bonds before 90 days prior to the call 
date, they needed to issue new advance refunding bonds and hold the 
proceeds in escrow until the call date of the original bonds, then pay 
off the original bonds on the call date. Now, issuers must wait until 
the bonds can be refunded on a current basis, 90 days prior to the call 
date, to issue tax exempt refunding bonds, which potentially reduces 
their savings.

Advance refundings were already restricted and regulated. The 
limitation of one advance refunding per bond issue was put in place in 
1986 to correct the perception of too many bonds being outstanding at 
the same time for a single project. Limiting governments to a single 
advance refunding was a compromise that recognized how important 
advance refundings are for states and localities while respecting the 
interest of the federal government to limit the number of tax-exempt 
bonds outstanding.

Recommendations

SIFMA supports reinstating the tax exemption for interest on advance 
refunding bonds, which would allow local governments to invest in 
additional infrastructure projects by saving local taxpayer dollars. 
Senators Roger Wicker (R-MS) and Debbie Stabenow (D-MI) introduced S. 
479, the LOCAL Infrastructure Act \4\ and Reps. C.A. Dutch 
Ruppersberger (D-MD) and Steve Stivers (R-OH) introduced identical 
legislation in the form of H.R. 2288, the Investing in Our Communities 
Act.\5\ If enacted, these bipartisan pieces of legislation would 
restore the tax exemption for interest on advance refunding bonds. 
Further, this reinstatement is also provided for in Section 90102 of 
the Moving Forward Act.
---------------------------------------------------------------------------
    \4\ https://www.congress.gov/bill/117th-congress/senate-bill/
479?q=%7B%22search%22%3A%5
B%22s.+479%22%5D%7D&s=1&r=1.
    \5\ https://www.congress.gov/bill/117th-congress/house-bill/
2288?q=%7B%22search%22%3A%5
B%22ruppersberger%22%5D%7D&s=8&r=1.
---------------------------------------------------------------------------

Direct Pay Bonds

In 2009 and 2010, the federal government authorized a direct payment 
``Build America Bond'' program whereby states and localities could 
choose to issue bonds with taxable interest instead of tax-exempt 
interest and receive a partial reimbursement for their interest expense 
in the form of a refundable tax credit, which generated new investment 
in public infrastructure in all 50 states. During the time in 2009 and 
2010 that direct pay bonds were authorized, state and local governments 
financed more than $150 billion of infrastructure investments using 
this tool. Reinstating a direct pay program could be designed to be 
revenue neutral, with a lower subsidy to the issuer than the 35 percent 
reimbursement for Build America Bonds.

Recommendations

SIFMA supports the authorization of a new direct payment bond program 
by Congress on a permanent basis as a supplement to, not a replacement 
for, tax-exempt bonds so long as the program ensures reimbursements to 
borrowers will not be affected by budget sequesters. In addition to S. 
1308, the American Infrastructure Bonds Act,\6\ legislation introduced 
by Senators Roger Wicker (R-MS) and Michael Bennet (D-CO) which 
authorizes a new direct pay bond program, Section 90101 of the Moving 
Forward Act would also permanently implement a direct pay bond program. 
In sum, any comprehensive expansion of federal investment in 
infrastructure should include the authorization of a new direct payment 
bond program.
---------------------------------------------------------------------------
    \6\ https://www.congress.gov/bill/117th-congress/senate-bill/1308/
cosponsors?q=%7b%22
search%22:%5b%22wicker%22%5d%7d&r=7&s=3&searchResultViewType=expanded.
---------------------------------------------------------------------------

The Small Issuer Exception

Our national infrastructure challenges are so complex and large that a 
single solution is not enough. An expansion of the ``small issuer 
exception'' for tax-exempt bonds would support infrastructure 
investment in small and rural communities that may have difficulty 
accessing the capital markets. Under current law, small issuers can 
issue up to $10 million or less in bonds per calendar year to be sold 
directly to local banks at a cost savings for local taxpayers. This $10 
million limit was set in 1986 under the Tax Reform Act of 1986. This 
limit was briefly raised in 2009 as part of the American Recovery and 
Reinvestment Act of 2009.

Recommendations

Congresswoman Terri Sewell (D-AL) introduced H.R. 2634, the Local 
Infrastructure Financing Tools (LIFT) Act,\7\ which includes several 
modifications to the small issuer exception as well as reinstates the 
tax exemption for interest on advance refunding bonds and establishes a 
permanent direct pay bond program. This legislation would increase the 
annual limit for the small issuer exception from $10 million to $30 
million and this limit would be adjusted by inflation in future years. 
This legislation would also apply the small issuer exception debt limit 
on a borrower by borrower basis, rather than aggregating all qualified 
loans of an issuer. SIFMA strongly urges the Congress to include this 
legislation in any comprehensive infrastructure legislation. Section 
90103 of the Moving Forward Act would also permanently increase the 
limit for the small issuer exception.
---------------------------------------------------------------------------
    \7\ https://www.congress.gov/bill/117th-congress/house-bill/
2634?s=1&r=5.
---------------------------------------------------------------------------

Private Activity Bonds

State and local governments are permitted under the tax code to issue 
bonds on behalf of private borrowers for a limited list of public 
purposes, including infrastructure. However, these bonds come with 
significant restrictions such as volume limitations and, for some 
purposes, the application of the individual Alternative Minimum Tax, 
which raises the cost of financing.

State and local governments are eligible to issue bonds in the capital 
markets where the interest earned by investors is exempt from federal 
income tax, which can significantly reduce the interest cost for the 
borrower compared to other forms of debt. However, if more than 10 
percent of the proceeds of a state or local bond issue are used by a 
private business and more than 10 percent of the debt service on a bond 
is paid or secured by a private business, the bond is deemed by the IRS 
to be a Private Activity Bond (PAB) and cannot be tax-exempt unless it 
meets one of the exceptions specified in law.

These exceptions were included in the tax code to promote the use of 
bonds to finance targeted categories of facilities and include, among 
others:

      Bonds where the project being financed is ``exempt facility'' 
infrastructure such as airports, docks and wharves, mass commuting 
facilities, water and sewer facilities, solid waste disposal 
facilities, and others;
      Bonds where the borrower is a 501(c)3 organization;
      Bonds used to finance qualified home mortgages for low- and 
middle-income families that meet certain criteria; and
      Bonds issued for the benefit of very small manufacturing 
companies.

Recommendations

State and local governments should be able to issue tax-exempt bonds 
for infrastructure projects with private participation in the same 
manner that they issue bonds for purely public projects. In addition, 
Congress should permit the sale or lease of infrastructure assets 
financed with governmental tax-exempt bonds to private parties without 
threatening the tax status of the interest on the bonds. A 
comprehensive expansion of federal investment in infrastructure should 
also include an increase in the volume cap for private activity bonds.

SIFMA supports increasing the volume cap for private activity bonds, 
particularly by:

      Increasing the volume cap for PABs;
      Efforts to create a National Reallocation Pool so that unused 
volume cap can be redistributed among states; and
      Expanding the permissible uses for PABs to activities such as 
rural broadband, amongst others.

Importantly, Section 90104 of the Moving Forward Act would expand the 
volume cap for private activity bonds.

Conclusion

In conclusion, we applaud the Committee for holding this critical 
hearing on infrastructure financing, and we encourage lawmakers to use 
this opportunity to consider the proposals suggested in this submission 
that will help expand the ability of municipalities to finance their 
infrastructure needs.