[Congressional Record Volume 142, Number 46 (Friday, March 29, 1996)]
[Extensions of Remarks]
[Pages E499-E500]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        REMOVE FEDERAL BARRIERS TO INNOVATIVE HIGHWAY FINANCING

                                 ______


                            HON. DAVID MINGE

                              of minnesota

                    in the house of representatives

                         Friday, March 29, 1996

  Mr. MINGE. Mr. Speaker, as an original cosponsor of the coalition's 
balanced budget plan, I am committed to balancing the Federal budget as 
soon as possible. However, I understand that in working to balance the 
budget, we cannot simply cut, cut, cut and leave the Nation to deal 
with the repercussions of lower Government spending. We must 
simultaneously make prudent policy changes to help empower the Nation 
during this fiscally trying time. One of those changes could be to 
allow the private sector of the transportation industry to use 
innovative financing methods to maintain our Nation's highways. 
Currently, there are barriers in Federal law that preclude such 
activity. I believe that innovative highway financing by the private 
sector could prove to be an important tool for preserving our 
transportation infrastructure. For information on this important 
subject, I commend to your attention the recent testimony of Robert 
Zauner, chairman of the Minnesota Transportation Group before the Joint 
Economic Committee. Mr. Zauner's testimony lays out an excellent 
explanation for why the private sector should be able to utilize 
innovative financing for maintaining our highways. I am submitting a 
copy of that testimony for printing in the Record.

  Testimony of Robert Zauner Before the Congressional Joint Economic 
                               Committee

       Mister Chairman, my name is Robert Zauner. I am a 
     registered professional engineer, vice-president of Hughes 
     Transportation Management Systems (HTMS) and the chairman of 
     the Minnesota Transportation Group (MTG). I have been 
     involved in the transportation industry for twenty-five 
     years. During the past six years I have been involved in the 
     development of privatized toll highways. I have served as a 
     member of the Board of Directors and as Vice President of the 
     Highway Division of the Associated General Contractors of 
     Minnesota. I also chaired its bridge committee. I currently 
     serve on the Boards of Directors of the Minnesota 
     Transportation Alliance, a transportation advocacy group, and 
     the Intelligent Transportation Society of Minnesota, as well 
     as the Advisory Council of the University of Minnesota's 
     Center for Transportation Studies.
       The MTG is a team of technology, construction, engineering, 
     and financial companies that personifies the private sector's 
     capability, desire and interest in the privatization of 
     highway infrastructure. For the past six years we have worked 
     with state legislators, local officials, and state 
     departments of transportation in the development of enabling 
     legislation, privatization programs and privatized highways. 
     Our team members have been involved in privatization efforts 
     in California, Washington, Arizona, Virginia, South Carolina, 
     and Minnesota where we recently submitted proposals to 
     develop three highway projects totaling over $700 million.
       In my testimony today I would like to share several issues 
     I have encountered in my efforts to privatize highways. Some 
     are institutional barriers others are perceptions or 
     prejudices created by the present funding system that are as 
     difficult to overcome as institutional barriers themselves. 
     They include:
       1. Reconstruction and improvements to the interstate system 
     are exempt from tolling.
       2. State and local government see little benefit to 
     privatizing or implementing toll financing due to their 
     perception that they are receiving no additional funding for 
     doing so.
       3. The disparity between taxable and tax exempt financing.
       4. Privately financed highways are at a disadvantage when 
     competing for investor dollars.
       5. Tolling represents double taxation.
       6. Unrealistic expectations for low cost roads: Roads are 
     free; Roads are paid for; My road is the most dangerous road 
     in the state

[[Page E500]]

     it should be fixed now; Its not fair, I paid for everyone 
     else's road they should pay for mine; Toll roads mean toll 
     booths and having to carry a jar of quarters in my car; Toll 
     roads create safety problems at toll plazas; and We have 
     waited long enough its our turn.
       The Interstate Highway System is a critical link in the 
     nation's transportation network. It is truly one of the 
     greatest and most expensive public works projects ever 
     undertaken. While the interstate system includes only 2.5% of 
     our highway lane-miles more than 22% of our travel is on it. 
     It will also require nearly a third of our annual capital 
     expenditures to improve it in the future. Yet reconstruction 
     or capacity expansions on the interstate system cannot be 
     toll financed. The privatization and tolling provisions of 
     ISTEA an the NHS Act should be expanded to allow the use 
     of tolls on the Interstate System if a road, bridge, or 
     tunnel, is reconstructed, substantially improved, or its 
     capacity is expanded. This will attract the investment and 
     expertise of the private sector to complete needed, major 
     reconstruction projects, improvements, and expansions to 
     the system faster and at less cost. It will also relieve 
     the large financial burdens these projects place on many 
     State Departments of Transportation.
       State and local governments have not yet accepted private 
     equity as additional money to meet their transportation 
     needs. I believe Congress could create a better environment 
     for the private sector by requiring that alternative 
     financing, including but not limited to tolls, congestion 
     pricing, mileage pricing, and public-private partnerships, 
     when the cost exceeds $10,000,000. Such a provision would 
     make it more likely for government entities to pursue 
     alternative financing.
       The private sector is at a disadvantage to government in 
     financing infrastructure due to the disparity in rates 
     between taxable and tax exempt financing. The federal 
     government also loses tax revenue when tax exempt bonds are 
     used to finance improvements. eliminating this disparity 
     would make taxable financing more competitive and the federal 
     government would increase its tax revenues.
       Unlike the power and telecommunications industries there is 
     no clear track record of private involvement in the delivery 
     of transportation infrastructure. As a result, the financing 
     of such investments can be difficult to close. By making the 
     unobligated balance in the Highway Trust Fund available as a 
     guarantee for transportation infrastructure loans, financing 
     would be more easily obtained and investment of private 
     equity in transportation projects would increase. Regarding 
     this provision the Office of Management and Budget has 
     advised the Federal Highway Administration that portions of 
     the unobligated balance in the trust fund actually committed 
     as a debt reserve would be scored at ten cents on the dollar 
     for budget purposes. Such use of the unobligated balance 
     would have a minimal effect on the deficit.
       The payment of tolls to finance specific projects does not 
     constitute double taxation. the situation is similar to a 
     homeowner who needs or desires to make repairs or 
     improvements to his, or her, home. A homeowner's monthly 
     mortgage payment allows him, or her, to live in a home while 
     it is being paid for. Similarly, the gas tax is being used to 
     maintain and make limited improvements to our existing road 
     system. If a homeowner desires to make repairs or 
     improvements additional funds outside his monthly payments 
     are needed. Similar to the homeowner, if we want to make 
     specific improvements to our road system we must find an 
     additional source of funds. By using tolls, the revenue 
     raised is targeted to a specific need. A need created by a 
     specific demand and the investment made is tailored to meet 
     that need. This is an efficient and equitable way of making 
     investments. It introduces market forces into transportation 
     infrastructure investments. The improvements made are also 
     paid by those who benefit most from the improvement. This a 
     fair and equitable means of paying for improvements.
       The public's unrealistic expectation that traditional 
     transportation funding can meet their needs is evidenced by 
     the statements listed above. The current system is unable to 
     meet those expectations due to major changes in automobiles 
     and our travel patterns. Increased fuel efficiency and life-
     span of vehicles coupled with increases in the number of 
     trips and trip length has contributed greatly to our current 
     funding situation. Neither the gas tax nor license fees is 
     increasing. Moving away from these funding mechanisms to 
     charging for the space used on a road would help change these 
     expectations. Charging for highway travel by the mile would 
     make us more aware of the cost of travel and would assess 
     costs to the largest users. This would result in more prudent 
     use of highway capacity. Such a move would also permit the 
     introduction of congestion pricing to highway travel. Most 
     commodities are paid for in this fashion. Introducing it into 
     highway travel would improve utilization of the existing 
     system and lessen demand for additional capacity.
       Drivers have not liked paying tolls because they do not 
     like fumbling for quarters, stopping and paying the tolls. 
     This is no longer necessary. My company, Hughes 
     Transportation Management Systems, has adapted defense-
     related technology to collect tolls at freeway speeds on the 
     open road without toll plazas. Eliminating toll booths and 
     stopping to pay tolls eliminates most driver's objection to 
     toll financing.
       In closing, I would like to state that I am very positive 
     on the opportunities and benefits of highway infrastructure 
     privatization. This optimism is buoyed by continued bi-
     partisan support of the Minnesota legislature, business, and 
     labor. We are continuing our efforts despite the fact that we 
     are charging a fee for a service that our competition, 
     government, is giving away ``free''. We would like to 
     participate more fully. Addressing the issues I have outlined 
     today would improve the competitive disadvantage we now face. 
     I would be happy to answer your questions.

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