Physical Infrastructure: Challenges and Investment Options for
the Nation's Infrastructure (08-MAY-08, GAO-08-763T).
Physical infrastructure is critical to the nation's economy and
affects the daily life of virtually all Americans--from
facilitating the movement of goods and people within and beyond
U.S. borders to providing clean drinking water. However, this
infrastructure--including aviation, highway, transit, rail,
water, and dam infrastructure--is under strain. Estimates to
repair, replace, or upgrade aging infrastructure as well as
expand capacity to meet increased demand top hundreds of billions
of dollars. Calls for increased investment in infrastructure come
at a time when traditional funding for infrastructure projects is
increasingly strained, and the federal government's fiscal
outlook is worse than many may understand. This testimony
discusses (1) challenges associated with the nation's surface
transportation, aviation, water, and dam infrastructure, and the
principles GAO has identified to help guide efforts to address
these challenges and (2) existing and proposed options to fund
investments in the nation's infrastructure. This statement is
primarily based on a body of work GAO has completed for the
Congress over the last several years. To supplement this existing
work, GAO also interviewed Department of Transportation officials
to obtain up-to-date information on the status of the Highway
Trust Fund and various funding and financing options and reviewed
published literature to obtain information on dam infrastructure
issues.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-08-763T
ACCNO: A82058
TITLE: Physical Infrastructure: Challenges and Investment
Options for the Nation's Infrastructure
DATE: 05/08/2008
SUBJECT: Accountability
Aviation
Critical infrastructure
Federal aid for highways
Federal aid for transportation
Federal aid to states
Federal funds
Federal/state relations
Fiscal policies
Fund audits
Funds management
Investment planning
Policy evaluation
Program evaluation
Reporting requirements
Transportation costs
Transportation industry
Transportation planning
Transportation policies
Transportation research
Program goals or objectives
Highway Trust Fund
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GAO-08-763T
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Testimony before the Committee on the Budget and the Committee on
Transportation and Infrastructure, U.S. House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Thursday, May 8, 2008:
Physical infrastructure:
Challenges and Investment Options for the Nation's Infrastructure:
Statement of Patricia A. Dalton, Managing Director:
Physical Infrastructure Issues:
GAO-08-763T:
GAO Highlights:
Highlights of GAO-08-763T, a testimony before the Committee on the
Budget and the Committee on Transportation and Infrastructure, U.S.
House of Representatives.
Why GAO Did This Study:
Physical infrastructure is critical to the nation�s economy and affects
the daily life of virtually all Americans�from facilitating the
movement of goods and people within and beyond U.S. borders to
providing clean drinking water. However, this infrastructure�including
aviation, highway, transit, rail, water, and dam infrastructure�is
under strain. Estimates to repair, replace, or upgrade aging
infrastructure as well as expand capacity to meet increased demand top
hundreds of billions of dollars. Calls for increased investment in
infrastructure come at a time when traditional funding for
infrastructure projects is increasingly strained, and the federal
government�s fiscal outlook is worse than many may understand.
This testimony discusses (1) challenges associated with the nation�s
surface transportation, aviation, water, and dam infrastructure, and
the principles GAO has identified to help guide efforts to address
these challenges and (2) existing and proposed options to fund
investments in the nation�s infrastructure. This statement is primarily
based on a body of work GAO has completed for the Congress over the
last several years. To supplement this existing work, GAO also
interviewed Department of Transportation officials to obtain up-to-date
information on the status of the Highway Trust Fund and various funding
and financing options and reviewed published literature to obtain
information on dam infrastructure issues.
What GAO Found:
The nation faces a host of serious infrastructure challenges. Demand
has outpaced the capacity of our nation�s surface transportation and
aviation systems, resulting in decreased performance and reliability.
In addition, water utilities are facing pressure to upgrade the
nation�s aging and deteriorating water infrastructure to improve
security, serve growing demands, and meet new regulatory requirements.
Given these types of challenges and the federal government�s fiscal
outlook, it is clear that the federal government cannot continue with
business as usual. Rather, a fundamental reexamination of government
programs, policies, and activities is needed. Through prior analyses of
existing programs, GAO identified a number of principles that could
guide a reexamination of federal infrastructure programs. These
principles include:
* creating well-defined goals based on identified areas of national
interest,
* establishing and clearly defining the federal role in achieving each
goal,
* incorporating performance and accountability into funding decisions,
* employing the best tools and approaches to emphasize return on
investment, and:
* ensuring fiscal sustainability.
Various options are available to fund infrastructure investments. These
options include altering existing or introducing new funding approaches
and employing various financing mechanisms, such as bonds and loans.
For example, a variety of taxes and user fees, such as tolling, can be
used to help fund infrastructure projects. In addition, some have
suggested including an infrastructure component in a future economic
stimulus bill, which could provide a one-time infusion of funds for
infrastructure projects. Each of these options has different merits and
challenges, and choosing among them will likely involve trade-offs
among different policy goals. Furthermore, the suitability of the
various options depends on the level of federal involvement or control
that policymakers desire. However, as GAO has reported, when
infrastructure investment decisions are made based on sound
evaluations, these options can lead to an appropriate blend of public
and private funds to match public and private costs and benefits. To
help policymakers make explicit decisions about how much overall
federal spending should be devoted to investment, GAO has previously
proposed establishing an investment component within the unified
budget.
Figure:
This figure is a combination of photos: an airplane, a truck, traffic,
and a river overview.
[See PDF for image]
Source: Corbis & U.S. Army Corps of Engineers.
[End of figure]
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-763T]. For more
information, contact Patricia Dalton at (202) 512-2834 or
[email protected]
[End of section]
Messrs. Chairmen and Members of the Committees:
We appreciate the opportunity to testify on infrastructure financing
issues. As you know, the nation's physical infrastructure is critical
to the nation's economy and affects the daily life of most Americans--
from facilitating the movement of goods and people within and beyond
U.S. borders to providing clean drinking water. However, as illustrated
by the 2007 bridge collapse in Minnesota and numerous water main breaks
across the country, the nation's physical infrastructure is under
strain. Estimates of the costs to repair, replace, or upgrade aging
infrastructure so that it can safely, efficiently, and reliably meet
current demands, as well as expand capacity to meet increasing demands,
top hundreds of billions of dollars.
Addressing these challenges is complicated by the breadth of the
nation's physical infrastructure--including aviation, highway, transit,
rail, water, and dam infrastructure--which is owned, funded, and
operated by all levels of the government and the private sector.
Moreover, infrastructure policy decisions are inextricably linked with
economic, environmental, and energy policy concerns. Calls for
increased investment in infrastructure coincide with increasing strains
on traditional funding for infrastructure projects. For example,
without significant changes in funding or planned spending, the Highway
Trust Fund is projected to incur significant deficits in the years
ahead.[Footnote 1]Furthermore, the federal government's financial
condition and fiscal outlook are worse than many may
understand.[Footnote 2] Specifically, the federal budget is on an
unsustainable path--raising questions about whether people should
assume federal funds will be available to help solve the nation's
current infrastructure challenges. We have also previously reported
that state and local governments will likely face persistent fiscal
challenges starting within the next few years.[Footnote 3]
Consequently, a range of investment options for the nation's physical
infrastructure is currently being explored and proposed by some
policymakers and industry stakeholders.
Prudent use of taxpayer dollars is always important. The economic and
social importance of the nation's infrastructure and the current fiscal
environment make it even more important that federal, state, and local
governments make prudent decisions on how to invest limited available
resources. In making these decisions, governments will face an array of
challenges that include repairing and maintaining aging infrastructure,
making more efficient use of existing infrastructure, accounting for
population growth, and incorporating new technologies in funding for
infrastructure. In this environment, the infrastructure improvements
that all levels of government want may not reflect what they need or
what the nation can afford. Accordingly, decisions about the
appropriate level of distribution and spending on infrastructure are
both difficult and enormously important.
My remarks today focus on (1) challenges associated with the nation's
surface transportation, aviation, water, and dam infrastructure, and
the principles we have identified to help guide efforts to address
these challenges and (2) existing and proposed options to fund
investments in the nation's infrastructure. My comments are based
primarily on a body of work that we have completed over the past
several years for the Congress.[Footnote 4] To supplement our existing
work, we also interviewed Department of Transportation (DOT) officials
and reviewed published literature to obtain up-to-date information on
the status of the Highway Trust Fund, various funding and financing
options, and dam infrastructure issues. We conducted this work between
March and May 2008 in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Summary:
The nation faces a host of serious infrastructure challenges. For
example, demand has outpaced the capacity of our nation's surface
transportation and aviation systems, resulting in decreased performance
and reliability. Furthermore, as we recently reported, federal surface
transportation programs are not effectively addressing key challenges,
such as congestion, because the federal goals and roles are unclear,
many programs lack links to performance or needs, and the programs
often do not employ the best tools and approaches. In addition, water
utilities are facing pressure to upgrade the nation's aging and
deteriorating water infrastructure to improve security, serve growing
demands, and meet new regulatory requirements. Given these types of
challenges and the federal government's fiscal outlook, it is clear
that the federal government cannot continue with business as usual.
Rather, a fundamental reexamination of government programs, policies,
and activities is needed. Through our prior analyses of existing
programs, we identified a number of principles that could help guide a
reexamination of the federal surface transportation program. While
these principles are designed specifically to reexamine the surface
transportation program, most, if not all of them, could be applicable
to other federal infrastructure programs. These principles are:
* creating well-defined goals based on identified areas of national
interest,
* establishing and clearly defining the federal role in achieving each
goal,
* incorporating performance and accountability into funding decisions,
* employing the best tools and approaches to emphasize return on
investment, and:
* ensuring fiscal sustainability.
A wide variety of options are available to fund infrastructure
investments. These options include altering existing or introducing new
funding approaches and employing various financing mechanisms, such as
bonds and loans. For example, a variety of taxes and user fees, such as
tolling, can be used to help fund infrastructure projects. In addition,
some have suggested including an infrastructure component in a future
economic stimulus bill, which could provide a one-time infusion of
funds for infrastructure projects. Each of these options has different
merits and challenges, and choosing among them will likely involve
policy trade-offs. Furthermore, the suitability of any of these options
depends on the level of federal involvement or control that
policymakers desire in a given policy area. However, as we have
reported, when infrastructure investment decisions are based on sound
evaluations, these options can lead to an appropriate blend of public
and private funds to match public and private costs and benefits. To
help policymakers make explicit decisions about how much overall
federal spending should be devoted to investment, we have previously
proposed establishing an investment component within the unified
budget.
Background:
The economic well-being of the United States is dependent on the
reliability, safety, and security of its physical infrastructure. The
nation's infrastructure is vast and affects the daily lives of
virtually all Americans. In total, there are about 4 million miles of
roads, 117,000 miles of rail, 600,000 bridges, 79,000 dams, 26,000
miles of commercially navigable waterways, 11,000 miles of transit
lines, 500 train stations, 300 ports, 19,000 airports,[Footnote 5]
55,000 community drinking water systems, and 30,000 wastewater
treatment and collection facilities. Collectively, this infrastructure
connects communities, facilitates trade, provides clean drinking water,
and protects public health, among other things.
The nation's infrastructure is primarily owned and operated by state
and local governments and the private sector. For example, state and
local governments own about 98 percent of the nation's bridges and the
private sector owns almost all freight railroad infrastructure. The
federal government owns a limited amount of infrastructure--for
instance, the federal government owns and operates the nation's air
traffic control infrastructure. In addition, through its oversight
role, the federal government plays an important role in ensuring the
safety, security, and reliability of the nation's infrastructure. Table
1 provides information on infrastructure ownership.
Table 1: Physical Infrastructure Ownership:
Surface transportation;
* Ninety-seven percent of the nation's roads and highways are owned by
state and local governments, with local governments owning
approximately 77 percent of the miles of roadway.
* About 98 percent of the nation's bridges are owned by state and local
governments.
* Most transit systems are owned and operated by public agencies that
are created by state and local governments.
* Most freight railroad infrastructure is owned by private freight
railroads. The federal government owns about 650 miles of Amtrak's
22,000-mile rail network.
* The maritime transportation infrastructure, including ports, is
generally owned and operated by state and local agencies and private
companies. Many ports are publicly owned and privately operated.
Aviation;
* Most commercial service airports are owned by local or state
governments, either directly or through an authority, a quasi-
governmental body established to operate the airport.
* Air traffic control facilities are owned by the federal government.
Water;
* About half of the nation's drinking water systems and an estimated 20
percent of the wastewater systems are privately owned. Private owners
range from homeowners' associations, mobile home parks, and other
entities whose primary business is unrelated to water supply or
wastewater treatment, to larger, investor-owned companies. Publicly
owned drinking water systems and wastewater utilities are owned by
municipalities, townships, counties, water or sewer districts, and
water or sewer authorities.
Dams (including levees);
* The majority of dams in the United States are privately owned. The
federal government owns and operates about 5 percent of the nation's
dams.
* Levees are typically constructed by the federal government, and local
governments are responsible for their operation and maintenance.
Source: GAO summary of information from the Airport Cooperative
Research Program, Department of Transportation, Environmental
Protection Agency, Federal Emergency Management Agency, National
Academy of Public Administration, and the National Railroad Passenger
Corporation.
[End of table]
Funding for the nation's infrastructure comes from a variety of
federal, state, local, and private sources. For example, the private
and local public owners of water infrastructure as well as multiple
federal agencies fund drinking water and wastewater capital
improvements. As owners of the infrastructure, state and local
governments and the private sector generally account for a larger share
of funding for infrastructure than the federal government. However, the
federal government has played and continues to play an important role
in funding infrastructure. For example:
* From 1954 through 2001, the federal government invested over $370
billion (in 2001 dollars) in the Interstate Highway System.
* Federal Airport Improvement Program grants provided an average of
$3.6 billion annually (in 2006 dollars) for airport capital
improvements between 2001 and 2005.
* From fiscal year 1991 through fiscal year 2000, nine federal agencies
provided about $44 billion (in 2000 dollars) for drinking water and
wastewater capital improvements.
* Through the New Starts program, the federal government provided over
$10 billion in capital funds for new fixed-guideway transit (e.g.,
commuter rail and subway) projects between fiscal year 1998 and fiscal
year 2007.
To increase the nation's long-term productivity and growth, the federal
government invests in various activities and sectors, including
infrastructure.[Footnote 6]While providing long-term benefits to the
nation as a whole, much of this spending does not result in federal
ownership of the infrastructure assets. For the most part, the federal
government supports infrastructure investments through federal
subsidies to other levels of government or the private sector. To
address concerns about the state of the nation's infrastructure,
Members of Congress have introduced several bills that are intended to
increase investment in the nation's infrastructure by, for example,
issuing bonds and providing tax credits for infrastructure investments.
(See table 2.)
Table 2: Examples of Proposed Legislation Related to Infrastructure
Investment:
Proposed title: National Infrastructure Bank Act (S. 1926 / H.R. 3401);
Description: Would establish an independent National Infrastructure
Bank to: (1) designate qualified transit, public housing, water,
highway, bridge, or road infrastructure projects for loans, loan
guarantees, and other financial assistance; and (2) issue general
purpose and project-based infrastructure bonds exempt from state and
local taxation.
Proposed title: Build America Bonds Act (S. 2021);
Description: Would provide $50 billion in new transportation
infrastructure funding through bonding to empower states and local
governments to complete significant infrastructure projects across all
modes of transportation, including roads, bridges, rail and transit
systems, ports, and inland waterways, and for other purposes.
Proposed title: American Infrastructure Investment and Improvement Act
(S. 2345);
Description: Would provide $3.4 billion to the Highway Trust Fund and
establish a rail infrastructure tax credit, among other things.
Proposed title: Our Nation's Trade, Infrastructure, Mobility, and
Efficiency Act (H.R. 5102);
Description: Would direct the Secretary of Transportation to establish
and collect a fee based on the fair market value of articles imported
into the United States and articles exported from the United States in
commerce and to use amounts collected from the fee to make grants to
carry out certain transportation projects in the transportation trade
corridors for which the fee is collected, and for other purposes.
Proposed title: Dam Rehabilitation and Repair Act of 2007 (H.R. 3224);
Description: Would provide $200 million over five years to repair state
and locally owned dams. The grants would be part of the National Dam
Safety Program, a federal-state partnership aimed at reducing the risk
to life and property from dam failure. The federal government's share
of repair costs would be limited to 65 percent. Dams that do not meet
state safety standards or that pose a risk to the public would be
eligible for funding under the program.
Proposed title: Freight Rail Infrastructure Capacity Expansion Act
(H.R. 2116 / S. 1125);
Description: Would provide incentives to encourage investment in the
expansion of freight rail infrastructure capacity and to enhance modal
tax equity. Specifically, the bill amends the Internal Revenue Code to
allow: (1) a tax credit for 25 percent of the cost of new qualified
freight rail infrastructure property and qualified locomotive property;
and (2) a taxpayer election to expense the cost of qualified freight
rail infrastructure property (i.e., deduct all costs in the current
taxable year).
Source: GAO analysis of legislation introduced in the 110TH Congress.
[End of table]
Congress previously established two commissions to study the condition
and future needs of the surface transportation system, including
financing options. It created the National Surface Transportation
Policy and Revenue Study Commission (Policy Commission) to examine the
condition and future needs of the nation's surface transportation
system and short-and long-term alternatives to replace or supplement
the fuel tax as the principal revenue source supporting the Highway
Trust Fund.In January 2008, the Policy Commission released its final
report. Congress also created the National Surface Transportation
Infrastructure Financing Commission and charged it with analyzing
future highway and transit needs and the finances of the Highway Trust
Fund and with recommending alternative approaches to financing
transportation infrastructure. This commission issued its interim
report in February 2008, and its final report is expected in November
2008.
The Nation Faces Significant Challenges Associated with Its
Infrastructure:
We have previously reported that the nation's surface transportation,
aviation, water, and dam systems face numerous challenges related to
their infrastructure. Increasing congestion has strained the capacity
of our nation's surface transportation and aviation systems, decreasing
their overall performance in meeting the nation's mobility needs.
Furthermore, significant investments are needed in our nation's
drinking and wastewater systems to address deteriorating infrastructure
and deferred maintenance. In light of these and other challenges, we
have called for a fundamental reexamination of government programs and
developed a set of principles that could help guide such a
reexamination.
Growing Congestion Challenges the Nation's Surface Transportation
System, While Federal Programs Face Funding Uncertainties:
Despite increases in transportation spending at all levels of
government and improvements to the physical condition of highways and
transit facilities over the past 10 years, congestion has worsened and
safety gains have leveled off. For example, according to DOT, highway
spending by all levels of government has increased 100 percent in real
dollar terms since 1980, but the hours of delay during peak travel
periods have increased almost 200 percent during the same period. In
addition, demand has outpaced the capacity of the system, and projected
population growth, technological changes, and increased globalization
are expected to further strain the system. We have previously reported
that federal surface transportation programs are not effectively
addressing these key challenges because federal goals and roles are
unclear, many programs lack links to needs or performance, and the
programs may not employ the best tools and approaches.[Footnote 7]In
addition, federal transportation funding is generally not linked to
specific performance-related goals or outcomes, resulting in limited
assurance that federal funding is being channeled to the nation's most
critical mobility needs. Federal funding is also often tied to a single
transportation mode, which may limit the use of federal funds to
finance the greatest improvements in mobility.
To address these surface transportation challenges, various
stakeholders have called for increasing significantly the level of
investment by all levels of government in surface transportation. For
example, in its January 2008 report, the Policy Commission recommended
that all levels of government and the private sector collectively
invest at least $225 billion each year to maintain and improve the
surface transportation system, which would be about $140 billion more
than is currently invested. However, without significant changes in
funding, planned spending, or both, the balance of the Highway Account
of the Highway Trust Fund--the major source of federal highway funds--
is projected to be exhausted at some point during fiscal year 2009. To
address this gap between revenues and spending, in its fiscal year 2009
budget request, the administration proposed granting the Secretary of
the Treasury, in consultation with the Secretary of Transportation, the
flexibility to transfer funds between the Highway and Transit Accounts
of the Highway Trust Fund. However, this solution, if enacted, would
provide only a short-term reprieve--both the administration and the
Congressional Budget Office project that the balances of the Highway
and Transit Accounts would be exhausted by the end of fiscal year 2010.
Increasing Demand Strains the Aviation System and Traditional Funding
Approaches:
The Federal Aviation Administration (FAA) faces significant challenges
in keeping the nation's current airspace system running as efficiently
as possible as the demand for air travel increases and the air traffic
control system ages. System congestion, and the resulting flight delays
and cancellations, are serious problems that have worsened in recent
years. For example, according to DOT, 2007 was the second-worst year
for delays since 1995. To accommodate current and expected demand for
air travel, FAA and aviation stakeholders are developing the Next
Generation Air Transportation System (NextGen) to modernize the
nation's air traffic control infrastructure and increase capacity. This
effort is complex and costly. Although there is considerable
uncertainty about how much NextGen will cost, FAA estimates that
NextGen infrastructure will cost the federal government between $15
billion and $22 billion through 2025. Other key challenges for FAA
include managing a timely acquisition and implementation of NextGen and
dealing effectively with the environmental concerns of communities that
are adjacent to airports or under the flight paths of arriving and
departing aircraft. For example, as we have previously testified, if
not adequately addressed, these concerns, particularly about the noise
that affects local communities and the emissions that contribute to
global warming, may constrain efforts to build or expand the runways
and airports needed to handle the added capacity envisioned for
NextGen.[Footnote 8] In addition, airports face similar funding
challenges in attempting to expand their capacity. For example, planned
airport development costs total at least $14 billion annually (in 2006
dollars) through 2011--exceeding historical funding levels by about $1
billion per year.
We have previously testified that FAA's current funding mechanisms--the
Airport and Airway Trust Fund (Trust Fund) and the U.S. Treasury's
general fund--can potentially provide sufficient resources to support
FAA activities, including NextGen.[Footnote 9]However, there are a
number of uncertainties--including the future cost of NextGen
investment, the volume of air traffic, the future costs of operating
the National Airspace System, and the levels of future appropriations
for the Airport Improvement Program--that may influence the funding
necessary to support FAA's activities. In addition, uncertainties
surrounding the status of FAA's reauthorization could have adverse
effects on FAA's ability to carry out its mission unless other revenue
sources and spending authority are provided. Without legislative
action, both the excise taxes that fund the Trust Fund and FAA's
authority to spend from the Trust Fund will expire on June 30, 2008.
Failing to meet these infrastructure challenges in aviation may have
significant economic consequences, since aviation is an integral part
of the economy.
Aging and Deteriorating Water Infrastructure Presents Challenges:
Water utilities nationwide are under increasing pressure to make
significant investments to upgrade aging and deteriorating
infrastructures, improve security, serve a growing population, and meet
new regulatory requirements.[Footnote 10]Water infrastructure needs
across the country are estimated to range from $485 billion to nearly
$1.2 trillion over the next 20 years. According to the Environmental
Protection Agency's (EPA) June 2005 Drinking Water Infrastructure Needs
Survey, the largest category of need is the installation and
maintenance of transmission and distribution systems--accounting for
$183.6 billion, or about 66 percent of the needs projected through
2022. For wastewater systems, EPA's 2004 Clean Watersheds Needs Survey
projected infrastructure-related needs for publicly owned wastewater
systems of $202.5 billion through 2024.[Footnote 11] Many drinking
water and wastewater utilities have had difficulty raising funds to
repair, replace, or upgrade aging capital assets; comply with
regulatory requirements; and expand capacity to meet increased demand.
For example, based on a nationwide survey of several thousand drinking
water and wastewater utilities, we reported in 2002 that about one-
third of the utilities (1) deferred maintenance because of insufficient
funds, (2) had 20 percent or more of their pipelines nearing the end of
their useful life, and (3) lacked basic plans for managing their
capital assets.[Footnote 12] Other GAO work suggests that the nation's
water utilities could more effectively manage their infrastructure at a
time when significant investments are needed.[Footnote 13]
Several factors have contributed to the nation's deteriorating water
infrastructure over the years. The adequacy of available funds, in
particular, has been a key determinant of how well utility
infrastructure has been maintained. However, according to our
nationwide survey, a significant percentage of the utilities serving
populations of 10,000 or more--29 percent of the drinking water
utilities and 41 percent of the wastewater utilities--were not
generating enough revenue from user charges and other local sources to
cover their full costs of service. In addition, when asked about the
frequency of rate increases during the period from 1992 to 2001, more
than half the utilities reported raising their rates infrequently:
once, twice, or not at all over the 10-year period. Citing communities'
funding difficulties, many have looked to the federal government for
financial assistance. However, if budgetary trends over the past few
years serve as any indication, federal funding will not close the gap.
For example, the trends and overall funding levels associated with the
Clean Water and Drinking Water State Revolving Funds, the key federal
programs supporting water infrastructure financing, suggest that they
will have only a marginal impact in closing the long-term water
infrastructure funding gap. We have previously reported that
comprehensive asset management, a technique whereby water systems
systematically identify their needs, set priorities, and better target
their investments, can help utilities make better us of available
funds. Additional funds, however, will ultimately be needed to narrow
the funding gap.
Aging Dam Infrastructure Raises Safety and Funding Challenges:
Our nation's dam infrastructure is an important component of the
nation's water control infrastructure, supplying such benefits as water
for drinking, irrigation, and industrial uses; flood control;
hydroelectric power; recreation; and navigation.[Footnote 14] However,
as evidenced by the events of Hurricanes Katrina and Rita, the failure
of dam infrastructure, which includes levees, also represents a risk to
public safety, local and regional economies, and the environment. In
particular, the aging of dam infrastructure in the United States
continues to be a critical issue for dam safety because the age of dams
is a leading indicator of potential dam failure.[Footnote 15]According
to the American Society of Civil Engineers, the number of unsafe dams
has risen by more than 33 percent since 1998, to more than 3,500 in
2005.[Footnote 16] In addition, the number of dams identified as unsafe
is increasing faster than the number of dams that are being repaired.
To address the challenges facing our nation's dams, the Federal
Emergency Management Agency and the National Dam Safety Review Board
identified both short-and long-term goals and priorities for the
National Dam Safety Program[Footnote 17] over the next 5 to 10 years.
They include identifying and remedying deficient dams, increasing dam
inspections, increasing the number of and updating of Emergency Action
Plans, achieving the participation of all states in the National Dam
Safety Program, increasing research products disseminated to the dam
safety community, and achieving cost efficiencies. However, according
to the Congressional Research Service, most federal agencies do not
have funding available to immediately undertake all nonurgent repairs,
and at some agencies, dam rehabilitation projects must compete for
funding with other construction projects.[Footnote 18] The Association
of State Dam Safety Officials reported similar funding constraints on
dam investment at the state level.
GAO Principles Could Guide Efforts to Reexamine Federal Programs in
Light of Challenges:
Given the nation's infrastructure challenges and the federal
government's fiscal outlook, we have called for a fundamental
reexamination of government programs. Addressing these challenges
requires strategic approaches, effective tools and programs, and
coordinated solutions involving all levels of government and the
private sector.[Footnote 19] Yet in many cases, the government is still
trying to do business in ways that are based on conditions, priorities,
and approaches that were established decades ago and are not well
suited to addressing 21st century challenges. A reexamination offers an
opportunity to address emerging concerns by eliminating outdated or
ineffective programs, more sharply defining the federal role in
relation to state and local roles, and modernizing those programs and
policies that remain relevant. Through our prior analyses of existing
programs, we identified a number of principles that could help drive an
assessment for restructuring and financing the federal surface
transportation program. While these principles are designed
specifically to reexamine the surface transportation programs, most, if
not all of these principles could be informative as policymakers
consider how to address challenges facing other federal infrastructure
programs. These principles include:
* creating well-defined goals based on identified areas of national
interest, which involves examining the relevance and relative priority
of existing programs in light of 21st century challenges and
identifying emerging areas of national importance;
* establishing and clearly defining the federal role in achieving each
goal in relation to the roles of state and local governments, regional
entities, and the private sector;
* incorporating performance and accountability into funding decisions
to ensure resources are targeted to programs that best achieve intended
outcomes and national priorities;
* employing the best tools, such as benefit-cost analysis, and
approaches to emphasize return on investment at a time of constrained
federal resources; and:
* ensuring fiscal sustainability through targeted investments of
federal, state, local, and private resources.
Various Options Are Available or Have Been Proposed to Fund Investments
in the Nation's Infrastructure:
Various options exist or have been proposed to fund investments in the
nation's infrastructure. These options include altering existing or
introducing new funding approaches and employing various financing
mechanisms. In addition, some have suggested including an
infrastructure component in a future economic stimulus bill, which
could provide a one-time infusion of funds for infrastructure. Each of
these options has different merits and challenges, and the selection of
any of them will likely involve trade-offs among different policy
goals. Furthermore, the suitability of any of these options depends on
the level of federal involvement or control that policymakers desire
for a given area of policy. However, as we have reported, when
infrastructure investment decisions are made based on sound
evaluations, these options can lead to an appropriate blend of public
and private funds to match public and private costs and
benefits.[Footnote 20] To help policymakers make explicit decisions
about how much overall federal spending should be devoted to
infrastructure investment, we have previously proposed establishing an
investment component within the unified budget.
Funding Approaches Can Be Altered or Developed to Help Fund
Infrastructure Investments:
Various existing funding approaches could be altered or new funding
approaches could be developed to help fund investments in the nation's
infrastructure. These various approaches can be grouped into two
categories: taxes and user fees.
A variety of taxes have been and could be used to fund the nation's
infrastructure, including excise, sales, property, and income taxes.
For example, federal excise taxes on motor fuels are the primary source
of funding for the federal surface transportation program. Fuel taxes
are attractive because they have provided a relatively stable stream of
revenues and their collection and enforcement costs are relatively low.
However, fuel taxes do not currently convey to drivers the full costs
of their use of the road--such as the costs of wear and tear,
congestion, and pollution. Moreover, federal motor fuel taxes have not
been increased since 1993--and thus the purchasing power of fuel taxes
revenues has eroded with inflation. As Congressional Budget Office
(CBO) has previously reported, the existing fuel taxes could be altered
in a variety of ways to address this erosion, including increasing the
per-gallon tax rate and indexing the rates to inflation.[Footnote 21]
Some transportation stakeholders have suggested exploring the potential
of using a carbon tax, or other carbon pricing strategies, to help fund
infrastructure.[Footnote 22] In a system of carbon taxes, fossil fuel
emissions would be taxed, with the tax proportional to the amount of
carbon dioxide released in the fuel's combustion. Because a carbon tax
could have a broad effect on consumer decisions, we have previously
reported that it could be used to complement Corporate Average Fuel
Economy standards, which require manufacturers meet fuel economy
standards for passenger cars and light trucks to reduce oil
consumption.[Footnote 23] A carbon tax would create incentives that
could affect a broader range of consumer choices as well as provide
revenue for infrastructure.
Another funding source for infrastructure is user fees. The concept
underlying user fees--that is, users pay directly for the
infrastructure they use--is a long-standing aspect of many
infrastructure programs. Examples of user fees that could be altered or
introduced include airport passenger facility charges; fees for use of
air traffic control services; fees based on vehicle miles traveled
(VMT) on roadways; freight fees, such as a per-container charge;
highway tolls; and congestion pricing of roads and aviation
infrastructure.
* Aviation user fees. Many commercial airports currently impose a user
fee on passengers--referred to as a passenger facility charge--to fund
airport capital projects.[Footnote 24] Over $2 billion in passenger
facility charge revenues are collected by airports each year,
representing an important source of funding for airport capital
projects. In contrast, FAA's activities, including the transition to
NextGen, are largely funded by excise taxes through the Airport and
Airway Trust Fund. To better connect FAA's revenues with the cost of
air traffic control services that FAA provides, the administration has
proposed, in its FAA reauthorization bill, to replace this excise tax
funding system with a cost-based user fee system. This new system would
aim to recover the costs of providing air traffic control services
through user fees for commercial operators and aviation fuel taxes for
general aviation. According to the administration, cost-based user
charges would link revenues more closely to costs and could create
incentives for more efficient use of the system by aircraft operators.
We have previously testified that a better alignment of FAA's revenues
and costs can address concerns about long-term revenue adequacy,
equity, and efficiency as intended, but the ability of the proposed
funding structure to link revenues and costs depends critically on the
soundness of FAA's cost allocation system in allocating costs to users.
We found that the support for some of FAA's cost allocation
methodology's underlying assumptions and methods is insufficient,
leaving FAA unable to conclusively demonstrate the reasonableness of
the resulting cost assignments.[Footnote 25]
* VMT fees. To more directly reflect the amount a vehicle uses
particular roads, users could be charged a fee based on the number of
vehicle miles traveled. In 2006, the Oregon Department of
Transportation conducted a pilot program designed to test the
technological and administrative feasibility of a VMT fee. The pilot
program evaluated whether a VMT fee could be implemented to replace
motor fuel taxes as the principal source of transportation revenue by
utilizing a Global Positioning System (GPS) to track miles driven and
collecting the VMT fee ($0.012 per mile traveled) at fuel pumps that
can read information from the GPS.[Footnote 26] As we have previously
reported, using a GPS could also be used to track mileage in high-
congestion zones, and the fee could be adjusted upward for miles driven
in these areas or during more congested times of day such as rush hour-
-a strategy that might reduce congestion and save fuel.[Footnote 27]In
addition, the system could be designed to apply different fees to
vehicles, depending on their fuel economy. On the federal level, a VMT
fee could be based on odometer readings, which would likely be a
simpler and less costly way to implement such a program. A VMT fee--
unless it is adjusted based on the fuel economy of the vehicle--does
not provide incentives for customers to buy vehicles with higher fuel
economy ratings because the fee depends only on mileage. Also, because
the fee would likely be collected from individual drivers, a VMT fee
could be expensive for the government to implement, potentially making
it a less cost-effective approach than a motor fuel or carbon tax. The
Oregon study also identified other challenges including concerns about
privacy and technical difficulties in retrofitting vehicles with the
necessary technology.
* Freight fees. Given the importance of freight movement to the
economy, the Policy Commission recently recommended a new federal
freight fee to support the development of a national program aimed at
strategically expanding capacity for freight transportation.[Footnote
28] While the volume of domestic and international freight moving
through the country has increased dramatically and is expected to
continue growing, the capacity of the nation's freight transportation
infrastructure has not increased at the same rate as demand.[Footnote
29] To support the development of a national program for freight
transportation, the Policy Commission recently recommended the
introduction of a federal freight fee. The Policy Commission notes that
a freight fee, such as a per-container charge, could help fund projects
that remedy chokepoints and increase throughput. The Policy Commission
also recommended that a portion of the customs duties, which are
assessed on imported goods, be used to fund capacity improvements for
freight transportation. The majority of customs duties currently
collected, however, are deposited in the U.S. Treasury's general fund
for the general support of federal activities.[Footnote 30]Therefore,
designating a portion of customs duties for surface transportation
financing would not create a new source of revenue, but rather transfer
funds from the general fund.
* Tolling. We have previously reported that roadway tolling has the
potential to provide new revenues, promote more effective and rational
investment strategies, and better target spending for new and expanded
capacity for surface transportation infrastructure.[Footnote 31] For
example, the construction of toll projects is typically financed by
bonds; therefore, projects must pass the test of market viability and
meet goals demanded by investors, although even with this test, there
is no guarantee that projects will always be viable. Tolling
potentially can also leverage existing revenue sources by increasing
private-sector participation and investment through such arrangements
as public-private partnerships. However, securing public and political
support for tolling can prove difficult when the public and political
leaders perceive tolling (1) as a form of double taxation, (2)
unreasonable because tolls do not usually cover the full costs of
projects, or (3) unfair to certain groups. Other challenges include
obtaining sufficient statutory authority to toll, adequately addressing
the traffic diversion that might result when motorists seek to avoid
toll facilities, limitations on the types of roads that can be tolled,
and coordinating with other states or jurisdictions on a tolling
project.
* Congestion pricing. As we have previously reported, congestion
pricing, or road pricing, attempts to influence driver behavior by
charging fees during peak hours to encourage users to shift to off-peak
periods, use less congested routes, or use alternative modes.
Congestion pricing can also help guide capital investment decisions for
new transportation infrastructure. In particular, as congestion
increases, tolls also increase, and such increases (sometimes referred
to as "congestion surcharges") signal increased demand for physical
capacity, indicating where capital investments to increase capacity
would be most valuable. Furthermore, these congestion surcharges can
potentially enhance mobility by reducing congestion and the demand for
roads when the surcharges vary according to congestion to maintain a
predetermined level of service. The most common form of congestion
pricing in the United States is high-occupancy-toll lanes, which are
priced lanes that offer drivers of vehicles that do not meet the
occupancy requirements the option of paying a toll to use lanes that
are otherwise restricted for high-occupancy vehicles. In its FAA
reauthorization proposal, the administration proposed extending
congestion pricing to the aviation sector as a means of managing air
traffic congestion. Specifically, the administration proposed that FAA
establish a fee based on time of day or day of the week for aircraft
using the nation's most congested airports to discourage peak-period
traffic. Under such a fee, cargo carriers could pay lower fees by
operating at night than they would pay by operating at peak periods of
the day, creating an incentive for some cargo carriers to switch
daytime operations to nighttime. Like tolling, congestion pricing
proposals often arouse political and public opposition, raise equity
concerns, and face statutory restrictions.
Various Financing Mechanisms Can Also Help Fund Infrastructure
Projects:
Financing strategies can provide flexibility for all levels of
government when funding additional infrastructure projects,
particularly when traditional pay-as-you-go funding approaches, such as
taxes or fees, are not set at high enough levels to meet demands. The
federal government currently offers several programs to provide state
and local governments with incentives such as bonds, loans, and credit
assistance to help finance infrastructure. Financing mechanisms can
create potential savings by accelerating projects to offset rapidly
increasing construction costs and offer incentives for investment from
state and local governments and from the private sector. However, each
financing strategy is, in the final analysis, a form of debt that
ultimately must be repaid with interest. Furthermore, since the federal
government's cost of capital is lower than that of the private sector,
financing mechanisms, such as bonding, may be more expensive than
timely, full, and up-front appropriations. Finally, if the federal
government chooses to finance infrastructure projects, policy makers
must decide how borrowed dollars will be repaid, either by users or by
the general population either now or in the future through increases in
general fund taxes or reductions in other government services.
A number of available mechanisms can be used to help finance
infrastructure projects. Examples of these financing mechanisms follow:
Bonding. A number of bonding strategies--including tax-exempt
bonds,[Footnote 32] Grant Anticipation Revenue Vehicles (GARVEE) bonds,
and Grant Anticipation Notes (GAN)--offer flexibility to bridge funding
gaps when traditional revenue sources are scarce. For example, state-
issued GARVEE bonds or GANs provide capital in advance of expected
federal funds, allowing states to accelerate highway and transit
project construction and thus potentially reduce construction costs.
Through April 2008, 20 states and two territories issued approximately
$8.2 billion of GARVEE-type debt financing and 20 other states are
actively considering bonding or seeking legislative authority to issue
GARVEEs. Further, SAFETEA-LU authorized the Secretary of Transportation
to allocate $15 billion in private activity bonds for qualified highway
and surface freight transfer facilities. To date, $5.3 billion has been
allocated for six projects. In aviation, most commercial airports issue
a variety of bonds for airport capital improvements, most notably
general revenue bonds that are backed by general revenues from the
airport--including aircraft landing fees, concessions, and parking
fees--and passenger facility charges. Several bills introduced in this
Congress would increase investment in the nation's infrastructure
through bonding. For example, the Build America Bonds Act would provide
$50 billion in new infrastructure funding through bonding. Although
bonds can provide up-front capital for infrastructure projects, they
can be more expensive for the federal government than traditional
federal grants. This higher expense results, in part, because the
government must compensate the investors for risks they assumed through
an adequate return on their investment.
* Loans, loan guarantees, and credit assistance. The federal government
currently has two programs designed to offer credit assistance to
states for surface transportation projects. The Transportation
Infrastructure Finance and Innovation Act of 1998 (TIFIA) authorized
FHWA to provide credit assistance, in the form of direct loans, loan
guarantees, and standby lines of credit for projects of national
significance. A similar program, Railroad Rehabilitation and
Improvement Financing (RRIF) offers loans to acquire, improve, develop,
or rehabilitate intermodal or rail equipment or facilities. To date, 15
TIFIA projects have been approved for a total of about $4.8 billion in
credit assistance and the RRIF program has approved 21 loan agreements
worth more than $747 million. These programs are designed to leverage
federal funds by attracting substantial nonfederal investments in
infrastructure projects. However, the federal government assumes a
level of risk when it makes or guarantees loans for projects financed
with private investment.[Footnote 33]
* Revolving funds. Revolving funds can be used to dedicate capital to
be loaned for qualified infrastructure projects. In general, loaned
dollars are repaid, recycled back into the revolving fund, and
subsequently reinvested in the infrastructure through additional loans.
Such funds exist at both the federal and the state levels and are used
to finance various infrastructure projects ranging from highways to
water mains. For example, two federal funds support water
infrastructure financing, the Clean Water State Revolving Fund (CWSRF)
for wastewater facilities, and the Drinking Water State Revolving Fund
(DWSRF) for drinking water facilities. Under each of these programs,
the federal government provides seed money to states, which they
supplement with their own funds. These funds are then loaned to local
governments and other entities for water infrastructure construction
and upgrades and various water quality projects. In addition, State
Infrastructure Banks (SIB)--capitalized with federal and state matching
funds--are state-run revolving funds, make loans and provide credit
enhancements and other forms of nongrant assistance to infrastructure
projects. Through June 2007, 33 SIBs have made approximately 596 loan
agreements worth about $6.2 billion to leverage other available funds
for transportation projects across the nation.[Footnote 34]
Furthermore, other funds--such as a dedicated national infrastructure
bank--have been proposed to increase investment in infrastructure with
a national or regional significance. A challenge for revolving funds in
general is maintaining their capitalized value. Defaults on loans and
inflation can reduce the capitalized value of the fund--necessitating
an infusion of capital to continue the fund's operations.
Designing an Economic Stimulus Package to Increase Infrastructure
Investment Would Be Difficult:
Another option proposed for temporarily increasing investment in the
nation's infrastructure is including an investment component in a
future economic stimulus bill. According to supporters, including
funding for "ready to build" infrastructure projects in a stimulus bill
would serve to both boost the economy and improve the nation's
infrastructure through a one-time infusion of funds. For example, the
American Association of State Highway and Transportation Officials
estimates 42,000 jobs are created for every $1 billion dollars invested
in transportation projects.
We have previously identified important design criteria for any
economic stimulus package.[Footnote 35] Specifically:
* Economic stimulus package should be timely. An economic stimulus
should not be enacted prematurely, delayed too long, or consist of
programs that would take too long to be implemented to lessen any
economic downturn. For example, if fiscal stimulus is undertaken when
it is not needed, it could result in higher inflation or if fiscal
stimulus is enacted too slowly, it could take effect after the economy
has already started to recover.
* Economic stimulus package should be temporary. An economic stimulus
should be designed to raise output in the short run, but should not
increase the budget deficit in the long-run. If a stimulus program is
not temporary and continues after the economy recovers, it could lead
to higher inflation.
* Economic stimulus package should be targeted. An economic stimulus
should be targeted to areas that are most vulnerable in a weakening
economy and should generate the largest possible increase in short-run
gross domestic product.
Designing and implementing an economic stimulus package with an
infrastructure investment component that is timely, temporary, and
targeted would be difficult. First, while an effective stimulus package
should be timely, practically speaking, infrastructure projects require
lengthy planning and design periods. According to CBO, even those
projects that are "on the shelf" generally cannot be undertaken quickly
enough to provide a timely stimulus to the economy.[Footnote 36]Second,
spending on infrastructure is generally not temporary because of the
extended time frames needed to complete projects. For example, initial
outlays for major infrastructure projects supported by the federal
government, such as highway construction, often total less than 25
percent of the total funding provided for the project. Furthermore, the
initial rate of spending can be significantly lower than 25 percent for
large projects.[Footnote 37] Third, because of differences among
states, it is challenging to target stimulus funding to areas with the
greatest economic and infrastructure needs. For example, two possible
indicators for targeting infrastructure aid to states, gross state
product and lane miles per capita, are not correlated. Furthermore, as
we have previously reported, states tend to substitute federal funds
for funds they would have otherwise spent--making it difficult to
target a stimulus package so that it results in a dollar-for-dollar
increase in infrastructure investment.[Footnote 38]
Investment Component within Unified Budget Could Guide Federal
Investment in Infrastructure:
We have previously reported that the budget process can favor
consumption over investment because the initial cost of an
infrastructure project looks high in comparison to consumption
spending.[Footnote 39]Thus, adopting a capital budget is suggested as a
way to eliminate a perceived bias against investments requiring large
up-front spending when they compete with other programs in a unified
budget. However, proposals to adopt a capital budget at the federal
level often start with certain concepts and models extended from state
and local governments and the private sector, which are not appropriate
because of fundamental differences in the role of the federal
government. Specifically, when state and local governments and the
private sector make investments, they typically own the resulting
assets, while this is frequently not the case for the federal
government. For example, although the federal government invests in
surface transportation, aviation, water, and dam infrastructure, a
significant portion of this infrastructure is owned by state and local
governments. This makes it difficult to fully apply traditional capital
budgeting approaches, such as depreciation, which might be considered
when assets are fully owned. Moreover, there are fundamental
differences between the roles of the state and local governments and
the federal government. In an inclusive, unified budget, it is
important to disclose up front the full commitments of the government.
Federal fiscal policy, as broadly conceived, plays a key role in
managing the short-term economy as well as promoting the savings needed
for long-term growth.
Rather than recommend adopting a capital budget, we have previously
proposed establishing an investment component within the unified budget
to address federal spending intended to promote the nation's long-term
economic growth.[Footnote 40]By recognizing the different effects of
various types of federal spending, an investment focus within the
budget would provide a valuable supplement to the unified budget's
concentration on macroeconomic issues. Moreover, it would direct
attention to the consequences of choices within the budget under
existing budget limitations--a level which is now not determined
explicitly by policymakers but is simply the result of numerous
individual decisions. If an investment component within the unified
budget was adopted, Congress could decide on an overall level of
investment in a budget resolution or other macro framework, which would
be tracked and enforced through the authorizing and appropriations
process to ensure that individual appropriations actions supported the
overall level. This approach has the advantage of focusing budget
decision makers on the overall level of investment supported in the
budget without losing sight of the unified budget's effect on the
economy. It also has the advantage of building on the current
congressional budget process. Finally, it does not raise the problems
posed by capital budgeting proposals that use depreciation and deficit
financing.[Footnote 41]
Although the investment component would be subject to budget controls,
the existence of a separate component could create an incentive to
categorize many proposals as investment. If an investment component
within the budget is to be implemented in a meaningful fashion, it will
be important to identify what to include. Any changes in the budgetary
treatment of investment need to consider broader federal
responsibilities. While well-chosen investments may contribute to long-
term growth, financing such programs through deficits would undermine
their own goal by reducing savings available to fund private
investment.[Footnote 42]Accordingly, reforms in the federal
government's budget for investment should be considered within the
overall constraints of fiscal policy based on unified budget
principles.
Concluding Observations:
The nation's physical infrastructure is under strain, raising a host of
safety, security, and economic concerns. Given these concerns, various
investment options have been, and likely will continue to be,
identified to help repair, upgrade, and expand our nation's
infrastructure. Ultimately, Congress and other federal policymakers
will have to determine which option--or, more likely, which combination
of funding and financing options--best meets the needs of the nation.
There is no silver bullet. Moreover, although financing mechanisms
allow state and local governments to advance projects when traditional
pay-as-you-go funding approaches, such as taxes and fees, are
insufficient, ultimately these borrowed dollars must be repaid by the
users or the general population. Consequently, prudent decisions are
needed to determine the appropriate level of infrastructure investment
and to maximize each dollar invested. We will continue to assist the
Congress as it works to evaluate various investment options and develop
infrastructure policies for the 21st century.
Messrs. Chairmen, this concludes my prepared statement. I would be
pleased to respond to any questions that you or other Members of the
Committee might have.
GAO Contact and Staff Acknowledgments:
For further information on this statement, please contact Patricia
Dalton at (202) 512-2834 or [email protected]. Individuals making key
contributions to this testimony were Kyle Browning, Nikki Clowers,
Steve Elstein, JayEtta Hecker, Carol Henn, Bert Japikse, Barbara
Lancaster, Matthew LaTour, Nancy Lueke, and Katherine Siggerud.
[End of section]
Related GAO Products:
Drinking Water: The District of Columbia and Communities Nationwide
Face Serious Challenges in Their Efforts to Safeguard Water Supplies.
GAO-08-687T. Washington, D.C.: April 15, 2008.
Surface Transportation: Restructured Federal Approach Needed for More
Focused, Performance-Based, and Sustainable Programs. GAO-08-400.
Washington, D.C.: March 6, 2008.
Highway Public-Private Partnerships: More Rigorous Up-front Analysis
Could Better Secure Potential Benefits and Protect the Public Interest.
GAO-08-44. Washington, D.C.: February 8, 2008.
Federal Aviation Administration: Challenges Facing the Agency in Fiscal
Year 2009 and Beyond. GAO-08-460T. Washington, D.C.: February 7, 2008.
Surface Transportation: Preliminary Observations on Efforts to
Restructure Current Program. GAO-08-478T. Washington, D.C.: February 6,
2008.
Long-Term Fiscal Outlook: Action Is Needed to Avoid the Possibility of
a Serious Economic Disruption in the Future. GAO-08-411T. Washington,
D.C.: January 29, 2008.
Freight Transportation: National Policy and Strategies Can Help Improve
Freight Mobility. GAO-08-287. Washington, D.C.: January 7, 2008.
A Call For Stewardship: Enhancing the Federal Government's Ability to
Address Key Fiscal and Other 21st Century Challenges. GAO-08-93SP.
Washington, D.C.: December 17, 2007.
Transforming Transportation Policy for the 21ST Century: Highlights of
a Forum. GAO-07-1210SP. Washington, D.C.: September 19, 2007.
Railroad Bridges and Tunnels: Federal Role in Providing Safety
Oversight and Freight Infrastructure Investment Could Be Better
Targeted. GAO-07-770. Washington, D.C.: August 6, 2007.
Vehicle Fuel Economy: Reforming Fuel Economy Standards Could Help
Reduce Oil Consumption by Cars and Light Trucks, and Other Options
Could Complement These Standards. GAO-07-921. Washington, D.C.: August
2, 2007.
Public Transportation: Future Demand Is Likely for New Starts and Small
Starts Programs, but Improvements Needed to the Small Starts
Application Process. GAO-07-917. Washington, D.C.: July 27, 2007.
Surface Transportation: Strategies Are Available for Making Existing
Road Infrastructure Perform Better. GAO-07-920. Washington, D.C.: July
26, 2007.
Highway and Transit Investments: Flexible Funding Supports State and
Local Transportation Priorities and Multimodal Planning. GAO-07-772.
Washington, D.C.: July 26, 2007.
Intermodal Transportation: DOT Could Take Further Actions to Address
Intermodal Barriers. GAO-07-718. Washington, D.C.: June 20, 2007.
Federal Aviation Administration: Observations on Selected Changes to
FAA's Funding and Budget Structure in the Administration's
Reauthorization Proposal. GAO-07-625T. Washington, D.C.: March 21,
2007.
Performance and Accountability: Transportation Challenges Facing
Congress and the Department of Transportation. GAO-07-545T. Washington,
D.C.: March 6, 2007.
U.S. Infrastructure: Funding Trends and Opportunities to Improve
Investment Decisions. GAO/RCED/AIMD-00-35. Washington, D.C.: February
7, 2007.
High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January
2007.
Fiscal Stewardship: A Critical Challenge Facing Our Nation, GAO-07-
362SP. Washington, D.C.: January 2007.
Intercity Passenger Rail: National Policy and Strategies Needed to
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Freight Railroads: Industry Health Has Improved, but Concerns about
Competition and Capacity Should Be Addressed. GAO-07-94. Washington,
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Aviation Finance: Observations on Potential FAA Funding Options. GAO-
06-973. Washington, D.C.: September 29, 2006.
National Airspace System Modernization: Observations on Potential
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Highway Trust Fund: Overview of Highway Trust Fund Estimates. GAO-06-
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04-744. Washington, D.C.: June 30, 2004.
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Major Projects Has Been Limited. GAO-04-419. Washington, D.C.: March
25, 2004.
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Help Utilities Better Identify Needs and Plan Future Investments. GAO-
04-461. Washington, D.C.: March 19, 2004.
Freight Transportation: Strategies Needed to Address Planning and
Financing Limitations. GAO-04-165. Washington, D.C.: December 19, 2003.
Marine Transportation: Federal Financing and a Framework for
Infrastructure Investments. GAO-02-1033. Washington, D.C.: September 9,
2002.
Water Infrastructure: Information on Financing, Capital Planning, and
Privatization. GAO-02-764. Washington, D.C.: August 16, 2002.
Budget Trends: Federal Investment Outlays, Fiscal Years 1981-2003. GAO/
AIMD-98-184. Washington, D.C.: June 15, 1998.
Budget Trends: Federal Investment Outlays, Fiscal Years 1981-2002, GAO/
AIMD-97-88. Washington, D.C.: May 21, 1997.
Budget Structure: Providing an Investment Focus in the Federal Budget.
GAO/T-AIMD-95-178. Washington, D.C.: June 29, 1995.
Budget Issues: Incorporating an Investment Component in the Federal
Budget. GAO/AIMD-94-40. Washington, D.C.: November 9, 1993.
[End of section]
Footnotes:
[1] The Highway Trust Fund is the mechanism used to account for federal
highway user taxes (e.g., federal excise taxes on fuel) that are
dedicated for highway-and transit-related purposes. The Highway Trust
Fund has two accounts: the Highway Account and the Mass Transit
Account.
[2] GAO, Long-Term Fiscal Outlook: Action Is Needed to Avoid the
Possibility of a Serious Economic Disruption in the Future, GAO-08-411T
(Washington, D.C.: Jan. 29, 2008) and Fiscal Stewardship: A Critical
Challenge Facing Our Nation, GAO-07-362SP (Washington, D.C.: January
2007).
[3] GAO, State and Local Governments: Persistent Fiscal Challenges Will
Likely Emerge within the Next Decade, GAO-07-1080SP (Washington, D.C.:
July 18, 2007).
[4] See Related GAO Products at the end of this testimony statement. We
conducted these performance audits in accordance with generally
accepted government auditing standards.
[5] About 3,400 of these airports are in the national airport system.
[6] In addition to federal spending designed to increase economic
activity, some federal spending on infrastructure is motivated by
noneconomic policy goals, such as improved safety.
[7] GAO, Surface Transportation: Restructured Federal Approach Needed
for More Focused, Performance-Based, and Sustainable Programs, GAO-08-
400 (Washington, D.C.: Mar. 6, 2008).
[8] GAO, Federal Aviation Administration: Challenges Facing the Agency
in Fiscal Year 2009 and Beyond, GAO-08-460T (Washington, D.C.: Feb. 7,
2008).
[9] GAO-08-460T.
[10] In October 2007, EPA made several changes to the monitoring and
public notice provisions in the Lead and Copper Rule under the Safe
Drinking Water Act, the principal federal regulation protecting public
water system consumers from exposure to lead and copper in drinking
water.
[11] U.S. Environmental Protection Agency, Clean Watersheds Needs
Survey 2004 Report to Congress, (Washington, D.C.: January 2008).
[12] GAO, Water Infrastructure: Information on Financing, Capital
Planning, and Privatization, GAO-02-764 (Washington, D.C.: Aug. 16,
2002).
[13] GAO, Water Infrastructure: Comprehensive Asset Management Has
Potential to Help Utilities Better Identify Needs and Plan Future
Investments, GAO-04-461 (Washington, D.C.: Mar. 19, 2004).
[14] The term "dam" includes conventional dams, navigation locks,
levees, canals (excluding channels), or other similar types of water
retention structures.
[15] A number of factors, including age, construction deficiencies,
inadequate maintenance, and seismic or weather events contribute to the
likelihood of dam failure.
[16] American Society of Civil Engineers, 2005 Report Card for
America's Infrastructure, March 2005.
[17] The National Dam Safety Program, which is administered by FEMA, is
a partnership of the states, federal agencies, and other stakeholders
to encourage individual and community responsibility for dam safety.
[18] Congressional Research Service, CRS Report for Congress, Aging
Infrastructure: Dam Safety, updated March 25, 2008.
[19] GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: Feb. 2005).
[20] GAO, Freight Transportation: Strategies Needed to Address Planning
and Financing Limitations, GAO-04-165 (Washington D.C.: Dec. 19, 2003).
[21] CBO, Status of the Highway Trust Fund: 2007, March 27, 2007.
[22] Another carbon pricing strategy is a cap-and-trade program, which
combines a regulatory limit or cap on the amount of carbon that can be
emitted into the atmosphere with market elements such as the
opportunity to buy additional allowances to emit additional carbon.
Auctioning the allowances of a cap-and-trade program would generate
revenue for the government, which could be used for a variety of
purposes, including infrastructure investments.
[23] GAO, Vehicle Fuel Economy: Reforming Fuel Economy Standards Could
Help Reduce Oil Consumption by Cars and Light Trucks, and Other Options
Could Complement These Standards, GAO-07-921 (Washington, D.C.: Aug. 2,
2007).
[24] The majority of commercial airports charge a passenger facility
charge of between $1 and $4.50 per enplaned passenger.
[25] GAO-08-460T.
[26] Oregon's Mileage Fee Concept and Road User Fee Pilot Program:
Final Report.
[27] GAO-07-921.
[28] Transportation for Tomorrow: Report of the National Surface
Transportation Policy and Revenue Study Commission, January 2008.
[29] GAO, Freight Transportation: National Policy and Strategies Can
Help Improve Freight Mobility, GAO-08-287 (Washington, D.C.: Jan. 7,
2008).
[30] GAO, Marine Transportation: Federal Financing and a Framework for
Infrastructure Investments, GAO-02-1033 (Washington, D.C.: Sept. 9,
2002).
[31] GAO, Highway Finance: States' Expanding Use of Tolling Illustrates
Diverse Challenges and Strategies, GAO-06-554 (Washington, D.C.: June
28, 2006).
[32] Tax-exempt bonds are government bonds that are used for purposes
such as infrastructure, schools, libraries, general municipal
expenditures or refunding of old debt. Tax-exempt means that the
interest paid to bondholders is generally not included in their gross
income for federal income tax purposes. Examples of tax-exempt bonds
include municipal bonds, and private activity bonds that allow tax-
exempt debt to be used by private entities to help finance qualified
facilities.
[33] According to DOT, federal requirements necessitate that a credit
risk premium be provided to insure the federal government against the
risk of loans defaulting. As a result, these loans are closely examined
for risk of loss and, to date, none of the TIFIA or RRIF loans have
defaulted.
[34] Eight states--Arizona, Florida, Minnesota, Missouri, Ohio, South
Carolina, Texas, and Wyoming--account for 95 percent of the total loan
agreements reached through fiscal year 2006.
[35] GAO-08-411T.
[36] CBO, Options for Responding to Short-Term Economic Weakness,
January 2008.
[37] CBO, Options for Responding to Short-Term Economic Weakness,
January 2008.
[38] GAO, Federal-Aid Highways: Trends, Effect on State Spending, and
Options for Future Program Design, GAO-04-802 (Washington, D.C.: Aug.
31, 2004).
[39] See GAO, Budget Trends: Federal Investment Outlays, Fiscal Years
1981-2003, GAO/AIMD-98-184 (Washington, D.C.: June 15, 1998); Budget
Structure: Providing an Investment Focus in the Federal Budget, GAO/T-
AIMD-95-178 (Washington, D.C.: June 29, 1995); and Budget Issues:
Incorporating an Investment Component in the Federal Budget, GAO/AIMD-
94-40 (Washington, D.C.: Nov. 9, 1993).
[40] GAO, Budget Trends: Federal Investment Outlays, Fiscal Years 1981-
2002, GAO/AIMD-97-88 (Washington, D.C.: May 1997), GAO/AIMD-95-178, and
GAO/AIMD-94-40. Numerous definitions of investment are possible and can
include more than physical capital. We have reported that an
appropriate definition would include federal spending, either direct or
through grants, directly intended to enhance the nation's long-term
productivity. This definition includes spending on some intangible
activities such as research and development; human capital designed to
increase worker productivity, particularly education and training; and
spending for physical capital to improve infrastructure, such as
highways and bridges.
[41] Paul Posner, Trina Lewis, and Hannah Laufe, Budgeting for Federal
Capital (Washington, D.C.: Public Budgeting and Finance, Fall 1998).
[42] Because the deficit absorbs private savings otherwise available
for domestic investment, it exerts the single most important federal
influence on investment. The surest way to increase national savings
and investment would be to reduce the unprecedented level of federal
dissaving by reducing the deficit.
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