Dear CAGTC Members,
Today the Senate Appropriations Subcommittee on Transportation, Housing and Urban Development held a hearing titled “Investing in America: Funding our Nation’s Transportation Infrastructure Needs.” Subcommittee Chair Susan Collins (R-ME) and Ranking Member Jack Reed (D-RI) presided over the hearing, and testimony was offered by the following: Mr. David Bernhardt, Commissioner, Maine DOT and President, American Association of State Highway Transportation Officials (AASHTO); Mr. Jim Tymon Chief Operating Officer And Director Of Policy Management, also of AASHTO; Mr. Todd Hauptli, President And C.E.O., American Association of Airport Executives; Mr. Edward Mortimer, Executive Director For Transportation Infrastructure, U.S. Chamber of Commerce; and Ms. Beth Osborne, Senior Policy Advisor, Transportation for America. Links to opening statements and testimony can be found here: http://www.appropriations.senate.gov/hearings/investing-in-america-funding-our-nations-transportation-infrastructure-needs.
A full hearing summary is below. Top takeaways from the hearing are:
- Congress and the Administration must identify funding for a large scale infrastructure proposal, such as the one President Trump has suggested.
- Should a large-scale infrastructure investment program be achieved, witnesses encouraged the use of existing funding distribution programs to make investments.
- Public Private Partnerships (P3s) will not work for every transportation project and must be deployed in partnership with public investment, not instead of public investment.
- Competitive grant programs encourage innovation and creativity in project development, maximizing the public dollar.
Summary
Subcommittee Chair Susan Collins (R-ME) opened the hearing by explaining that President Trump’s stated intention to invest $1 trillion in our nation’s infrastructure network will require Congress and the Administration to identify funding and financing options. While there is a clear need for a robust infrastructure investment program, much work remains to be done to identify how the much-needed investments will be paid for. Senator Collins cited the USDOT’s “Conditions and Performance Report” which identifies an $836 billion backlog of unmet needs for roads and bridges alone. To address this backlog, all levels of government would be required to increase spending by 36% over the next two decades. Senator Collins noted that in her home state of Maine, competitive grant programs have worked the best to address their needs. She cited success in both the TIGER program and the FASTLANE Competitive grant program.
Subcommittee Ranking Member Jack Reed (D-RI) said current levels of funding are insufficient to bring infrastructure to a state of good repair. Senator Reed is eager to see President Trump’s infrastructure investment plans and believes this is an area for bipartisan agreement, but the Senator and his colleagues are concerned the plan may be a program of private company tax incentives. Such deals do not pencil out in rural communities, and as a result, large parts of the country will be left behind. He also hopes the Trump administration “doesn’t attempt to fix surface transportation problems on the cheap.” He cited the House’s restricted investments under the FAST Act, providing just a meager inflation adjustment. Senator Reed is deeply concerned about the budget outlined by OMB, which makes $54 billion in cuts against non-defense discretionary spending. This will do significant harm to transportation.
Maine DOT Commissioner David Bernhardt’s testimony makes four asks of Congress and the Administration:
1) Stabilize the Highway Trust Fund (HTF);
2) Timely appropriations laws are needed to minimize disruptions;
3) Develop multimodal funding solutions with federal funding; and
4) Support a major infrastructure package that has national benefits.
Commissioner Bernhardt noted that while the HTF has become unreliable, passage of the FAST Act has given state DOTs temporary reprieve from potentially deep cuts. Maine plans transportation programming in three-year cycles and federal funding stability is necessary to avoid a guessing game. He supports passing the FY17 appropriations bill, as Continuing Resolutions create two challenges for DOTs: 1) DOTs can’t make guarantees without full year funding authority; and 2) although the FAST Act increases funding from FY16 to FY17, the Continuing Resolution locks in the FY 16 rate. The Commissioner is also concerned because Positive Train Control funding was authorized only in FY17 from the mass transit account; without a full year appropriations bill, states are unable to access that money. DOTs manage an intermodal system, and the federal government’s help in managing that system is invaluable. Maine DOT has been successful in TIGER and FASTLANE and has been able to utilize the federal freight funding, which is necessary in Maine to support their agriculture and natural resource businesses. With regard to the notion of a new infrastructure investment program, Commission Bernhardt encouraged Congress to funnel any new funding through existing programs to avoid additional implementation/ oversight. He closed by saying that transportation financing is no replacement for funding, and he hopes that Congress will remain committed to providing direct investment.
Jim Tymon of AASHTO thanked Congress for its support and leadership in FAST Act. States supports a level of predictability that allows for planning big, multiyear projects; this predictability is undermined if an appropriations bill is not passed. As spring construction season draws near, AASHTO encourages Congress to pass a full year FY17 bill. Mr. Tymon noted that a funding increase of at least 35% is needed to begin improving the state of the US transportation system, but unfortunately, the method under which the network is funded remains at a crossroads. The HTF worked well for many years – it was a stable source of funding from 1956 until 2008, but now infusions are needed to maintain existing investment levels. There are three factors that contribute to the HTF’s inadequacy: 1) reduced miles traveled by motorists; 2) reduced fuel use due to CAFE standards; and 3) reduced purchasing power due to inflation. The year 2020 will force a choice: provide additional funding to the HTF through General Fund transfers, increase receipts into the HTF through new revenue, or cut spending by 40%. AASHTO produced a matrix of options to find HTF solvency (available here). AASHTO believes any new investment program considered by Congress or the Trump Administration should provide funding through the existing formula programs. While State DOTs support the use of financing tools, Tymon said they are not viable for most transportation projects and stressed that direct investment is necessary.
Todd Hauptli of the American Association of Airport Executives (AAAE) said the United States is chronically underinvesting in infrastructure – that is not limited to transportation, but also includes water, broadband, schools, etc. This underinvestment is negatively impacting the United States’ domestic and international competitiveness. That said, the Federal Government alone cannot solve this problem. According to a recent study, airports have $20 billion per year in capital needs. Hauptli said the Airport Improvement Program (AIP) obligation limit should be doubled and even with that, there is still no danger in overinvesting in airport infrastructure. Hauptli also encouraged Congress to lift the cap on local Passenger Facility Charges (PFC); that cap has not been lifted since 2000, and PFCs provide the biggest bang with the least impact on the federal government. Hauptli also urged Congress to retain the tax exemption for municipal bonds and to eliminate the tax burden of the Alternative Minimum Tax (AMT) on airport private activity bonds.
Ed Mortimer with the U.S. Chamber of Commerce lamented that although the U.S. Infrastructure network has been the envy of the world, failure to maintain this asset allows minor issues to turn into big problems. USDOT’s Beyond Traffic finds that the U.S. population is expected to grow by 70 million people in the next 30 years and by 2045, the economy is expected to grow by 115%. Unfortunately, the transportation network’s needs are great and the resources are limited. The U.S. Chamber is excited that by the President’s desire to invest in infrastructure. This level of investment is a once in a lifetime opportunity and critical to future economic success. The Chamber would like the package to include:
1) Actual infrastructure projects that promise long-term economic growth. Unlike the 2009 stimulus package, projects should be selected based on their ability to create economic benefits, not by the speed at which they can be built.
2) Funding should come in a variety of forms, including direct federal investment, loan programs, and P3 options. Any program should include a plan of long-term solvency for the Highway Trust Fund. A mega-project competitive grant approach should be included in the package to encourage competition and stimulate creativity. While new federal programs may be necessary, existing programs should be used whenever possible.
3) Funding should be accompanied by reforms that increase accountability, best practices, and performance measures. There should be a commitment to project analysis. When possible, new technologies should be embedded in infrastructure.
Mr. Mortimer noted that the gas tax has not kept pace with inflation, but the business community is committed to standing with Congress. The Chamber is committed to working with elected officials to find a long term solution for the Highway Trust Fund.
Beth Osborne of Transportation for America (T4A) said her organization seeks to ensure that local leaders are better represented in the federal program since this level is where most travel happens and where people and freight are getting stuck. While T4A agrees that the lack of funding plays a large role in our nation’s transportation woes, there is also a problem in how the existing funding is spent. T4A feels that, despite frequently citing dire system repair numbers, funding is not being invested in repairs at the needed level and instead a large amount of funding is going toward new roadways and adding lanes to existing roads. Osborne said that between 2009 and 2011, states collectively spent $20.4 billion annually to build new roadways and add lanes to existing roads. During that same time, states spent $16.5 billion annually repairing and preserving the existing system. (Source here)
T4A strongly supports innovative programs, such as TIGER and New Starts. Osborne noted that despite the low success rate due to competition for funding, the TIGER program is very popular due to its wide ranging eligibility and wide ranging eligible recipients. Since the loss of earmarks, this is one of the few ways locals can access federal money. Competitive programs also encourage innovation such as design-build project delivery. These competitive programs are important because they reward cities and states that improve planning and land use. Osborne closed by reiterating that federal funding is essential. Communities across the US are in a bind and cannot make investments alone.
Senator Collins opened the question and answer portion of the hearing by asking Mr. Tymon which of the funding options in AASHTO’s matrix of possibilities, in his professional opinion, would best meet the need without being unduly burdensome for the average American. Mr. Tymon said the existing revenue sources have served the HTF very well for a long time and are the most effective way to collect revenue and funnel it into the HTF. AASHTO is exploring vehicle miles traveled (VMT) to see if it is a realistic solution.
Senator Collins then turned to Mr. Mortimer and said she was surprised to see the large number of conservative states that have raised the gas tax. She asked Mr. Mortimer to what he attributed the federal government’s resistance to increasing the tax. Mr. Mortimer replied that it comes down to political courage. In many instances across the country, labor and business came together – politicians did not lose their job as a result of supporting an increase in the user fee. All elected officials needs to approach this with an open mind. In recent years there have been two federal revenue commissions and multiple studies – all finding that raising the gas tax is the easiest solution. While the Chamber is closely watching a VMT approach, they believe it is about 10 years from implementation.
Next Senator Collins asked Maine DOT Commissioner Bernhardt how states around the country are coping with insufficient funding, to which Commissioner Bernhardt responded that DOTs are trying to stretch dollars through innovation, optimization through asset management, etc. Maine DOT is not addressing everything they’d like to and at some point in time there will be a breaking point and something will fail.
Noting that 56% of Rhode Island’s bridges are functionally deficient or obsolete, Senator Reed asked Maine DOT Commissioner Bernhardt if his state has completed an assessment of what is needed to fix its bridges. Bernhardt responded that his department completed a year-long study on bridges and they have a great asset inventory at this point. The report looked at what the DOT was spending ($70 million/yr) and what is actually needed ($14 million/ yr). In other words, they are not moving the needle and tradeoffs are made to keep the system running with insufficient funding. For example, a bridge may be repaired to bump it up a weight class so as to allow emergency response vehicles and school buses to pass, although more investment would be needed to completely fix the bridge. He noted that Maine is a very rural state and it is important that the bridges can accommodate high-weight commodities. Senator Reed and Commissioner Bernhardt then had a discussion about P3s and agreed that private investors would have difficulty recovering costs in rural states.
Senator Reed said that the real future is in intermodal transportation – we need to move away from planning in modal silos. He is struck by the different categories of matching funds that discourage intermodalism.
Ms. Osborne agreed and said that many programs are siloed and put a thumb on the scale to skew decision making in how to invest. While T4A encouraged localities to do thoughtful freight planning, USDOT had a strong emphasis on funding highway-centric projects. TIGER has been a critical program because it allows localities to apply with objectives and methods that ignore modal siloes.
Senator Boozman (R-AR) said that, despite all of the conversations around P3s, tolling doesn’t seem to benefit rural areas; he asked Commissioner Bernhardt to talk about specific areas that do benefit from P3 arrangements. Commissioner Bernhardt responded that in Maine, due to its rural nature, P3 approaches are tough because there is not enough volume to generate a benefit to private sector investors. The Commissioner said that the State engages in P3s, but they are not necessary toll roads. For example, the state is currently building an interchange and a business is paying 1/3 the cost of the interchange. The state does not need to repay the business because they will derive benefit from enhanced economic activity yielded by the infrastructure. Commissioner Bernhardt said that he has met with equity firms, but their starting point is typically $100 million, and many projects do not rise to that level.
Senator Boozman then said that too often in conversation about infrastructure, highways and bridges receive all of the attention, despite the lack of investment in inland waterways, ports and harbors. The Senator asked Mr. Mortimer if there are a large number of farmers relying on the inland waterways. Mr. Mortimer responded that ports are gateways to trade and critical to the economy. The Chamber has done a lot of research on ports, and while there are some water access needs, a lot of the needs are land access – rail and roads getting out of/ into the port. Mr. Mortimer continued by saying that we continue underinvesting in inland waterways – there is a long list of projects that will not be funded for many years, and that is not acceptable. Mr. Mortimer said that P3s should be encouraged to supplement public funding for water infrastructure. He noted that there is no single P3 approach, tolls are just one – P3s can also come in the form of availability payments, for example.
Senator Daines (R-MT) stressed the importance of infrastructure to the agricultural and energy communities. The state of Montana has more recoverable coal than any other state and the state is working to expand transportation opportunities. Senator Daines asked how rural states can ensure they have access to multimodal funding. Mr. Mortimer noted that there is no longer a debate between truck and rail – both are needed. Mr. Mortimer said that local chambers of commerce are frequently asked about the state of infrastructure and availability of multimodal connections by businesses looking to relocate. Good infrastructure attracts businesses and is needed to grow the economy.
Senator Collins asked why TIGER is necessary in addition to formula programs. Ms. Osborne responded that TIGER rewards performance and innovation in a way that formula programs can’t. Formula is essential for asset management, but, the competition is what drives communities to go above and beyond and innovate to find the highest performing solution. Ms. Osborne said the process of preparing for TIGER has gotten more stakeholders involved in planning and funding conversations; there have been examples of projects that did not receive a TIGER award but moved forward to completion due to excitement drummed up during the application process, which resulted in a commitment to finding the money through other channels.
Senator Collins closed the hearing by saying that President Trump’s infrastructure proposal is exciting, but a dialogue on financing it is necessary. The Senator believes a large-scale infrastructure bill could be one of the few bipartisan achievements of this Congress. There is a widely and unanimously recognized need for infrastructure.
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If you have any questions about this hearing, please don’t hesitate to contact me. Thank you!
Elaine Nessle
Executive Director
Coalition for America's Gateways & Trade Corridors
1444 Eye Street NW
Suite 1100
Washington, DC 20005
Phone: (202) 828-9100
Mobile: (607) 368-5028
www.tradecorridors.org