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S. HRG. 115–114 

LEVERAGING FEDERAL FUNDING; 

INNOVATIVE SOLUTIONS FOR INFRASTRUCTURE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TRANSPORTATION 

AND INFRASTRUCTURE 

OF THE

COMMITTEE ON 

ENVIRONMENT AND PUBLIC WORKS 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

MAY 16, 2017 

Printed for the use of the Committee on Environment and Public Works 

( 

Available via the World Wide Web: http://www.fdsys.gov 

(II) 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

JOHN BARRASSO, Wyoming, Chairman 

JAMES M. INHOFE, Oklahoma 

SHELLEY MOORE CAPITO, West Virginia 

JOHN BOOZMAN, Arkansas 

ROGER WICKER, Mississippi 

DEB FISCHER, Nebraska 

JERRY MORAN, Kansas 

MIKE ROUNDS, South Dakota 

JONI ERNST, Iowa 

DAN SULLIVAN, Alaska 

RICHARD SHELBY, Alabama 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

BERNARD SANDERS, Vermont 

SHELDON WHITEHOUSE, Rhode Island 

JEFF MERKLEY, Oregon 

KIRSTEN GILLIBRAND, New York 

CORY A. BOOKER, New Jersey 

EDWARD J. MARKEY, Massachusetts 

TAMMY DUCKWORTH, Illinois 

KAMALA HARRIS, California 

RICHARD M. RUSSELL, Majority Staff Director 

GABRIELLE BATKIN, Minority Staff Director 

SUBCOMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

JAMES M. INHOFE, Oklahoma, Chairman 

SHELLEY MOORE CAPITO, West Virginia 

JOHN BOOZMAN, Arkansas 

ROGER WICKER, Mississippi 

DEB FISCHER, Nebraska 

JERRY MORAN, Kansas 

JONI ERNST, Iowa 

DAN SULLIVAN, Alaska 

RICHARD SHELBY, Alabama 

JOHN BARRASSO, Wyoming (ex officio) 

BENJAMIN L. CARDIN, Maryland 

BERNARD SANDERS, Vermont 

SHELDON WHITEHOUSE, Rhode Island 

JEFF MERKLEY, Oregon 

KIRSTEN GILLIBRAND, New York 

EDWARD J. MARKEY, Massachusetts 

TAMMY DUCKWORTH, Illinois 

KAMALA HARRIS, California 

THOMAS R. CARPER, Delaware (ex officio) 

(III) 

C O N T E N T S 

Page 

MAY 16, 2017 

OPENING STATEMENTS 

Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma .................... 1 

Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland ................ 2 

Carper, Hon. Thomas R., U.S. Senator from the State of Delaware ................... 5 

WITNESSES 

Garcetti, Hon. Eric, Mayor, City of Los Angeles, California, and Chair, U.S. 

Conference of Mayors Infrastructure Task Force .............................................. 11 

Prepared statement .......................................................................................... 14 

Responses to additional questions from Senator Carper .............................. 19 

Gatz, Tim J., Executive Director, Oklahoma Turnpike Authority ...................... 20 

Prepared statement .......................................................................................... 22 

Responses to additional questions from Senator Carper .............................. 28 

Yarema, Geoffrey S., Partner, Nossaman LLP ..................................................... 29 

Prepared statement .......................................................................................... 31 

Responses to additional questions from Senator Carper .............................. 36 

Response to an additional question from Senator Boozman ......................... 37 

DeGood, Kevin, Director, Infrastructure Policy, Center for American Progress 39 

Prepared statement .......................................................................................... 41 

Layne, Aubrey L., Jr., Secretary of Transportation, Commonwealth of Virginia ....................................................................................................................... 46

Prepared statement .......................................................................................... 49 

Responses to additional questions from Senator Carper .............................. 64 

ADDITIONAL MATERIAL 

Testimony of Aubrey L. Layne, Jr., regarding New Routes for Funding and 

Financing Highways and Transit, before the U.S. Senate Finance Committee, May 6, 2014 ............................................................................................. 81 

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LEVERAGING FEDERAL FUNDING; INNOVATIVE SOLUTIONS FOR INFRASTRUCTURE 

TUESDAY, MAY 16, 2017 

U.S. SENATE, 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS, 

SUBCOMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 3:17 p.m. in room 

406, Dirksen Senate Building, Hon. James M. Inhofe (Chairman of 

the Subcommittee) presiding. 

Present: Senators Inhofe, Fischer, Ernst, Sullivan, Cardin, 

Whitehouse, Gillibrand, Duckworth, Harris, and Carper. 

OPENING STATEMENT OF HON. JAMES M. INHOFE, 

U.S. SENATOR FROM THE STATE OF OKLAHOMA 

Senator INHOFE. The hearing will come to order. 

I want to thank all of you for being here today. I thank my 

friend, Ranking Member Cardin, and his staff for the flexibility 

with the scheduling of today’s hearing. 

It is kind of interesting because Ben Cardin and I are maybe 

three of the last remaining of the class of—what was that? 

Senator CARDIN. The 100th Congress in 1987. 

Senator INHOFE. Yes, 1987. No, we have Lamar Smith and a couple more. 

It is funny. We are on opposite sides on a lot of issues, but we 

are always together in friendship as well as in infrastructure. 

As this week is Infrastructure Week, it is a great opportunity for 

us to highlight the critical needs we have in this country. Tomorrow the full Committee will have the chance to question Secretary 

Chao on the Administration’s priorities. It is my hope today’s hearing will be a productive lead in to her visit. 

Last Congress the EPW Committee led the charge to pass the 

FAST Act and the sixth highway reauthorization bill that I personally worked on. This was the largest one since 1998. Nobody believed we would get it done, and others thought we would only get 

an 18-month bill. 

However, Senator Boxer and I, as the Chairman and the Ranking Member, insisted on 5 years. It shows that people of opposite 

and different philosophies can get along and make wonderful 

things happen. 

However, the current investment is not enough to fully address 

our maintenance and the new capacity needs. The FAST Act authorization is about $305 billion over 5 years. Yet according to the 

2 

United States DOT report from this year, the backlog of highway 

and bridge work in the United States stands close to $836 billion. 

As the Administration and Congress consider a potential trillion 

dollar infrastructure package, we must keep in mind that the package will include more than just roads and bridges, but also our port 

system waterways, airports, and energy needs as well. While the 

Federal Government will and should continue to be a leading partner in maintaining and building out our infrastructure, the current 

and proposed Federal investment will not meet all of our needs. 

Whatever action we take on infrastructure, our State and local 

partners have to be a part of the solution and prioritize transportation. Some States and local areas are doing this. Unfortunately, 

this weekend, in my State of Oklahoma, I learned about the effect 

of proposed budget cuts to the Department of Transportation. 

My State of Oklahoma did not properly prioritize the need for 

transportation. Oklahoma and other States have to meet their 

modest match. We are talking about matches of either 10 and 90 

or 20 and 80. It occurred to me, and I was not aware, that they 

were not prioritizing that. 

Ben, I took my plane and loaded it up with media and went 

around to all the construction sites saying that if we do not do our 

portion of the match, we are going to be stopping some of the construction. I think you know what happens when that does happen. 

In addition to States and locals prioritizing infrastructure, we 

also need to find responsible and meaningful ways to attract and 

leverage additional private investment to help close the gap. 

Today’s hearing will examine all these possibilities and what the 

Federal Government can do to help make it easier for our partners 

to leverage the Federal investment with other opportunities. 

Though not all ideas will work everywhere, all options should be 

on the table. We should incentive our non-Federal partners to pursue them. 

I look forward to hearing from our witnesses. 

Senator Cardin. 

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 

U.S. SENATOR FROM THE STATE OF MARYLAND 

Senator CARDIN. Mr. Chairman, once again, thank you very 

much for your leadership in regard to infrastructure in our country. 

It is a real pleasure to be the Ranking Democrat on the Subcommittee to work with you on a bipartisan infrastructure bill. 

We have never had a problem in bipartisan infrastructure. I expect that will be the same, and I really do look forward to working 

with you to figuring out a way we can get this done. 

Up front, let me put on the record my conflict with today’s hearing. I commute back and forth from Baltimore to Washington every 

day. I know firsthand the problems of traffic and congestion. When 

I started in 1987, Mr. Chairman, when we were both elected, the 

roundtrip commute between Baltimore and Washington took me 

about 2 hours. Today, that exact same commute at the exact same 

time today takes 3 hours and 15 minutes. 

My transportation people are telling me to expect 1 million more 

people in Maryland over the next 25 years. Twenty-five years from 

now when we are celebrating whatever anniversary that is together 

3 

in Congress, that commute is going to take 4 hours and 15 minutes. We have to do something about it. 

Mayor Garcetti, I am glad you are here because the congestion 

in Los Angeles is worse than our congestion. I have someone I can 

point to who has an even more difficult commute than we do. 

We really need to address this. The congestion is very costly to 

our economy; it is costly to our public health. It is a circumstance 

that the public demands that we modernize our infrastructure. 

We have neglected it. Yes, I agree with the Chairman, we can 

always do things more efficiently and always find more creative 

ways for partnership, but the bottom line is the public investment 

must keep up with the need. We have not kept up with the need. 

We are here today to figure out how we can do this. 

The Washington district has ranked anywhere from one to four 

to fifth as the most congested region in the country. That is why 

we work on ways to get people out of cars. The transit programs 

are important. 

WMATA, which has 700,000 riders a day, one-third of whom are 

Federal employees trying to get to work, is an old system. It also 

needs help. It takes resources to rebuild our stations, to improve 

our lines, and to deal with the needs of additional lines. Some of 

this is extremely expensive. We have to figure out a proper way in 

order to finance our infrastructure. 

We also need to deal with the flexibility issues. I appreciate that. 

Senator Carper is now here. Senator Carper is the Ranking 

Member of the full Committee and a real champion on infrastructure. 

He is very bold, by the way, in saying he is ready to pay for it. 

Senator Carper is very much in the leadership of saying, we have 

to pay for what we need, and let us find a way to do it. I appreciate 

his leadership on this. 

One of the things we try to do is give flexibility to local governments, which I think is very important. Baltimore was designed by 

Olmsted. Olmsted connected all neighborhoods together through 

green space. Over the years, that green space got developed, and 

communities got isolated. Literally, people were trapped in their 

neighborhoods. The only way they could get around was if they had 

a car. Some had cars, and some did not have cars, but it put more 

traffic on the road. 

We have given Baltimore the flexibility of using transportation 

money to reconnect neighborhoods so that people can literally walk 

and bike between neighborhoods without using their cars, which 

takes cars off the roads; that preserves our roads for longer periods 

of time and improves the quality of life. That is what we did together, giving the flexibility in our transportation programs so local 

governments can make their own decisions rather than us trying 

to dictate from Washington how things should be done. 

I would hope we would continue those types of efforts as we look 

at additional tools we can give our mayors and local officials so 

that they can do what is best for their community in order to restore their communities. 

This is an area we should be able to get done, Mr. Chairman. We 

have a President of the United States making transportation one 

of his top priorities. We have had bipartisan proposals come out of 

4 

Congress on revenues to deal with transportation. This Committee 

is dedicated to working together, listening to every member of this 

Committee. We come from different areas. Oklahoma and Maryland have different transportation needs, but we agree that we 

need additional help. 

Working together, I think we can get this done. I very much look 

forward to our hearing and to working with the Chairman. 

Senator INHOFE. Thank you very much, Senator Cardin. 

Let me suggest we will go ahead and make some introductions. 

I want to get into the record all five important people we have here 

to testify. 

Senator Harris, why don’t you start off by introducing the 

Mayor? 

Senator HARRIS. I appreciate that, Chairman. As you know, I am 

also on the Senate Intelligence Committee which is meeting at the 

exact same time. Thank you for that. 

I would like to introduce and welcome Los Angeles Mayor Eric 

Garcetti, a longstanding friend and a great leader in California. He 

is here to talk about our nation’s transportation needs. 

Los Angeles freeways are infamous. The intersection between the 

10 and the 405 is known affectionately as the biggest parking lot 

in America. 

It is not just our roads that are overstretched. In 2015, 45.5 million visitors traveled to Los Angeles, and 6.7 million arrived from 

other countries. Los Angeles International Airport is the second 

busiest airport in the country. L.A. County has the top two biggest 

container ports in the country. 

Having quality infrastructure in Los Angeles is not just important for those who call it home, as do I, but it is important for the 

entire country. When Los Angeles is moving efficiently, that means 

it is easier for the products, goods, and people that we all need to 

move around the country and the world, that they are able to move 

in an easier way. 

Mayor Garcetti has a front row seat to the transportation challenges and needs of southern California while also running a city 

that is looking at new ways to address urban mobility and challenges and hopefully, a city that will also host the Olympics. 

Los Angeles is investing in new highway and surface street infrastructure while it is expanding rail transit and looking at how to 

impact dedicated bus and bike lanes. Los Angeles residents just approved a measure to invest their own money in the infrastructure 

that helps keep Los Angeles and its region growing and moving. It 

is time for the Federal Government to do its part. 

Residents are steadily seeing new options to get around their 

city, but they need Federal resources in order to provide businesses 

and tourists the experience they deserve. The City and County of 

Los Angeles have always had a history of working with the Federal 

Government to build bipartisan support in an effort to accelerate 

infrastructure improvement projects. 

The work underway to address Los Angeles’ urban mobility challenges requires innovation, combined with support from local, 

State, and Federal Government. I look forward to hearing my Mayor’s testimony today. 

Welcome, Eric Garcetti. 

5 

Senator INHOFE. Thank you, Senator Harris. 

Before we continue with the introductions, I would like to ask 

Senator Carper if he has any statement to make as he is the Ranking Member of the entire Committee. 

OPENING STATEMENT OF HON. THOMAS R. CARPER, 

U.S. SENATOR FROM THE STATE OF DELAWARE 

Senator CARPER. Welcome, one and all. 

I am proud to be a member of this Committee. I have been on 

it for about 16 years now. I am also a recovering Governor and 

served for 8 years as Governor of Delaware from 1993 to 2001. I 

care about these issues and have thought about them as well. 

I want to thank the leadership of this Subcommittee for holding 

the hearing today. I want to thank all of you for coming and sharing with us your perspectives on an issue on which we hope we can 

find some bipartisan agreement and make progress. We pretty 

much need to. 

I like to say one of the major roles of government is to provide 

a nurturing environment for job creation and job preservation. I 

say that several times a day. That is one of my guiding principles. 

It is hard to have a nurturing environment if you do not have 

good transportation systems. You folks know that from the work 

that you do. I support measures to enable public agencies to partner with private investors. I want to ensure that these agencies 

have the capacity and the support they need to be successful. 

In Delaware, we have an interest in using public-private partnerships. Right now, our State is working on one agreement with a 

private developer to build a mixed use parking garage and transit 

center in Wilmington, Delaware, where my family and I live. We 

would do that in order to try to facilitate access an increasingly vibrant retail district downtown. 

If we are successful in this one endeavor, it will be the first 

transportation related P3 for Delaware—the first. Although our 

State has bid projects on public-private partnerships in the past, 

they have never proceeded ultimately because of a lack of investor 

interest, I suspect because the investor figured out they could not 

make the kind of return on the investment they wanted to make. 

In Congress, we have done important work to support agencies 

interested in partnering with private firms to transfer project risks 

and potentially to build projects more quickly. In the FAST Act, we 

restructured the Department of Transportation’s credit and innovation finance programs into a single, one stop show to streamline 

and improve the process for agencies and for investors. 

We also reduced the minimum project cost for the Transportation 

Infrastructure Financing Innovation Act, TIFIA, in order to expand 

access to TIFIA loans. I believe the private sector can play an important role in stimulating investment in our critical infrastructure. 

However, I also know public-private partnerships and other financing tools are not the complete solution to our funding shortage 

even though sometimes we imply they would be. We need to be 

clear that leveraging public funding with private finances is not a 

replacement for public funding and will not solve either our HighVerDate Aug 31 2005 13:56 Dec 01, 2017 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 S:\_EPW\DOCS\27297.TXT SONYA
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way Transportation Fund insolvency crisis or the maintenance 

backlog for our roads, our bridges, and for transit. 

In just over 3 years we will face an insolvency crisis for the High- way Trust Fund yet again. We will be facing a $115 billion shortfall for our next 5-year transportation bill. That funding crisis will 

also be a crisis for private investors who similarly rely on certainty 

of public funding from the Highway Trust Fund. 

Partnering with private investors can help public agencies complete large, complex problems more quickly. That is an important 

value, particularly with the number of major bottlenecks in transportation regional projects that need to be completed today where 

I live, and frankly, where we all live. 

On the other hand, there are only a small number of large, complex, and transformative transportation projects where financiers 

are interested in investing. For example, in 2014 just four transportation projects were closed with a public-private partnership 

contract. They were all several hundred million dollar projects. 

The hard truth is that public-private partnerships have not been 

as useful for routine maintenance and critical safety projects. This 

was a shock to me. Moreover, a total of a third of all States do not 

allow the use of public-private partnerships. 

In Texas, a State that has allowed them in the past, the legislature recently voted not to use P3s because their constituents did 

not want to pay higher tolls. There are a number of questions that 

should be asked about when public-private partnerships are a useful tool, how we can ensure they are making good use of scarce 

Federal dollars. 

I use this analogy, and my colleagues have heard we say it before. Usually when we come to funding transportation across the 

country, there is no silver bullet. There are a lot of silver BBs, 

some are bigger than others. I have said the biggest silver BB is 

one that calls for those who use roads, highways, bridges, businesses and people should pay for them. 

There are other ways we can use that money to help leverage 

other money, including public-private partnerships and we should 

do that. 

Thank you so much. 

Senator INHOFE. Thank you, Senator Carper. 

Let me introduce the next witness, Tim Gatz, the Executive Director of the Oklahoma Turnpike Authority. Before his current role, 

he worked for the Oklahoma Department of Transportation for over 

25 years, starting as a drafting technician and working his way up 

to serving as the director of the department. 

At the Oklahoma Department of Transportation, he was actively 

involved in developing their project management methodologies, as 

well as construction work plan which guides the department’s 

project development and delivery strategies. 

With his new role as the Executive Director of the Turnpike Authority, Tim will oversee the continued development and implementation of the nearly $900 million driving forward plan which he will 

be sharing with us. 

Tim, it is great to have you here. 

Let me say we have so many people right now really into this 

issue. I often sometimes say, these guys have heard me say it, 

7 

there is an old, worn out document nobody ever reads anymore 

called the Constitution which talks about what we are really supposed to be doing here, defending America, and they called it post 

roads then, but highways and construction. 

We have a new President who has made this commitment a long 

time ago. People say, wait a minute, a trillion dollars; that is not 

going to work. It is time to think about what happened 8 years ago. 

Eight years ago we had another person elected as the President of 

the United States. He came out with an $800 billion∂ program 

that was supposed to stimulate, and it did not stimulate anything. 

I can remember Barbara Boxer and I trying to put amendments 

on there to use that for that very reason. 

Also, I was visited this morning by the Business Roundtable. I 

ask unanimous consent that their statement of support for what we 

are doing today be made a part of the record. Without objection, 

so ordered. 

[The referenced information follows:] 

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Senator INHOFE. Mayor Garcetti, do you have to leave early? 

Does this alter your testimony? 

Mr. GARCETTI. I do have to leave early, but I am ready to go 

whenever you say. 

Senator INHOFE. Let me introduce the rest of the witnesses. We 

will start with you, and when you have to leave, let us know. I appreciate your presence here very much. 

Geoffrey S. Yarema is a partner at Nossaman LLP in Los Angeles, California. Kevin DeGood is Director of Infrastructure Policy, 

Center for American Progress, Washington, DC. Welcome. Aubrey 

L. Layne is Secretary of Transportation for the Commonwealth of 

Virginia. 

Senator CARDIN. I should explain I asked my Maryland folks who 

would be the best person to testify in regards to our problems in 

this region, and they recommended Secretary Layne. 

It is a pleasure to have you here, Mr. Secretary. Virginia, Maryland, and Delaware get along very well together. 

Senator INHOFE. Your Honor, you are on. 

I am going to try to encourage you folks to limit your statement 

to 5 minutes or a bit more maybe, but your entire statement will 

be made a part of the record, as is always the case. 

STATEMENT OF HON. ERIC GARCETTI, MAYOR, CITY OF LOS 

ANGELES, CALIFORNIA, AND CHAIR, U.S. CONFERENCE OF 

MAYORS INFRASTRUCTURE TASK FORCE 

Mr. GARCETTI. Thank you so much, Chairman Inhofe. Thank you 

for your friendship. 

For the times we have met in the past, Ranking Member Cardin, 

thank you. 

Senator INHOFE. What is it I always tell you when we meet? I 

say, I had a hard job once. 

Mr. GARCETTI. Yes, you did. I think we bonded over that, and I 

appreciate the perspectives you have brought. 

Ranking Member Cardin and Senator Carper, as well, thank you 

for your leadership, and also Senators Ernst and Fischer. 

I am Eric Garcetti, Mayor of Los Angeles. I want to give a special 

thanks to my Senator, Senator Harris, for the introduction. 

I am honored to appear before you, not only as Mayor of a great 

American city, but also as the Chair of the Task Force on Infrastructure for the U.S. Conference of Mayors. 

When I heard folks talking about infrastructure a few months 

ago in the presidential election, as Mayor of the city that has the 

biggest port in America, the largest municipal utility in America, 

the No. 1 airport of origin and destination, the most miles of road, 

and as stated, the worst traffic, I got very excited. Contrary to 

what you might have seen in LaLa Land, no, we do not dance in 

traffic. We just sit there and stew. 

I am here today to get you excited. Do not let this get out because 99 percent of the coverage tonight is not going to be about 

how we are all getting along; it is going to be about how we disagree. Right here, we truly do have bipartisanship and agreement 

on what this country needs. That is the space Mayors occupy every 

single day. 

12 

For all of us in the municipalities who have heard the words ‘‘a 

trillion dollars,’’ in the election in November when everyone was focused on the national elections, throughout cities in America, $230 

billion of infrastructure initiatives were approved by voters, a quarter of that down payment people are talking about happening over 

a decade. 

My message from America’s cities is loud and clear. We can do 

this. We should be excited to do this. I want to share our lessons 

in Los Angeles about how we did this. Republicans and Democrats 

agree, as well as Independents, on the need for this. We looked at 

this in Los Angeles, not just as an infrastructure need, but really 

as a jobs and quality of life initiative. 

We get excited about the word ‘‘infrastructure,’’ but normal 

Americans want more time with their kids to tuck them in. They 

know the billions of dollars in our local economy that were taken 

from us, millions of hours taken away from us through the traffic 

that chokes our cities. 

We started crisscrossing a 4,700 square mile county with 10 million people, bringing in Republicans and Democrats. My wingman 

on this was somebody you may know, Supervisor Mike Antonovich, 

the most conservative member of the Board of Supervisors in L.A. 

County, and we crossed over to say, this is something we have to 

figure out a way. 

In California, you need a two-thirds vote to raise a tax. It is an 

incredibly high threshold. A long story short, we had a 71 percent 

vote for a $120 billion package, the largest in American history 

times two at the local level, to fix our roads, 15 rapid transit lines, 

repair our freeways, and give local money back to our cities and the 

county for the road repairs they need. 

What led to that success? I think we each gave up a little something of who we were. As a Democrat, I came in skeptical as a 

Mayor about public-private partnerships and the role of leverage 

and banks. Today, I am a convert. Somewhere the fiscal conservative in me did not feel great about grants that come in with little 

accountability, but I see how critical and how crucial they are. 

The days of cities coming or States coming to this esteemed Senate or the House of Representatives saying, look, I have an empty 

hat in hand and a great project, please fill it up are long gone. We 

know that. 

We have been immensely successful in Los Angeles in coming to 

you with a hat that is half filled saying, can we have our Federal 

tax dollars along with our local tax dollars to make this happen? 

I spent 3 days last week with the International Olympic Committee members who came to Los Angeles. I do want to bring the 

Olympics back home to America. They were blown away by what 

we are doing with infrastructure: $14 billion in our airport; $120 

billion, as I said, in public transportation and roads; and another 

$2.6 billion at our port. 

However, the jobs piece of making sure these are American jobs, 

because there is no port equipment manufacturer in the United 

States, there is no railcar manufacturer in the United States, we 

have real opportunities in passing this not just to talk about the 

needs of infrastructure, but the need for middle class jobs in America. 

13 

What leads to success policy-wise? I hope to lay that out in my 

last minute here. There are three things. We are calling this the 

I3. You have heard of P3; this is the Infrastructure Incentives Initiative. 

One is leverage. Two is to think about the life of projects. Three 

is innovation and technology. Leverage, I think, is clear. I just 

came from a discussion with Members of the House and Senate, 

leaders in industry and a few of us mayors. They were talking the 

same language. 

You need to leverage localities; reward those that step up, but 

also put out there that if you do have local money, you have a better chance of getting Federal money. Similarly do that between 

public and private partnerships, knowing the advantages and the 

shortcomings that P3s have. 

We have seen this in Denver where in 75 percent of the time and 

7 years less, they got a transit line from downtown to the airport. 

Leverage has to be the central principle of what we write. 

Two is to think about life of projects. I am glad you brought up 

WMATA. We have seen this not just in Washington where people 

were killed, where yesterday you saw the line shut down, but in 

Boston where people kicked out windows of the railcar because it 

was smoking and places like the Bay Area in my State where folks 

are trying to get on the ballot something for maintenance. Make 

sure you reward those places that are not just thinking about the 

construction, because we all love ribbon cuttings, but think about 

the maintenance and the long term. 

The third is innovation and technology both in the process as 

well as the technology itself. We are looking at changing American 

tunneling technology. Elon Musk, who you all know, in my city is 

looking at changing boring machines. I know this sounds like a boring topic, but it is actually quite exciting. Boring machines have 

not changed in 50 years, and he thinks he can get SpaceX engineers to increase the speed that they drill by as much as 10 times. 

We do not know what we do not know, but you need to put aside 

some funds, as we did in our initiative, for new, innovative technologies because we could be getting around in a very different way 

in 5, 10, we for sure will be in 20 years from now. 

Those three concepts of leverage, the full life of projects, and innovation technology is what the U.S. Conference of Mayors is putting forward as our plan to help assist you. 

I will close with this. I will work off my tail to help you get Republican and Democratic mayors from every single town and city 

in this nation to help get this passed. There is no better thing we 

could be doing for jobs, for the quality of life of all Americans, and 

it is the one thing that unites all of us. 

I will say, on behalf of America’s cities, we have stepped up; we 

cannot wait for you to join us, too. 

Thank you for all your support. 

[The prepared statement of Mr. Garcetti follows:] 

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Senator INHOFE. Thank you, Mayor. 

Tim Gatz. 

STATEMENT OF TIM J. GATZ, EXECUTIVE DIRECTOR, 

OKLAHOMA TURNPIKE AUTHORITY 

Mr. GATZ. Mr. Chairman, Ranking Member Cardin and members 

of the Committee, for the opportunity to come and testify this afternoon. 

My name is Tim Gatz, and I serve as the Executive Director for 

the Oklahoma Turnpike Authority. Today, I want to emphasize 

several points. 

The conditional deficiencies of a long underfunded national transportation system cannot be resolved by the States alone and will 

require an increasing and congressionally influenced Federal investment, combined with a long term national transportation strategy. 

The focused investment of Federal resources is necessary, but 

should in no way be restricted from use as leverage for financing 

opportunities and private sector partnerships. The advancements 

in tolling technologies and equipment, along with toll tag interoperability efforts by tolling authorities across the country, indicates 

that tolling should be clearly recognized as a viable, long term, and 

sustainable transportation revenue mechanism. 

The Oklahoma Turnpike Authority was legislatively created in 

1947 to construct a modern transportation link between Oklahoma 

City and Tulsa. Today the more than 270 miles of the Turner, the 

Will Rogers, and the H.E. Bailey Turnpikes carry the Interstate 44 

shield and are part of a combined toll network of 605 miles. 

Oklahoma has utilized a balanced and responsible investment 

strategy, including tax supported and toll supported highways to 

meet the transportation needs of our citizens. To be clear, long 

term, consistent Federal funding remains vitally important to the 

development and delivery of transportation improvement projects. 

States must be able to anticipate the availability of resources in 

order to properly plan, design, and construct projects. Recognized 

and documented critical needs and our clear understanding of long 

term resource availability factors heavily into our investment decisionmaking. 

In 1956 the Federal Highway Act included a general prohibition 

on tolling that remains largely in effect with tolling allowed only 

under very specific circumstances. However, public-private partnerships and other debt financing options requiring long term revenues are encouraged. 

Simple tolling can be a very flexible and effective revenue component in a bold, new national transportation strategy and is the 

purest representation of an equitable user fee. That being said, 

3Ps, innovative financing, and tolling options will not work in every 

case and should not be held as the Federal Government’s best or 

only solution to stemming the further deterioration and operational 

deficiency of our national transportation system. 

Recognizing that a 3P project must have sufficient liquidity to 

provide an adequate return to investors, we believe carefully vetting potential projects, selecting the appropriate risk sharing 

21 

model, and preparing a structured financial plan is paramount to 

project success. 

In Oklahoma, the Gilcrease Expressway was part of the original 

Tulsa region expressway master plan created more than 50 years 

ago, including a segment to serve west and north Tulsa. Some development work has progressed over the years funded with very 

limited traditional Federal, State, and local revenue streams. 

Completing this $300 million, 5 mile leg of the Expressway between Interstate 44 and US Highway 412 with a bridge over the 

Arkansas River is vital to providing access for businesses and economic activity in the region and to provide a reliever route for 

growing congestion concerns for travel into downtown Tulsa. 

After many years of discussion, the Oklahoma Turnpike Authority, the city of Tulsa, Tulsa County, the Indian Nations Council of 

Governments, the Oklahoma Department of Transportation, and 

the Federal Highway Administration have crafted an innovative 

partnership. 

The Oklahoma Turnpike Authority will leverage the investment 

and work that has been accomplished to construct the Gilcrease 

Expressway segment as a federalized toll facility. It is anticipated 

that OTA will develop a process to solicit interest from potential 

third party contractors and investors in a delimited public-private 

partnership. 

The proposed partnership will share only in the cost of construction which will be partially offset with a defined cash contribution 

from the OTA and from the sale of GARVEE bonds. 

While many variables with the Gilcrease project are yet to be 

solved, it is evident that a variety of funding and financing methodologies can be combined and leveraged to successfully and quickly deliver transportation improvement projects that might not be financially viable otherwise. 

Innovation to address well defined transportation system needs, 

and in turn generate a user specific revenue stream in order to finance or partially finance construction, operation, and maintenance 

should be enhanced in the Federal program and should not be unnecessarily restricted. 

In conclusion, any proposed Federal infrastructure initiative 

seeking to attract private sector investment must be flexible 

enough to equitably accommodate potential projects in all stages of 

completion and in all types and sizes, not just mega-projects. Likewise, State and national tolling strategies should be supported and 

enhanced for the future. 

Mr. Chairman and members, thank you again for the opportunity 

to visit with you today, and I will be happy to try and answer any 

questions you may have. 

[The prepared statement of Mr. Gatz follows:] 

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Senator INHOFE. Thank you, Mr. Gatz. 

Mr. Yarema, I appreciate your being here today. You are recognized. 

STATEMENT OF GEOFFREY S. YAREMA, 

PARTNER, NOSSAMAN LLP 

Mr. YAREMA. Chairman Inhofe, Ranking Member Cardin, Ranking Member Carper, and members of the Committee, thank you for 

inviting me to testify today. 

My name is Geoff Yarema. I am a lawyer and partner at the 

Nossaman law firm. 

My testimony today reflects a long career advising State and regional governments across the country in more than $40 billion of 

infrastructure projects and in my service on the bipartisan congressionally mandated National Surface Transportation Infrastructure 

Financing Commission. 

As our commission reported, the nation faces a crisis. Our surface transportation system has deteriorated to such a degree that 

our safety, economic competitiveness, and quality of life are at risk. 

That view remains true today. 

Thanks largely to this Committee’s action, and Mr. Chairman, to 

your leadership in particular, the last two authorization bills represent real progress. There is still much work to do, however, 

which is why we are all here today collectively determined to seize 

the opportunity. 

If we are to remain the leader of the global economy, we must 

have, as Chairman Barrasso has repeatedly called for, a significant 

supplement to existing Federal infrastructure spending. 

Today, I would like to focus on the important question of how to 

spend any newly secured discretionary funds in the most impactful 

way possible. By working together, Congress and the Administration can achieve this paradigm shift through what Mayor Garcetti 

has called the Infrastructure Incentives Initiative or I3. 

I3 would expend new discretionary resources expressly to serve 

four outcomes. First would be creating significant leverage by 

incentivizing government infrastructure owners to secure and commit their own revenue measures and project revenues beyond historical Federal-State funding splits. 

Second is assuring long term performance of new capital improvements by incentivizing owners to achieve life cycle cost efficiencies and avoiding any further deferred maintenance. 

Third is modernizing business practices by incentivizing owners 

to update procurement policies to better capture the best of private 

sector capabilities. 

Finally would be incorporating rapidly evolving technology by 

incentivizing infrastructure owners to design their spending programs to maximize innovation. 

Applying these principles to the allocation of new Federal funds 

would move the Federal Government away from selecting what it 

deems to be the most worthy projects and move it toward spurring 

its non-Federal partners to achieve better, long term infrastructure 

outcomes and permanent program-wide enhancements. 

30 

I3 can be scaled to match whatever size funding program is created, can be adapted to all government owner infrastructure classes, and can be designed to benefit rural as well as urban areas. 

The recent State gas tax increases in Wyoming, Iowa, Idaho, Nebraska, Georgia, Vermont, Tennessee, and Indiana stand alongside 

Measure M in Los Angeles, Proposition 1 in Austin, Texas and 

Sound Transit 3 in Seattle to demonstrate how rural and urban regions alike can generate billions of self-help dollars as supplemental transportation investment. These results are entirely 

replicable around the country with the right Federal incentives. 

Funding is only part of the solution, however. We need better outcomes from long term maintenance technology and procurement 

practices. 

In conclusion, I3 would have our nation be more ambitious for 

the outcome of its hard fought infrastructure investment than just 

to fund a federally selected basket of shiny new projects or add 

more to highway apportionment. 

It would expressly urge every State and city with major infrastructure challenges to partner more aggressively in exchange for 

new funding. That partnership would result in outsized program 

responses with each area around the country selecting for itself 

what kind of self-help leverage to commit, what projects are most 

worthy of completion, and the types of procurement models to use. 

The result would be a lasting paradigm shift in the Federal, 

State, local, and private infrastructure partnership. 

Thank you for your attention. I stand ready to assist the Committee as it pursues its legislative efforts. 

[The prepared statement of Mr. Yarema follows:] 

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Senator INHOFE. Thank you, Mr. Yarema. 

Mr. DeGood. 

STATEMENT OF KEVIN DEGOOD, DIRECTOR, INFRASTRUCTURE POLICY, CENTER FOR AMERICAN PROGRESS 

Mr. DEGOOD. Thank you, Chairman Inhofe, Ranking Member 

Cardin, and members of the Committee, for inviting me to testify. 

It is an honor to contribute to this Committee’s work. 

Transportation infrastructure is essential to our economy and 

local communities. Unfortunately, public investment has not kept 

pace with overall needs. As a result, the United States faces a well 

documented infrastructure backlog. 

Throughout the presidential campaign, Donald Trump repeatedly 

vowed to spend $1 trillion to rebuild America’s infrastructure. Unfortunately, this promise has given way to a call for State and local 

governments to ‘‘maximize leverage’’ through public-private partnerships, or P3s. 

At their core, public-private partnerships are an alternative 

method of procurement. Importantly, P3s are not a means of closing the infrastructure gap. The binding constraint facing State and 

local governments is insufficient tax revenue, not a lack of access 

to financing. Let me say that again. The binding constraint facing 

State and local governments is insufficient tax revenue. Public-private partnerships and tax credits do not solve this problem. 

Instead, the true value of P3s is risk transference. Unlike traditional procurement models, P3 allow the State to draft a contract 

that shifts the responsibility for delivering a large, complex project 

on time and on budget to a private entity. 

This transference does not come cheaply as the private companies rightly demand a premium price for assuming the project 

risks. Proponents of P3s talk about the need to get private capital 

‘‘off the sidelines.’’ This assumes project sponsors face capital scarcity. This is simply wrong. 

The municipal bond market is robust with more than $3.8 trillion 

in outstanding issuances and a strong appetite for new offerings. 

Additionally, the TIFIA Loan Program, run by USDOT, offers flexible, low cost financing to project sponsors. 

The current interest rate on municipal bonds with an AAA rating 

over 30 years is only 3 percent. By comparison, equity investors 

look for annual returns of between 10 and 15 percent. This raises 

costs significantly. 

For instance, the financing charge on $100 million of municipal 

debt at 3 percent over 30 years is just $90 million. Over the same 

period, $100 million in private equity capital at 15 percent has a 

finance charge of $450 million. 

Even factoring in the Trump administration’s plan to offer investors tax credits, equity capital is still vastly more expensive than 

municipal debt. 

Additionally, P3s have very limited applicability. The average 

cost of highway P3s with a TIFIA loan and equity capital is $1.28 

billion. However, maintenance and incremental expansion projects 

represent the majority of the infrastructure needed across the 

country. 

40 

For example, for the 1,657 highway projects included in the State 

of Ohio’s transportation program, only two have a cost of over $1 

billion and another six a cost of more than $200 million. The average project cost in Ohio is just $9 million. 

The lesson is that outside of urban mega-projects, public-private 

partnerships have little value. For rural communities, small towns, 

and economically struggling urban areas, an infrastructure plan 

based on tax credits is the same as no plan at all. 

Wall Street is eager to see more P3s. A 2015 report by UBS sums 

up the attraction. ‘‘The high barriers to entry and the monopoly 

like characteristics of typical infrastructure assets mean their financial performance should not be as sensitive to the economic 

cycle as many other asset classes.’’ 

In other words, highways behave like a utility but without price 

regulations. Even this is often not sufficient to defend against future competition; many private firms push for non-compete clauses. 

These contractual provisions are intended to keep the private firm 

financially whole. 

A non-compete clause often includes a specific list of parallel facilities that the State may not expand or otherwise improve. If the 

State chooses to make improvements to a listed facility, it must 

provide a payment to compensate the private firm for their estimated loss revenue. 

These provisions are deeply problematic as they offer private 

firms a degree of guaranteed profitability that does not exist anywhere else in the marketplace. 

Finally, in recent weeks, the Trump administration has pushed 

for ‘‘asset recycling.’’ This is a new term of art for brownfield lease 

transactions. In a typical lease deal, a State or local government 

receives an up front payment from a private firm. In return, that 

firm has the right to collect a stream of user fee revenues over the 

life of the agreement. 

These deals are presented as a source of new revenue. In reality, 

they are an expensive loan that comes with contract terms often 

harmful to the public. For example, in 2008 the city of Chicago 

leased its parking meters for 75 years in exchange for an up front 

payment of $1.15 billion or 20 percent of its 2008 budget. 

As result, the city is substantially constrained in how it may 

manage its roadways, including making it more difficult to make 

improvements to public transportation service. If the city had simply issued municipal debt to generate these funds, residents would 

face lower parking fees, and the city would have the freedom to 

grow and change without the contractual limitations. 

This deal, like other asset leases, was a cash grab under the 

guise of innovation that the public must live with for many decades 

to come. 

In conclusion, there are no shortcuts to rebuilding America’s infrastructure. The Federal Government needs to provide direct funding to State and local project sponsors. Furthermore, these funds 

should be targeted to those communities facing the greatest need 

and the highest level of economic hardship. 

Thank you again for the opportunity to address this Committee. 

[The prepared statement of Mr. DeGood follows:] 

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Senator INHOFE. Thank you, Mr. DeGood. 

Secretary Layne, you are recognized. 

STATEMENT OF AUBREY L. LAYNE, JR., SECRETARY OF 

TRANSPORTATION, COMMONWEALTH OF VIRGINIA 

Mr. LAYNE. Thank you very much, Chairman Inhofe, Ranking 

Member Cardin, and other members of the Subcommittee. Thank 

you for the opportunity to testify today. 

My name is Aubrey Layne. I am the Secretary of Transportation 

for the Commonwealth of Virginia. My testimony today will focus 

on my personal experience with public-private partnerships, or P3s, 

throughout my professional career. 

These deals have been praised in some circles as the solution to 

all our transportation problems and condemned in others as a corporate giveaway. The truth is much more complex and ultimately 

dependent on the nature of the project and the degree to which the 

government officials understand how these deals work and how to 

protect taxpayers. 

I have had a 30 year business career of running large operational 

companies. I have a degree in accounting and a Master’s in Business Administration. I began my career as an auditor in the CPA 

for KPMG and finished as the president of a large real estate company. 

As Secretary of Transportation, I oversee seven transportation 

agencies that employ more than 10,000 staff and have a combined 

annual budget of over $6 billion. 

The toughest issues I face today involve funding projects, not engineering or environmental problems. That means I spend most of 

my time on resource allocation, financing, risk assessment, and operations. 

Fortunately, my past experience provides me with a foundation 

and knowledge for financing large scale construction deals. 

Public-private partnerships are complex transactions that can 

have significant implications for the public. It is important that we 

all understand them. Before I get into that, I, first, want to be clear 

that financing, whether public or private, helps leverage resources, 

but it is not a replacement for sustainable and stable public funding. 

The priority for Congress should be addressing the long term solvency of the Federal Highway Trust Program, fund growth in the 

program, and helping States fund our transportation needs regardless of mode. 

In Virginia, we have relied on several guiding principles regarding public-private partnerships. Our fiduciary responsibility is to 

the taxpayers. We need to deliver the best results for them. 

P3s are a helpful procurement tool where appropriate and when 

negotiated well. Government officials should consider all options, 

including public finance, before making decisions. We must ensure 

competition throughout the process. We must be transparent and 

accountable to the public and elected officials. 

I am an unabashed capitalist and a big believer in private industry. This belief is premised on true free market competition. Both 

parties entering a P3 must have a full understanding of the issues 

being negotiated. Unfortunately, that is not always the case. 

47 

Our Commonwealth has long been recognized as a leader in P3s. 

Since 2007 we have closed five concession deals that transfer risk 

to the private sector. Collectively, these deals are worth more than 

$9 billion, more than $2.5 billion coming from private equity and 

approximately, $1 billion in public funds and the remaining from 

privately backed debt. 

In addition, we are currently negotiating a P3 contract for $1 billion in improvements right here in the I–95/I–395 corridor. 

As I stated before, P3s are complex business transactions that 

are unlike any transaction in which a State DOT is typically involved. First, P3s are typically long in nature, long contracts. Normal transportation contracts expire when construction is done after 

a limited number of years. 

This provides the opportunity to evaluate outcomes, and if necessary, officials can make changes. This is not true with a 50 year 

P3 concession contract with a private partner. Changes can often 

result in compensation to the private party. Getting these deals 

wrong can be very costly. 

These deals also can be some of the largest projects, as we have 

heard in previous testimony. The average P3 deal in Virginia is 

$1.8 billion compared with an average contract value of less than 

$3 million. 

For these reasons, it is imperative that decisionmakers understand the fiduciary responsibility of each party involved. The private sector is responsible to its shareholders and its investors. The 

public sector needs to make sure the public’s interest is protected 

and advanced. The hard part is to see where these interests lie. 

In 2015 Governor McAuliffe asked me to evaluate our P3 program. We were not getting the results we wanted. In fact, we had 

some pretty tough deals that were negotiated. I found out that 

these deals were not made with transparency and accountability, 

so we decided to start from scratch. 

What we found is the best way to protect the taxpayer is to make 

sure the private sector has to compete. We do not want to give anything away which means they need to beat our bottom line. 

We lay out our major business terms, what we want to accomplish, and we develop the public option. We do not go it alone; we 

have a steering committee to help us evaluate this. Then and only 

then if it makes sense do we invite the public and the private sector to compete along with us. If the private sector can beat our public option, then we enter into a P3 process. 

It is important to note that we never take the public option off 

the table. This has worked very well for us in Virginia with our I– 

66 deal that we just did, a $3.1 billion deal. We ended up doing 

it with no public subsidy and an additional $500 million paid as 

a concession payment to the State up front. 

This is not free money. This is how the public toll funds will be 

used. This new process considers that users’ fees benefit taxpayers. 

As you guys consider—as Congress considers potential infrastructure packages, I would strongly urge members to be careful 

not to create unintended consequences through new incentives for 

P3s. 

48 

Many of the concepts being considered would provide incentives 

only available if a project is privately financed. This can undercut 

the published negotiating position. 

In closing, P3s have real promise to address certain transportation projects, but according to FHWA, there are only 42 surface 

transportation projects across the country that involve private financing and 60 percent in five States: Virginia, Texas, Florida, 

California, and Colorado. Thirty-five States have never entered a 

single transaction involving private financing. 

I would encourage Congress to ask two questions if we consider 

incentives. How will it help deliver the best deal for taxpayers and 

whether it will create distortions that will hurt the public negotiating position. 

I have one last closing comment. I know you will hear a lot of 

people say there are a lot of barriers to P3s, but I strongly disagree. These are the same people who said, when we reformed our 

program, that it would kill it. It turned out that just was not true. 

Thank you very much for the opportunity to testify. 

[The prepared statement of Mr. Layne follows:] 

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Senator INHOFE. Thank you very much, Secretary Layne. 

Let us start with Director Gatz. You did not say much about the 

Driving Forward Program, the projects it would cover and why we 

developed this plan in our State of Oklahoma. 

Mr. GATZ. Mr. Chairman, the Driving Forward Program really 

consists of two parts. There are three projects that represent major 

reinvestment in our existing toll network to make sure it stays in 

good operational condition. 

One of those is a six lane project that is about 22 miles on the 

east end of the Turner Turnpike in Tulsa. The other in the Tulsa 

area that is an expansion project is the Gilcrease that I discussed 

in my testimony. In the Oklahoma City metropolitan area, in our 

efforts to try to continue to manage increasing traffic volumes and 

make sure we can continue to move people, goods, and services, we 

are expanding the John Kilpatrick Turnpike on the southwest side 

of Oklahoma City and introducing a new reliever route between 

Interstate 40 and Interstate 44, the Turner Turnpike in eastern 

Oklahoma County. 

Again, those expansion projects are really being predicated on developing congestion in the metropolitan areas and the increase in 

accidents we see occurring as a result of that. That is our effort to 

stay ahead of it, Mr. Chairman. 

Senator INHOFE. Thank you. 

Mr. Yarema, you heard the attacks on P3s. It has been my experience in conversations I have had with our new President that everything is on the table. It is going to take a lot of imagination, 

a lot of hard work, experience, and gifted people, and I would hesitate taking anything off the table. Is there anything you would like 

to say after the attack on P3s, your feelings about them? 

Mr. YAREMA. Thank you, Mr. Chairman. 

I do not know that I would serious disagreement with what has 

been said. I agree with others and with you that P3s are not anymore a silver bullet to solve the big infrastructure challenges we 

have than conventional delivery is. We have problems with every 

delivery device. 

They do not produce new funding. That should not be the purpose of P3s. They are much more than financing devices; they are 

effective project delivery mechanisms in the right circumstances. 

I believe there is too narrow an understanding of what that term 

applies to and the potential value they offer to both urban and 

rural areas. There are two main types of P3s: those that require 

revenue streams and those that do not. 

Most commentators focus on the P3s that require revenue 

streams, like toll roads and manage lanes. These do raise the 

issues about rate setting and non-compete clauses and the limits 

on potential future activity by State DOTs. 

The other type of P3, known as an availability payment contract 

or performance contract, raises none of those issues. It does not involve toll revenues. In fact, it is the most common type of P3 in 

the U.S. and the global market today, but it is not widely appreciated. 

If I could, I would take just a second to explain the performance 

P3. It offers a different value proposition than conventional delivery. With conventional delivery, a State DOT or a regional transit 

68 

agency tells a contractor not just what to do but how to do it. It 

compensates for the resulting work on a progress basis, and there 

is no warranty generally for the outcome. 

With a performance P3, you compensate the contractor only for 

the infrastructure performance over its useful life. It is akin to a 

super-warranty. The government generally makes no payments 

until the project is complete, and then the payments over the life 

of the project are subject to adjustment downward to the extent the 

infrastructure underperforms. 

The tool ensures that companies that design and build a project 

are on the hook for the long term infrastructure performance; they 

are required to bid life cycle costs, and they reward the contractor 

for innovative solutions. 

There is strong competition and rigorous bidding for these kinds 

of contracts. There are numerous examples in this country: the 

Ohio River bridges in Indiana, the Purple Line in Maryland, three 

major projects in Florida, and the Los Angeles World Airport is delivering $4 billion worth of these kinds of contracts today for its 

major project, just as examples. 

I respectfully suggest that the outcomes that an availability payment or performance payment P3 can produce are just as valuable 

in a rural setting as they would be in an urban contracting environment. 

Senator INHOFE. Thank you, Mr. Yarema. I appreciate that clarification. 

Senator Carper. 

Senator CARPER. Thank you, Mr. Chairman. 

Again, welcome and thank you for your testimony which I think, 

for the most part, is illuminating. Tomorrow we are going to hold 

another hearing in this room, and the witness will be the Secretary 

of Transportation, Elaine Chao. 

I met with her several weeks ago and had a good meeting. One 

of the questions I asked of her was what do you think the Administration would like to do to fund transportation projects? I am a believer that if things are worth having, they are worth paying for. 

I also believe that a basic underlying concept for building transportation projects is those who use them, people and businesses help 

pay for them. That is sort of where I come from, Danville and Roanoke, Virginia, Mr. Secretary. 

The Secretary will be sitting tomorrow where you are. Just kind 

of lift yourself out of your chair and put yourselves up here with 

us, and it is tomorrow. You are here to give her advice on how to 

fund transportation projects. 

She seemed to think public-private partnerships made a lot of 

sense. I explained to her that I think in the last I do not know how 

many years, but for a number of years, if you add them all up, 

there are maybe 40 or 50. There are big ones; some are really big. 

There are several you said, but there is just not that many of them. 

What advice would you give her? Start, if you could, with our 

friend from Oklahoma, Tim Gatz. 

Tim Gatz, keep it within a minute. What advice would you give 

her for funding? 

Mr. GATZ. I think the most important thing is to understand 

there is going to have to be a lot of tools in our infrastructure toolVerDate Aug 31 2005 13:56 Dec 01, 2017 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6633 S:\_EPW\DOCS\27297.TXT SONYA
69 

box. It is going to take a healthy combination of revenue and financing mechanisms. 

I think with public-private partnerships, we have to explore innovation that will begin to allow some of the smaller projects—but 

not the billion dollar projects—to potentially take advantage of 

those opportunities. 

I think, again, as stated many times here in the Committee 

meeting today, it is going to take a lot of BBs to be able to make 

that happen. 

Senator CARPER. Not a lot of silver bullets but a lot of silver BBs. 

Mr. Yarema, what advice would you give the Secretary for funding transportation? 

Mr. YAREMA. No. 1, leave existing programs in place. No. 2, find 

$200 billion in new funding for infrastructure. Allocate $100 billion 

of that to surface transportation, and then create the Infrastructure Incentive Initiative Program, I3, so you take that $100 billion, 

and you are able to leverage it into significantly more funding. 

You are able to find the efficiencies that life cycle cost approach 

delivery gives you, the efficiencies that modernizing business practices gives you, and the efficiencies that technology gives you. Then 

you can get a 5 to 7 times multiple in total infrastructure outcomes. 

Senator CARPER. Thanks so much. 

Mr. DeGood. 

Mr. DEGOOD. Thank you. 

I think the No. 1 piece of advice I would give is that we have 

a longstanding tradition of a user pays model of infrastructure finance for most infrastructure sectors. That has served us incredibly 

well. 

I think unfortunately for a number of political reasons, we have 

drifted away from that, and it has made the political lift for members to try to find offsets to continue to fill the Trust Fund increasingly difficult. As that number grows with each successive round 

and surface bill, it gets harder and harder. 

I would think that we need to look at those sectors, whether 

ports, inland waterways, aviation, and surface transportation 

where we have a user fee structure in place and try to raise those 

fees to match inflation over the years where we have not. 

Senator CARPER. Thank you. 

Secretary Layne. 

Mr. LAYNE. First of all, I would echo the current funding programs in place like Fast Lane, because P3s are a financing alternative, not a funding alternative. 

In terms of P3s, I want to make it clear. I am a big believer in 

them. I just think you need to understand the two different types 

of risk and how they need to be negotiated. I believe that is a pretty steep learning curve in some of the States in terms of how to 

evaluate construction, operational and particularly financial risk. 

When you talk about concessions, that is truly the risk you are 

trying to pass on. If you think about equity, in any deal you do, 

that is the most significant and most costly part of the capital 

stream in terms of that. 

70 

Quite frankly, it has been attracted because of the low interest 

public debt programs that are out there. That is what has really 

enticed many of them to invest. 

I would certainly encourage the Secretary, if we are going to continue that, to have some type of programs to help States gear up 

for the use of these tools. Certainly I believe outcome based results 

are needed. In the Commonwealth of Virginia, we prioritize now, 

with our limited resources, through a process we call Smart Scale. 

It is based on outcomes, not so much inputs but outcomes. Are we 

reducing congestion using land use? 

I have found in my professional career the better way to get 

more money is to use what you have more effectively and more efficiently. Certainly, I think a prioritization program along with that 

would be shortening the periods of environmental work and what 

is needed and helping these projects come to fruition. 

That would be my advice to the Secretary. 

Senator CARPER. Thanks so much. We will see you tomorrow. 

Senator INHOFE. Senator Fischer. 

Senator FISCHER. Thank you, Mr. Chairman. 

Like many of my colleagues, I believe in the importance of funding our nation’s infrastructure. Reliable infrastructure represents a 

critical investment in advancing safety and also commerce. 

The Highway Trust Fund has served to equitably distribute 

funds to all States, rural and urban, and is the lynchpin of our 

transportation system. As many of you are aware, we are looking 

at a shortfall of over $100 billion that we will face in the 5 years 

following the FAST Act. I happen to have a bill that will handle 

that, Mr. Chairman. 

However, Mr. Gatz, can you elaborate on how important it is 

that we have certainty in the formula funding to your State’s 

transportation systems? When it comes to maintaining our roads 

and bridges, is there really any substitute to that critical apportioned funding that we have? 

Mr. GATZ. Senator, I would tell you in many cases, there is no 

substitute, there is no alternative, especially for a State like Oklahoma. We have to have funding to be able to maintain the system 

that we have. 

Again, it is all predicated on inspection, understanding what our 

needs are, and then having a very carefully crafted investment 

strategy to meet those needs. That investment strategy is fiscally 

constrained based on what resources we believe we are going to 

have available. 

Again, there will have to be continued investment at the Federal 

level to be able to manage our infrastructure for the future. 

Senator FISCHER. I like that you used the term ‘‘investment’’ because that is what this is. It is not going to be a stimulus; it is not 

really job creation, but it is an investment in the future. When you 

look at the strategy for that investment, it really, I believe, needs 

to take place at the State and local levels so you can have those 

stakeholders come together and decide on the priorities that meet 

that strategy you are looking at for your State. Do you agree with 

that? 

Mr. GATZ. I would agree. The States are typically held accountable by the folks that reside in those States. Again, we are reVerDate Aug 31 2005 13:56 Dec 01, 2017 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 S:\_EPW\DOCS\27297.TXT SONYA
71 

sponding. We have a responsibility to those constituents to be able 

to explain our investment strategy and make sure they understand 

how we are reinvesting in the network to make sure its operationally as good as it can be. 

Senator FISCHER. It is important to involve constituents and the 

people in our States in these decisions. 

Mr. GATZ. Absolutely. 

Senator FISCHER. Mr. Yarema, you talked about evaluating infrastructure investments based on their performance. Can you elaborate on what performance based standards would look like? Do you 

believe these could be applied to publicly funded projects? 

Mr. YAREMA. I would be happy to. In an availability payment P3 

or a performance P3, in a conventional project, the Government basically comes up with standards and specifications that it applies 

prospectively where they serve as a proxy for outcomes they want 

to achieve. They mandate how a project is to be built, the manner 

in which it is to be built, and the means in which it is to be built. 

In a performance based P3, the contractor is held to contractual 

requirements of the infrastructure’s long term performance. They 

are only paid to the extent that performance is actually retrospectively secured. 

By performance, we mean that the infrastructure is available, it 

is safe, it is meeting all of its maintenance criteria, and on many 

other standards set forth, and it is potentially applicable to apply 

environmental standards. 

Under NEPA and in Federal permits, there is a need to have 

mitigation requirements, but whether those mitigation requirements actually achieve the desired environmental outcomes is speculative. If it is applied in a performance contract, it is contractually 

required. 

That is the difference in a P3 environment as opposed to a conventional contracting environment. 

Senator FISCHER. Thank you. 

Secretary Layne, the FAST Act requires States to develop freight 

plans in order to receive Federal funding. My State, Nebraska, is 

in the process of developing a very comprehensive freight plan. 

Can you talk about the importance of ensuring we have a thorough strategy to address the growing movement of freight across 

this country? 

Mr. LAYNE. Yes. Thank you very much for the opportunity to respond to that. 

We, in Virginia, just received one of the largest FAST lane grants 

for our Atlantic Gateway project, a $1.4 billion project, between 

Richmond and the I–95 corridor up to northern Virginia. 

It consists of $1.4 billion, $165 million in a Federal grant, but 

supported by $565 million of private investment and $710 million 

coming from the State of Virginia to deliver these projects. A big 

part of that was freight. 

We teamed with our partner, CSX, one of the most congested 

freightways in the country. It is very important not only for freight 

but passenger traffic. We certainly support the Port of Virginia 

having double stacked trains coming up through that corridor. 

Having a freight program is actually helping not only freight, but 

other modes of transportation, taking people off the highway by alVerDate Aug 31 2005 13:56 Dec 01, 2017 Jkt 000000 PO 00000 Frm 00075 Fmt 6633 Sfmt 6633 S:\_EPW\DOCS\27297.TXT SONYA
72 

lowing passenger trains. The freight improvements also helped our 

passenger movements. 

Senator FISCHER. That intermodal connection is very, very important. I am glad to hear you are doing that. 

Mr. LAYNE. Yes, it is extremely important. 

Senator FISCHER. Thank you. 

Thank you, Mr. Chairman. 

Senator INHOFE. Thank you, Senator Fischer. 

Senator Duckworth. 

Senator DUCKWORTH. I thank the Ranking Member, and I thank 

the gentleman from Rhode Island for his generosity. I want to 

thank our witnesses for participating in this very important conversation. 

Mr. DeGood, the details of the President’s $1 trillion infrastructure investments are still unavailable to anyone outside of the Administration. However, his budget blueprint reduces transportation 

funding in very troubling ways. 

What little we know about the President’s plan suggests that 

there is actually no trillion dollar investment. Rather, he will rely 

on financing gimmicks that have limited applicability in most of 

the country. 

I tend to agree with your view that financing mechanisms are 

mostly limited to urban and mega-project applications. Your testimony suggests that the real constraint facing State and local government is lack of actual dollars, not a lack of access to financing 

markets. Would this be a correct assessment of your testimony? 

Mr. DEGOOD. Absolutely, and I think one of the more disappointing aspects that so much of the conversation from this Administration has been around the possibility of tax credits for equity investors, which I think is both a huge addition to the budget 

deficit if it were enacted, and also does not really deliver the benefits communities need. We need to get dollars into the hands of 

project sponsors. 

I think one of the things unappreciated about this tax credit program is that, for the most part, it is not something investors are 

looking for. In my conversations with folks in Wall Street firms, 

they have repeatedly said to me people bring us money because 

they want it put into projects and want it earning a return. What 

we do not need is 82 cents back on the dollar. 

I think if Congress were to move forward with this sort of tax 

credit scheme, we would see it have almost no net effect on overall 

construction, and it would deliver almost no benefits to the vast 

majority of communities out there. 

We need to bring Federal dollars to the table. I think there is a 

certain virtuous cycle from that which is when State and local officials know the Federal Government is acting as a partner, they are 

more likely to take on that political risk to go out and raise their 

own dollars. 

Senator DUCKWORTH. Otherwise there is an interesting history 

with public-private partnerships. The CREATE Program in Chicago, which is a partnership between the Federal Government, the 

State of Illinois, the city, and the freight rail industry with their 

hard dollars, is an extremely effective and balanced effort to address Chicago’s freight rail challenges. 

73 

In fact, the nation’s freight rail challenge is a logjam there in 

Chicago, but it is not a traditional P3 mechanism. It does not shift 

risk from one entity to another. However, Chicago’s parking meter 

and Skyway deals highlight how difficult it can be to evaluate public assets to ensure taxpayers get a good deal. 

All of these examples are in the context of a challenge of large 

urban infrastructure. I am interested in learning more about opportunities for rural communities. What financing opportunities are 

best suited for rural communities where access to private investment is limited, Mr. DeGood? 

Mr. DEGOOD. I think one of the potential benefits for rural communities in this conversation about public-private partnerships is 

that any urban mega-project that is sort of taken care of as a result 

of a P3 can free up dollars that the State has, general tax dollars 

that the State has to do smaller projects that just do not fit with 

that kind of procurement and financing model. 

I think it is important for us to be sensitive to the fact that rural 

communities and small towns just do not have the same tax base. 

They also do not have the same ability to generate user fees because there is less travel demand on the roadways. 

No matter what plan we come up with, we have to make sure 

to set aside an appropriate amount of money for rural communities 

and recognize their unique needs. 

Senator DUCKWORTH. Thank you. 

Secretary Layne, as you noted, most public assets are owned by 

State and local jurisdictions. I am concerned about the ability of 

States and local governments to assess and implement complex financing opportunities and also protect local taxpayers at the same 

time. 

As your testimony suggests, VDOT’s I–66 expansion project could 

have gone down a very long path due to an original analysis that 

was flawed. Relying on that original analysis would likely have led 

to a very bad deal for Virginia taxpayers. 

Secretary Layne, how can States and municipalities avoid similar 

circumstances? How can we better prepare to assess complex financial deals that ensure taxpayers get the best deal? What can the 

Federal Government do to help in this effort? 

Mr. LAYNE. Senator, I do agree with that assessment. When we 

came into office, the analysis that was put forth by the department 

suggested that we were going to need $1 billion in public subsidy. 

It was not going to support any multimodal solutions in the area 

or additional improvements. 

What we did, which I think is the key going forward, was to develop the public option. If you are going to negotiate with a third 

party, you need to understand what it is going to cost you before 

you begin negotiating. We did our public option. We said it would only take $600 million in public subsidy and substantial moneys, over $800 million for 

multimodal improvements. As it turned out, true competition, that 

is the other key besides having a public option on the table, is what 

resulted in the great deal for taxpayers. 

Unless you have true price discovery, which is through competition, you cannot determine what actually has a bidder to make an 

offer. It could be other factors other than the deal, competition, a 

74 

competitor being in control of the whole market, maybe a lower 

cost to capital that we do in the United States. These are big multinational companies. 

The two things we can do to help the States negotiate these deals 

is have a public option and have true competition. I believe the 

Federal Government, in helping that, could help us educate the 

States in how we go forward. 

Let me push back on one thing. Every P3 does have a revenue 

stream. Availability payments do not have a specific one connected 

to a project, but it still has to be a revenue stream. How else are 

you going to pay back the third parties? 

There is some value for money or the options given up if that 

money is used for something else already. In the State of Virginia, 

that would be considered debt because if we do not pay for a project 

within our construction period, it is considered debt. 

I do think availability payments do help in some areas in that, 

but they are dedicating a revenue stream that could go somewhere 

else. There are some lost opportunities in those investments. 

Those are the things I would say, the public option and having 

true competition in these deals. 

Senator DUCKWORTH. Thank you. 

Senator INHOFE. Thank you, Senator Duckworth. 

Senator Ernst. 

Senator ERNST. Thank you, Mr. Chairman. 

Republicans and Democrats are often at odds over a number of 

things, but when it comes to infrastructure, we generally have bipartisan agreement. That gives me hope. I think coming up this 

year, really the Federal Government does have a very important 

role to play in this issue. 

Along with ensuring our national defense, which I think is very 

important, I believe building and maintaining our nation’s infrastructure should also be a top priority for our Federal Government. 

Director Gatz, you have served at the Oklahoma Turnpike Authority for nearly 30 years. Thank you very much for your service. 

In your testimony, you stated, ‘‘Until recently, no public-private 

partnership opportunities really made sense for Oklahoma.’’ Oklahoma has almost 1 million more people than the State of Iowa. Its 

largest metro area in Oklahoma, Oklahoma City, has more than 

twice the population of our capital city of Des Moines. 

If to this point, a public-private partnership has not worked for 

Oklahoma, under what circumstance do you see a public-private 

partnership working for the State of Iowa? 

Mr. GATZ. Thank you for the question, Senator. 

I think as much as we have engaged in discussions with a lot of 

different governmental partners, whether that be the city of Tulsa, 

the Oklahoma Department of Transportation, Tulsa County, and 

others, on the Gilcrease Project, we are trying to find ways to leverage resources in a project of some size but certainly not a megaproject, to be able to create an opportunity for a private party to 

come in and help with only the construction of that project. 

Again, we think we can create a very competitive environment 

that would facilitate that investment. It is a bit unique. Again, we 

have some question marks we are going to have to resolve, but we 

75 

simply—I would say that Iowa has, have never had the right 

project to be able to try to accomplish this. 

Quite frankly, we have been talking about the Gilcrease expansion now for about 9 years with these partners. We are only now 

to a point where we feel we have an opportunity to move forward 

with it. 

Senator ERNST. Every circumstance is very, very different, and 

making sure it is not one size fits all, I think is really important. 

I thought it was interesting that Mayor Garcetti mentioned Los 

Angeles and their county of 10 million people. My county back 

home, Montgomery County, is 10,000 people, very different circumstances. 

Director Gatz, you also mentioned in your testimony that tolling 

should be recognized as a long term and sustainable transportation 

revenue mechanism. My concerns with tolling are a couple different 

points. 

One is how many roads are we going to toll, and at what point 

do we start inhibiting movement of travelers? This is very true in 

those rural areas. Oklahoma has the same minimal rural areas 

where the tax base is really pretty low, and every penny, of course, 

in those families’ budgets count. 

Second, wouldn’t we be forcing people to go off onto those secondary roads that maybe have not been built for heavy traffic? 

Mr. GATZ. Most importantly, I think you have to have a very 

careful vetting process in place to make a decision about tolling. It 

cannot be arbitrary. Again, where you have critical transportation 

needs that are developing that are simply otherwise going to go 

unmet without a resource commitment, certainly with a lack of traditional transportation investment revenue streams, we think that 

tolling is a viable option. 

In Oklahoma, that is how we have used tolling, where we have 

had critical needs that we see all the indicators developing, whether that is accidents, congestion, access issues. We have been able 

to invest and use toll roads to meet those needs and have been 

pretty successful in doing that. 

Again, that cannot be arbitrary. You have to have the right set 

of circumstances and very careful consideration and vetting. 

Senator ERNST. I appreciate that. Again, the one size for all does 

not fit all kind of approach and thorough vetting. Thank you very 

much. 

Thank you to all our witnesses. 

Thank you, Mr. Chairman. 

Senator INHOFE. Thank you, Senator Ernst. 

Senator Whitehouse. 

Senator WHITEHOUSE. Thank you, Mr. Chairman. 

I am actually optimistic and hopeful that we are going to be able 

to get something done on infrastructure. You have been a great 

Chairman on infrastructure projects before. We have worked in terrific bipartisan fashion. We do not always agree on everything, but 

I think this is a great place to get things done. 

First all, thank you for that, Mr. Chairman. 

Secretary Layne, although it is not one size fits all, although you 

have to be able to adapt P3s to different projects, are there certain 

red flags that we should look out for that should ordinarily be a 

76 

warning sign for people trying to protect the taxpayer in P3 deals? 

If there are those red flags, which ones would you highlight for us? 

Mr. LAYNE. First, let me say that you never can institutionalize 

risk. Every deal is different. For instance, here in the Commonwealth, the risk for extending new lanes on Interstate 66 in an existing right-of-way is a lot different than sticking a tube underneath the Elizabeth River for a new tunnel. 

To answer your question, it really gets down to what risks are 

in each particular project. They primarily fall into three areas: construction risk, operations risk, or financing. That is really where 

we get into the concessions, and most people think of P3s where 

we are transferring all those risk to the third parties. 

The only way I know to be able to mitigate that is to, first of all, 

understand what the project is you want built and what it would 

cost the entity that owns the project, in our case, the State, so that 

you, one, understand those risks and when you start talking about 

negotiating those risk away, what they may be a value to in terms 

of the deal. 

Senator WHITEHOUSE. There is no easy red flag. You just have 

to go in with your heads up and knowing that there are smart people on the other side who are interested in getting money out of 

taxpayers? 

Mr. LAYNE. That is correct. That is not because they are not good 

citizens. That is their fiduciary responsibility. As a trustee at a real 

estate corporation, fiduciary responsibility meant a great deal to 

who I was representing. That is what we need to understand. They 

are good citizens, but they are fiduciaries. 

One red flag that I have found, this is my first time in the public 

arena, is when you have government, particularly a Governor as 

we do, a one term Governor, standing up and saying this is the 

most important project, and I am going to deliver this project before I leave office, that undercuts the public’s ability to negotiate 

the terms of the deal. 

That would be a red flag, and my hat is off to Governor 

McAuliffe for allowing us to walk away from a bad deal. That is 

why it is important to keep the public option on the table. Not walk 

away from the project, but walk away from a bad deal. 

As I said, I was, in the private sector, an unabashed capitalist 

and believe in private industry, but you do understand where the 

fiduciary relationships are. That is what they are going to do. 

Senator WHITEHOUSE. Let me turn to another topic that I think 

also relates to Virginia. Your State is a coastal State, rather like 

Rhode Island. We are seeing very extraordinary infrastructure 

needs emerging along our coast as we are seeing very extraordinary sea level rise projections coming from our local scientists, 

national scientists, NOAA, coastal resources folks, and so forth. 

You are seeing this down at Norfolk Naval Station, which is getting all sorts of trouble. You are seeing this down at Hampton 

Roads. Are you doing anything in particular, or should we do anything in particular looking at infrastructure to address that specific 

problem of new risks to coastal infrastructure whether it is wastewater, roads, coastal defenses, or military bases? The sea does not 

like any of that very much. It takes it all over. Are you focusing 

in any particular way on that threat? 

77 

Mr. LAYNE. You are correct. It is a significant threat because it 

is not just sea level rise; the ground in those coastal areas is also 

sinking because of taking out groundwater, and they are compressing it. 

The answer is yes, but not enough. Particularly on our new 

projects, that is one part of the big scoring, the resiliency or the 

environmental impact as we develop new projects. However, we 

have also had to devote resources to what we call our State of Good 

Repair because we do have significant assets subject to that, raising the roads or whatever we have to do in those areas. It is far 

short of the needs. 

I have seen that localities have been doing much more, and we assist them. The city of Norfolk got a $100 million grant from the 

Federal Government. They have been doing a lot, and we have 

been assisting them. 

We do not have in our budget the ability to take care of all of 

the resiliency and the sea level rise impacts on the State of Virginia. 

Senator WHITEHOUSE. Thank you very much. 

Thank you for the extra 30 seconds, Mr. Chairman. 

Senator INHOFE. Thank you, Senator Whitehouse. 

Senator Cardin. 

Senator CARDIN. Thank you, Mr. Chairman. 

I really thank all the witnesses. I have found this presentation 

to be very helpful. 

I want to drill down a bit more on the recommendation that 

came in on the I3, that we change the way we configure the Federal partnership in infrastructure to reward, place an incentive for 

leveraging with either more local government support and/or private sector, which was one leg of it. 

The other two legs, I will get to in a moment, deal with technology and dealing with maintenance. I think both of those are 

very important issues we should talk about at the national level. 

Let me talk about leveraging particularly private sector because 

I thought, Mr. DeGood, you raised a very important point about accountability and so forth and private sector participation. 

Secretary Layne, I was listening to your testimony pretty carefully. I was trying to figure out where you come down on this. It 

sounds like you want to be left alone. Where you want to do publicprivate partnerships, let the States do it, but do not put any incentives or restrictions at the national level. Let the States figure it 

out. Am I reading you correctly? 

Mr. LAYNE. Yes, sir. I do believe the current tools we have in 

place, TIFIA and the Government programs, there could be things 

to enhance that. In terms of tax credits or giving some type of 

bonus for incentivizing the project be done as a public-private partnership, that puts the factors in the deal that the other side, the 

private sector, is going to know they are there, too, and they will 

figure out a way to make sure they use them and how they can 

benefit from that. 

I am not saying that is wrong, but I am pointing out you may 

not get the dollar for dollar increase the Federal Government 

would be spending, particularly in tax credits and certainly with 

the incentives in that. 

78 

Yes, we have seen no problem attracting private investment in 

the Commonwealth of Virginia for those projects that lend themselves to P3s. 

Senator CARDIN. Mr. DeGood, let me ask you a question. Is there 

anything in the current Federal authorization and implementation 

of our transportation programs that causes you heartburn as it relates to private partnerships? 

Mr. DEGOOD. I do not think there is anything in the current Federal program that gives me heartburn with respect to P3s. I think 

the biggest shortcoming is that we do not have aggressive enough 

performance metrics when it comes to holding States and metropolitan regions accountable for how they expend the vast majority 

of money which the Federal Government hands out through formulas. 

I agree with the Secretary’s point that you have to look at this 

from the perspective of performance, and that should inform your 

project selection decisions. I would also say I think we need to push 

substantially more money down to metropolitan regions. I think too 

much of the decisionmaking authority currently rests with State 

DOTs. 

I think it is a natural outcome of being a State DOT employee 

that when what you look at every day is a State highway network, 

you tend to think the solution to the State’s mobility challenges is 

going to rest with expansion of the State highway network, even 

if there are other lower cost or more environmentally sustainable 

approaches or things that just provide more transportation options 

for local families. 

I think more money to locals and more performance accountability at the State level is important. 

Senator CARDIN. That is helpful. 

In my opening statement, I strongly supported the flexibility for 

local governments. I am proud of the role that Senator Cochran 

and I played in preserving the transportation alternative programs 

with the help of this Committee so that we do have that flexibility 

under the current system. We are going to fight to maintain that. 

Let me go to the other two issues, technology and maintenance, 

which I strongly support. I think we have neglected maintenance. 

Everyone likes to cut ribbons and they do not like to preserve roads 

and bridges. 

How do we, at the national level, provide the right incentives for 

advancing technology and dealing with life cycle maintenance? 

Mr. YAREMA. I would be happy to take a crack at that. 

Again, we start with the proposal that base programs be kept in 

place and new money be handled differently. Handling it by way 

of incentives is a new way of establishing a Federal, State, local, 

and private partnership. 

One of those incentives should be preserving assets to the end of 

their life and doing effective maintenance. Let us draw a line in the 

sand and say we are not going to build anything new, we are not 

going to reconstruct anything unless we make that commitment. 

One of the ways of making sure that will take place is through 

an availability payment P3. The contract will obligate the contractor to achieve life cycle costs and useful life length by contract. 

That is a way of achieving it with certainty. 

79 

The truth about the Federal-State relationship in transportation, 

at least, is that the States and localities own the assets. The Federal role is to fund, to provide TIFIA financing, and to regulate. 

Hopefully, what we can do is add an incentive, a stronger incentive, as a Federal role as it evolves. 

Senator CARDIN. Does anyone else want to comment on that? 

Mr. LAYNE. If I may, yes. In Virginia, more than half of our 

transportation dollars, Federal and State, go to maintaining the 

roads. In fact, we just added a new law that requires 45 percent 

of our construction moneys goes into what we call State of Good 

Repair. Those assets that you cannot pave anymore or just paved, 

you have to rebuild them, but you are not adding capacity. 

Senator CARDIN. Is there something we can do at the national 

level to encourage States to meet their commitments on life cycles? 

Mr. LAYNE. You can probably tell I am not an engineer. I am not 

enlightened or encumbered by that degree. I look at things from a 

logistical standpoint or from a pragmatic business perspective. 

Certainly rating performance of your current assets, which we do 

in the Commonwealth, I believe, should be part of the Federal program. Are we maintaining assets to a standard, particularly interstate systems and what have you and that they make sure, like we 

do, that we are maintaining those. 

Senator, I would suggest that there be some performance output 

based results in the moneys the Federal Government passes on to 

the States. 

Senator CARDIN. That is a good suggestion. 

I would make this final comment, Mr. Chairman. In the days 

when we used to have congressionally designated funding, better 

known as earmarks, I have never known a legislator to request 

money for maintenance, but we do request for new roads and new 

projects because we like to see new projects. 

It is a tough political sell when you are dealing with maintenance, but it is our responsibility to make sure that is built into 

the accountability and into the way we develop our partnership. 

I look forward to your input as we develop the next infrastructure authorization bill to see how we can be more effective in preserving our transportation infrastructure in this country, and by 

the way, also to deal with technology. I think that is an emerging 

area that is not always given the priority that it needs. 

Thank you all for your testimony. 

Senator INHOFE. Thank you, Senator Cardin. 

I thank all the witnesses. 

We started in the opening session talking about the successes we 

have had over the last couple years. It has been rewarding because 

people think things get bogged down in political rhetoric, and nothing gets done. That is not the case with this Committee. We actually do things. 

I am optimistic. I have heard it from the Administration that we 

are going to get aggressive and do the things we should have done 

before. 

I do look wistfully back at the old days when our biggest problem 

was too much surplus in the Trust Fund, but those days will never 

come back. 

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I appreciate very much the expertise expressed by the witnesses 

today. 

I am going to adjourn, but this happens to be the 30th year of 

the partnership program, one in which I was involved 30 years ago 

this year. We are going to be holding the celebration in this office 

building in about an hour. I would hope all of you who were kind 

enough to show up will leave as quickly as you got here. 

[Laughter.] 

Senator INHOFE. I appreciate that very much. 

We are adjourned. 

[Whereupon, at 4:50 p.m., the Subcommittee was adjourned.] 

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