S. HRG. 111–983 

Senate Hearings 

Before the Committee on Appropriations 

Departments of Transportation 

and Housing and Urban 

Development and Related 

Agencies Appropriations 

Fiscal Year 2011 

111th CONGRESS, SECOND SESSION 

H.R. 5850/S. 3644 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

DEPARTMENT OF TRANSPORTATION 

NATIONAL RAILROAD PASSENGER CORPORATION (AMTRAK) 

NONDEPARTMENTAL WITNESSES 

WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY 
Departments of Transportation and Housing and Urban Development, and Related Agencies 

Appropriations, 2011 (H.R. 5850/S. 3644) 
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54–989 PDF 2011

S. HRG. 111–983 

TRANSPORTATION AND HOUSING AND URBAN 

DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2011 

HEARINGS 

BEFORE A

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

ON

H.R. 5850/S. 3644 

AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 

2011, AND FOR OTHER PURPOSES 

Department of Housing and Urban Development 

Department of Transportation 

National Railroad Passenger Corporation (Amtrak) 

Nondepartmental witnesses 

Washington Metropolitan Area Transit Authority 

Printed for the use of the Committee on Appropriations 

( 

Available via the World Wide Web: http://www.gpo.gov/fdsys 
(II) 

COMMITTEE ON APPROPRIATIONS 

DANIEL K. INOUYE, Hawaii, Chairman 

ROBERT C. BYRD, West Virginia 

PATRICK J. LEAHY, Vermont 

TOM HARKIN, Iowa 

BARBARA A. MIKULSKI, Maryland 

HERB KOHL, Wisconsin 

PATTY MURRAY, Washington 

BYRON L. DORGAN, North Dakota 

DIANNE FEINSTEIN, California 

RICHARD J. DURBIN, Illinois 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

JACK REED, Rhode Island 

FRANK R. LAUTENBERG, New Jersey 

BEN NELSON, Nebraska 

MARK PRYOR, Arkansas 

JON TESTER, Montana 

ARLEN SPECTER, Pennsylvania 

THAD COCHRAN, Mississippi 

CHRISTOPHER S. BOND, Missouri 

MITCH MCCONNELL, Kentucky 

RICHARD C. SHELBY, Alabama 

JUDD GREGG, New Hampshire 

ROBERT F. BENNETT, Utah 

KAY BAILEY HUTCHISON, Texas 

SAM BROWNBACK, Kansas 

LAMAR ALEXANDER, Tennessee 

SUSAN COLLINS, Maine 

GEORGE V. VOINOVICH, Ohio 

LISA MURKOWSKI, Alaska 

CHARLES J. HOUY, Staff Director 

BRUCE EVANS, Minority Staff Director 

SUBCOMMITTEE ON TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, 

AND RELATED AGENCIES

PATTY MURRAY, Washington, Chairman 

ROBERT C. BYRD, West Virginia 

BARBARA A. MIKULSKI, Maryland 

HERB KOHL, Wisconsin 

RICHARD J. DURBIN, Illinois 

BYRON L. DORGAN, North Dakota 

PATRICK J. LEAHY, Vermont 

TOM HARKIN, Iowa 

DIANNE FEINSTEIN, California 

TIM JOHNSON, South Dakota 

FRANK R. LAUTENBERG, New Jersey 

ARLEN SPECTER, Pennsylvania 

DANIEL K. INOUYE, Hawaii (ex officio) 

CHRISTOPHER S. BOND, Missouri 

RICHARD C. SHELBY, Alabama 

ROBERT F. BENNETT, Utah 

KAY BAILEY HUTCHISON, Texas 

SAM BROWNBACK, Kansas 

LAMAR ALEXANDER, Tennessee 

SUSAN COLLINS, Maine 

GEORGE V. VOINOVICH, Ohio 

THAD COCHRAN, Mississippi (ex officio) 

Professional Staff 

ALEX KEENAN

MEAGHAN L. MCCARTHY

RACHEL MILBERG

DABNEY HEGG

JON KAMARCK (Minority) 

ELLEN BEARES (Minority) 

RACHEL JONES (Minority) 

Administrative Support 

MICHAEL BAIN
(III) 

C O N T E N T S 

THURSDAY, MARCH 4, 2010 

Page 

Department of Transportation: Office of the Secretary ........................................ 1 

THURSDAY, MARCH 11, 2010 

Department of Housing and Urban Development: Office of the Secretary ......... 61 

THURSDAY, APRIL 29, 2010 

Department of Transportation: Federal Railroad Administration ...................... 121 

National Railroad Passenger Corporation (Amtrak) ............................................. 145 

THURSDAY, MAY 6, 2010 

Department of Transportation: Office of the Secretary ........................................ 179 

Department of Housing and Urban Development: Office of the Secretary ......... 191 

THURSDAY, MAY 13, 2010 

Department of Housing and Urban Development: Federal Housing Administration ................................................................................................................... 225 

WEDNESDAY, MAY 19, 2010 

Washington Metropolitan Area Transit Authority ............................................... 285 

Nondepartmental witnesses .................................................................................... 345 

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TRANSPORTATION AND HOUSING AND URBAN 

DEVELOPMENT, AND RELATED AGENCIES 

APPROPRIATIONS FOR FISCAL YEAR 2011 

THURSDAY, MARCH 4, 2010 

U.S. SENATE, 

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, 

Washington, DC. 

The subcommittee met at 9:31 a.m., in room SD–124, Dirksen 

Senate Office Building, Hon. Patty Murray (chairman) presiding. 

Present: Senators Murray, Kohl, Specter, Bond, and Collins. 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY

STATEMENT OF HON. RAY LaHOOD, SECRETARY 

ACCOMPANIED BY CHRIS BERTRAM, ASSISTANT SECRETARY FOR 

BUDGET AND PROGRAMS AND CHIEF FINANCIAL OFFICER 

OPENING STATEMENT OF SENATOR PATTY MURRAY

Senator MURRAY. Good morning, the subcommittee will come to 

order. 

This morning, we’re going to be holding our first hearing on the 

President’s budget request for the Department of Transportation. 

I want to welcome Secretary Ray LaHood. Thank you so much 

for being here today. 

The transportation budget that we have before us today is important for families, commuters, communities across the country, and 

it’s about more than just dollar amounts and more than just the 

sum of the programs and provisions; it really is a statement of values and a reflection of priorities. It’s an issue that touches every 

American, every day. It affects the men and women who commute 

to work and need safe roads or new public transportation options, 

it affects the parents who strap their young kids into the back seat 

of the family car and need to be confident that their government 

has the resources to make sure that passenger vehicles used by 

American families are safe. It affects communities around the country that are facing immense fiscal challenges and depend on Federal resources to maintain and improve their transportation infrastructure. 

The transportation budget has a real impact on real people, people who are struggling in these tough economic times. Last year, 

we passed a recovery package that is now working to create jobs 

and rebuild infrastructure and lay down a strong foundation for 
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long-term economic growth. It was a good start, but we cannot stop 

working until our economy is steadily growing again and any 

American who wants a job can find one. 

That’s why we are building on the Recovery Act with new targeted jobs bills to help workers get back on the job and make investments that strengthen our competitiveness in the long term, including investments in transportation. And its why, as we examine 

this budget request, we need to make sure that it builds on those 

efforts and continues moving us forward, creating jobs, and investing in our communities, long term. 

Today’s hearing comes shortly after the Senate passed an extension of the surface transportation programs. But, unfortunately, as 

we know, this extension was not passed in time and almost 2,000 

DOT employees were furloughed without pay for the first half of 

this week. The gap in funding didn’t just hurt those Federal employees, it also left State governments wondering about the future 

of funding that they desperately need. In my home State of Washington, a reimbursement payment of $13.5 million for federallysponsored projects, that was due on Tuesday, was left in limbo. 

Seeing these programs shut off, even just for a short time, is especially troubling since Senator Bond and I have worked so hard 

to bring stability to the highway safety and transit programs authorized under SAFETEA–LU. Two years ago, we included a transfer of funds to prevent the Highway Trust Fund from going bankrupt. Last year, we provided an additional $650 million for the 

highway program, an increase of $400 million for transit, despite 

the absence of a new authorization law to provide for such increases. 

And now, when our communities need jobs and Federal investments in infrastructure more than ever, they’re facing shutdowns 

of the highway and transit programs and instability in their funding streams. The uncertainty of this brings—undermines essential 

planning by our States and local jurisdictions. That’s why we need 

to move quickly toward a long-term authorization of the highway, 

safety, and transit programs, one that brings solvency to the Highway Trust Fund and stability to our States and communities, and 

I am committed to getting that done in the near future. 

Before I get to the budget request, I want to take a few minutes 

to commend Secretary LaHood and the DOT on meeting some significant challenges this past year. Immediately after the Recovery 

Act was enacted, the Department began working to distribute highway and transit grants to State and local governments. The law set 

very aggressive deadlines for all of the programs it funded, and to 

its credit, the DOT has met each one and it has worked hard to 

help our State and local governments meet their deadlines, as well. 

That was absolutely critical as we worked to create jobs, invest in 

our infrastructure, and accelerate economic recovery. I was very 

happy with the DOT’s work on two programs, in particular, the 

Inner-City and High-Speed Rail Grants, and TIGER, the program 

that I helped create, that supports significant projects across almost every mode of transportation. I fought to include those programs in the Recovery Act, because I know that getting commerce 

and commuters moving is an important part of our recovery efforts. 

I was proud that my home State of Washington received $590 mil-
3 

lion for high-speed rail upgrades along the Pacific Northwest Cascades Corridor. And I recently was out in the State and visited the 

North-South Freeway in Spokane, and the Mercer Street Corridor 

in Seattle; both projects had been awarded TIGER grants. 

The project in Spokane will create about 100 jobs, and the Seattle grant is the final piece required to finish a project that will 

create thousands of jobs. These are projects that will help families 

and small businesses in their communities, get workers back on 

the job, and help lay the foundation for long-term economic growth. 

And I’m sure Secretary LaHood has seen plenty of great projects 

like that that are in the works, helping communities across the 

country. This subcommittee included an additional $600 million in the fiscal year 2010 bill to continue provided Federal resources to support 

these types of regional transportation investments, and I look forward to working with the Department as it moves forward in the 

coming year to get to a new round of investments out of the door. 

But, now, as we look toward this year’s budget, it’s clear that the 

DOT is going to have to find ways to do more with less, especially 

given the President’s announcement of an overall cut in nondefense, domestic discretionary spending. But, even in this challenging environment, I’m encouraged by many of the items I do see 

in the budget request. The request includes increased funding for 

safety inspectors for aviation, rail, and pipelines, an investment of 

$1.1 billion for NextGen efforts at the Federal Aviation Administration, another $1 billion in grants for inter-city and high-speed rail, 

and continued investment infrastructure to support our airports, 

roads, bridges, highways, transit systems, and Amtrak. 

I still have some questions about some of the decisions reflected 

in this budget request. I’m certain Senator Bond has some of his 

own, as well. For example, why is it necessary to create a new 

agency at the Department for awarding multimodal grants, especially when we have seen DOT agencies work together on the 

TIGER grants? And why did the administration choose not to request any funding for positive train control? PTC is an important 

technology for preventing rail collisions and derailments. 

But, the biggest question on my mind, and on the mind of many 

families I hear from, is whether the Department has been doing 

enough to oversee the safety of our cars and our trucks. The American people deserve to have faith in the safety of the cars and 

trucks they drive to work, to school, to soccer practice with their 

kids every day. Questions have been raised about whether the National Highway Traffic Safety Administration has adequate expertise and resources to investigate safety defects among the 246 million passenger vehicles—246 million passenger vehicles—in the 

United States. 

Given that NHTSA opened and closed four narrowly-focused investigations into sudden, unintended acceleration in Toyota vehicles between 2003 and 2006 without a significant finding of a defect trend, I question whether additional resources would have resolved consumer complaints of sudden, unintended acceleration. 

NHTSA must ensure the industry is honest in disclosing defects, 

and timely in alerting drivers, particularly when these defects can 

result in fatal accidents. To do this, they need to be more strategic 
4 

about their workforce and use the expertise of their employees 

more effectively. 

NHTSA finally does have strong leadership in place, with the recent confirmation of Mr. Strickland, as well as from you, Mr. Secretary. I am hopeful that you will reenergize the agency’s vehicle 

safety mission to focus on enforcement and strengthen its electronic 

expertise. Families across America rely on the DOT to be a leader 

in improving transportation safety and to provide expertise on 

what safety issues need to be addressed. 

I’m also glad to see a request for additional resources to allow 

the Federal Transit Administration to oversee transit safety. However, this activity is not yet authorized; and, importantly, the 

FTA’s proposal to oversee transit safety came out only after severe 

deficiencies were found in the safety of the Washington Metro system, right here in our backyard. 

I look forward to hearing from you, Mr. Secretary, on where the 

greatest risks exist in rail transit and what steps the Department 

can take to make transit safer for the millions of Americans who 

rely on it for their daily commutes. Unfortunately, too much of the 

Department’s work is initiated in reaction, now, to a crisis situation. We’ve seen this before; most recently, the Federal Aviation 

Administration revisited its safety standards after the tragic crash 

of the Colgan Air flight, a year ago. 

The DOT is doing good work in so many areas, but we can never 

ignore the core mission of this agency: to make sure the safety of 

our Nation’s transportation system is there for all of our families. 

Over the course of this hearing this morning, we’ll have an opportunity to discuss all of these issues in more—greater detail. 

But, Mr. Secretary, thank you again for your participation today, 

and I look forward to your testimony. 

With that, I’d like to turn it over to my partner, Senator Bond, 

ranking member, for his opening remarks, as well. 

OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you very much, Madam Chair. 

And welcome, Mr. Secretary. I’m pleased to join with the chair 

and Senator Collins in welcoming you to testify on the Department’s 2011 budget. 

There are plenty of people in Washington who don’t think transportation spending is glamorous. They’d rather spend money on 

anything else other than roads, bridges, and infrastructure. But, in 

my way of thinking, ensuring America has an updated transportation infrastructure is a key responsibility of government. And I— 

it’s no secret that I am a huge proponent of spending to improve 

our transportation spending and create jobs and get the infrastructure we need; but it has to be done well. It’s an economic climate 

where we need to invest our scarce resources in areas, like infrastructure, that will not only build roads and bridges, but help rebuild our economy. 

But, while investing in our transportation infrastructure is critical, we can’t just wish it to be. With a $12 trillion and growing 

deficit, we cannot continue to throw Federal funds at projects, 

willy-nilly. We need a clear-cut, coherent, and detailed blueprint, 
5 

detailing how taxpayer dollars will be spent to reach our transportation infrastructure goals. 

Unfortunately, the administration proposal misses this mark, 

once again. In fact, there is little ‘‘print’’ in the administration’s 

supposed ‘‘transportation blueprint.’’ As I said earlier this year, 

this budget is making me feel a lot like Bill Murray in ‘‘Groundhog’s Day.’’ Instead of a serious plan to tackle our Nation’s transportation policy challenges, the administration is repeating last 

year’s mistake. 

We’re facing the same issues, Mr. Secretary, which we faced last 

year when you came before the subcommittee. I understand there 

are many difficult transportation challenges facing our Nation, but 

refusing to deal with them, or putting off the tough choices, is not 

a responsible way to go about it. 

Once again, the budget assumes an extension of SAFETEA. We, 

once again, need to bail out the Highway Trust Fund with general 

revenue to get us through the fiscal year, much less get us through 

fiscal year 2011. And, once again, we have to bail out the mass 

transit account with general funds to get us through fiscal year 

2011. 

There are no broad reauthorization proposals or solutions to any 

of these challenges. Instead, this budget actually adds to our already daunting challenges by including various pet project initiatives that would wait, like everything else, for a full reauthorization to occur. 

In addition to a lack of realistic decisionmaking, this budget adds 

to our challenges by failing to provide a national rail plan and a 

cost-to-complete estimate of what we are trying to accomplish with 

the $10.5 billion we’ve already appropriated, much less the additional billions, which I fear will be in the hundreds and hundreds 

of billions of dollars, this budget requests. Where are we going to 

spend all of that money? Where are we going to get all of that 

money? What’s it going to do? Finally, we have another $4 billion request for what, this year, 

is called the National Infrastructure Innovation and Finance Fund. 

Last year, it was called the National Infrastructure Bank. You 

might have changed the name of the program, but the details remain the same. By that, I mean there are no details, once again, 

no legislative language about the specifics of this $4 billion proposal. 

I also must point out what is a general theme of this budget: a 

continuation of the American Recovery and Reinvestment Act and 

its broad—and I mean very broad—grantmaking authorities and 

requests. Your budget asks for Congress to write you a blank 

check, to the tune of $527 million in grants, under a new Office of 

Livability. Your budget also asks Congress to write you another 

blank check for $53 million in greenhouse gas and energy reduction 

grants. Your budget asks Congress to write you another $1 billion 

check for high-speed rail. Do you really want us to give you another 

bunch of pots of money from which to make earmarks, with no accountability? I want to know where is Congress’ role in deciding 

how these tax dollars will be spent. 

As you will recall, Mr. Secretary, Congress gives the—is given, 

by the Constitution, the responsibility to appropriate money. Why 
6 

should all of the decisions about spending our scarce Federal resources be made by unelected and unaccountable bureaucrats with 

no involvement of the representatives of the people in Congress or 

a full disclosure to them? 

Equally important, where is the transparency in the process? I 

thought I heard the clear, unambiguous promise that this administration would be the most transparent ever. I’ve continued to ask 

questions on exactly how the administration is making their earmark decisions, awarding these transportation grants, what criteria are being used. I continue to get no answer. 

It’s critical that the process be transparent so Congress, and the 

taxpayers we serve, knows how taxpayer dollars are being used. 

It’s essential that we shine needed sunlight on the funding of 

transportation projects to date, and it hasn’t happened. 

Mr. Secretary, I believe that if this grantmaking process is continued in our bill, it needs to be done in a far more transparent 

and accountable way. Grants that are applied for by communities 

and States should be posted on the Internet for every taxpayer to 

see and evaluate, not just delivered by a lobbyist to the Department of Transportation, with no transparency. Cost shares, the 

leveraging of funds, should be readily available on the Internet so 

that we, and our constituents, have access to information about 

other sources of Federal, State, or private funds that may be used 

to augment these grant awards. 

We have continued to demand that Congress be notified of award 

decisions 3 days prior to the Department of Transportation’s announcement, with backup material and information on the methodology of award selections, including information on how the selected projects fit into our transportation goals. We have not been 

getting that, and it is very awkward to have to tell our constituents 

that you didn’t even bother to tell us where the grants are going, 

why they are going there, and how they were selected. 

Now, it’s unclear to me the extent to which the Department is 

funding projects for which there are no traditional sources of funding, as you indicated was the priority for the TIGER funds when 

you testified before our subcommittee last year. Mr. Secretary, last 

year when I asked you what Congress’ role in all of this, you indicated that, ‘‘Congress’ role ended when the check was signed.’’ I 

think the American taxpayer deserves more, deserves better. The 

administration has pledged to provide transparency, lobbying reform across all programs. This commitment must extend to the billions of taxpayer dollars spent on our transportation projects. 

Our transportation infrastructure, like our highways, roads, and 

bridges, are the lifeblood of our economy and key to future economic growth and economic recovery. We cannot afford to pass the 

buck on difficult challenges; we cannot afford to spend billions of 

dollars, with no transparency, oversight, or accountability, if we are 

to create a modern transportation infrastructure, new jobs in our 

community, safer travel for our families, and economic development 

across the Nation. 

For many of these challenges, there are no easy or popular solutions, but we cannot afford to keep putting the problems down the 

road, or there won’t be a road to drive on. 

Mr. Secretary, obviously I look forward to your testimony. 
7 

Senator MURRAY. Thank you, Senator Bond. 

Senator Collins, do you have an opening statement? 

STATEMENT OF SENATOR SUSAN COLLINS

Senator COLLINS. Thank you, Madam Chairman. 

First, let me thank you and the ranking member for your strong 

leadership on this subcommittee, and your advocacy. 

I do have an opening statement which I’m going to submit for the 

record, but I did just want to take a moment to talk about the 

TIGER grants that were authorized in the Recovery Act. 

It’s my understanding that the Department of Transportation received nearly 1,400 TIGER grant applications, totaling $56.9 billion. The Recovery Act included $1.5 billion for TIGER grants. I 

think this—the figures show what an overwhelming demand there 

is for infrastructure spending along the lines that both of you have 

outlined. 

A project submitted in the State of Maine, alone, totaled $236.2 

million. Obviously, due to the high volume of applications, the vast 

majority of these projects were not able to be funded. There were 

two in Maine that were of particular importance. One, I’m going to 

discuss when the questions come around; it has to do with more 

than 200 miles of track in northern Maine that the railway in 

question is seeking to abandon, which would be devastating for 

northern Maine. 

The second is a very innovative program that New Hampshire 

and Maine have come together on, and that is to repair a major 

bridge that links the two States. And that, too, is an innovative 

project that I hope might be able to secure future funding. 

But, again, it just is evidence of the overwhelming need for investment in infrastructure. And I look forward to working with you 

and the ranking member, both of whom are such effective advocates in this area, and as well as with the Secretary. 

Thank you. 

[The statement follows:] 

PREPARED STATEMENT OF SENATOR SUSAN COLLINS

Our Nation continues to face serious economic challenges and the transportation 

sector is certainly not immune to these hardships. During consideration of the 

American Recovery and Reinvestment Act, I advocated for a strong investment in 

transportation funding. Unfortunately, our investment came up short. While we secured over $48 billion for all modes of transportation, this funding represented less 

than 7 percent of Recovery Act spending. I find that troubling as investments in 

transportation infrastructure are strongly needed in all States and a sure way to 

create good-paying jobs. 

Maine was the first State in the Nation to obligate 100 percent of its Recovery 

Act highway funds. I applaud the quick action of my State to get Recovery Act funds 

out the door and create much needed jobs. I often hear from my constituents in the 

construction industry that the investments we made in transportation funding 

saved the industry from a dismal year and significant lay-offs. 

As many of the Recovery Act funds are now spent, the transportation industry 

faces difficult times ahead if we do not act to make the necessary investments in 

our transportation infrastructure. 

I am particularly pleased that the administration has taken steps to invest in 

projects of regional and national significance through the creation of a National Infrastructure Innovation and Finance Fund. The high number of applicants for the 

Transportation Investment Generating Economic Recovery (TIGER) Grant program 

funded by the Recovery Act shows the need for continued investments in this area. 
8 

The Department of Transportation received 1,381 TIGER grant applications totaling $56.9 billion. The Recovery Act included $1.5 billion for TIGER grants. The need 

for funding is great. Projects submitted in Maine alone totaled $236.2 million. Due 

to the high volume of requests, most of these projects were funded. 

One project in particular that did not receive a TIGER grant is the Montreal, 

Maine and Atlantic (MMA) Railway in northern Maine. Because of the economic 

downturn, it is not financially viable for MMA to operate its full 745 miles of rail 

line, and the company, therefore, has filed to abandon 233 miles in Aroostook County. This will be devastating for Maine’s economy. Once a rail line is abandoned, it 

is almost impossible to bring that line back into service. I look forward to working 

with the subcommittee and the Secretary to ensure that Maine has the resources 

we need to maintain our transportation infrastructure. 

Senator MURRAY. Thank you very much, Senator Collins. 

Mr. Secretary, again, welcome to this morning’s hearing, and I 

will turn it over to you for your opening statement. 

STATEMENT OF HON. RAY LAHOOD

Secretary LAHOOD. Thank you very much, Madam Chair, Ranking Member Bond, Senator Collins, for the opportunity to discuss 

the administration’s fiscal year 2011 budget request for the U.S. 

Department of Transportation. 

I’ve traveled to more than 32 States and 72 cities in the last 

year, and I’ve seen firsthand how much our citizens depend on a 

safe, modern, and reliable transportation system to access jobs, 

healthcare, and other essential services. 

The President’s request for next year totals $79 billion, a $2 billion increase over fiscal year 2010 levels. These resources will support the President’s and DOT’s top transportation priorities for 

safety on the roads, in the air, and also making communities livable and sustainable, and modernizing our infrastructure. 

Safety is our highest priority at DOT. Our leadership campaign 

against the perils of distracted driving, which kills thousands of 

Americans every year, has been very effective. It’s critical we continue to lead the charge on this; that’s why we’re seeking $50 million for the National Highway Traffic Safety Administration to develop an incentive-based grant program encouraging more States to 

pass laws prohibiting the unsafe use of cell phones and texting 

while driving. The President is also asking for 66 additional personnel assigned to highway and vehicle safety at NHTSA. 

Turning to aviation, the President’s plan includes $1 billion for 

next-generation technology, the program to modernize our air traffic control system. That’s a $270 million, or 32-percent increase, 

over fiscal 2010 levels. These funds are essential for transitioning 

from a ground-based radar surveillance system to a more accurate 

satellite-based one. This system is already in use in the Gulf of 

Mexico, and we look forward to working on building on our success. 

Our groundbreaking investments in high-speed passenger rail 

service, which have generated tremendous excitement around the 

country, will go a long way to enhance livability in many communities. Our budget seeks $1 billion to continue the 5-year, $5 billion 

pledge made in this year’s budget. I want to thank Congress for its 

commitment and leadership on high-speed rail; the $2.5 billion provided to the Department for high-speed rail grants last year, combined with $8 billion we announced recently, brings us closer to 

ushering in a new era for passenger rail service in this country. 
9 

In the area of transit safety, we’re seeking $30 million to establish a new rail transit safety oversight program within the Federal 

Transit Administration. This program will carry out a comprehensive safety oversight strategy by establishing common safety standards nationwide, as envisioned in the administration’s transit safety bill. This is an important step forward for the rail transit industry, which has suffered recent accidents in Washington, DC, Boston, and San Francisco. This is unacceptable, and we must put 

strong remedies in place as soon as possible. I urge Congress to 

pass this legislation this year. 

Going forward, we must find new ways to finance infrastructure. 

We’re requesting $4 billion to establish a new Infrastructure Innovation and Finance Fund. These first-year funds would be used to 

invest in multimodal transportation projects of regional and national significance. Our crosscutting, outcomes-based approach to 

funding will enable us to move away from the silo mentality that 

has long hindered our ability to respond to local and regional 

needs. 

On authorization, the President proposes to continue spending 

levels with $42.1 billion for highway and bridges, and $10.8 billion 

for transit. This request includes $150 million to enable the Washington Metropolitan Area Transit Authority to address much-needed safety-related infrastructure improvements. Transportation 

must not only be safe, but also contribute to livable, sustainable 

neighborhoods. The President’s plan provides record-level investments to make our communities more livable. 

Specifically, we’re seeking $527 million for Livable Communities, 

which will help us build on the tremendous successes we have 

achieved through our sustainable partnership with HUD and the 

EPA. Together, we’re helping State and local governments make 

smarter investments in their transportation, energy, and housing 

infrastructure, with better outcomes for our citizens. 

Finally, we’re seeking $30 million to make long-overdue infrastructure improvements at the Merchant Marine Academy, which 

our Nation depends on to educate and train a new generation of 

military and civilian maritime leaders. I’ve been to Kings Point a 

number of times, and I know these investments will have a lasting, 

positive effect on this institution. 

I look forward to your questions. 

[The statement follows:] 

PREPARED STATEMENT OF HON. RAY LAHOOD

INTRODUCTION

Chairman Murray, Ranking Member Bond and members of the subcommittee, 

thank you for the opportunity to appear before you today to discuss the administration’s fiscal year 2011 budget request for the U.S. Department of Transportation. 

The administration’s fiscal year 2011 budget request for the U.S. Department of 

Transportation reflects the importance of strengthening our Nation’s transportation 

system. In my first year as Transportation Secretary, I have travelled throughout 

the country and I know first-hand how important a safe and reliable transportation 

system is to all Americans. The President’s request totals $79 billion, a nearly $2 

billion increase over fiscal year 2010 levels. These resources will support the President’s top transportation priorities: improving transportation safety, investing for 

the future, and promoting livable communities. 
10 

HIGHWAY SAFETY

Safety is and will continue to be our top priority, and reducing highway fatalities 

is one of the Department’s High Priority Performance Goals. The budget contains 

a number of new initiatives to increase road, transit, and aviation safety. One of 

the most serious issues facing drivers today is distracted driving. We must end the 

dangerous practice of unsafe cell phone use or texting while driving. Too many lives 

have been lost already due to distracted driving. Working together, I believe that 

we can stop this dangerous practice—and save lives. The President’s budget requests $50 million for the National Highway Traffic Safety Administration’s 

(NHTSA) for a new incentive grant program to promote State laws to curtail unsafe 

cell phone use and eliminate texting while driving. Today, our children don’t think 

twice when they ‘‘buckle up’’—and our goal is that tomorrow, our future generations 

won’t think twice about putting down their cell phone so that they can drive safely. 

This new program will work alongside NHTSA’s other highway safety programs in 

making our highways safer for everyone. The President is also asking for funds to 

support 66 additional personnel for NHTSA to be assigned to highway and vehicle 

safety issues, and $7 million for the Federal Motor Carrier Safety Administration 

for 118 new truck safety personnel. 

NEXTGEN

The future of aviation is in our hands. The President’s fiscal year 2011 plan includes over $1 billion—an increase of $275 million over the fiscal year 2010 levels— 

for ‘‘NextGen’’—the program to modernize the air traffic control system. Currently, 

the Federal Aviation Administration is undertaking a long-term effort to improve 

the efficiency, safety, and capacity of the aviation system. But while we are talking 

about the future of aviation, I’m pleased to report that it’s happening now. The 

funds requested under the fiscal year 2011 budget request will support the transformation from a national ground-based radar surveillance system to a more accurate, satellite-based surveillance system. This system is already being used in the 

Gulf of Mexico, which is improving the safety and accuracy of air traffic services 

in the gulf. We will be building on the successes of our research and development, 

to improve capacity to the flying public. We will be developing more efficient routes 

through the airspaces, and improving aviation weather information. As always, as 

we launch these critical new applications, we will continue to keep our strong focus 

on safety. Under my budget request, our vision of a modernized air traffic control 

system is becoming a reality. 

HIGH SPEED RAIL

The budget also continues President Obama’s vision to better connect communities with a new, high-speed rail network. The budget includes an additional $1 

billion for High Speed Rail. This request builds on the historic $8 billion down payment provided through the Recovery Act, and continues the 5 year, $5 billion pledge 

made in the fiscal year 2010 budget. The $2.5 billion provided to the Department 

for high speed rail grants last year along with our recent announcements of the first 

awards of the High Speed Rail Program will put us one step closer to making High 

Speed Rail a reality. 

This is an exciting time for the Nation. Looking ahead, high-speed rail will one 

day provide the traveling public with a practical alternative to flying or driving, particularly in highly congested areas. With trains efficiently connecting city and business centers, travelers will enjoy a new level of convenience not available in many 

parts of the country today. 

RAIL TRANSIT SAFETY

The President’s request also includes resources to address rail transit safety. 

While rail transit is safe, we must take substantive steps now to make it even safer 

for the future. We are all well aware that rail transit has the potential for catastrophic accidents resulting in multiple injuries, considerable property damage, and 

heightened public concern. Following the recent tragic accidents in Washington, DC, 

Boston, and San Francisco, it is clear that we need to strengthen the safety oversight of transit rail operations. Our budget requests $30 million to establish a new 

transit safety oversight program within the Federal Transit Administration, which 

has never before been granted safety oversight authority. This program will implement a comprehensive safety oversight strategy, as proposed in the administration’s 

transit safety bill, to establish common safety standards nationwide and to ensure 

the safety of our Nation’s transit riders. 
11 

INVESTING IN TRANSPORTATION INFRASTRUCTURE

As we continue to focus on improving transportation safety, we must also rethink 

the way we invest in our future transportation infrastructure. That is why the 

President’s plan includes $4 billion to establish the new National Infrastructure Innovation and Finance Fund (Infrastructure Fund). This is the first year of a 5-year 

plan to capitalize the fund with $25 billion. This fund will invest in projects of regional or national significance, and marks an important departure from the Federal 

Government’s traditional way of spending on infrastructure through mode-specific 

grants. 

Instead, the Infrastructure Fund will directly provide resources for projects 

through grants or loans, or a blend of both, enabling us to effectively leverage nonFederal resources, including private capital. The projects funded under the Infrastructure Fund will be based on demonstrable merit and analytical measures of performance. Only the most worthwhile projects from around the Nation will be selected. Projects eligible for funding from the Infrastructure Fund consist of multimodal projects that include highway, transit, rail, aviation, ports and maritime components. This marks a bold new way of thinking about investments in our transportation infrastructure and will become a key component of the administration’s future surface transportation proposal. 

The reauthorization of the Nation’s surface transportation programs is complex 

and has critical long-range implications for the future. While the President and the 

Congress continue to work on a long-term strategy for surface transportation, the 

President’s plan continues the current levels of spending: $42.1 billion is proposed 

for highways and bridges and $10.8 billion for transit. Within this funding, $1.8 billion is included for ‘‘New Starts’’ and ‘‘Small Starts’’, and $150 million to enable the 

Washington Metropolitan Area Transit Authority to focus on badly needed safetyrelated infrastructure improvements. Reauthorization is a challenging issue facing 

our Nation and I look forward to working with the Congress to design a new Federal surface transportation program that leads to higher performing investments, 

increases transportation options, and promotes a sustainable environment. 

LIVABILITY

The President’s plan also provides a record investment to make our communities 

more livable. Our budget request allocates over $500 million toward investments 

that support the President’s multi-agency Partnership for Sustainable Communities. 

We have joined with the Department of Housing and Urban Development and the 

Environmental Protection Agency to stimulate comprehensive regional and community planning efforts that integrate transportation, housing, energy and other critical investments. Together, we will help State and local governments make smarter 

investments in their transportation infrastructure, to better leverage that investment and advance sustainable development. 

RECOVERY ACT

February 17 marked the 1-year anniversary of the Recovery Act and I am pleased 

to report that much has been accomplished to improve transportation infrastructure 

throughout the Nation. Overall, the Recovery Act provided $48.1 billion for transportation programs to be used for improvements to our Nation’s highways and 

bridges, transit systems, airports, railways, and shipyards. To date we have obligated $36 billion on more than 13,700 projects nationwide. 

In addition, section 1512 of the legislation calls upon Recovery Act fund recipients 

to report on the number of jobs created on individual projects. We have now completed two rounds of recipient jobs reporting. Based on the recent October–December 2009 reporting period, we have created about 41,000 direct full time equivalent 

jobs for transportation programs nationwide. I want to emphasize that the jobs estimates included in this report are only those directly associated with the individual 

transportation projects and do not include the many other jobs created due to increased demand on supply chains and other supporting services. When these indirect jobs are also taken into account, it is clear that the Recovery Act resources have 

made a significant impact on jobs and we expect these numbers to hold steady as 

some of the larger transportation projects continue to come on-line. 

CONCLUSION

Finally, I am proud of the proposed investments the President’s budget makes in 

the U.S. Merchant Marine Academy—one of our Nation’s five service academies. I 

have visited the young men and women at Kings Point, and I’m greatly concerned 

about the conditions of their facilities. They are old and badly in need of basic re-
12 

pair. The President’s plan includes $26 million to make long overdue capital improvements that will help ensure midshipmen have a positive learning environment. 

Thank you for the opportunity to appear before you to present the President’s fiscal year 2011 budget proposal for the Department of Transportation and discuss 

some of the successes of the Recovery Act. This plan supports our Nation’s key 

transportation priorities, and makes investments that will benefit all for years to 

come. I look forward to working with the Congress to ensure the success of our newest initiatives. 

I will be happy to respond to your questions. 

TOYOTA RECALLS

Senator MURRAY. Secretary, thank you very much. 

Let me begin with the safety aspect that I talked about in my 

opening remarks, which is what Americans really count on to know 

what is happening. And I’m concerned that, despite the recall of 6 

million vehicles here in the United States and 81⁄2 million now 

worldwide, it’s likely that engineers have not yet discovered the 

problem with the sudden, unintended acceleration in Toyotas. 

There is speculation that another problem may be in Toyota’s electronics or software that manage the throttle operations. And I realize that Toyota and NHTSA are now investigating those possible 

causes, but I’m concerned because today I’m seeing another news 

articles that some Toyota owners say they’re still having trouble 

with unintended acceleration after their recalled cars were repaired. 

Now, I know this isn’t an easy issue, but I want to be sure that 

we understand how you are making the American people aware of 

what the problems are, and which problems the recalls can actually 

resolve, and what issues still need to be resolved. And I wanted to 

ask you this morning, what advice do you have today for consumers? 

Secretary LAHOOD. Well, first of all, they should look at our Web 

site, DOT.gov. We list all of the cars that have been recalled by 

Toyota, and every other manufacturer; and if their car is on that 

list, they should return it to the dealer and have the car repaired. 

I don’t think we would have had the kind of testimony before the 

Senate or the House if it hadn’t been for our people holding Toyota’s feet to the fire. I personally requested Mr. Toyoda come to 

America, talk to Members of Congress, talk to its customers. I had 

a personal meeting with him. 

We have held Toyota’s feet to the fire on these safety issues, and 

we will continue to do that. We’re not going to rest until every Toyota is safe to drive. That’s our pledge, because safety is our No. 1 

priority. 

Senator MURRAY. Well, if the new stories are accurate and the 

reports are accurate, that the fix is not working, Americans who 

went online, saw that their car was supposed to go back in, took 

it back in, and they’re still out there driving it, and that didn’t 

work. What are we doing now to fix the problem? 

Secretary LAHOOD. We’re suggesting to people, if your car is not 

working properly, take it to the dealer and have them address or 

fix—— 

Senator MURRAY. But, that’s what they did. They took it in and 

had it fixed—— 

Secretary LAHOOD. They need to take it back. They need to take 

the car back if it’s not running properly. 
13 

And on the electronics issue, Madam Chair, I want you to know 

that, we did look into that, and we’ve listened to Members of Congress and from testimony that was given, both in the House and 

Senate. We are doing a complete review, looking at every aspect of 

the electronics in Toyota. 

Senator MURRAY. How long will that take? 

Secretary LAHOOD. It’ll take some time, because we want to look 

at some studies that were previously done. We want to get the best 

experts we can; we want to get the best electrical engineers. I don’t 

want to put a time on it, because we want to do it right, we want 

to do it thoroughly, and we want to make sure that, when we 

produce answers, it’s done with the best possible research and 

background and review that we can do. 

Senator MURRAY. Well, I know it’s not an easy problem, but it 

is very challenging to somebody who owns a car, did the right 

thing, took it in for a recall, and now they’re hearing that perhaps 

that fix didn’t work for them, and now they’re sitting there with 

a car in a driveway and kids waiting to take to school. I mean, 

they’re—— 

Secretary LAHOOD. Yes. 

Senator MURRAY [continuing]. Concerned about it. 

Secretary LAHOOD. Well, I want you to know that we’re not sitting around on our hands; we’re addressing this. There was a 

woman that testified, at a House hearing, about a Toyota that she 

owned. We have purchased that vehicle, because she believed the 

electronics were what caused her to accelerate to a very high speed. 

We have purchased that vehicle, and we’re going to do everything 

we can to investigate, look into, and check out the electronics on 

that car. 

NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION BUDGET

REQUEST

Senator MURRAY. Okay. Well, the President’s budget requested 

46 positions for vehicle safety. How many of those positions will be 

used to hire software engineers? 

Secretary LAHOOD. Well, the President is requesting 66 new positions, which will all come to NHTSA. I’ll get back to you, for the 

record. 

If the Congress passes our budget, we’re going to see where these 

experts are needed. We know they are needed in our opportunity 

to really look at cars and complaints and really make sure we have 

the right staff and also the right professionals to handle the kind 

of complaints that we’re receiving from people. 

[The information follows:] 

Of the 66 additional personnel requested in the President’s fiscal year 2011 budget, 46 positions (46 full time positions-FTPs; 23 full time equivalents-FTEs) would 

support electrical vehicle safety, light vehicle and heavy duty truck fuel economy 

and labeling standards, and import surveillance of automotive equipment coming 

into the United States from foreign countries. NHTSA retains outside experts in 

electronics and other fields as necessary to supplement its permanent Federal workforce. NHTSA is still assessing the agency’s needs to determine what additional 

staff with expertise in electronics, computer science, or other areas of specialization 

are needed. 
14 

Senator MURRAY. Okay. Also, are you going to be expanding your 

staff with expertise in electrical and computer engineering for both 

vehicle safety investigations and regulations? 

Secretary LAHOOD. Yes. 

Senator MURRAY. You are. Okay. 

Secretary LAHOOD. Yes. We do have some electrical engineers on 

staff, but we feel, now that this issue of the electronics has been 

raised, more resources are needed. While you all are working on 

our budget, we may look for some outside help on this, for some 

electrical engineers who can really help us with this. 

Senator MURRAY. Okay. The issue of sudden and unintentional 

acceleration in Toyotas has focused attention on the actions of Toyota and NHTSA officials, and the relationship between the two entities. Safety advocates have been complaining that NHTSA officials failed to push Toyota to find the root cause of this problem, 

and worked with vehicle manufacturers to inappropriately limit investigation. Now that you have new leadership at NHTSA, which 

I’m pleased to see, what actions are being taken now to ensure that 

there’s a strong enforcement where culture exists and is encouraged? 

Secretary LAHOOD. There are laws on the books that prohibit 

former employees of NHTSA working on matters where they were 

intimately involved at NHTSA. We’ve checked out the two individuals, and we’ve determined that they did not come back to us and 

were involved on issues that they worked on in the Department. 

But, I’ve said at other hearings, Madam Chair, I think this law 

needs to be tightened up. I think the appearance of it causes great 

concern for people, and I’m willing to work with Congress to tighten that kind of exiting of employees. I’m willing to work on tightening that up. 

But, I will tell you this, it was our people who went to Japan and 

met with Toyota, because we thought they were a little safety deaf 

in Japan. We knew their people here in North America were making recommendations, but apparently they weren’t hearing it in 

Japan. That’s the reason I got on the phone with Mr. Toyoda and 

talked to him. I met with him when he came here. I think they get 

it now, I think they understand they have serious issues. 

The perception is that many of their cars, particularly the ones 

that are listed on the recall list are not safe. There’ve been some 

improvements in communication, thanks to the diligent effort of 

our people at NHTSA, to hold their feet to the fire. 

Senator MURRAY. Yes. And, I do understand that NHTSA has 

widened its investigation and requested documents about how and 

when Toyota learned of the defects. When do you expect NHTSA 

to complete that inquiry? 

Secretary LAHOOD. It’ll be several months. I mean, we’ve asked 

for a voluminous amount of material to make sure that what they 

told us in 2004, 2005, 2006, and even prior to that, was everything 

they should have told us. The only way we can do that is to look 

at documents that they have. It’s going to take us a while to pore 

through these documents. 

Senator MURRAY. Do you think the Department’s authority to 

level civil enforcement penalties is sufficient? 

Secretary LAHOOD. I do. 
15 

CHILDREN IN AIR TRAFFIC CONTROL TOWER

Senator MURRAY. All right. Well, we’ll be following that very 

closely. But, before my times up, I wanted to ask you another question on safety. And I, for one, was very disturbed about the report 

yesterday about a young child who was allowed to direct traffic at 

the Air Traffic Control Center at New York’s Kennedy Airport, apparently speaking with pilots and clearing flights for takeoff. This 

subcommittee spent a lot of time talking with DOT, and you, and 

the Federal Aviation Administration about the FAA’s culture of 

safety. How does this incident reflect on the FAA’s culture of safety? 

Secretary LAHOOD. Well, this is a stunning example of a lack of 

professionalism, not following the rules, not using common sense. 

The air traffic controller and his supervisor are on administrative 

leave, and we are doing a thorough and complete investigation. The 

idea that a young child would be directing planes in and out of an 

airport is totally unacceptable. It’s an abuse of all of the rules 

that—— 

Senator MURRAY. Are there rules in place that children cannot 

be allowed in control towers? 

Secretary LAHOOD. There are, today. 

Senator MURRAY. Were there, yesterday? Just out of curiosity. 

Secretary LAHOOD. Yes, but they weren’t followed. 

Senator MURRAY. Yes. Well, I think this is extremely disconcerting. I know during the Nisqually earthquake in Seattle, 

when air traffic controllers immediately had an emergency where 

they had to land every single airplane; after 9/11, when we had a 

serious—— 

Secretary LAHOOD. Right. 

Senator MURRAY [continuing]. Emergency; or a plane goes 

down—I think every one of the flying public, and all of the public, 

wants to know that those air traffic controllers’ minds are on their 

jobs. This is extremely demanding, challenging, important safety 

aspect of our FAA, and I’m hopeful that this will be followed up. 

Secretary LAHOOD. Yes. I, too, want to congratulate NATCA. The 

head of NATCA, which is the union that represents air traffic controllers, spoke out very strongly on this being a violation of every 

rule and regulation that any controller has been taught. 

Senator MURRAY. Okay. Thank you very much, Mr. Secretary. 

NATIONAL INFRASTRUCTURE INNOVATION AND FINANCE FUND

Senator Bond. 

Senator BOND. Mr. Secretary, I have a lot of questions about details, as I indicated. And let’s start with the National Infrastructure Innovation Finance Fund Policy Board. Who’s going to be appointed? What’s the process? Who will be the selections? Will they 

come before the Senate for confirmation? 

Secretary LAHOOD. You know what, Senator Bond? I don’t know 

all the answers to that. I know that the idea of an infrastructure 

bank, as it was commonly referred to earlier on, has been kicked 

around Congress for a long time. The Department of Transportation is trying to find ways to do all the things that we all want 

to do. 
16 

Senator BOND. Right. 

Secretary LAHOOD. And without raising the gasoline tax. We feel 

that the Infrastructure Fund is a way to do that. Specifically, I’ll 

get back to you. 

But, if this is enacted into law, and if this comes about, we will 

work with, obviously, members of this subcommittee and Congress 

on the way forward for the implementation of it. 

[The information follows:] 

The details of the National Infrastructure Innovation and Finance Fund’s (I-Fund) 

policy and investment council are still being finalized. The Department will soon 

issue proposed statutory language for the I-Fund that will include details on the 

composition of this council. 

Senator BOND. Well, I appreciate that, Mr. Secretary, but let me 

just say, I’m from the ‘‘Show Me’’ State. And before I can support 

this, I want to know: Who’s going to be on it? Who’s going to appoint them? What the criteria will be for selecting them? Will Congress have a role? Will they be available for comment on—the people on the board? What are the criteria on which these grants are 

going to be made? 

And just to make it simple, so we don’t get any confusion, I am 

not going to vote for it until I have that path laid out, because if 

we’re going to try to fund that board with $4 billion, I think that— 

we have had real problems knowing how money is going out the 

door, and I am not excited about sending any money—more money 

out the door unless I know, in advance, how it’s going to go. 

I don’t disagree with you. We need funding—infrastructure, 

bonding issues—there are a lot of—private-sector cooperation— 

there are a lot of good ideas, and we will work with you on those 

ideas. And we have seen where there are a lot of ways—toll roads 

are very controversial, but a lot of places are getting—they’re getting badly needed highways built by toll roads. We want to see 

those ideas, and work with you on those. But, for my part, no blank 

checks until we see what you’re going to do. And we’ll be happy to 

work with you—— 

Secretary LAHOOD. Thank you. 

Senator BOND [continuing]. But we need to know in advance. 

And as I said—I’ve mentioned earlier—I think, when the administration prepares to make these grants, it would be appropriate for 

the administration to follow the same policy that Congress makes 

when we select some things. Posting—for example, posting all of 

the applications on the Internet, along with the cost shares, funds 

leveraged. What are the metrics and evaluation criteria on how the 

projects will be selected? 

Congress has, rightly, reformed our earmarking process, and 

we’ve tried to make it as transparent as possible. Do you agree it’s 

time for the administration to have the same kind of transparency? 

Secretary LAHOOD. Well, Senator, I would say this. I’ve been 

around 30 years—I served in Congress for 14, and I was a staffer 

for 17; I served on the Transportation and Infrastructure Committee. I don’t know of a more transparent administration than 

this one. If there’s information you want, Senator, we’ll be helpful 

in getting it to you. 
17 

HIGH SPEED RAIL

I will tell you this, Senator, when it comes to the ‘‘Show Me’’ 

State, high-speed rail did very well; TIGER grants did very well. 

I was in a room with over 200 people, in Kansas City, announcing 

a TIGER grant; I heard not one word of complaint about the 40— 

or about the $50 million that went to Kansas City for a project that 

everybody in that room, in that region of your State, was very 

much for. I heard no complaining about the high-speed rail money 

that’s going to connect Chicago to St. Louis to Kansas City. Highspeed rail is coming to Missouri, thanks to the Economic Recovery 

Plan, and thanks to, I think, a lot of good staffwork with people 

in Missouri who want this. I think we’ve been very transparent 

about this. 

Senator BOND. Mr. Secretary, I’ve never had a problem being 

well received when I brought money. Only thing better is if you’re 

bringing a free lunch and some beer. And they’ll not object to you 

coming in when you bring the money. But, what I’m saying is that 

all of us need to know—and as far as I can tell, there’s been—there 

has been an almost complete absence of transparency—how you’re 

selecting them, where are you going? All right, great, it comes 

down like a gift from Santa Claus. And, sure, my State got some, 

every State gets some, but we have a right, these days, to know: 

What were the criteria? What were the applications? Whose were 

the ones who were disappointed? Who did not get it? How were 

they selected? 

I mean, no question, when you throw money into infrastructure 

projects—everybody likes money in infrastructure projects. But, we 

need to see how the process works. And I’ll be damned if I can figure out how that process worked. That’s what I’m just saying. You 

know, we work very hard to find out what the priorities are, and 

when we come before our colleagues in Congress to present them, 

we lay out the—who has applied, we go on the floor and debate 

them. And I’ve had a lot of debates on why these are good 

projects—before they ever get the money. But, you know, you come 

in and—well, I’ll get around to high-speed rail a little bit later on. 

But, before we put money into these things, we’d like to know that 

there is going to be advance information; there’s going to be disclosure of—I mean, you don’t let lobbyists in, but obviously they prepare the information, and they bring applications to you. When 

those applications come in, maybe there are some applications—if 

you’re going to be making the earmarks, maybe we would like to 

comment, say, ‘‘Here, you’ve got 12 applications from my State, or 

250 applications from our intelligence and investigation. Here are 

several that really meet the needs, and we can tell you why.’’ 

We—— 

Secretary LAHOOD. Well—— 

Senator BOND [continuing]. We didn’t know where they were 

going. 

Secretary LAHOOD. Okay. Well, let me respond to some of this. 

Because—— 

Senator BOND. Sure. 

Secretary LAHOOD. The truth is we put guidance up for the $1.5 

billion, look on our Web site. It’s up there now. We have another 
18 

$600 million that you all provided to us, thankfully, in our budget. 

We’re going to put guidance up. 

So, the guidance is up there. Everybody knows what the criteria 

are and then people begin to submit applications. I don’t know of 

one lobbyist that darkened our door with an application. I don’t 

know of one lobbyist that came to our office with the idea that they 

were going to have some kind of an edge because they’re a lobbyist. 

Okay. So, we put the guidance up, and then we took time to review them all. I’ll be honest with you, Senator, we heard from a 

lot of Senators and Members of the House, who called me and said, 

‘‘How many applications from my State? What are they?’’ and we 

heard from Governors, too. So, the idea that nobody weighed in on 

this from Capitol Hill is not accurate. I got phone calls every day 

from House Members, from Senators, from Governors, saying: How 

many applications did you receive from my State? What are they? 

How much are they for? What are they going to do?’’ We shared 

all that information. 

Senator BOND. Well, it would be very easy, if you’d just put it 

on the Web site, save you all those calls. 

Secretary LAHOOD. Well, I would have been happy to take a call 

from you, Senator, about anything in Missouri. And on the—— 

Senator BOND. Well, I—— 

Secretary LAHOOD [continuing]. High-speed rail—let me tell you 

about the high-speed rail. There is a rail plan. We put a rail plan 

together before we decided to go out and figure out what we were 

going to do with our $8 billion. We funded 13 regions in the country. Missouri did very well, by the way, because you’re going to be 

connected with some other States. Then we received these applications, we evaluated them, we met with the people, and we awarded 

$8 billion. Thanks to all of you, we have an additional $2.5 billion 

this year. If anybody in Missouri had questions about high-speed 

rail, we sat down with them, we answered them. I talked to your 

Governor on several occasions about high-speed rail. So, the idea 

that people don’t have access to information is absolutely not accurate. It’s not. I’ll give you a list of my phone log and show you how 

many Members of Congress have called me, and how many Governors. 

Senator BOND. Well, I remember talking to you back in June. I 

said, ‘‘How are you going to spend the money that you got in the 

ARRA?’’ If I remember correctly, you said, ‘‘You gave us some 

money, and we’ll spend it.’’ That’s what—— 

Secretary LAHOOD. Well—— 

Senator BOND [continuing]. We heard. 

Secretary LAHOOD [continuing]. You know what, Senator, I’ll 

look back on the record—— 

Senator BOND. Well—— 

Secretary LAHOOD [continuing]. But, I doubt if I put it that way. 

Senator BOND. Well—— 

Secretary LAHOOD. We’ll get a copy of the record and see. 

Senator BOND. Well, this—— 

Secretary LAHOOD. You know—— 

Senator BOND [continuing]. This is—— 

Secretary LAHOOD [continuing]. Look it—— 

Senator BOND [continuing]. This is—— 
19 

Secretary LAHOOD [continuing]. I have—— 

Senator BOND [continuing]. This is the—— 

Secretary LAHOOD [continuing]. Very—— 

Senator BOND [continuing]. Question we had—— 

Secretary LAHOOD [continuing]. High regard—— 

Senator BOND [continuing]. In the S. 128. 

Secretary LAHOOD. Okay. Well, look I have a very high regard 

for Members of Congress, having been one, and I—— 

Senator BOND. I—and I—— 

Secretary LAHOOD [continuing]. I don’t think—— 

Senator BOND [continuing]. Have a high regard for you, sir. 

Secretary LAHOOD [continuing]. And I—— 

Senator BOND. But—— 

Secretary LAHOOD [continuing]. Don’t take—— 

Senator BOND [continuing]. I’m just saying—— 

Secretary LAHOOD [continuing]. Lightly questions—— 

Senator BOND. Yes. 

Secretary LAHOOD [continuing]. From Members—— 

Senator BOND. There’s no information—— 

Secretary LAHOOD [continuing]. Of Congress. 

Senator BOND [continuing]. On the waiting. You’ve got some big, 

broad—I’m going to ask you how you define livability and all those 

things. I mean, wow. You know, it’s like saying we’re going to oppose pornography. What are you going to oppose? How are you 

going to support livability? We’ll get into that in the next round. 

I have a great personal admiration for you; we’ve been good 

friends for a long time. 

Secretary LAHOOD. Yes, sir. 

Senator BOND. I’m just saying, the system is not working, and 

I need to know, before we put more money in. And more questions 

to follow. 

Thank you. 

Senator MURRAY. Do you need some more coffee, Senator? 

Senator BOND. No. 

Senator COLLINS. I—we could offer to get you some. 

Senator BOND. Thank you, it’s working. 

Senator MURRAY. Senator Collins. 

FREIGHT RAIL

Senator COLLINS. Thank you Madam Chairman. 

Mr. Secretary, I want to take advantage of this opportunity to 

bring to your attention, and the attention of my colleagues, a very 

serious problem that we’re facing in northern Maine. And the best 

way for me to do this is to refer to a map that we’re providing to 

each of the members and to you. Thank you, I’m glad that you have 

it. 

First, let me tell you a little bit about the geography. The area 

in question in Maine includes the largest county east of the Mississippi in our country. And it is facing the imminent loss of virtually all the freight rail service for this area. The Montreal, 

Maine, and Atlantic Railway has filed with the Surface Transportation Board to abandon 233 miles of rail. It’s signified on the map 

by the red line. And, as you can see, it’s an enormous area. In fact, 
20 

the only freight rail that would remain is a little strip at the very 

northern border between Madawaska and Van Buren. 

This area of our State has an unemployment rate that is almost 

10 percent. It’s higher than the national average, and it’s higher 

than Maine’s overall rate of 8.3 percent. If this rail line is abandoned, it will be devastating to the economy of northern Maine. 

There are about 20 major shippers that rely on this line. That includes a major paper mill that is in Madawaska; it includes a potato processing plant; and there are a variety of smaller shippers 

that also rely on the line. 

I want to read to you a quotation from the Maine transportation 

commissioner, because it sums up well just how important this is. 

‘‘The Maine Department of Transportation feels very strongly that 

we cannot allow this line to be abandoned. It is inconceivable that 

the largest county east of the Mississippi’’—this is Aroostook County, it’s my home county in Maine—‘‘a county whose economy is primarily manufacturing and agrarian-based, would be completely cut 

off from rail service. That would truly be unprecedented. The outright abandonment of freight rail service would have an immediate 

and direct negative economic effect on the companies’’—and I 

would add, all the employees—‘‘that are located in this county.’’ 

Everyone, Mr. Secretary, is trying to work together—the State, 

the shippers, the local officials, county officials, State officials—but, 

it’s obviously going to take an investment of capital to save this 

service. I am so committed to saving freight rail service for northern Maine. As you can see, it’s an enormous area of our State. And 

I want the chairman of this subcommittee, and the ranking member, to understand that a contribution of Federal funding is going 

to be essential in saving this line. It’s going to be one of my top 

priorities for the bill that we worked so hard on. 

Mr. Secretary, I know that the decision on whether or not to 

allow abandonment does not fall to you, it falls to the Surface 

Transportation Board. However, the Department does have funding 

options. And today I’m asking you to work with me, to work with 

this subcommittee, to work with the State of Maine to come up 

with a solution. We simply cannot allow 233 miles of line to be 

abandoned, when there’s no other freight service for this large area 

of Maine. It would have a devastating impact on the economy, an 

economy that is already very fragile. 

So, today I’m asking you to work with me to try to identify solutions where the Federal Government can be a partner in trying to 

save this necessary freight service. 

Secretary LAHOOD. Well, Senator, thank you for your leadership 

on this. Freight rail is very, very important. It’s a big, big component of our transportation system around America, and I know it 

is for Maine. You’ll have my full commitment. What I’d like to offer 

up is for our rail administrator to go to Maine, as quickly as possible, to meet with all of the stakeholders and all of the people that 

are involved, and we’ll figure out some kind of a funding opportunity to make sure that this line is not closed down, because, it’s 

like an interstate system. You can’t close down a part of the interstate that connects so many other parts of the State. 
21 

We get it. I’m committed to helping you. I’ll have our rail administrator in Maine, whenever we can get all the stakeholders together, and we will work with you on a plan to get this funded. 

SAFETEA–LU

Senator COLLINS. Thank you so much. It’s so important, and I 

very much appreciate your commitment. 

I want, next, to discuss an issue that my colleagues have talked 

about, and that is the expiration of the 2005 highway reauthorization law. I’m very proud of the fact that Maine was the first State 

in the Nation to obligate all of the funding provided by the Recovery Act. That is a credit to Governor Baldacci, to State officials, but 

it also shows you what an overwhelming need that there is for 

funding for infrastructure in my State. 

And it was brought home recently when a construction company 

executive came to meet with me. He talked about the fact that he 

had hired 150 workers as a result of the funding from the stimulus 

bill, but he’s very concerned that there’s no long-term highway 

funding plan on the horizon. 

Given the unfortunate reality that it looks unlikely that Congress will pass a highway reauthorization bill this year, what actions are the administration taking to ensure that the Highway 

Trust Fund has adequate funding? 

Secretary LAHOOD. Well, actually, the bill that you all passed— 

that’s pending in the House today, and I think there’ll be a vote 

on it—which extends our program through the end of the year, is 

an enormous help to the States. These 30-day extensions do them 

no good. As a matter of fact, States begin to lose money, and it’s 

impossible to hire contractors. I mean, we like the bill that you all 

passed, and we’re encouraging the House to pass it today, because 

it takes us right up to the end of the calendar year. It gives us time 

to work with all of you on another authorization bill, to find the 

money to do all the things we want to do. That bill, alone, is an 

enormous lift for all of these States. 

Senator COLLINS. I couldn’t agree with you more that it’s a real 

problem that we’re passing just these short-term extensions. I supported and helped advance the bill—— 

Secretary LAHOOD. Thank you. 

Senator COLLINS [continuing]. In question, because—the contractors simply can’t plan. And the State does not dare enter into contracts if it’s not assured that funding is going to be forthcoming. 

And finally, Mr. Secretary, I do want to mention the TIGER 

grant applications. The demand was enormous for that funding, as 

you know even better than I—nearly 1,400 applications were submitted, including several from Maine. We’re grateful for the port 

funding that we received. But, there are other projects that are so 

important—the rail project that I just mentioned—but also what I 

believe is an innovative project that Maine and New Hampshire 

brought forth, to rebuild the bridge from Kittery, Maine, to Portsmouth, New Hampshire. The two States collaborated on a TIGER 

grant application. It has unanimous support from both the Maine 

and New Hampshire delegations, both of our Governors. And I 

hope, as you do the second round of TIGER grant applications—I 

believe it’s $600 million—— 
22 

Secretary LAHOOD. Yes. 

Senator COLLINS [continuing]. More that you have available this 

year—— 

Secretary LAHOOD. Yes. 

Senator COLLINS [continuing]. That you’ll take a hard look at 

that application. This is a major thoroughfare connecting our two 

States. It’s important for commerce, for tourism, for day-to-day 

travel by residents. And I urge you to take a close look. It’s unusual for two States to collaborate together in filing an application, 

but that’s what we’ve done. 

Secretary LAHOOD. Yes. Senator, let me just suggest that maybe 

we could work with your staff and get the stakeholders from both 

of the States together. We could review their application, in anticipation of us posting up our guidance for the next round, and that 

may be helpful to them. If we could work with your staff to get a 

few of those people gathered together, we can talk about the previous application and the way forward. 

Senator COLLINS. Thank you very much, Mr. Secretary. 

Thank you, Madam Chairman. 

Senator MURRAY. Thank you, Senator Collins. 

PENNSYLVANIA EXPRESSWAY

Senator Specter. 

Senator SPECTER. Thank you, Madam Chair, and good morning, 

Mr. Secretary. 

Secretary LAHOOD. Good morning. 

Senator SPECTER. Thank you for accepting the position in the administration to provide a breath of bipartisanship. We can use it 

around here. And thank you for being so accessible and the many 

trips you have made to Pennsylvania to take a look at our needs 

that come within the purview or your Department. 

As I have mentioned to you in our private conversations, I think 

that Pennsylvania ought to be getting more on the next round of 

disbursements. I understand the problems you’ve had, but the fraction allocated to my State has been relatively small. 

Picking up on some of the specifics, a very important project in 

Pennsylvania is the Mon Valley Expressway, and it connects 

Uniontown, in Fayette County, to the city of Pittsburgh, and is indispensable for economic growth in that area, an area which has 

been really hard hit with steel and coal, et cetera. 

PENNDOT requested some $401 million from the stimulus highspeed, but no funding was awarded. And we’re searching for the 

concerns which the U.S. Department of Transportation has. And 

this is a matter which has to be worked out at the staff level, but 

I want to make the request, to you, to use the power of the—your 

office to see if we can’t move that along so that we’re in a position 

to answer whatever questions there are. That—the Mon Valley Expressway is really of critical importance to southwestern Pennsylvania. 

Turning now to the so-called Lackawanna Cutoff between Scranton and Hoboken, New Jersey, to establish a line which would set 

the stage for a Wall Street West, which would be very important 

for Wall Street and very developmental for New Jersey and also for 

northeastern Pennsylvania, the request was made for $401 million 
23 

from Stimulus High-Speed. And, here again, we do not know what 

the problems were, and I’d like to get that worked out, at the staff 

level, so we can figure out to—— 

Secretary LAHOOD. Yes, sir. 

Senator SPECTER [continuing]. Correct whatever problems you 

see. 

The Schuylkill Valley Metro is a project you know, because you 

came to Norristown and graciously participated in a meeting out 

there. We have received substantial funding over the years, but it 

hasn’t gone forward. But, there is a fund of $24 million which has 

not been obligated. And I wrote you, back on December 23, asking 

you not to reprogram the money, and I’d appreciate your taking a 

look at that and honoring our request, because that really is vital 

to take pressure off the Schuylkill Expressway. And one day we’re 

going to get it worked out with existing sector rail lines called R6 

and other lines which can be used to work all the way up to Reading. 

The Maglev issue has been on the table for a long time, and there have been plans to allocate $90 million—half in the west and 

half in the east. And finally, yesterday—and I thank you—there 

was a release of the $950,000 which you and I talked about a long 

time ago. It was reduced to $889,200, but thank you for liberating 

it. 

Secretary LAHOOD. Thank you for jogging my memory on it. 

Senator SPECTER. Well, I’m glad you have a memory, once 

jogged, and even gladder, if there is such a word, that we got some 

of that money. 

Mr. Secretary, without carrying on a monologue, where do you 

see Maglev heading, what kind of a timeframe do you see for a decision to make an allocation of the $45 million to Pennsylvania? 

Secretary LAHOOD. Maglev is very expensive, Senator, and we 

really need to sit down with the stakeholders and look at their 

plans and determine what kind of commitment there will be from 

others. To be honest with you, it is a very expensive project, and 

we just need to make sure we know where all the money is going 

to be coming from, and that the plans are in place so that if somebody makes a decision to go ahead with this, that the commitments 

will be there, not only from us, but from those that want to implement this program. 

Senator SPECTER. Mr. Secretary, whom are you looking toward to 

be at the table? Because I’d like to move ahead, and I would certainly take the lead in organizing the meeting. Who—— 

Secretary LAHOOD. Well, I think we need to get people in the 

State that are interested in this program, and members of your delegation who have expressed an interest, together and have a meeting. We’d be happy to help you organize that—or if you want to 

take the lead. I think we should do that. 

Senator SPECTER. Well, I’d be glad to take the lead, and I will 

follow up with you on that. Maglev is present in other countries. 

I’ve rode on a pilot project in Hamburg; it must have been a decade 

ago. The train is designed to run close to 300 miles an hour. You 

go from Philadelphia to Pittsburgh in 2 hours and 7 minutes, with 

intermediate stops in Lancaster, Harrisburg, Altoona, Johnstown, 

and Greensburg. And you wouldn’t have to take your shoes off to 
24 

get on the train. It would cut down on a lot of vehicular traffic and 

have all the ingredients we talked about on high-speed rail—highspeed travel. And I think it is a technology which is expensive, but 

I think it would be worth it. But, let’s pursue the—— 

Secretary LAHOOD. Yes, sir. 

INFRASTRUCTURE FUND

Senator SPECTER [continuing]. The dialogue we’ve had. 

We’re working, on the Environment and Public Works Committee, on the highway bill—highway and transit—and we’re talking about a figure of $600 billion. Is that realistic, from the point 

of view of the administration? I hope so. 

Secretary LAHOOD. Well, if you look at the bill that’s been put together in the House, it’s about a $450 to $500 billion bill. Everywhere I’ve gone, I’ve said the President wants a robust, comprehensive transportation program. We need to find the money to do it. 

One of the ways that the President suggested, in the budget that 

you’re all considering, is an infrastructure fund. Some people like 

it and some people don’t, but it would be a fund that would allow 

for significant outstanding projects around the country. 

We need to think outside of the box. The President is not for 

raising the gasoline tax when unemployment, nationally, is just 

below 10 percent. So, the Highway Trust Fund is not sufficient to 

do all the things we all want to do, and we need to think about 

an infrastructure fund, we need to think about tolling, we need to 

think about alternatives that help us do the things that we all 

want to do. 

Senator SPECTER. Mr. Secretary, what would the source of the 

revenue be for the so-called infrastructure fund? Would there be 

bonds? How would we—— 

Secretary LAHOOD. That is correct. 

Senator SPECTER. How would you—put a little flesh on the 

bones. How would you proceed on it? 

Secretary LAHOOD. There are big, significant projects around the 

country that people don’t have the money for, whether it’s a bridge 

between two States, an interchange, or an extension of an interstate system to connect one State to another. The way I envision 

it, if Congress allowed this kind of a fund, to receive proposals for 

significant projects and then work with the States on the cost. The 

bonds would allow the money, then, to begin to flow, over a period 

of time. 

Senator SPECTER. Well, it certainly would be a—— 

Secretary LAHOOD. I can tell you this, Senator. The Buy America 

Bond Program is wildly popular, oversubscribed. This is not exactly 

the same thing, but I’m just saying alternative funding is what we 

really need to think about, because there’s just not enough money 

in the Highway Trust Fund. 

Senator SPECTER. Well, I’ve given you some homework, and 

you’ve given me some homework. And I’ll proceed to look at that. 

It’s the kind of legislation that I would favor and would be inclined 

to introduce, and we’ll proceed. 

Well, my red light just went on. 

Thank you very much for your—— 

Secretary LAHOOD. Thank you, sir. 
25 

Senator SPECTER [continuing]. Service, Mr. Secretary. 

Thank you, Madam Chair. 

Senator MURRAY. Thank you, Senator Specter. 

HIGH SPEED RAIL

Senator Kohl. 

Senator KOHL. Thank you very much, Senator Murray. 

Secretary LaHood. 

Secretary LAHOOD. Yes, sir. 

Senator KOHL. On January 28, the White House announced the recipients of $8 billion in high-speed rail grants, including two 

projects, as you know, in Wisconsin. 

Secretary LAHOOD. Yes. 

Senator KOHL. Connecting Wisconsin’s major metropolitan areas 

through high-speed rail will yield both immediate and long-term 

benefits. Ultimately, this link will help develop both Madison and 

Milwaukee’s economies, creating long-term growth for each city, as 

well as the cities in between. 

In the short-term, the projects will create thousands of jobs, and 

Wisconsin is anxious to get started, as I’m sure you can well understand. My understanding, Mr. Secretary, is that the Wisconsin Department of Transportation is ready to assign contracts next 

month, and could begin construction this coming fall. If our goal is 

quickly creating jobs, then getting money out the door seems to be 

the most important and the most effective thing that we can do. 

I’d like to ask you what the Federal Railroad Administration’s 

timeline is for getting this funding to the States. Will the FRA be 

able to get the funds to Wisconsin in time for our fall construction 

season? 

I want to be clear, Mr. Secretary, this is about jobs—we all understand that—now and in the future. And I’d like to hope that you 

will do everything you can to make sure that this process is well 

expedited and that transportation departments are able to put people to work quickly. Do you have some sense or knowledge about 

how the FRA might be able to act quickly on the Wisconsin—— 

Secretary LAHOOD. We want to enter into agreements with these 

regions, of which, obviously, Wisconsin is ready to go, as quickly as 

we can so that people can begin working on high-speed rail and 

Americans can begin to see the results of this economic recovery. 

Our plan is to do that very quickly, sign these agreements with the 

States, and begin as soon as the States are ready to go. Our people 

are, right now, putting together documents and will meet with the 

stakeholders, like the State of Wisconsin, very, very soon, like within the next 10 days or 2 weeks, to begin to say, ‘‘Here are the documents, here’s what we think needs to be signed so that you can 

begin.’’ 

Senator, let me just say something that I talked to you about privately. I want to compliment your Governor. I think the reason 

that Wisconsin is in the high-speed rail business is because Governor Doyle stepped up, a year ago. He came to see me and said, 

‘‘How do we get into the high-speed rail business? This is something we’ve been planning.’’ Thanks to the leadership of your delegation and your Governor, you all are going to be at the forefront 

of the Midwest Region by connecting your State with other States 
26 

that are in that region. I want to compliment, not only you and 

Senator Feingold but also Governor Doyle, because he was early at 

the starting gate on this. We want to make it happen quickly, because we know there’ll be thousands of jobs provided when they 

start building the train sets and the infrastructure and all the 

things that will be needed. 

Senator KOHL. Well, that is really encouraging to hear. And, of 

course, you are right about Governor Doyle. He has been out front 

and has exhibited the foresight to see this coming down the road 

and seeing that Wisconsin was there in time, fully planned and organized to take advantage. It’s nice for me to know that you are 

fully aware of it and that you want to expedite—— 

Secretary LAHOOD. Yes, sir. 

Senator KOHL [continuing]. You know this particular project just 

as quickly as you can. I know he’ll be happy to hear it. I think people all over our State will be happy to hear it, and I express my 

appreciation to you. 

Secretary LAHOOD. Thank you. 

Senator KOHL. Thank you. 

TIGER PROGRAM

Senator MURRAY. Thank you very much, Senator Kohl. 

Mr. Secretary, DOT has, as you know, recently awarded grants 

under the TIGER program that we funded under the Recovery Act. 

And, under that, it was necessary to give priority to projects that 

could be completed over the next few years. However, the funding 

that we provided for fiscal year 2010 has a new set of requirements, and it can be used for longer-term projects. I know there 

are a lot of projects across the country that need this funding. I’ve 

talked to you about one in Washington State, the Columbia River 

Crossing Project that’s so important for mobility for cars and trucks 

and transit and bicycles and pedestrians; it’s one of the worst bottlenecks we have on the I–5 corridor. 

I wanted to ask you, this morning, how will the different requirements for the 2010 funding affect the kinds of projects that you’ll 

be able to fund under the TIGER program? 

Secretary LAHOOD. Right now, Madam Chair, we’re probably 

looking at the same guidance that we provided for the other TIGER 

grants. And, frankly, we’d like to try and get some of this money 

out the door this year, so we can continue the progress that we’ve 

made with our economic recovery. We know that the $600 million 

will provide jobs. That’s our goal. That’s the reason you put this 

money in the bill, so people could go to work. 

I don’t think the guidance will be that much different. We also 

will probably look at some applications that were very close in the 

first competition. The projects that if we’d had more than $1.5 billion, they would have gotten funded. We’re advising—— 

Senator MURRAY. You don’t expect to see new requirements, even 

though we have said this funding can be for longer-term projects. 

Secretary LAHOOD. I want to try and get the money out the door 

as quickly as possible so we can provide jobs. 
27 

RAIL TRANSIT SAFETY

Senator MURRAY. Okay. The budget that you submitted includes 

$24 million and 100 positions to establish a new Rail Transit Safety Oversight Program. That proposal, obviously, follows on the heel 

of rail transit accidents in Boston and San Francisco and, tragically, here in Washington, DC, and supports the legislation the administration transmitted to Congress in December. I know you’re 

hopeful that Congress will approve that legislation this year. In the 

meantime, I wanted to ask you what you’ve been able to do, within 

your current authority that you have, to make sure transit systems 

are safe without that legislation. 

Secretary LAHOOD. We’re prohibited by law from doing that, Senator. That’s the reason we proposed to all of you a bill. Because the 

law says we can’t do it. For some strange reason—I guess it was 

because, years ago, people thought since we were divvying up the 

money, we shouldn’t have the responsibility for the safety aspect of 

it. 

Senator MURRAY. Can you provide training or technical assistance? 

Secretary LAHOOD. Peter Rogoff, our transit administrator, is 

looking at best practices from around the country, and then trying 

to make sure that transit systems know what that is. But—— 

Senator MURRAY. So you really need that legislation. 

Secretary LAHOOD. We do, absolutely. We need the legal authority that only a law can give us, to really get into this up to our 

eyeballs, and really do a good job in making sure that these transit 

systems are safe. 

POSITIVE TRAIN CONTROL

Senator MURRAY. Okay. Positive train control is an important 

new technology that will help, we believe, and prevent some of 

these train-to-train collisions and derailments. Recognizing the 

safety benefits of this technology, the NTSB included positive train 

control on its most-wanted list for 18 years, and they took it off the 

list only after Congress mandated its use. For fiscal year 2010, this 

subcommittee provided $50 million for a new program that would 

support the development of positive train control, but you’ve requested no funding for the program this year. Can you explain to 

the subcommittee why the budget request doesn’t include any funding? 

Secretary LAHOOD. Well, we have a rule pending. We believe 

positive train control is something that is absolutely critical to safety. I’m going to ask Chris—you all know Chris Bertram, go ahead. 

Mr. BERTRAM. Yes. We did not include any funding for that. 

There is, as the Secretary mentioned, a rule pending at OMB that 

would mandate positive train control. 

Senator MURRAY. But, you’ve requested no funding. 

Mr. BERTRAM. Correct. 

Senator MURRAY. And you don’t believe it needs any funding? 

Mr. BERTRAM. I think the FRA will take a look at the money that 

Congress provided, and evaluate the effectiveness of that. 

Senator MURRAY. From last year. 

Mr. BERTRAM. From last year, yes. 
28 

Senator MURRAY. Okay. Well, I may submit another question on 

the record on that. 

FERRY FUNDING

I wanted to ask you about ferry systems. As you know, ferries 

are, just, a critical part of transportation systems in my home 

State, connecting communities between Puget Sound and across 

the Columbia River system. In fact, the ferry system in my home 

State is the largest ferry system in the United States, with over 40 

percent of U.S. ferry passengers, and about three-fourths of the vehicles, carried nationwide. Last year, I introduced legislation to reauthorize the Federal Ferryboat Discretionary Program and expand 

the Federal investment in our Nation’s ferry system, and that legislation built directly on what we did in SAFETEA–LU to give priority to ferry systems that carry the most passengers and most vehicles and have access to critical areas. I wanted to ask you, Mr. 

Secretary, this morning, if I have your commitment to work closely 

with us, following that directive in SAFETEA–LU, to allocate ferry 

funding in 2010. 

Secretary LAHOOD. Absolutely. I had the privilege, when I was 

in Seattle, to use the ferry system. I know how important it is as 

a part of the overall comprehensive transportation system in the 

Northwest, and you have my commitment. 

Senator MURRAY. To work on the criteria. 

Secretary LAHOOD. Absolutely. 

MEXICAN TRUCKS

Senator MURRAY. Great, one last question for you. I wanted to 

ask you a question on a topic that we talked about at this hearing 

last year: cross-border trucking with Mexico. Last year, you talked 

about the work you were doing with the various departments to 

craft a plan to resume cross-border trucking with Mexico in a way 

that would address the safety concerns raised during the pilot and 

in the tariffs that have now been imposed by the Mexican Government. Those tariffs were imposed on over 90 U.S. products and 

they undermine the competitiveness of many agricultural products 

in my home State of Washington. If we’re not able to find a path 

forward with Mexico on this issue, these tariffs are going to send 

American jobs north to Canada as our growers and our processors 

and our packers are being forced to relocate, and it is threatening 

the livelihood of many communities in my State. 

Now, I appreciate there’s a lot of concern about implementing 

this cross-border trucking, but we’ve got to work with Mexicans to 

address this impasse and move forward. I met with Ambassador 

Kirk a few weeks ago. I wanted to ask you, this morning, to give 

us an update on your discussions with the administration and with 

Mexico, to give us a sense of when we will see the plan from the 

administration. 

Secretary LAHOOD. We are finalizing a plan. The reason it’s 

taken so long is because there’s a lot of different moving parts, including about five different Cabinet officials. Every time we make 

a tweak or a change, everybody has to sign off on it. But, we’re 

very near a proposal that we think will meet all of the safety con-
29 

cerns that I heard when I talked to 25 Members of Congress. We’re 

close to talking to all of you about what we think are—— 

Senator MURRAY. Okay, well, we’re—— 

Secretary LAHOOD [continuing]. Our way of addressing the safety 

concerns that Congress brought to us. 

Senator MURRAY. Okay, Mr. Secretary, I appreciate that. And 

you and I have had this discussion; I know you’re working on it. 

This is critical to a number of our agricultural industry now in my 

State. Would you please tell the folks you’re talking to in the White 

House, and others, that we need to get this done? 

Secretary LAHOOD. I will. 

Senator MURRAY. Thank you, Mr. Secretary. 

Secretary LAHOOD. Thank you. 

Senator MURRAY. I’m going to turn this over to my ranking member, Senator Bond. I have to get to another hearing. He has kindly 

agreed to be very nice to you. No. 

Secretary LAHOOD. Thank you, Madam Chair, for all of your 

leadership on transportation. We really appreciate your forwardlooking on transportation issues, and it’s a joy to work with you 

and your staff on these things that we all really want to get done. 

So, thank you for your leadership. 

Senator MURRAY. Thank you, Mr. Secretary. 

I will turn this over to Senator Bond. He is going to ask his questions and recess the meeting for me. And I really appreciate your 

doing that. 

Thank you. 

LIVABILITY

Senator BOND [presiding]. Thank you, Madam Chair. If you will 

continue to keep the E&W meeting going, I will look forward—I’d 

have some friendly questions to ask Secretary Chu. 

But, Mr. Secretary, let’s go back to a couple of the questions we 

were talking about, about the standards. The TIGER grants, you 

said, the strategic plan is for safety, economic competitiveness, 

state of good repair, and livability. What’s livability? 

Secretary LAHOOD. Communities where people have access to 

many different forms of transportation and affordable housing and 

the ability to really have access to all of the things that are important to them, whether it’s a grocery store, a drug store—access. It’s 

not dissimilar to the neighborhood, for example, that the Department of Transportation is located in. After the ballpark went there, 

there was a Metro stop, there were new bus stops, there are new 

condominiums, there’s access to affordable housing. What it is, Senator, it’s an opportunity for people who want to live in neighborhoods—maybe they don’t want a car—so they can walk to work, 

they can take mass-transit to work, they can take a bus to work, 

they can go to a grocery store. These are communities and neighborhoods where people want to live, where they have access to all 

the things that they want. 

Senator BOND. Well, I mean, how do you measure that? I mean, 

the—I don’t think the Department of Transportation is in the business of determining the state of the communities. We do—we try 

to help build community plans that are locally based community 

plans, that come to the request from HUD for neighborhood sta-
30 

bilization, economic development; and the plans must come from 

the localities. And I’ve supported access—transportation access— 

the BRT program in Kansas City—bus rapid transit—it’s been very 

important. But, that supplements a local plan, where transportation is just one part of it, where there is a much broader plan 

for the housing, the facilities, and what the State is doing. And livability, to me—you know, I’ve got a lot of constituents for whom 

livability means having a decent highway. They’ve got to drive on 

the highway because they live in a rural area and they’ve got to 

drive from one town to another town or maybe from one town to 

a city. And we are killing those people on the roads. We have—we 

lose three people a day on highways, in Missouri, and at least onethird of those deaths are due to poor highway conditions. This is 

not a question of convenience; this is a question of staying alive. 

So, livability, in some areas, has a different meaning. And I just 

question—if we’re building—if we’re looking at all these dollars to 

go in and build urban livability sections, I think there needs to be 

broader criteria, as well. That’s why I’m questioning—— 

Secretary LAHOOD. Well, Senator, let me just give you an example in your home State. The $50 million that we gave to Kansas 

City is for some of the simplest things that you and I take for 

granted. In this neighborhood—it’s a 150-block neighborhood, in 

your colleague Congressman Cleaver’s district. That money is going 

to be used to do simple things, like make sure people have a sidewalk to walk on, and to make sure that there are curbs. Now, that 

may sound silly to you—— 

Senator BOND. No, it’s not—it’s—— 

Secretary LAHOOD [continuing]. But when I went there for the 

announcement, I took a tour with Mr. Cleaver, and what we found 

was an abandoned neighborhood, because there are no sidewalks, 

there are lousy streets, and people can’t even drive down the 

streets. So, what Congressman Cleaver and a whole group of community people did is put together a plan—$50 million of our money 

and some HUD money—to build affordable housing so that people 

that want to stay in this neighborhood can stay in the neighborhood. That’s what Livable Communities is all about. 

Senator BOND. Mr. Secretary, I have the highest respect for Congressman Cleaver. A former mayor I’ve worked very closely with. 

I don’t know what’s going on in Kansas City. But, when did it become the responsibility of the Federal Department of Transportation to build sidewalks? 

Secretary LAHOOD. When you all put it in the—— 

Senator BOND. I think that—— 

Secretary LAHOOD. No. When you all put it in the transportation 

bill for the amenities for neighborhoods, whether—— 

Senator BOND. This is—— 

Secretary LAHOOD [continuing]. Its streetscape or medians, or 

whatever it is, you all did it. I was a part of it. I was a Member 

of Congress that did it, too. 

Senator BOND. To go in and be building sidewalks, when there 

is a—there are such transportation needs. You—I know that heeland-toe is transportation, but what I’m saying is, there are other 

priorities that I think come ahead of that. And I just question how 

much money is going to be spent on sidewalks, when we need high-
31 

ways and we need bridges. That’s where—and I—any—this is 

a—— 

Secretary LAHOOD. Senator, if you look at—— 

Senator BOND. It’s a question of priorities. 

Secretary LAHOOD. If you look at our portion of the economic re- covery—you all provided $48 billion—the lion’s share of it went to 

highways—$28 billion; $8 billion for transit, $8 billion for highspeed rail, $1.5 billion for so-called TIGER grants, $28 billion for 

highways. That’s—— 

Senator BOND. That is—— 

Secretary LAHOOD. That’s your priority. 

Senator BOND. Well, unfortunately—— 

Secretary LAHOOD. That’s where the lion’s share of the money 

went. 

Senator BOND [continuing]. It was a drop in the bucket—out of $787 billion—— 

Secretary LAHOOD. I’m talking about—— 

Senator BOND [continuing]. That was far too little—no, but I’m— 

I think we might be on the same side, on that one. I think it was 

far too little, because we could have used a whole lot more for highways and bridges. 

But, my problem is that every dollar we’re spending in that stimulus bill, and a lot of other things we’re doing, is going on the deficit. We are borrowing from our children and our grandchildren. 

And I am kind of embarrassed to tell my son and—if he and his 

wife have children, tell my grandchildren—‘‘Oh. I’m sorry. We’ve 

been spending—we spent your—we spent on your credit card.’’ And 

I think there is a growing realization that we need to get these 

deficits under control, and spend only on things that we can justify 

to our children and grandchildren. That’s the problem. 

And high-speed rail, again—I don’t know if you saw it, but the 

Wall Street Journal had a—had an article by Wendell Cox, on January 31 called the ‘‘Runaway Subsidy Train.’’ Did you see that? 

HIGH SPEED RAIL

Secretary LAHOOD. No, sir. 

Senator BOND. I’ll give you a copy of it. 

Secretary LAHOOD. Okay. 

Senator BOND. It’s very critical, and I think raises questions that 

need to be answered. It says, ‘‘Proponents claim that high-speed 

rail is profitable, but this is off the mark. Internationally, only two 

segments have ever broken even—Tokyo to Osaka and Paris to 

Lyon.’’ And they did that because they had $4 gasoline—equivalent 

of $4 gasoline and highway tolls of $40 to $100, respectively. If 

that—if you want to make it profitable, you have to have those 

kinds of tolls. 

It—the question that I have, generally, about high-speed rail is 

what’s going to be the total cost? I know that—let’s see, I guess the 

estimate in California is that—let’s see—California high-speed rail, 

Los Angeles to San Francisco, $40 billion to $60 billion. Totally taxpayer subsidized taxpayer money. Same time, we’ve got airlines flying there that are not flying on the—they’re not being subsidized 

by the taxpayer dollar. The people who drive on the roads are paying taxes that not only pay for roads, but also help subsidize high- 
32 

speed transportation. I want to know what the total cost of all 

these wonderful high-speed rail plans are and what is the justification. How is it going to be—how are we going to know that these 

are valuable? There seems to be—there are many, many questions 

about why—whether some of these routes are going to be much 

faster than when the trains were, back in the 1930s and 1940s. I 

know we got $34 million in Missouri. That’s nice. That will probably provide some amenities, like extra sidings for trains to— 

freight trains, or even passenger trains, if needed, to pull off so 

they can get passed. But, what are the projections for ridership between St. Louis and Kansas City? How many billions of dollars is 

it going to cost to build a high-speed rail through there? Can we 

justify that to the taxpayers—not just to Missouri, but to the Nation—for what we’d have to spend? These are questions I think we 

have a responsibility to ask when we are working in a deficit situation. 

And even if—you know, always glad to see money in Missouri. 

But, before we continue to spend that money, I want to make sure 

we’re spending it properly. That’s the big concern I have. Are we 

spending it properly? 

I’ll give you that and—we had another couple of Wall Street 

Journal editorials that I think—— 

Secretary LAHOOD. You want me to answer these for the record, 

Senator, or—— 

[The information follows:] 

Ensuring proper use and distribution of funds remain high priorities for the Department of Transportation. As the Department moves forward in the development 

of each of the State corridors, we will be working with our State partners to develop 

reliable cost estimates for programs to develop specific high-speed rail corridors recognizing the challenges associated with predicting costs for projects that might span 

decades. We will also be looking for the States and other interest parties to become 

part of both the planning and corridor development process. 

Each program will include several projects. As we move to project level decisions 

that involve commitment of funds for construction, we will be refining cost estimates, refining ridership and benefit estimates, and refining commitments from 

stakeholders and interested parties. In this merit-based competitive program, those 

corridor projects that move to construction are the ones that are expected to generate the largest benefits to the U.S. taxpayers. 

Senator BOND. Oh, I—— 

Secretary LAHOOD [continuing]. Do you want me to answer 

them? 

Senator BOND [continuing]. Well, yes, answer these for the 

record. Or, I mean, if you’ve got any comment—— 

Secretary LAHOOD. Okay, all right. 

Senator BOND. I’ll let you—— 

Secretary LAHOOD. I know you want to go to another committee 

meeting, so I’ll answer them for the record for you. 

Senator BOND. Okay. And if you have any comments on my comments, I’d welcome those now. I mean—— 

Secretary LAHOOD. Of course, I have comments. Yes. I didn’t 

know if—— 

Senator BOND. Good. No, I—— 

Secretary LAHOOD [continuing]. You wanted to go on to another 

hearing, or not. 

Senator BOND. But, this is important, so—but I mean—— 

Secretary LAHOOD. Yes. 
33 

Senator BOND [continuing]. For these things I gave you, if you 

may want to look at them and have—— 

Secretary LAHOOD. Okay. 

Senator BOND [continuing]. Indepth comment, but—— 

Secretary LAHOOD. Yes. 

Senator BOND [continuing]. You—I want to let you—— 

Secretary LAHOOD. No, look it—— 

Senator BOND [continuing]. Have an opportunity—— 

Secretary LAHOOD. Senator, you know—— 

Senator BOND [continuing]. For anybody who’s still listening, I 

want you to make sure you have your time to—— 

Secretary LAHOOD. Sure. 

Senator BOND [continuing]. Express your view. 

Secretary LAHOOD. I appreciate that. 

Senator BOND. Sure, no. That’s—— 

Secretary LAHOOD. No, I appreciate that. 

When President Eisenhower signed the Interstate Highway bill, 

nobody knew where all the lines were going to go, and nobody 

knew how we were going to pay for all of it. So, I’m not going to 

sit here and tell you I know where all the money’s going to come 

from for high-speed rail. I know this: Americans want high-speed 

passenger rail. We did not have one of the 13 regions turn us down 

in their opportunity to receive some of the $8 billion. There are so 

many people around America that want good passenger rail transportation. I can tell you, when the announcement was made in Missouri, there was a big hue and cry that went up. I didn’t hear one 

word of criticism about it from your Governor or any of the elected 

officials there, because it’s going to connect opportunities for people. 

You know this as well as I do, Senator. If you build it, they will 

come. The interstate system is an example of that. What an economic engine the interstate system has been for places all over 

America. What’s happened in Europe and Asia, their governments 

have made a huge investment and these corridors have become a 

huge economic engine everywhere that they are. 

I can cite chapter and verse. You build a transit line, you build 

a busline, you build an interstate or a—improve a street—you build 

it, and they will come. 

I know this. There’s going to be a lot of private investment. We 

had a meeting with all of the companies that build train sets, not 

only in Europe, but in Asia. And we had them come to the Department, and what we said to them—— 

Senator BOND. Oh man, they—I mean, they—they love it. 

They’re the ones who are going to build it. They’re going to—yes, 

that—they’re—— 

Secretary LAHOOD. Yes, but they’re also going to make an investment of some of their money, because they know this is an opportunity to get into the high-speed, inner-city rail—— 

Senator BOND. Yes, right. 

Secretary LAHOOD [continuing]. Business in America. 

Senator BOND. Now, they’re going to make some money off of it, 

but how much—— 

Secretary LAHOOD. They’re going to invest—— 
34 

Senator BOND [continuing]. Is it going to cost—how much is it 

going to cost—— 

Secretary LAHOOD [continuing]. The money too, Senator. 

Senator BOND [continuing]. The taxpayer? 

Secretary LAHOOD. They’re going to invest a lot of money, too, 

Senator—— 

Senator BOND. And where they do—— 

Secretary LAHOOD [continuing]. The way they have in Europe—— 

Senator BOND [continuing]. They’re going to invest in—— 

Secretary LAHOOD [continuing]. And in Asia. 

Senator BOND [continuing]. Where they get some money out of 

it. 

Secretary LAHOOD. The—— 

Senator BOND. I—I’ve talked to the people who are building toll 

roads, and they love it, because they know they are going to make 

money. But, here, as I said, two rail—two high-speed rail lines are 

profitable—I will—as Governor, I supported Amtrak. I started subsidizing Amtrak, and we could—the State of Missouri, I think, is 

still subsidizing Amtrak. But have they come in large numbers? 

No. I’ve—I rode it, and I’ve seen how a few people are on it. We 

have Amtrak from—between Kansas City and St. Louis. Yes. I’d 

like to see that. But, am I willing, on the thought that they will 

come, to spend billions of dollars more? I haven’t seen it, so far. 

And to make that into a high-speed—— 

Secretary LAHOOD. Well, you were willing to put—— 

Senator BOND [continuing]. Rail—— 

Secretary LAHOOD. As Governor, and certainly, as a Senator 

here, you’ve been willing to stake a claim on the idea that if we 

build a bridge between Illinois and Missouri, people are going use 

it. 

Senator BOND. I will put a whole lot more money on that one—— 

Secretary LAHOOD. I know you will; you already have. 

Senator BOND [continuing]. Than on spending billions on—spending billions on high-speed rail. You and I both need that bridge. We 

want you—— 

Secretary LAHOOD. The principle is that—— 

Senator BOND. We want you Illinois people to come over and 

watch the Cardinals. We’re not—— 

Secretary LAHOOD. Well, I’m looking forward to being with you 

to dig the first spade of dirt. But, I’m—— 

Senator BOND. Yes. 

Secretary LAHOOD. Senator, you know this. When that bridge is 

built, people are going to use it. You build it and they will come. 

I don’t think you would have staked a claim to that unless you 

thought people were going to use it and that it was needed. And 

I can—— 

Senator BOND. We’ve seen the projection—— 

Secretary LAHOOD. The same principle is true for high-speed 

inter-city passenger rail. 

Senator BOND. I’m sorry, I believe we have an experience with 

the highways. We know how important they are. We have a good 

track record. The track record, unless you’re looking at Tokyo to 

Osaka, or Paris to Lyon, is not that good. So, I just would like to 
35 

know the total estimated cost, where the funding is going to come 

from to ensure the things you are starting now, and what commitment, by State, localities, and private companies, are going to meet 

the required need, before we invest—before we commit to—I don’t 

care whether it’s St. Louis to Kansas City, St. Louis to Chicago, 

Chicago to Milwaukee, or Portland to Seattle—how much is it 

going to cost? What do you project the ridership? How much is that 

ridership going to be per person? Sometimes those numbers are 

pretty scary, because it’s the taxpayer dollar that we’re putting at 

risk. Well—— 

Secretary LAHOOD. Those are all very good questions—— 

Senator BOND. Yes. 

Secretary LAHOOD [continuing]. And I’ll do my best to answer 

them. 

[The information follows:] 

The administration’s support of the high-speed rail program highlights the significance that this intercity passenger rail initiative is expected to have on American 

way of life and our economy. This initiative will help relieve congestion, is environmentally sound, and ultimately promotes more livable communities across the country. Although the cost of a national high-speed rail system is unknown at this time, 

the closest analogy that we can make is the Interstate Highway program, which 

began in 1956. DOT did not estimate the cost to complete the Interstate System, 

but the benefits to the United States were immeasurable. 

The $8 billion appropriated under ARRA, as well as the $2.5 billion that was appropriated in fiscal year 2010, and the $1 billion requested in fiscal year 2011 President’s budget, are reflective of the administration’s commitment to advance the 

building of the infrastructure necessary to make high-speed intercity passenger rail 

transportation a reality. These resources are the down payment for this long-term 

infrastructure effort. We are working closely with the States and the rail industry 

to develop preliminary estimates and longer-term infrastructure requirements and 

plans. We commit to keep the subcommittee informed as we validate requirements 

and assemble more tangible plans. 

Senator BOND. Good, good. And I—and I—those are—that’s what 

I’m asking, because this is not like—we all know what—when you 

build a highway, when you build a bridge—and you and I know 

that a good friend of ours, when I was fighting for the highway bill 

and I proposed a bridge, he complained that there was a—‘‘You 

should not be using highway money to build a bridge.’’ Well he 

happened to come from a very dry State, and I explained to him, 

‘‘In the Heartland, highways don’t work unless you have a bridge 

across the river.’’ So, I fought—I’ve fought that battle. I know—— 

Secretary LAHOOD. I know. 

Senator BOND [continuing]. That battle. 

Secretary LAHOOD. I know. 

Senator BOND. I know it from both sides. That’s why I raise it. 

CYBER SECURITY

Now, I’ve got a very—one very serious question that we are not 

going to discuss at length in a—in an open hearing. You’ve got $30 

million for cybersecurity. I’m not going to ask you to go into the 

threats. I’m on the Intel Committee, and I know what the threats 

are. Do you have a plan for how that money is being spent? 

Secretary LAHOOD. Yes, sir. I’ll be happy to come up and brief 

you on that. 

Senator BOND. Okay. 

Secretary LAHOOD. I’d like to do that. 
36 

Senator BOND. We would like—I think Chairman Feinstein and 

I, on the Intel Committee, are also—— 

Secretary LAHOOD. Yes, sir. 

Senator BOND [continuing]. On Appropriations. If you would arrange to send your staff up—is the plan completed? 

Secretary LAHOOD. It is. 

Senator BOND. And who was responsible for preparing it? 

Secretary LAHOOD. We have hired a very, very experienced person to deal with this issue. 

Senator BOND. Has it been completed, in cooperation with other 

agencies? 

Secretary LAHOOD. Absolutely. It’s being coordinated with other 

agencies, of course. 

Senator BOND. Has it—have you coordinated with NSA? 

Secretary LAHOOD. Of course. 

Senator BOND. Okay. Let me just say—I was hoping that they 

would be here, but my—all right. Lewis Tucker, on my staff, and 

David Grannis, on Chairman Feinstein’s staff, would like to work 

with you to prepare a full staff briefing, and then we would like 

to have an opportunity—Brian Smith, from the Budget Office, in 

the Intel Committee. This is a very, very important investment, 

and we want to work with you on it to make sure—— 

Secretary LAHOOD. Yes, sir. 

Senator BOND [continuing]. It is done—that the money that you 

need is available, that it’s well designed, and it’s—— 

Secretary LAHOOD. Yes, sir. 

Senator BOND [continuing]. Well carried out, because this is—— 

Secretary LAHOOD. We will do it. 

Senator BOND. No further comments on that one, here, but just 

know that we appreciate how serious it is. 

Secretary LAHOOD. Yes, sir. 

ADDITIONAL COMMITTEE QUESTIONS

Senator BOND. And we’d work with you to make sure it’s done. 

At this time I would ask the subcommittee members to submit any 

additional questions they have for the record. 

[The following questions were not asked at the hearing, but were 

submitted to the Department for response subsequent to the hearing:] 

QUESTIONS SUBMITTED BY SENATOR PATTY MURRAY

Question. Mr. Secretary, your budget request includes $4 billion for a new agency 

at DOT—the Infrastructure Fund, or I-Fund. This proposal goes beyond the TIGER 

program that we funded in the Recovery Act and the regular 2010 bill. The I-Fund 

would not only evaluate project applications, but it would also look for projects to 

fund, whether or not the project even considered applying to DOT. 

Giving this authority to DOT would be granting the Department an unprecedented amount of discretion over taxpayer dollars. 

Senator Bond and I are both responsible for making sure that DOT conducts its 

programs with a fair and open process. 

Mr. Secretary, how would this kind of authority be consistent with running the 

Department with transparency and accountability? 

Answer. At the Department of Transportation, we are absolutely committed to accountability and full transparency, and the operations of the National Infrastructure 

Innovation and Finance Fund (NIIFF) would be handled in the same manner. The 

Infrastructure Innovation Fund would take a relatively small portion of the overall 

Federal expenditure for transportation infrastructure and focus on funding projects 
37 

of national and regional significance that help us achieve our national goals, such 

as economic competitiveness and livability. The ability to dedicate a portion of Federal transportation resources to fund these projects through a merit-based process, 

based on performance and outcomes of the projects, is an important part of our overall approach to address our most critical transportation infrastructure needs. We 

have been clear about the criteria we have established to evaluate these projects 

and about the analysis that we expect applicants to prepare to support them. We 

would be happy to work with you and your staff to develop appropriate ways of 

achieving the transparency and accountability that we all agree will be essential in 

this program. 

Question. Why should such an ambitious program be considered before we even 

know what is in the administration’s reauthorization proposal? 

Answer. The Department has committed to releasing principles for a reauthorization bill as soon as they are ready. We hope to use the time between now and the 

end of the year, when the current extension of the surface transportation program 

runs out, to make progress in developing long-term legislation. The I-Fund’s merit 

based evaluation process will be an important part of our overall approach to address the most critical transportation infrastructure needs. Every project selected 

through the TIGER discretionary grant and the National Infrastructure Investment 

(TIGER II) grant process will require specific performance measurements so we can 

track actual outcomes against the estimates provided in the submitted applications. 

This will provide a new knowledge that will help inform the Department’s other surface transportation programs, as we work to better identify the highest-priority 

needs, and how to address them, through the Reauthorization process. 

Question. In any competitive program, there will always be questions about how 

funding decisions were made. And the TIGER program was the Department’s first 

experience running a discretionary program of that size. 

Mr. Secretary, as you go through the process of awarding TIGER grants funded 

in 2010, how will you ensure the Department follows a fair and open process? 

Answer. DOT has made a significant amount of material available to the public 

about the criteria used to select projects, description of the process used to evaluate 

applications and list of the applications received. More than just making information available, DOT has aggressively reached out to the Congress and public to answer questions about the TIGER process, through webinars, conference calls and 

face-to-face meetings. 

The fiscal year 2010 appropriations act provided $600 million to be awarded by 

the Department of Transportation for National Infrastructure Investments (‘‘TIGER 

II Discretionary Grants’’). To ensure a fair and open process, the TIGER II Discretionary Grants will be awarded on a competitive basis by measuring grant applications for eligible projects against the selection criteria specified in the program’s 

Federal Register notice (an interim notice was published on April 26 and a final notice was published on June 1). 

The ‘‘Primary Selection Criteria’’ include: 

—Long-term Outcomes.—The Department will give priority to projects that have 

a significant impact on desirable long-term outcomes for the Nation, a metropolitan area, or a region. 

The following long-term outcomes will be given priority: 

—State of Good Repair.—Improving the condition of existing transportation facilities and systems, with particular emphasis on projects that minimize life-cycle 

costs; 

—Economic Competitiveness.—Contributing to the economic competitiveness of the 

United States over the medium- to long-term; 

—Livability.—Fostering livable communities through place-based policies and investments that increase transportation choices and access to transportation 

services for people in communities across the United States; 

—Environmental Sustainability.—Improving energy efficiency, reducing dependence on oil, reducing greenhouse gas emissions and benefitting the environment; 

and 

—Safety.—Improving the safety of U.S. transportation facilities and systems. 

—Job Creation & Economic Stimulus.—While the TIGER II Discretionary Grant 

program is not a Recovery Act program, job creation and economic stimulus remain a top priority of this administration; therefore, the Department will give 

priority (as it did for the TIGER Discretionary Grant program) to projects that 

are expected to quickly create and preserve jobs and stimulate rapid increases 

in economic activity, particularly jobs and activity that benefit economically distressed areas. 

The ‘‘Secondary Selection Criteria’’ include: 
38 

—Innovation.—The Department will give priority to projects that use innovative 

strategies to pursue the long-term outcomes outlined above. 

—Partnership.—The Department will give priority to projects that demonstrate 

strong collaboration among a broad range of participants and/or integration of 

transportation with other public service efforts. 

The Department will give more weight to the Long-term Outcomes and Job Creation & Economic Stimulus criteria than to the Innovation and Partnership criteria. 

Projects that are unable to demonstrate a likelihood of significant long-term benefits 

in any of the five long-term outcomes will not proceed in the evaluation process. For 

the Job Creation & Economic Stimulus criterion, a project that is not ready to proceed quickly is less likely to be successful. 

Pursuant to the fiscal year 2010 appropriations act, the Department will also 

strive for an equitable geographic distribution of funds, an appropriate balance in 

addressing urban and rural needs and investment in a variety of transportation 

modes. 

The June 1, 2010, notice published in the Federal Register provides additional 

guidance on how the Department will apply the selection criteria. 

Question. The Rail Safety Improvement Act of 2008 mandates that railroads implement positive train control over large areas of their track by the end of 2015. 

Such widespread use of Positive Train Control will require a large investment by 

the public sector, as well as significant investments by the Federal Government. Mr. 

Secretary, what are you doing to make sure that railroads are able to meet this 

mandate? 

Answer. The Department has taken a number of steps to assist railroads in meeting the December 31, 2015 mandate. The Federal Railroad Administration (FRA), 

in partnership with its Railroad Safety Advisory Committee (RSAC), published a 

final rule on January 12, 2010, that addresses the requirements of the Positive 

Train Control (PTC) mandate. 

A critical step in achieving PTC implementation was the requirement that each 

applicable railroad submit a PTC implementation plan (PTCIP) by April 16, 2010. 

Each PTCIP was to map out: (1) the railroad’s lines; (2) the lines meeting the criteria requiring PTC; (3) the manner in which the railroad will provide for interoperability within its PTC system of movements of trains of other railroad carriers over 

its lines; and (4) implementation of PTC on its line segments prioritized by areas 

of greater risk to areas of lesser risk. FRA received 40 implementation plans and 

has assembled a team of subject matter experts and is on target to complete the 

review and approval of the plans within 90 days. To support railroads during their 

PTC system testing and implementation phase, FRA’s PTC Specialists will oversee 

the testing and implementation and otherwise address PTC-related issues. The PTC 

Specialists will be further supported by FRA Signal Engineers and Specialists, as 

well as a small cadre of Senior Engineering staff. 

To minimize duplication of effort by railroads and vendors, and facilitate PTC system certification, FRA established a process where railroads may share common 

PTC system information. For example, railroads using the same PTC product only 

need to provide railroad-specific information necessary to certify the PTC product 

on their property. 

To address technical issues and facilitate interoperability, in fiscal year 2010, FRA 

is targeting the $50 million available under the Railroad Safety Technology Grant 

Program to address common PTC interoperability questions. This decision maximizes the utility of these limited resources by making investments in projects that 

benefit the railroad industry, verses using these grant resources to procure PTC 

equipment for few individual railroads. 

Finally, FRA is supporting the railroads and their suppliers by actively participating in meetings, reviewing draft documents, and providing feedback on the implementation of PTC. FRA, with the support of the Railroad Safety Advisory Committee, has crafted regulations that limit the scope of PTC implementation to a level 

consistent with enhancing the safety of railroad employees and the general public. 

Individual stakeholders may have strong feelings regarding the most appropriate 

way to achieve this goal. Consequently, FRA has provided mechanisms to allow individual railroads to demonstrate that the railroads’ proposed actions provide an 

equivalent level of safety for employees and the public. 

Question. Mr. Secretary, your budget request redirects $200 million from the regular highway program, and puts that money into livability grants that would help 

transportation planning organizations. 

I understand the need for these planning grants, but I also believe that we need 

to invest in our Nation’s highways. This past year, Senator Bond and I worked hard 

to provide an increase of $600 million for the Federal highway program. 
39 

I don’t know if that is something we’ll be able to do again this year. The budget 

resolution hasn’t been developed, and the subcommittee does not have its allocation 

yet. 

Mr. Secretary, can you please explain your decision in funding livability grants 

out of the highway program? 

Answer. The President’s budget marks a bold new way of thinking about investments in our transportation infrastructure and will become a key component of the 

administration’s future surface transportation proposal. The President’s budget requests $200 million to fund a competitive livability program within FHWA, which 

is compatible with the legislative intent of the Federal-aid Highway Program 

(FAHP). This benefits State and local governments, helping to modernize outdated 

planning and regional models and improve data needed to make transportation investment decisions. Because of competition for scarce resources, sometimes innovative solutions can take a back seat to the more pressing needs of maintenance and 

repair. By targeting some investment funding, DOT hopes to demonstrate that 

smart investment up front can save communities tax money over time by strengthening communities and lowering infrastructure costs. 

The $200 million request to leverage a proportional takedown from funding authorized for FAHP activities is a wise and much needed investment that will allow 

for the better leveraging of public funds for future transportation investments. This 

program will provide transportation practitioners with the tools, resources, and capacity they need to develop transportation systems that provide transportation 

choices, save people money, protect the environment, and efficiently move goods. 

Question. The Department is also requesting a new office within the Office of the 

Secretary. You are also requesting additional OST staff to work on livability issues, 

but they would not be a part of this new office. 

Congress is working on the reauthorization of most transportation programs. This 

legislation will also take a look at the Department’s overall structure. 

Mr. Secretary, why is it necessary to create a new office at this time? 

Answer. The Partnership for Sustainable Communities and the DOT’s livability 

initiative are a high priority for this administration. Because this is a new emphasis 

for the Government, however, there is substantial analysis and policy-making required to remove barriers and align the Federal programs and funding requirements 

to support the principles of livability. The Livable Communities Program within the 

Office of the Secretary will house full time employees that support this initiative. 

The Office will coordinate livability programs across DOT’s operating administrations and assess the effectiveness of various programs in supporting livability. It 

will also assist in coordinating interagency efforts for the Partnership for Sustainable Communities, lead in developing metrics and performance measures for livability, and assist in the selection and management of grant and technical assistance programs for seeking greater input and buy-in from the public. 

Question. Mr. Secretary, you have spoken many times on the topic of livability. 

Often, you talk about the importance of giving our communities a variety of transportation options. And how people shouldn’t be forced into driving a car wherever 

they want to go. 

But the biggest initiatives in your budget for livability don’t focus on funding specific projects. Instead, your new initiatives are about giving planning organizations 

access to better data and analytical tools, supporting public outreach efforts, and 

providing technical assistance. 

In the end, different communities will have their own definition of what is livable. 

For some it’s a traditional road that just happens to include room for bicycles and 

pedestrians. For others, it’s nothing short of a new transit line. 

How important is the planning process to DOT when it evaluates the livability 

of a transportation project? 

Answer. A livable community is one with transportation choices, housing choices 

and destinations located close to home. Because coordinating transportation with 

other investments like housing, water infrastructure and economic development initiatives is at the heart of creating a livable community, a strong planning process 

is essential to generating the sorts of projects that improve livability. However, 

these kids of comprehensive planning efforts require good data, tools and staff, and 

often this is difficult for struggling communities in difficult budget times. 

USDOT is, therefore, proposing to provide communities with the resources necessary to take a comprehensive look at their land-use decisions in conjunction with 

their housing, transportation, and environmental infrastructure plans. The result 

will be projects that provide a higher return on investment to the Federal taxpayer. 

Question. What standards is the Department using now to judge the livability of 

transportation projects? 
40 

Answer. While the Partnership is working to determine performance measures 

that can be used for livability projects, the current standards used are those listed 

in the Notice of Funding Availability (NOFA) for TIGER and TIGER II grants. The 

livability of transportation projects is judged by: enhanced mobility by creation of 

more transportation options; improved connectivity; increased accessibility to economically disadvantaged populations, non-drivers, senior citizens, and persons with 

disabilities; and the result of a planning process which coordinated land use and 

transportation planning decisions and involved community participation in the 

project. 

Question. DOT’s budget request includes $527 million for new initiatives that 

would support community livability. 

In addition, the Department of Housing and Urban Development is requesting $150 million as part of the administration’s sustainability initiative. This request 

builds on the funding this subcommittee provided HUD for fiscal year 2010. 

Mr. Secretary, I am glad to see that over the past year, DOT has worked hard 

to coordinate with HUD and the EPA on matters of livability and sustainability. 

However, it is still unclear how your livability requests fit with the work that HUD 

started this year. 

Can you explain to me how your new initiatives on livability will work with 

HUD’s ongoing livability program? 

Answer. In the fiscal year 2011 budget request, the three agencies divided up the 

roles in order to reduce overlap and redundancy and save taxpayer money. The focuses of the agencies represent which agency will act as the lead on this topic. 

DOT’s program will focus on capacity building. The goal is to increase capacity at 

all levels of government to integrate transportation, housing, economic development 

and water infrastructure investments in urban and rural communities. The funds 

could be used to improve modeling and data collection, provide training, fund household transportation surveys, and support organizational changes to better reflect integrated planning. 

On the other hand, HUD’s program has a focus on planning. Their goals are to 

improve regional planning efforts that integrate housing and transportation decisions, and update land use plans and zoning codes. They will be able to award funds 

to housing, transportation, and environmental stakeholders who are focused on 

planning efforts. 

Without the support to build institutional capacity to do the sort of comprehensive 

planning that HUD is promoting, communities may simply find an outside contractor to develop the plan without having the internal capacity to implement it and 

adjust it in the long term. DOT and HUD’s programs rely on one another to reach 

the highest levels of success. 

Question. The relationship between DOT and HUD is an important one, and Federal departments should coordinate and work together—whether it’s on livability or 

any other issue area. But we need to make sure that this relationship is sustained 

by more than the force of personalities. 

Mr. Secretary, what are you doing to make this new relationship between DOT 

and HUD something that will live beyond the current administration? 

Answer. Ensuring that this Partnership continues in the long-term—beyond the 

term of this administration—is a top priority. We are working together to institutionalize changes that will support this priority. We have begun this effort by creating offices at DOT, HUD, and EPA to head up the important work of encouraging 

livable communities. Our initial goals include joint NOFAs for planning grants and 

joint funding application review, evaluation and award processes. We also have been 

identifying institutional barriers and addressing them, such as HUD’s ban on multifamily housing on a cleaned up brownfield or replacing the New Starts cost-effectiveness review for a more broad cost-benefit analysis that includes economic development, housing and environmental impacts. 

Question. The DOT budget request includes $1.1 billion for the FAA’s effort to 

modernize the air transportation system—called ‘‘NextGen’’. And an essential part 

of NextGen is the replacement of radar surveillance with satellite-based technology. 

However, for this program to work, each aircraft that uses the air traffic control 

system must be equipped with compatible technology. The FAA has mandated such 

equipage by the year 2020, but there is no guarantee that airlines will be able to 

meet this mandate. 

Mr. Secretary, your budget proposal includes no funding to support NextGen equipage. 

Do you believe that the airlines can afford to meet the mandate on their own? 

Answer. The FAA has not currently mandated any NextGen equipage by aircraft 

owners and operators. We are in the final stages of considering industry comments 

on a proposed rule that would mandate Automatic Dependent Surveillance-Broad-
41 

cast (ADS–B) ‘‘Out’’ in certain airspace by 2020. The final rule is expected to be published soon. ADS–B is one of several components of NextGen and is capable of 

broadcasting (‘‘Out’’) and receiving (‘‘In’’) information regarding the location of other 

aircraft. Equipage mandates generally require following rulemaking procedures, including cost benefit analysis and public comments. 

The administration has been exploring various options to incentivize NextGen equipage prior to any mandatory due dates. The primary focus of our work has been 

to accelerate equipage above that which may occur naturally. Operational incentives 

for early adopters (‘‘best equipped, best served’’) could help to alleviate concerns regarding the financial ability of aircraft owners and operators to equip their aircraft 

with NextGen technologies in the near-term. 

Question. Secretary LaHood, I appreciate the work we’ve done together to promote 

sustainable communities and address climate change. As you may know, about onehalf of the emissions in my home State of Washington come from the transportation 

sector—which is much higher than the national average. So it’s really important to 

me to work to address this important issue. 

That’s why I created the Transit Investments for Greenhouse Gas and Energy Reductions in the Recovery Act. The program was such a huge success and we were 

able to include fiscal year 2010 funding as well. 

Secretary LaHood, can you tell me what lessons have been learned in establishing 

this new program? 

Answer. There is a great deal of interest and demand for such programs and assistance. The Federal Transit Administration (FTA) received over 560 project proposals and reviewed more than $2 billion in applications for the $100 million made 

available through the American Recovery & Reinvestment Act (ARRA) of 2009. 

Forty three proposals were selected from across the country as part of a nationwide 

competition, which rated projects on such factors as readiness to implement, applicant capacity, degree of innovation and national applicability. 

We also learned that there are a wide variety of technologies or operational efficiencies that can be implemented to reduce the energy and/or greenhouse gas emissions of our transit agencies. For example, among the projects funded within this 

competitive environment, Alabama will replace gasoline and diesel buses with electric hybrids, Massachusetts will construct wind energy generation turbines and 

Vancouver, Washington, will install solar panels at transit facilities. Ultimately, 

there are many innovative ideas that need to be researched and actions that can 

be taken to assist our transit agencies become more efficient as well as sustainable. 

Question. What lessons have been learned from projects selected for Grant Agreements? 

Answer. Due to the great variety of selected projects, we are just now beginning 

to understand some of the challenges we will need to address going forward such 

as how to more accurately calculate and document energy use and savings claims. 

We have learned, for example, that transit agencies need help measuring their carbon footprint, and that the source of their energy is ultimately a factor in moving 

the country forward toward sustainability. 

Question. Washington State is very appreciative of the $590 million you have approved for the NW High Speed Rail Corridor projects in Washington State. As a 

State, we’ve put a lot of investment into this corridor and these funds are going to 

help build on this to dramatically improve passenger service. 

Our State has nearly $280 million in projects that can turn dirt and put nearly 

2,000 people to work during the 2010 spring and summer construction season. This 

includes a lot of work that is ready to begin within 60 days. 

However, Washington State DOT is waiting for approval from FRA to proceed, 

and it’s unclear how long this approval process may take. It is very important we 

get these WA projects underway as well as others around the country and put people to work during this upcoming construction season. 

I’d like your commitment to have your staff look into this and work with the 

Washington State DOT on an acceptable schedule. 

Answer. The Federal Railroad Administration (FRA) is working closely with 

Washington State DOT to implement these projects as quickly as possible. Among 

the things FRA is collaborating on is completion of the environmental review required under the National Environmental Policy Act (NEPA) and other laws. These 

environmental approvals are necessary before FRA can complete and execute the 

grant agreement. FRA is also working with Washington to finalize the scope, schedule, and budget of each of the large projects planned as part of the anticipated $590 

million in infrastructure improvements. 

The Department understands the urgency of beginning construction as soon as 

possible. As a result, FRA has reached out to Washington and the host railroads 

(BNSF and Sound Transit) to provide them guidance on the appropriate ways in 
42 

which they might begin construction of certain projects in advance of the signed 

grant agreement with the goal of maximizing the likelihood that the State and host 

railroad could be reimbursed later with grant funds. FRA looks forward to continued 

progress in our productive on-going collaboration with Washington State. 

Question. Two projects in Washington State—the North-South Freeway in Spokane and the Mercer Street Corridor in Seattle—have been awarded TIGER grants 

recently. 

They are both great projects. The project in Spokane will create about 100 jobs— 

and the Seattle grant is the final piece required to finish a project that will create 

thousands of jobs. 

Would you please comment briefly on the role of infrastructure investment in supporting local and regional economies? 

Answer. Infrastructure spending has an immediate, primary, impact in creating 

employment in the communities while the infrastructure is being built. We estimate 

that the $48.1 billion in infrastructure investment funded by the Recovery Act will 

produce 523,000 job-years of employment, many of which take the form of jobs produced when increased employment at construction sites leads to increased spending 

at local and regional businesses producing consumer goods and services. 

In the longer run, transportation infrastructure investment helps to shape communities’ economic options. Manufacturers of high-value, high-volume semiconductors or electronics depend on air shipments to move their products to markets 

around the globe. Commodity agriculture or raw materials producers depend on access to bulk freight transportation infrastructure. Manufacturers of complex, high 

value products like automobiles depend on multi-modal freight links. 

Equally important are the benefits that good personal transportation options can 

confer on communities in the era of a global, knowledge-based economy. Livable 

communities are better able to attract clusters of high-skill, high-paying knowledgebased industries and workers, to the benefit of residents, communities, and the U.S. 

economy as a whole. Building livable communities requires collaboration across levels of government and between the public and private sector. 

One of my highest priorities is to work closely with Congress, other Federal departments, the Nation’s Governors, and local officials to help promote more livable 

communities through sustainable surface transportation programs. 

Question. In September 2009, the Department of Transportation Inspector General issued a Management Advisory to PHMSA raising strong concerns with the 

management and processing of special permits to transport hazardous materials. 

PHMSA developed an action plan and began a process to review the fitness of special permit holders to rectify the agency’s fundamental failure to appropriately review: (1) an applicant’s safety history; and (2) an applicant’s proposed alternative 

safety packaging and transport plan. 

How many special permits have been reviewed to date? Of those special permits 

reviewed, how many have been suspended, revoked, or denied? 

Answer. From November 1, 2009 to May 11, 2010, there have been 1,155 Special 

Permit applications reviewed. Of those reviewed, 10 were terminated and 12 were 

denied. 

Question. What is your projected caseload for the processing of special permit applications in fiscal year 2011? 

Answer. PHMSA expects a significant increase in the projected caseload of special 

permits and approvals applications in fiscal year 2011 due to policy changes for 

trade associations. 

PHMSA is in the process of modifying (or terminating when appropriate) special 

permits and approvals granted to association members collectively. For any special 

permit issued to association members collectively, PHMSA has started the process 

of providing notice of modification or termination to the association and each individual member whose name and address is on file with PHMSA. This notice provides information for the individual members to determine whether the activity authorized by the special permit or approval will eventually be incorporated into the 

regulations or will continue to need a special permit or approval. 

When a special permit or approval is not incorporated into the regulation, the individual members must submit an application for a special permit or approval. This 

will result in an increase in the 2011 caseload that could be up to 20,000–30,000 

applications. 

As of April 2010, PHMSA has approximately 6,000 pending applications, which 

include applications received more than 180 days ago in addition to applications received less than 180 days ago. The 6,000 applications on file are divided into 2 categories—Approvals (5,400) and Special Permits (600). 
43 

Question. In the President’s proposed budget for fiscal year 2011, you are elimi- nating $900,000 for contractor support to assist in executing the agency’s full-scale 

review of existing special permits to fulfill the IG’s recommendations. 

With this proposed cut in funding, will you have the resources necessary to appropriately process the estimated 5,500 special permit holder’s requests for approvals 

consistent with the new PHMSA action plan guidelines and Inspector General recommendations? 

Answer. PHMSA’s 2011 budget request included $1.5 million to annualize 20 positions enacted in fiscal year 2010 in support of the special permits and approvals action plan to enhance management and oversight of this hazardous materials safety 

program. 

Question. The Department of Transportation Office of Inspector General is due to 

issue a second management advisory to PHMSA regarding the review and authorization of explosive classifications and insufficient oversight of the four labs authorized by PHMSA to examine and test explosives. 

When will PHMSA be providing its personnel with the necessary guidance for 

classifying and approving explosives? 

Answer. PHMSA has formed a cross-functional team to review all previous guidance, both formal and informal, and existing regulatory provisions for classifying 

and approving explosives. The team has developed a draft guidance manual that 

covers three separate audiences: (1) guidance for persons applying for an explosive 

classification recommendation; (2) guidance for the authorized explosive test laboratories for testing and examination; (3) Standard Operating Procedures for PHMSA 

related to approving authorized test agencies, and evaluating and approving explosive classifications. This guidance manual is under review and will be formalized 

by September 2010. 

Question. How many explosives classifications and approvals has the agency processed annually for the past 5 fiscal years? 

Answer. See table. 

Approval Type 2005 2006 2007 2008 2009 2010 (YTD) 

Explosives ........................................................... 733 1,626 1,752 1,930 1,681 1,364 

Fireworks ............................................................. 505 5,201 4,933 4,599 2,579 2,265 

Question. What processes and internal certifications will you develop to ensure 

that all authorized testing labs comply with PHMSA guidance for classifying and 

approving explosives? 

Answer. As of March 2010 PHMSA requires on-site inspections by PHMSA for all 

new and renewal approvals applications for all certification agencies. The on-site inspection will determine whether the certification agency, including explosive testing 

labs, is fit and capable of operating in accordance with the specifications outlined 

in the approval. The inspection will include review of the specific requirements and 

criteria under the requested special permit or approval, including: 

—Test procedures and equipment 

—Internal quality assurance/control measures 

—Spatial Requirements 

—Security policies/procedures 

—Personnel and subcontract qualifications 

—Employee training and certifications 

—Independent and impartial operations 

The four PHMSA authorized explosive examination laboratories were inspected 

between March and April 2010. The PHMSA inspection team found all four laboratories fit to perform the examination and shipping classification recommendation 

functions authorized under approval. Some minor violations related to training, 

marking, labeling, and reporting were noted, which the audit team determined not 

to adversely impact their fitness capability under the approvals. 

Question. How are you improving your oversight of PHMSA’s approved explosives 

testing labs and who specifically will be accountable for the lab’s safety reviews, fitness inspections, and regulatory compliance? 

Answer. The Special Permits and Approvals Office is responsible and accountable 

for certification agency oversight. PHMSA is developing more detailed application, 

inspection, reporting, and accountability provisions to ensure impartial and quality 

performance of the laboratories. We plan to require each laboratory to reapply under 

these new terms. These guidelines require an initial inspection from PHMSA staff 

prior to issuing the approval, and compliance inspections by our enforcement staff. 

Question. Please use the attached table to provide a complete listing by year of 

employees who received retention bonuses during the years 2006–2010. For each 
44 

year, please include each employee’s name, title, grade, salary, and retention bonuses. 

Answer. The information for fiscal year 2007–2010 is provided below. Data prior 

to fiscal year 2007 is not readily available due to FAA’s conversion to the Delphi 

accounting system in 2006. 

Some employees have more than one entry for a given fiscal year. Since retention 

bonuses are calculated using base salary, if that changes during the course of a year 

then separate retention bonus amounts must be calculated against each separate 

base salary. Adding the multiple retention bonus amounts listed equals the employee’s total retention bonus earned for that year. The amounts in the ‘‘Salary’’ column, 

however, are not additive. 

Employee Name Title Grade Salary Retention Bonus 

Fiscal Year 2007: 

BORO, THOMAS R. ................. SUPV PERSONNEL MANAGEMENT SPEC ....... J .......... $104,500 

106,200 

$8,068.20 

22,408.60 

CLAYTON, ROBERT J. ............. SUPV PERSONNEL MANAGEMENT SPEC ....... K ......... 127,000 15,877.40 

DIX, MARY E. ......................... DEP ASST ADMIN FOR HR MGMT ................ 02 ....... 146,193 

148,678 

2,849.76 

9,660.00 

GIBSON, VENTRIS C. .............. ASST ADMIN FOR HUMAN RESOURCE 

MGMT.

01 ....... 155,653 11,592.00 

GOMES, GARY R. ................... SUPV AVIATION SAFETY INSPE .....................

SUPV AVIATION SAFETY INSPECTOR ............

K .........

K .........

124,800 

124,800 

556.80 

2,153.28 

JUBA, EUGENE ....................... SR VICE PRESIDENT FOR FINANCE .............. 01 ....... 164,100 11,592.00 

KERWIN, PETER J. .................. SUPV AVIATION SAFETY INSPECTOR ............ K ......... 127,000 16,279.20 

MINIACE, JOSEPH N. .............. DEP ASST ADM STRATEGIC LABOR MGT 

REL.

02 ....... 145,785 3,864.00 

PUNWANI, RAMESH ................ ASST ADMIN FOR FINANCIAL SERVICES ...... 01 ....... 161,400 

164,100 

11,082.40 

30,590.00 

RITMAN, ALLISON W. ............. SUPERVISORY ACCOUNTANT ........................

SUPV ACCOUNTANT ......................................

K .........

K .........

127,000 

124,792 

127,000 

2,771.20 

674.48 

519.60 

WILLETT, ANTHONY J. ............ PROGRAM MANAGER .................................... K ......... 127,000 2,771.31 

WILLIAMS, CLIFFORD J. .......... AIRWAY TRANSPORTATION SYS SPEC .......... H ......... 61,335 11,254.00 

WILLIAMS, HAROLD F., III ...... AIRWAY TRANSPORTATION SYS SPEC .......... H ......... 78,657 14,433.00 

Fiscal Year 2007 Total ..... ...................................................................... ............ .................... 178,997.23 

Fiscal Year 2008: 

AMANN, GORDON K. .............. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 110,711 3,527.82 

ANDERSON, THEODORE H. ..... SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 148,960 920.16 

ANGLE, THEODORE W. ........... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 3,268.44 

AUSTIN, THOMAS P. ............... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 4,139.19 

BACILE, MICHAEL J. ............... AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 3,910.20 

BAHLER, GARY C. .................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 126,402 4,027.86 

BALL, RANDALL R. ................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 140,319 3,445.26 

BARBIERI, JOHN R. ................ AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 3,910.20 

BEADLE, MARK R. .................. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 91,568 1,417.98 

BERRA, PATRICK M. .............. AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 90,802 2,068.08 

BIGGERS, JACK H. ................. AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 2,346.12 

BLACK, NELSON K. ................ AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 74,705 2,187.54 

BLAIS, MICHAEL J. ................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 126,400 6,265.56 

BLITTERSDORF, JEFFREY E. ... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 83,814 1,908.90 

BOELTER, TIMOTHY T. ........... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 4,027.86 

BONE, MICHAEL D. ................ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 3,094.98 

BORO, THOMAS R. ................. MANAGER, LABOR & EMPLOYEE REL 

BRACH.

J .......... 106,200 

109,000 

1,179.40 

23,278.80 

SUPV PERSONNEL MANAGEMENT SPEC ....... J .......... 106,200 8,255.80 

BOWE, JOHN R. ...................... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 4,475.40 

BOYLE, DANIEL P. .................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 4,088.88 

BROKER, BARBARA A. ........... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 119,178 3,797.82 

BURTON, CARL JR ................. SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 141,029 460.08 

BURZYCH, CRAIG A. .............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 126,402 1,342.62 

BUSSE, JUDITH A. .................. SUPV AIR TRAFFIC CONTROL SPEC (T) ....... LJ ........ 140,908 460.08 

BYRNE, JOHN J. ..................... SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 142,230 2,760.48 

BYTHEWAY, DAVID L. ............. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 104,010 3,745.80 

CARMICHAEL, DAVID L. ......... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,122 3,238.62 
45 

Employee Name Title Grade Salary Retention Bonus 

CARVER, STEVEN T. ............... SUPV COMPUTER SPEC ............................... K ......... 115,015 21,187.20 

CATOE, RALPH D. .................. AIR TRAFFIC CONTROL SPEC (T) ................. IH ........ 102,216 1,995.48 

CERAMI, JOSEPH S. ............... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 130,011 4,137.39 

CLAYTON, ROBERT J. ............. SUPV HUMAN RESOURCES SPECIALIST .......

SUPV PERSONNEL MANAGEMENT SPEC .......

K .........

K .........

130,000 

127,000 

130,000 

24,096.00 

10,103.80 

6,024.00 

CLEAVER, MICHAEL D. ........... SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 139,353 

141,030 

1,360.26 

3,671.04 

COLFER, STEVEN L. ............... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 5,978.83 

CONTRERAS, CARLOS ............ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 115,783 3,689.82 

COPPA, MICHAEL F. ............... AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 102,216 4,320.00 

DOBRINICH, DAVID A. ............ SUPV AIR TRAFFIC CONTROL SPEC (T) ....... LJ ........ 147,123 

148,893 

460.08 

3,680.64 

DOEGE, BLANE S. .................. AIR TRAFFIC CONTROL SPEC ....................... LH ....... 125,928 1,719.60 

DRESSLER, ROBERT K. .......... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,788 5,651.88 

DRISCOLL, CHARLES F. ......... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 4,922.94 

DYER, STANLEY J. .................. SUPV AIR TRAFFIC CONTROL SPEC (T) ....... LJ ........ 144,045 2,970.36 

EWING, MICHAEL L. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 3,268.44 

FRAWLEY, EDWARD J. ............ SUPV AIR TRAFFIC CONTROL SPEC ............. LJ ........ 160,414 

162,344 

1,980.24 

3,960.48 

FREDRICKSON, THOMAS E. .... AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 128,892 1,677.60 

FUNKHOUSER, BRADLEY C. ... AIR TRAFFIC CONTROL SPEC (C) ................. JH ....... 120,954 1,574.16 

GALASSINI, DEBRA A. ............ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,788 3,912.84 

GIBBS, BRENDA E. ................ AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 3,910.20 

GIBSON, VENTRIS C. .............. ASST ADMIN FOR HUMAN RESOURCE 

MGMT.

01 ....... 155,653 

159,544 

6,762.00 

7,920.96 

GISH, EDMUND C. .................. SUPV AIR TRAFFIC CONTROL SPEC (T) ....... LJ ........ 164,168 920.16 

GOODNOUGH, DAVID W. ......... AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 90,802 609.96 

GRATYS, JOHN G. ................... SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 140,908 2,760.48 

GRIFFIN, CHARLES W. ............ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 118,733 1,249.38 

GRIMM, CYNTHIA J. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 121,658 6,030.36 

GROENE–BRASS, LISA C. ...... AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 92,617 2,109.66 

GROFF, BRYAN W. ................. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,122 4,626.60 

HAGEN, SHAWN C. ................. AIR TRAFFIC CONTROL SPECIALIST (T) ........ LH ....... 61,328 860.40 

HALL, MICHAEL A. ................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 1,400.76 

HASENPFLUG, JEFFREY D. ..... AIR TRAFFIC CONTROL SPEC ....................... JH ....... 129,058 3,554.40 

HOCKING, ROBERT G. ............ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 110,605 4,738.60 

HOFFMAN, ROBERTA S. ......... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 5,063.52 

HORNER, WILLIAM T. ............. AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 125,405 4,080.60 

HOUSE, MARK S. ................... DIR FIN ANALYSIS & PROCESS REENGINEER.02 ....... 144,848 

148,469 

4,830.00 

18,812.28 

HURLEY, WILLIAM J., JR ........ AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 90,042 1,757.88 

HYLAND, JOHN L. ................... AIR TRAFFIC CONTROL SPEC (C) ................. JH ....... 117,682 1,148.76 

JEANES, JOSEPH A. ................ AIR TRAFFIC CONTROL SPEC (T) ................. IH ........ 116,303 4,162.62 

JONES, MELVIN B. ................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 3,537.12 

JUBA, EUGENE ....................... SR VICE PRESIDENT FOR FINANCE .............. 01 ....... 164,100 

168,200 

6,762.00 

19,802.40 

KERWIN, PETER J. .................. SUPV AVIATION SAFETY INSPECTOR ............ K ......... 127,000 

130,000 

5,997.60 

887.52 

KEYES, ROBERT C. ................ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 4,142.88 

KHATCHERIAN, PAUL .............. SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 142,230 2,300.40 

KOOS, MARK .......................... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 135,543 1,380.30 

KUHN, GEORGE W. ................. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 111,843 3,564.00 

KUZANEK, DWIGHT M. ............ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,788 4,782.36 

LADNIER, DARRYL A. ............. AIR TRAFFIC CONTROL SPEC ....................... KH ....... 113,300 1,105.92 

LANGSTON, MILES H., JR ....... AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 125,405 2,448.36 

LAWRENCE, TONY H. ............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 125,928 429.90 

LEWIS, KEITH C. .................... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 118,733 1,249.38 

LIGNELLI, ROBERT J. ............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 4,089.96 

LIZZIO, MICHAEL J. ................ SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 131,855 2,300.05 

LOVETT, STEVEN B. ............... SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 142,837 

144,556 

1,394.28 

3,762.72 

MARKS, ROBERT L. ................ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,329 3,861.54 

MATHEIS, ULRICH R. ............. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 5,059.01 

MAURICE, LOURDES Q. .......... CHIEF SCIENTIFIC & TECHNICAL ADVISOR .. 03 ....... 138,516 5,777.28 

MCCONAHAY, KENNETH C. .... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 2,693.52 
46 

Employee Name Title Grade Salary Retention Bonus 

MCCORMICK, MICHAEL J. ...... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 1,362.96 

MIETH, DOUGLAS R. .............. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 4,139.19 

MINER, MATHEW M. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 1,400.76 

MINIACE, JOSEPH N. .............. DEP ASST ADM STRATEGIC LABOR MGT 

REL.

02 ....... 145,785 

149,430 

9,016.00 

21,122.56 

MISNER, JOHN E. ................... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 2,685.24 

MOFFAT, JAY .......................... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,788 3,043.32 

MOLLICA, ANTHONY J. ........... AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 92,235 664.32 

MORALES, DAVID A. ............... AIR TRAFFIC CONTROL SPEC (T) ................. EH ....... 70,600 1,378.44 

MORRISON, ROBERT M. ......... SUP ATCS (C/T–I) ........................................ K ......... 130,000 5,640.00 

NASH, CHARLES F. ................ AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 83,814 1,090.80 

NELSON, BARRY J. ................. AIR TRAFFIC CONTROL SPEC (T) ................. EH ....... 76,950 1,759.32 

NEMCEK, RICHARD M. ........... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 4,027.86 

NICHOLAS, ROBERT M. .......... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 5,059.01 

OSEKOWSKI, CRAIG P. ........... SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 144,738 

146,480 

470.94 

3,813.12 

PALLONE, MARK A. ................ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 125,928 859.80 

PARMAN, DENNIS J. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 1,747.20 

PASSIALES, JAMES J. ............. SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 127,548 2,709.72 

PATT, LAWRENCE K. .............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 4,997.52 

PETRE, PHILIP J. .................... SUPV AIR TRAFFIC CONTROL SPEC (T) ....... KJ ........ 127,159 2,482.56 

PRATT, THOMAS J. ................. SUPV AVIATION SAFETY INSPECTOR ............ K ......... 127,000 

130,000 

1,864.28 

18,642.80 

PUGH, DENNIS W. .................. AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 83,814 2,533.68 

PUNWANI, RAMESH ................ ASST ADMIN FOR FINANCIAL SERVICES ...... 01 ....... 164,100 

168,200 

11,270.00 

31,353.80 

QUINN, GLENN P. ................... AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 127,032 447.48 

RAWLINGS, KEVIN S. .............. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 94,798 3,393.06 

RAY, MARK A. ........................ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 137,237 4,140.18 

REGRUTO, SANDRA G. ........... AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 81,884 4,368.00 

REINERT, KURT A. ................. AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 84,643 3,029.40 

RHEA, RODNEY R. ................. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 83,814 1,908.90 

RITMAN, ALLISON W. ............. MANAGING DIR OF FINC RPTNG & CONTROLS.02 .......

K .........

135,93 

130,000 

3,212.66 

180.72 

SUPERVISORY ACCOUNTANT ........................ K ......... 127,000 

130,000 

1,212.42 

180.72 

ROESKE, DAVID W. ................ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 4,027.86 

ROY, KIM A. ........................... AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 127,032 447.48 

RUIZ, DAVID R. ...................... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 4,997.52 

SACKETT, GREGORY A. .......... SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 146,290 

148,050 

951.96 

3,853.92 

SANOCKI, MICHAEL H. ........... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 5,984.16 

SCOTT, ROBERT E. ................ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 109,000 1,929.60 

SEACAT, GARY D. .................. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 92,617 301.38 

SICKLES, STEPHAN J. ............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 4,202.28 

SMITH, TERRY R. ................... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,329 429.06 

SNYDER, FREDERICK J., JR ... AIR TRAFFIC CONTROL SPEC (C) ................. KH ....... 125,568 1,435.32 

SNYDER, THOMAS G. ............. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 83,814 1,636.20 

STANKOWICZ, JOSEPH M. ...... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 4,139.19 

STAROS, JOHN D. ................... AIR TRAFFIC CONTROL SPEC (T) ................. LJ ........ 128,572 2,731.32 

STEINBERG, FREDERICK W. ... AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 84,550 2,577.12 

STEINWEDEL, ROBERT P. ....... AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 2,346.12 

STRONG, ROBERT L. .............. AIR TRAFFIC CONTROL SPEC ....................... JH ....... 125,568 864.60 

SWITCH, JAY M. ..................... AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 3,519.18 

TIGHE, GRACE ........................ AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 93,531 2,738.88 

TOTH, DANIEL A. .................... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 3,580.32 

VANDERWEEL, PETER J. ......... AIR TRAFFIC CONTROL SPEC (T) ................. IH ........ 116,303 1,135.26 

VELLA, ANTHONY C. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 4,997.52 

VERONICO, JAMES N. ............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 6,435.94 

WALSH, STEPHEN G. .............. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 88,474 1,151.52 

WAWRZYNSKI, DAVID B. ........ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 125,928 1,324.98 

WAZOWICZ, PAUL J. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 5,976.23 

WHEELER, DAVID A. ............... AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 127,941 2,497.68 

WHITE, LARRY D. ................... AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 92,617 1,205.52 

WHITMAN, STEPHEN S. .......... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 137,237 4,140.18 

WIEGMANN, DARRYL L. .......... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 143,599 1,380.24 
47 

Employee Name Title Grade Salary Retention Bonus 

WILLENBRINK, WAYNE C. ....... AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 93,531 3,347.52 

WILLETT, ANTHONY J. ............ PROGRAM MANAGER .................................... K ......... 127,000 

130,000 

6,466.41 

19,276.80 

WILLIAMS, CLIFFORD J. .......... AIRWAY TRANSPORTATION SYS SPEC .......... H ......... 61,335 

61,337 

63,226 

3,310.00 

1,324.00 

4,279.41 

WILLIAMS, HAROLD F., III ...... AIRWAY TRANSPORTATION SYS SPEC .......... H ......... 78,657 

78,660 

81,770 

4,245.00 

1,698.00 

5,533.65 

WISHOWSKI, DONALD A. ........ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 140,842 5,981.04 

WITTMAN, MARK A. ................ AIR TRAFFIC CONTROL SPEC ....................... JH ....... 122,080 2,101.50 

WOLVIN, MICHAEL S. ............. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 100,334 1,958.76 

WYNKOOP, DOUGLAS J. .......... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 123,598 2,109.60 

ZAROBA, PAUL B. .................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 3,094.98 

Fiscal Year 2008 Total ..... ...................................................................... ............ .................... 719,405.04 

Fiscal Year 2009: 

ALLEGRINI, KEVIN J. .............. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 68,424 3,583.68 

ALLSOP, KEVIN L. .................. AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 93,531 6,121.74 

ANDERSON, THEODORE H. ..... SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 148,960 

155,663 

3,220.56 

21,165.10 

ANGLE, THEODORE W. ........... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 466.92 

AUSTIN, THOMAS P. ............... AIR TRAFFIC CONTROL SPEC (C) ................. LH .......

LI ........

133,625 

135,772 

20,337.73 

464.75 

BACILE, MICHAEL J. ............... AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 16,858.32 

BAHLER, GARY C. .................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 126,402 19,792.56 

BALL, RANDALL R. ................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 140,319 22,292.10 

BARBIERI, JOHN R. ................ AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 16,858.32 

BEADLE, MARK R. .................. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 91,568 4,099.62 

BERRA, PATRICK M. .............. AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 90,802 10,068.36 

BIGGERS, JACK H. ................. AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 18,441.12 

BINNER, ROGER A. ................ AIR TRAFFIC CONTROL SPEC ....................... LH ....... 140,319 993.24 

BLACK, NELSON K. ................ AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 74,705 12,682.62 

BLAIS, MICHAEL J. ................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 126,400 17,506.86 

BLINK, CHARLES L. ................ AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 92,235 6,636.84 

BLITTERSDORF, JEFFREY E. ... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 83,814 13,683.72 

BOELTER, TIMOTHY T. ........... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 19,792.57 

BONE, MICHAEL D. ................ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 20,897.58 

BORO, THOMAS R. ................. MANAGER, LABOR & EMPLOYEE REL 

BRACH.

J .......... 109,000 

110,800 

7,351.20 

23,917.20 

BOWE, JOHN R. ...................... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 19,335.42 

BOYLE, DANIEL P. .................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 19,642.56 

BRANNIGAN, TIMOTHY W. ...... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 67,342 3,527.04 

BROKER, BARBARA A. ........... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 119,178 19,088.10 

BROMLEY, DANA L. ................ AIR TRAFFIC CONTROL SPEC ....................... GH ...... 79,154 4,663.44 

BRYAN, JEFFREY L. ................ AIR TRAFFIC CONTROL SPEC ....................... IH ........ 104,966 5,154.30 

BURTON, CARL JR ................. SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 141,029 

147,375 

3,220.56 

3,310.30 

BURZYCH, CRAIG A. .............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 126,402 22,987.74 

BUSSE, JUDITH A. .................. SUPV AIR TRAFFIC CONTROL SPEC (T) ....... LJ ........ 140,908 

147,248 

3,220.56 

20,319.36 

BYRNE, JOHN J. ..................... SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 142,230 

148,630 

3,220.56 

18,749.30 

BYTHEWAY, DAVID L. ............. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 104,010 15,799.32 

CARGIULO, LUIS P., JR .......... HUMAN RESOURCES SPECIALIST ................. I .......... 84,626 5,836.80 

CARMICHAEL, DAVID L. ......... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,122 20,761.38 

CARVER, STEVEN T. ............... SUPV COMPUTER SPEC ............................... K ......... 115,015 7,945.20 

CATOE, RALPH D. .................. AIR TRAFFIC CONTROL SPEC (T) ................. IH ........ 102,216 15,686.34 

CERAMI, JOSEPH S. ............... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 130,011 20,346.93 

CHAMBERLIN, MARK J. .......... AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 86,141 2,256.00 

CHIASSON, MICHAEL P. ......... SUPV AIR TRAFFIC CONTROL SPEC ............. IJ ......... 118,893 3,502.44 

CLAYTON, ROBERT J. ............. SUPV HUMAN RESOURCES SPECIALIST ....... K ......... 130,000 

132,200 

10,542.00 

18,715.20 

CLEAVER, MICHAEL D. ........... SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 141,030 

147,376 

3,212.16 

18,650.94 
48 

Employee Name Title Grade Salary Retention Bonus 

COLFER, STEVEN L. ............... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 18,459.37 

CONTRERAS, CARLOS ............ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 115,783 18,544.14 

COPPA, MICHAEL F. ............... AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 102,216 14,824.80 

DOBRINICH, DAVID A. ............ SUPV AIR TRAFFIC CONTROL SPEC (T) ....... LJ ........ 148,893 

155,593 

3,220.56 

17,292.12 

DOEGE, BLANE S. .................. AIR TRAFFIC CONTROL SPEC ....................... LH ....... 125,928 20,766.60 

DRESSLER, ROBERT K. .......... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,788 17,450.46 

DRISCOLL, CHARLES F. ......... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 18,878.28 

DUNPHY, DANIEL P. ............... AIR TRAFFIC CONTROL SPEC (T) ................. IH ........ 110,732 18,817.68 

DUTTON, RANDELL L. ............. AIR TRAFFIC CONTROL SPEC ....................... IH ........ 114,201 4,111.80 

DYER, STANLEY J. .................. SUPV AIR TRAFFIC CONTROL SPEC (T) ....... LJ ........ 144,045 

150,527 

3,465.42 

19,157.28 

EWING, MICHAEL L. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 21,616.32 

FRAWLEY, EDWARD J. ............ SUPV AIR TRAFFIC CONTROL SPEC ............. LJ ........ 162,344 

166,959 

3,465.42 

21,618.78 

FREDRICKSON, THOMAS E. .... AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 128,892 20,628.72 

FUNKHOUSER, BRADLEY C. ... AIR TRAFFIC CONTROL SPEC (C) ................. JH ....... 120,954 18,961.92 

GALASSINI, DEBRA A. ............ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,788 19,665.85 

GIBBS, BRENDA E. ................ AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 20,005.20 

GIBSON, VENTRIS C. .............. ASST ADMIN FOR HUMAN RESOURCE 

MGMT.

01 ....... 159,544 

164,011 

6,930.84 

9,159.48 

GISH, EDMUND C. .................. SUPV AIR TRAFFIC CONTROL SPEC (T) ....... LJ ........ 164,168 

166,959 

3,220.56 

21,165.09 

GOODNOUGH, DAVID W. ......... AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 90,802 15,297.96 

GOSS, NORBERT L., JR .......... AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 74,501 4,876.50 

GRATYS, JOHN G. ................... SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 140,908 

147,248 

3,220.56 

18,749.30 

GREEN, JEFFREY S. ............... AIR TRAFFIC CONTROL SPECIALIST (T) ........ EH ....... 65,107 4,261.14 

GRIEST, DIANE L. ................... SUPV AIR TRAFFIC CONTROL SPEC ............. LJ ........ 159,567 

166,747 

920.16 

8,985.10 

GRIFFIN, CHARLES W. ............ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 118,733 20,563.98 

GRIMM, CYNTHIA J. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 121,658 17,285.04 

GROENE–BRASS, LISA C. ...... AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 92,617 13,605.30 

GROFF, BRYAN W. ................. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,122 24,295.19 

HABER, SELIM ....................... GENERAL ENGINEER .................................... K ......... 132,200 4,539.36 

HALL, MICHAEL A. ................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 22,599.24 

HARDIMAN, MATTHEW J. ........ AIR TRAFFIC CONTROL SPEC ....................... GH ...... 67,342 3,527.04 

HASENPFLUG, JEFFREY D. ..... AIR TRAFFIC CONTROL SPEC ....................... JH ....... 129,058 20,105.28 

HAYNES, DARRYL A. .............. AIR TRAFFIC CONTROL SPEC ....................... JH ....... 130,974 5,014.02 

HEINTZ, ROBERT B. ............... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 68,970 3,612.48 

HOFFMAN, ROBERTA S. ......... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 19,417.08 

HOLDGATE, FREDERICK I. ...... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 85,520 4,479.36 

HOLLAND, JEFFERY K. ............ AIR TRAFFIC CONTROL SPEC ....................... IH ........ 104,966 4,467.06 

HORNER, WILLIAM T. ............. AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 125,405 17,593.33 

HOTRUM, GLENN M. .............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 115,133 21,978.01 

HOUSE, MARK S. ................... DIR FIN ANALYSIS & PROCESS REENGINEER.02 ....... 148,469 

152,626 

6,930.84 

8,141.76 

HURLEY, WILLIAM J., JR ........ AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 90,042 13,817.04 

HYLAND, JOHN L. ................... AIR TRAFFIC CONTROL SPEC (C) ................. JH ....... 117,682 18,065.64 

IMUNDO, RICO F. ................... SUPV TRAFFIC MANGEMENT COORDINATOR.JJ ........ 124,448 8,698.20 

JEANES, JOSEPH A. ................ AIR TRAFFIC CONTROL SPEC (T) ................. IH ........ 116,303 15,551.70 

JONES, MELVIN B. ................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 19,553.16 

JUBA, EUGENE ....................... SR VICE PRESIDENT FOR FINANCE .............. 01 ....... 168,200 

171,100 

6,930.84 

8,141.76 

KELLY, THOMAS C. ................ SUPV AIR TRAFFIC CONTROL SPEC ............. LJ ........ 164,740 8,740.19 

KEYES, ROBERT C. ................ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 20,340.76 

KHATCHERIAN, PAUL .............. SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 142,230 

148,630 

3,220.56 

19,235.03 

KOOS, MARK .......................... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 135,543 23,631.42 

KRAKOWSKI, HENRY P. .......... CHIEF OPERATING OFFICER ......................... 1A ....... 211,000 25,762.24 

KUHN, GEORGE W. ................. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 111,843 17,512.20 

KUZANEK, DWIGHT M. ............ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,788 6,558.36 

SUPV AIR TRAFFIC CONTROL SPECIALIST .... LH ....... 122,788 11,780.10 

LADNIER, DARRYL A. ............. AIR TRAFFIC CONTROL SPEC ....................... KH ....... 113,300 18,876.12 

LAMBERT, DAWN E. ............... SUPV AIR TRAFFIC CONTROL SPEC ............. LJ ........ 132,494 2,344.50 
49 

Employee Name Title Grade Salary Retention Bonus 

LANGSTON, MILES H., JR ....... AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 125,405 19,245.24 

LASH, WILLIAM C. .................. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 125,928 23,062.80 

LAWRENCE, TONY H. ............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 125,928 22,082.58 

LESTER, CRAIG S. .................. AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 90,802 2,972.40 

LEWIS, KEITH C. .................... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 118,733 20,142.60 

LEWIS, TIMOTHY R. ................ AIR TRAFFIC CONTROL SPEC ....................... KH ....... 123,598 6,068.70 

LICON, RUBEN ....................... AIR TRAFFIC CONTROL SPEC ....................... LH ....... 129,524 23,162.28 

LIGNELLI, ROBERT J. ............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 19,633.32 

LIZZIO, MICHAEL J. ................ SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 131,855 3,220.07 

LOVETT, STEVEN B. ............... SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 144,556 

151,061 

3,292.38 

16,390.45 

MANCHESTER, RICHARD D. ... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 68,424 3,583.68 

MARKS, ROBERT L. ................ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,329 18,550.38 

MATHEIS, ULRICH R. ............. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 19,398.55 

MAURICE, LOURDES Q. .......... CHIEF SCIENTIFIC & TECHNICAL ADVISOR .. 03 ....... 138,516 

142,394 

4,493.44 

7,391.12 

MCCARTNEY, WILLIAM A. ....... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 23,162.28 

MCCONAHAY, KENNETH C. .... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 21,228.84 

MCCORMICK, MICHAEL J. ...... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 22,432.56 

MCKEE, DAVID C. .................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,329 22,435.92 

MICHAEL, GLENN W. .............. CAST OUTREACH PROGRAM MGR ................ K ......... 132,200 9,951.36 

MIETH, DOUGLAS R. .............. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 20,337.73 

MINER, MATHEW M. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 23,055.72 

MINIACE, JOSEPH N. .............. DEP ASST ADM STRATEGIC LABOR MGT 

FREL.

02 ....... 149,430 

153,614 

9,241.12 

9,498.72 

MISNER, JOHN E. ................... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 21,163.99 

MOFFAT, JAY .......................... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,788 20,114.46 

MOLLICA, ANTHONY J. ........... AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 92,235 1,992.96 

MOORE, DIANNA H. ................ MANAGEMENT AND PROGRAM ANA ............. I .......... 63,698 7,525.44 

MOORE, GEORGE E. ............... AIR TRAFFIC CONTROL SPEC ....................... LH ....... 129,524 23,162.28 

MORALES, DAVID A. ............... AIR TRAFFIC CONTROL SPEC (T) ................. EH ....... 70,600 10,603.92 

MORRISON, ROBERT M. ......... SUP ATCS (C/T–I) ........................................ K ......... 130,000 5,640.00 

NASH, CHARLES F. ................ AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 83,814 13,374.99 

NELSON, BARRY J. ................. AIR TRAFFIC CONTROL SPEC (T) ................. EH ....... 76,950 13,889.89 

NELSON, MATTHEW F. ............ AIR TRAFFIC CONTROL SPEC (T) ................. JH ....... 114,418 5,243.28 

NEMCEK, RICHARD M. ........... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 19,792.56 

NICHOLAS, ROBERT M. .......... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 19,398.55 

OSEKOWSKI, CRAIG P. ........... SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 146,480 

153,072 

3,336.48 

18,142.81 

OTERO, CARLOS V. ................ SUPV AIR TRAFFIC CONTROL SPEC ............. GJ ....... 95,385 4,995.84 

PALLONE, MARK A. ................ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 125,928 21,643.92 

PARMAN, DENNIS J. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 21,546.42 

PASSIALES, JAMES J. ............. SUPV AIR TRAFFIC CONTROL SPEC (C) ....... LJ ........ 127,548 

133,287 

3,161.34 

18,748.44 

PATT, LAWRENCE K. .............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 18,717.90 

PETRE, PHILIP J. .................... SUPV AIR TRAFFIC CONTROL SPEC (T) ....... KJ ........ 127,159 

132,881 

2,896.32 

870.00 

PRATT, THOMAS J. ................. SUPV AVIATION SAFETY INSPECTOR ............ K ......... 130,000 3,728.56 

PUGH, DENNIS W. .................. AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 83,814 12,414.60 

PUNWANI, RAMESH ................ ASST ADMIN FOR FINANCIAL SERVICES ...... 01 ....... 168,200 

171,100 

11,551.40 

16,962.00 

QUINN, GLENN P. ................... AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 127,032 23,860.08 

RABINOWITZ, BRIAN R. .......... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 49,145 2,402.18 

RAWLINGS, KEVIN S. .............. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 94,798 16,090.15 

RAY, MARK A. ........................ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 137,237 20,343.60 

REGRUTO, SANDRA G. ........... AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 81,884 12,531.12 

REINERT, KURT A. ................. AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 84,643 14,089.09 

RHEA, RODNEY R. ................. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 83,814 14,232.48 

RITMAN, ALLISON W. ............. MANAGING DIR OF FINC RPTNG & CONTROLS.02 ....... 135,933 755.92 

RITMILLER, JOHN M. .............. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 129,524 1,833.60 

RIXEY, WILLIAM S. ................. AIR TRAFFIC CONTROL SPEC ....................... GC ......

GG ......

33,700 

44,500 

147.12 

1,748.16 

AIR TRAFFIC CONTROL SPEC (T) ................. GC ...... 33,700 147.12 

AIR TRAFFIC CONTROL SPECIALIST ............. GG ...... 44,500 194.24 

ROESKE, DAVID W. ................ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 19,792.56 
50 

Employee Name Title Grade Salary Retention Bonus 

ROY, KIM A. ........................... AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 127,032 23,860.09 

RUBIN, BARRY E. .................. AIR TRAFFIC CONTROL SPEC (C) ................. JH ....... 104,612 4,451.46 

RUIZ, DAVID R. ...................... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 18,502.42 

SACKETT, GREGORY A. .......... SUPV AIR TRAFFIC CONTROL S ................... KJ ........

KK .......

154,712 

160,900 

17,815.20 

508.86 

SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........

KK .......

148,050 

160,900 

3,372.18 

2,544.30 

SANOCKI, MICHAEL H. ........... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 18,460.14 

SCAVILLA, JASON R. .............. AIR TRAFFIC CONTROL SPEC ( .................... GH ...... 49,373 2,586.24 

SCOTT, ROBERT E. ................ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 109,000 

110,800 

2,701.44 

16,128.96 

SEACAT, GARY D. .................. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 92,617 16,041.54 

SECIA, PAULA E. .................... AVIATION ASSISTANT .................................... E ......... 35,687 1,869.12 

SICKLES, STEPHAN J. ............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 133,122 19,797.72 

SLOSEK, CARRIE A. ............... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 67,342 3,527.04 

SMITH, TERRY R. ................... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 122,329 22,840.98 

SNYDER, FREDERICK J., JR ... AIR TRAFFIC CONTROL SPEC (C) ................. KH ....... 125,568 23,647.86 

SNYDER, THOMAS G. ............. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 83,814 14,234.16 

STANKOWICZ, JOSEPH M. ...... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 20,337.74 

STAROS, JOHN D. ................... SUPV AIR TRAFFIC CONTROL SPEC (T) ....... LJ ........ 128,572 

134,357 

3,186.54 

18,898.92 

STEINBERG, FREDERICK W. ... AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 84,550 14,271.84 

STEINWEDEL, ROBERT P. ....... AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 18,441.12 

STRONG, ROBERT L. .............. AIR TRAFFIC CONTROL SPEC ....................... JH ....... 125,568 22,650.24 

STYER, MICHAEL J. ................ AIR TRAFFIC CONTROL SPEC ....................... LH ....... 129,524 10,254.72 

SUTPHEN, SCOTT S. ............... AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 89,675 3,815.76 

SWITCH, JAY M. ..................... AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 20,400.90 

TIGHE, GRACE ........................ AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 93,531 13,122.96 

TOOREN, JUERGEN G. ............ SUPV FOREIGN AFFAIRS SPECIALIST ........... L ......... 150,327 10,828.48 

TOPHAM, PATRICK M. ............ SUPV AIR TRAFFIC CONTROL SPEC ............. GL ....... 98,746 5,171.52 

TOTH, DANIEL A. .................... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 126,402 20,249.70 

VANDERWEEL, PETER J. ......... AIR TRAFFIC CONTROL SPEC (T) ................. IH ........ 116,303 18,615.54 

VELLA, ANTHONY C. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 18,712.56 

VERONICO, JAMES N. ............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 17,982.62 

WACHTER, MARK V. ............... AIR TRAFFIC CONTROL SPEC ....................... GG ...... 48,100 2,519.04 

WALSH, STEPHEN G. .............. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 88,474 15,028.93 

WAWRZYNSKI, DAVID B. ........ AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 125,928 21,808.38 

WAZOWICZ, PAUL J. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 18,003.53 

WEBER, GLENN M. ................. AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 83,814 1,097.52 

WHEELER, DAVID A. ............... AIR TRAFFIC CONTROL SPEC (T) ................. KH ....... 127,941 20,052.10 

WHITE, LARRY D. ................... AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 92,617 14,823.42 

WHITMAN, STEPHEN S. .......... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 137,237 20,343.60 

WIEGMANN, DARRYL L. .......... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 143,599 23,899.93 

WILKS, RANDY O. ................... AIR TRAFFIC CONTROL SPEC ....................... KH ....... 123,598 2,427.48 

WILLENBRINK, WAYNE C. ....... AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 93,531 13,119.24 

WILLETT, ANTHONY J. ............ PROGRAM MANAGER .................................... K ......... 130,000 

132,200 

6,746.88 

14,972.11 

WILLIAMS, CLIFFORD J. .......... AIRWAY TRANSPORTATION SYS SPEC .......... H ......... 63,226 

65,692 

1,728.23 

5,160.98 

WILLIAMS, HAROLD F., III ...... AIRWAY TRANSPORTATION SYS SPEC .......... H ......... 81,770 

85,646 

2,234.75 

6,729.16 

WISHOWSKI, DONALD A. ........ AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 140,842 18,042.66 

WITTMAN, MARK A. ................ AIR TRAFFIC CONTROL SPEC ....................... JH ....... 122,080 19,881.80 

WOLVIN, MICHAEL S. ............. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 100,334 15,397.08 

WYNKOOP, DOUGLAS J. .......... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 123,598 19,951.20 

ZAROBA, PAUL B. .................. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 129,524 20,004.30 

Fiscal Year 2009 Total ..... ...................................................................... ............ .................... 2,998,201.46 

Fiscal Year 2010: 

ALLEGRINI, KEVIN J. .............. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 68,424 

70,477 

2,090.48 

2,467.20 

ALLSOP, KEVIN L. .................. AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 93,531 10,408.26 

BINNER, ROGER A. ................ AIR TRAFFIC CONTROL SPEC ....................... LH ....... 140,319 

145,974 

3,476.34 

4,132.80 

BLACK, NELSON K. ................ AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 74,705 1,711.92 
51 

Employee Name Title Grade Salary Retention Bonus 

77,715 2,040.48 

BLINK, CHARLES L. ................ AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 92,235 9,041.74 

BLITTERSDORF, JEFFREY E. ... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 83,814 

87,191 

1,920.66 

2,289.12 

BORO, THOMAS R. ................. HUMAN RESOURCES SPECIALIST (ER/LR) ... J .......... 110,800 

114,100 

7,552.80 

10,435.21 

MANAGER, LABOR & EMPLOYEE REL 

BRACH.

J .......... 110,800 1,258.80 

BRANNIGAN, TIMOTHY W. ...... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 67,342 

69,362 

2,057.44 

2,428.16 

BROMLEY, DANA L. ................ AIR TRAFFIC CONTROL SPEC ....................... GH ...... 79,154 

82,344 

1,813.56 

9,179.40 

BRYAN, JEFFREY L. ................ AIR TRAFFIC CONTROL SPEC ....................... IH ........ 104,966 

109,196 

2,405.34 

11,143.44 

CARGIULO, LUIS P., JR .......... HUMAN RESOURCES SPECIALIST ................. I .......... 84,626 

86,742 

6,809.60 

8,024.00 

CERAMI, JOSEPH S. ............... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 130,011 464.62 

CHAMBERLIN, MARK J. .......... AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 86,141 

89,612 

1,974.00 

2,352.96 

CHIASSON, MICHAEL P. ......... SUPV AIR TRAFFIC CONTROL SPEC ............. IJ ......... 118,893 

121,865 

2,724.12 

3,199.68 

CLEAVER, MICHAEL D. ........... SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 147,376 

151,944 

3,376.80 

3,989.28 

CONDLEY, GARY R. ................ FAA ACADEMY SUPERINTENDENT ................ 02 ....... 146,505 8,014.00 

DUTTON, RANDELL L. ............. AIR TRAFFIC CONTROL SPEC ....................... IH ........ 114,201 

118,803 

2,616.60 

12,967.44 

FLEMMING, JOHNNIE M. ......... DIRECTOR OF HUMAN RESOURCES ............. K ......... 132,200 

136,200 

2,884.80 

11,920.00 

FRAWLEY, EDWARD J. ............ SUPV AIR TRAFFIC CONTROL SPEC ............. LJ ........ 166,959 

171,133 

3,562.02 

4,132.80 

GIBBS, BRENDA E. ................ AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 

125,008 

2,753.52 

3,282.24 

GOSS, NORBERT L., JR .......... AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 74,501 8,291.10 

GREEN, JEFFREY S. ............... AIR TRAFFIC CONTROL SPECIALIST (T) ........ EH ....... 65,107 178.49 

GRIEST, DIANE L. ................... SUPV AIR TRAFFIC CONTROL SPEC ............. LJ ........ 166,747 15,580.07 

GROFF, BRYAN W. ................. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,122 

138,487 

3,297.84 

3,956.64 

HABER, SELIM ....................... GENERAL ENGINEER .................................... K ......... 132,200 2,269.68 

HARDIMAN, MATTHEW J. ........ AIR TRAFFIC CONTROL SPEC ....................... GH ...... 67,342 

69,362 

2,057.44 

2,428.16 

HAYNES, DARRYL A. .............. AIR TRAFFIC CONTROL SPEC ....................... JH ....... 130,974 

136,252 

3,190.74 

3,817.44 

HEINTZ, ROBERT B. ............... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 68,970 

71,039 

2,107.28 

2,487.04 

HOLDGATE, FREDERICK I. ...... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 85,520 

88,086 

2,612.96 

3,083.52 

HOLLAND, JEFFERY K. ............ AIR TRAFFIC CONTROL SPEC ....................... IH ........ 104,966 

109,196 

2,405.34 

11,889.73 

IMUNDO, RICO F. ................... SUPV TRAFFIC MANGEMENT COORDINATOR.JJ ........ 124,448 15,107.41 

JEANES, JOSEPH A. ................ AIR TRAFFIC CONTROL SPEC (T) ................. IH ........ 116,303 761.40 

JEFF-CARTIER, JOLAINA ......... HUMAN RESOURCES SPECIALIST (LR) ......... J .......... 87,349 2,071.29 

KELLY, THOMAS C. ................ SUPV AIR TRAFFIC CONTROL SPEC ............. LJ ........

LK .......

164,740 

164,740 

920.02 

14,260.30 

KRAKOWSKI, HENRY P. .......... CHIEF OPERATING OFFICER ......................... 1A ....... 211,000 15,007.52 

LAMBERT, DAWN E. ............... SUPV AIR TRAFFIC CONTROL SPEC ............. LJ ........ 132,494 

136,601 

3,282.30 

2,000.23 

LESTER, CRAIG S. .................. AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 90,802 

94,461 

2,080.68 

2,480.16 

LEWIS, TIMOTHY R. ................ AIR TRAFFIC CONTROL SPEC ....................... KH ....... 123,598 

128,579 

2,832.06 

13,120.57 

MANCHESTER, RICHARD D. ... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 68,424 

70,477 

2,090.48 

2,467.20 

MCKEE, STEVEN W. ............... HUMAN RESOURCES SPECIALIST ................. I .......... 93,300 9,156.00 

MICHAEL, GLENN W. .............. CAST OUTREACH PROGRAM MGR ................ K ......... 132,200 

136,200 

4,353.72 

2,580.32 
52 

Employee Name Title Grade Salary Retention Bonus 

MOORE, DIANNA H. ................ MANAGEMENT AND PROGRAM ANA ............. I .......... 63,698 

66,437 

4,052.16 

3,645.12 

NELSON, MATTHEW F. ............ AIR TRAFFIC CONTROL SPEC (T) ................. JH ....... 114,418 

119,030 

2,621.64 

11,771.53 

NICHOLAS, ROBERT M. .......... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 464.75 

OSEKOWSKI, CRAIG P. ........... SUPV AIR TRAFFIC CONTROL SPEC ............. KJ ........ 153,072 501.06 

OTERO, CARLOS V. ................ SUPV AIR TRAFFIC CONTROL SPEC ............. GJ ....... 95,385 

98,342 

2,914.24 

3,442.56 

PARDEE, JAY J. ...................... DIR, OFF OF ACCIDENT INVEST & PREV ...... 02 ....... 162,695 7,232.40 

RABINOWITZ, BRIAN R. .......... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 49,145 

52,469 

1,257.39 

915.53 

LH ....... 68,496 338.00 

RAWLINGS, KEVIN S. .............. AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 94,798 

98,618 

2,172.24 

2,589.12 

REINERT, KURT A. ................. AIR TRAFFIC CONTROL SPEC (T) ................. FH ....... 84,643 

88,054 

1,939.56 

2,312.16 

RHEA, RODNEY R. ................. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 83,814 

87,191 

1,920.66 

2,289.12 

RITMILLER, JOHN M. .............. AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 129,524 

134,744 

3,208.80 

3,849.60 

RIXEY, WILLIAM S. ................. AIR TRAFFIC CONTROL SPECIALIST ............. GH ...... 48,100 

52,469 

1,469.44 

1,836.80 

RUBIN, BARRY E. .................. AIR TRAFFIC CONTROL SPEC (C) ................. JH ....... 104,612 

108,828 

2,396.94 

11,134.56 

SACKETT, GREGORY A. .......... SUPV AIR TRAFFIC CONTROL S ................... KJ ........ 154,712 

161,365 

3,545.22 

4,132.80 

SANOCKI, MICHAEL H. ........... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 465.24 

SCAVILLA, JASON R. .............. AIR TRAFFIC CONTROL SPEC ( .................... GH ...... 49,373 

52,469 

1,508.64 

1,836.80 

SCHMITT, RICHARD A. ........... SATCS, OPERATIONS SUPERVISOR ............... GJ ....... 85,247 1,678.68 

SECIA, PAULA E. .................... AVIATION ASSISTANT .................................... E ......... 35,687 

36,793 

1,090.32 

1,288.32 

SLOSEK, CARRIE A. ............... AIR TRAFFIC CONTROL SPEC ....................... GH ...... 67,342 

69,362 

2,057.44 

2,428.16 

SNYDER, THOMAS G. ............. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 83,814 

87,191 

1,920.66 

2,289.12 

STANKOWICZ, JOSEPH M. ...... AIR TRAFFIC CONTROL SPEC (C) ................. LH ....... 133,625 464.75 

STYER, MICHAEL J. ................ AIR TRAFFIC CONTROL SPEC ....................... LH ....... 129,524 12,934.56 

SUTPHEN, SCOTT S. ............... AIR TRAFFIC CONTROL SPEC (T) ................. HH ...... 89,675 

93,289 

2,054.64 

10,156.92 

SWITCH, JAY M. ..................... AIR TRAFFIC CONTROL SPEC ....................... KH ....... 120,165 

125,008 

2,753.52 

3,282.24 

TOOREN, JUERGEN G. ............ SUPV FOREIGN AFFAIRS SPECIALIST ........... L ......... 150,327 3,989.44 

TOPHAM, PATRICK M. ............ SUPV AIR TRAFFIC CONTROL SPEC ............. GL ....... 98,746 

101,807 

3,016.72 

3,118.64 

VERONICO, JAMES N. ............. AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 464.62 

WACHTER, MARK V. ............... AIR TRAFFIC CONTROL SPEC ....................... GG ...... 48,100 

49,543 

1,469.44 

1,734.40 

WALSH, STEPHEN G. .............. AIR TRAFFIC CONTROL SPEC ....................... GH ...... 88,474 

92,039 

2,027.34 

2,416.80 

WAZOWICZ, PAUL J. ............... AIR TRAFFIC CONTROL SPEC (T) ................. LH ....... 130,011 20.24 

WEBER, GLENN M. ................. AIR TRAFFIC CONTROL SPEC (T) ................. GH ...... 83,814 

87,191 

1,920.66 

2,289.12 

WICKS, EDWIN D. ................... HUMAN RESOURCES SPECIALIST ................. I .......... 93,300 7,518.40 

WIETHORN, MICHAEL R. ........ AIR TRAFFIC CONTROL SPEC ....................... KH ....... 113,300 

117,866 

385.26 

3,213.60 

WILKS, RANDY O. ................... AIR TRAFFIC CONTROL SPEC ....................... KH ....... 123,598 

128,579 

2,832.06 

3,375.84 

WILLIAMS, CLIFFORD J. .......... AIRWAY TRANSPORTATION SYS SPEC .......... H ......... 65,692 

67,334 

2,007.04 

2,357.12 

WILLIAMS, HAROLD F., III ...... AIRWAY TRANSPORTATION SYS SPEC .......... H ......... 85,646 

87,787 

2,616.88 

3,073.28 

Fiscal Year 2010 Total ..... ...................................................................... ............ .................... 519,137.07 
53 

Question. Other than FAA, do any other offices within DOT provide retention bonuses? If so, under what circumstances and restrictions? 

Answer. Yes. The following agencies have provided retention bonuses: FHWA, 

NHTSA, FRA, PHMSA, SLSDC, OST, RITA, OIG, and STB. 

The Department of Transportation follows the guidelines in DPM 575–1, Payment 

of Recruitment and Relocation Bonuses and Retention Allowances. Retention incentives are used to retain current employees with unique competencies that are critical to the Department’s mission. In most cases, retention incentives are used to 

keep individuals who are eligible for and who have indicated they will be retiring. 

However, they may also be used to retain staff with unique and very marketable 

competencies who could otherwise earn a higher salary in the private sector. 

Question. The budget includes $24 million and 100 positions to establish a new 

Rail Transit Safety Oversight Program. This proposal follows on the heels of rail 

transit accidents in Boston, Los Angeles, San Francisco, and Washington, DC and 

supports the legislation the administration transmitted to Congress in December. 

In the meantime, however, what can FTA do within its current authority to ensure transit systems are safe, without new legislation, be it through training, technical assistance or other efforts? 

Answer. Even without authorization legislation in place, FTA could still take important steps to stand up its safety program if Congress provides the necessary 

funds, including: 

—Hiring new program staff (as opposed to field safety inspectors) with special expertise in areas of safety, engineering, and behavioral experts. 

—Undertaking research and demonstration projects in the area of transit safety. 

Moreover, FTA currently is taking steps to strengthen State Safety Oversight 

Agencies (SSOAs). FTA provides stakeholder outreach (informational exchanges, 

best practices, lessons learned, program guidance) through a variety of efforts, including: 

—Two State Safety Oversight workshops per year including one for SSOAs and 

one for both SSOAs and Rail Transit Agencies. 

—Two Safety & Security Roundtables per year co-sponsored by TSA and attended 

by safety and security officials from the largest 50 transit agencies. 

—FTA’s Safety and Security Web site, which contains resource documents, program guidance, training course listings. 

—‘‘Dear Colleague’’ letters issued to industry stakeholders about best practices. 

Question. Please explain the need for Federal regulation and oversight of rail 

transit safety. What information does FTA have on the current performance of the 

State Safety Oversight Agencies in overseeing safety on rail transit systems, including their safety standards, level of oversight, and ability to enforce compliance? 

What kind of enforcement actions would FTA be able to take? 

Answer. Concerning the need for Federal regulation and oversight, FTA does not 

have regulatory authority or the resources to oversee safety performance of transit 

agencies. This responsibility currently resides at the State and local levels. Without 

field verification audits, FTA cannot confirm that (1) rail transit agencies have 

adopted the appropriate safety standards for track, vehicles, signals and train control, operating practices, and electrification systems and (2) that the adopted standards are being implemented. Nor do we have the authority to require States and 

rail transit agencies to address critical safety issues, such as fatigue (hours of service), medical qualification (to include sleep apnea and other sleep disorders), incorporation of automatic systems and technology into track inspection, and information 

management systems to enhance communication between and across operating and 

maintenance departments regarding the reporting and analysis of safety hazards 

and concerns. 

In December 2009, FTA transmitted to Congress authorization legislation that 

would expand FTA’s responsibilities to help ensure the safety of the Nation’s transit 

systems. The legislation would allow FTA to create an oversight program focused 

on transit safety, with the ability to develop safety regulatory standards and with 

increased enforcement authority. We urge Congress to take up this important legislation as soon as possible. 

Regarding State safety oversight (SSO) agencies, FTA obtains information on the 

requirements, activities, and performance of the SSO agencies and the rail transit 

agencies from several sources including: 

—The SSO Initial Submission.—Made prior to entering the program. FTA uses 

a checklist to review the initial submission and corresponds with the SSO agency until all open issues are resolved. At the current time, all 27 SSO agencies 

have Program Standards that have passed the basic initial submission review 

and approval process. 
54 

—The SSO Annual Submission.—Made to FTA by March 15 of each year. This 

report includes information on the personnel devoted to implementing the SSO 

program, the training received that year by personnel, the use of contractors to 

support the State’s SSO program, as well as the accidents that were investigated at the rail transit agency. 

—SSO 3-Year Reviews.—Each State also submits any 3-year reviews completed at 

the rail transit agencies in its jurisdiction. FTA uses this information to develop 

its Rail Transit Safety Statistics Report and to track the level of effort expended 

by each State to meet 49 CFR part 659 requirements. Three-year review reports 

also provide valuable snapshots of the rail transit agencies and their activities 

to implement their System Safety Program Plans. 

—Periodic Submission.—FTA has the authority to collect information from the 

State safety oversight agencies periodically to address special requests. Working 

with the States, FTA collects information on specific rail transit agency issues 

in response to publicly submitted complaints. For example, FTA has used this 

authority to investigate complaints involving rail transit agencies in Atlanta, 

Detroit and Memphis. In addition, FTA works with the States to get information from rail transit agencies in special studies, such as on fatigue management, track inspection, on-site reviews and audits, or managing safety in extensions and major capital projects. 

—Audit Program.—FTA audits each State no less than once every 3 years. As 

part of the audit process, FTA requests an extensive list of materials that the 

State collects from the rail transit agency, including the rail transit agency System Safety Program Plan, hazard tracking log, all accident investigations completed in the last year prior to the audit, all internal audit reports, and any 

special studies or investigations performed by the rail transit agency or the 

State. Each audit report provides an in-depth look at how each State is implementing 49 CFR part 659. As appropriate, in certain cases, FTA can also make 

determinations regarding how well the rail transit agency is performing specific 

safety functions, such as internal auditing, hazard identification and analysis, 

accident investigation and corrective action management. FTA does not, however, conduct independent inspections to verify that track, vehicles, and equipment are being operated and maintained within specified standards. Nor does 

FTA review or approve any standards adopted by the rail transit agency. 

—National Transit Database.—FTA compares the accidents and safety information being reported by the rail transit agencies to the Safety and Security Reporting Module of the national Transit Database with the information being reported to the States to ensure that States are notified of the accidents they 

should be notified of and that information is reported accurately to the NTD. 

Collectively, information received from these sources provides FTA with a reasonable picture regarding the level of staffing, expertise, training and activity being 

performed to carry out safety functions in the States and the rail transit agencies. 

Further, we have a strong analytic handle on the types and frequency of accidents 

occurring in the rail transit industry, their causes and the typical actions being 

taken to prevent recurrence. It is the information culled from these sources that has 

contributed to the administration’s conclusion that the status quo is inadequate and 

is in dire need of reform. 

Question. FTA has requested $30 million in fiscal year 2011 for this new program. 

What does FTA project this program will cost in subsequent years and how does 

it plan to use these funds? 

Answer. As you know, the fiscal year 2011 budget includes $30 million and 130 

FTE to support policies and activities included in the administration’s transit safety 

legislation, the ‘‘Public Transportation Safety Program Act of 2009’’ transmitted to 

Congress on December 7, 2009. We believe these resources will enable FTA to institute an effective regulatory system for the rail transit industry. Looking ahead, we 

will assess any potential additional resource requirements as part of the fiscal year 

2012 budget. 

Question. What is FTA doing to help the Washington Metropolitan Area Transit 

Authority get back on track in terms of safety? Do you believe the Tri-State Oversight Committee as currently organized, can provide appropriate oversight of 

WMATA? 

Answer. FTA’s greatest contribution has been the audit we recently conducted in 

December 2009 of both Tri-State Oversight Committee (TOC) and WMATA. This 

audit enabled us to identify priority actions to support both agencies in strengthening their safety programs. TOC and WMATA recently submitted their initial 

plans for addressing the audit findings and we believe positive steps are being taken 

as a result of our action. Moving forward, FTA has planned quarterly meetings on- 
55 

site with WMATA and TOC to review their progress in addressing and closing our 

audit findings. 

In terms of technical assistance, through the Transportation Safety Institute (TSI) 

FTA has provided safety training, including training on internal auditing and hazard management on site at WMATA in late 2009. We are currently working with 

WMATA to schedule additional training deliveries for their employees in the next 

few months including the following courses. 

—Instructors Course for Rail Trainers 

—Current Trends in Transit Rail System Safety 

—Transit System Security 

—Effectively Managing Transit Emergencies 

—Transit Rail Incident Investigation 

—Transit Rail System Safety. 

In June, FTA is bringing a new Track Inspection Refresher Training Workshop 

to WMATA with three offerings. This 2-day workshop is designed to reinforce critical skills and safety practices of employees in WMATA’s track inspection program. 

FTA has also participated with WMATA, TOC and the Federal Railroad Administration (FRA) in supporting WMATA’s Roadway Worker Protection Working Group 

to overhaul and improve WMATA’s existing rules and procedures for protecting 

workers on the right of way. 

In terms of funding, the Passenger Rail Improvement Act of 2008 authorized a special appropriation for WMATA of $150 million per year. Congress appropriated 

as much in fiscal year 2010 and FTA requested funding for fiscal year 2011. Under 

this program, the Secretary will use his authority to approve grants to ensure that 

available funds first address WMATA’s most critical safety needs. Maintenance and 

repair needs are also addressed through formula grants funded from both the Urbanized Area and the Fixed Guideway Modernization programs. These grants are 

in addition to the $150 million appropriation. 

Regarding the Tri-State Oversight Committee’s oversight, we recognize that the 

current three jurisdiction committee organization presents challenges to the TOC in 

effectively carrying out its important safety oversight mission. It has suffered from 

inadequate resources, lack of authority and lack of permanent technical staff. 

The Obama administration’s Public Transportation Safety Act of 2009 that was 

submitted to Congress this past December will address these and other shortcomings of the current SSO framework on a National basis. 

As far as TOC’s current status, we appreciate that the Commonwealth of Virginia, 

the State of Maryland, and the District of Columbia have come together to address 

some of the challenges TOC confronts with its current legal and organizational 

structure. In response to an FTA finding from the December audit, TOC jurisdictions have created a TOC Executive Committee. This committee recently had its 

first meeting, and took action with both the WMATA Interim General Manager and 

the WMATA Board to request monthly safety reporting and to ensure that WMATA 

follows its hazard reporting and accident notification thresholds. These are good 

first steps. 

In addition, Virginia Governor Bob McDonnell, Maryland Governor Martin 

O’Malley and Washington, DC Mayor Adrian Fenty recently released a white paper 

documenting their proposal for enhancing TOC’s existing authority and resources. 

Phase 2 of this plan calls on the jurisdictions to create a distinct legal entity—the 

Metro Safety Commission—that would have additional authorities beyond the existing program. 

The best long term solution to the problems faced by TOC and the 26 other SSO 

agencies around the Nation are for Congress to take prompt action on the Obama 

administration’s safety reform proposal. 

Question. In January, the Department announced it will now consider other important factors in addition to reduced commuting time when evaluating new transit 

projects. Cutting commuting times is clearly important, but this change signals a 

more holistic approach that considers the impact on congestion, the environment, 

and local economies. All contribute to making the places we live and work more vibrant and sustainable. 

When will the draft rule to be made public? 

Answer. FTA published an Advance Notice of Proposed Rulemaking (ANPRM) in 

the Federal Register on Thursday, June 3, 2010, asking for public comment on how 

to change the way major transit project proposals seeking Federal funding are rated 

and evaluated. 

Question. How will this change affect the importance of cost effectiveness when 

the Department considers future transit projects? 

Answer. Cost-effectiveness will continue to be evaluated as one of the six statutory project justification criteria, but will not be the only consideration in making 
56 

funding recommendations. Through a rulemaking, FTA will develop measures for 

better capturing the environmental, community and economic development benefits 

provided by transit projects, including a revised cost effectiveness measure that will 

recognize these benefits. This Advance Notice of Proposed Rulemaking (ANPRN) 

will invite feedback on what benefits should be included in the evaluation process 

and issues related to baseline alternatives, travel demand modeling, and New Starts 

and Small Starts streamlining. The New Starts and Small Starts projects funded 

in the fiscal year 2011 budget were selected using the current project rating criteria. 

The earliest any revised rating criteria could be utilized would be for the fiscal year 

2013 budget. 

Question. What is the Department’s opinion on allowing transit agencies discretion to use transit assistance funding for operating costs during these difficult economic times? 

Answer. Secretary LaHood has stated that DOT will work with Members of the 

House and Senate this year to see if we can allow transit agencies more flexibility 

to use a portion of their Federal funds to cover operating costs during these tough 

economic times. However, he has also stated that this cannot be open-ended, and 

that such assistance would be temporary, not the normal course of business. 

Question. What is the estimated capital needs backlog of transit systems? 

Answer. There is no one single estimate or a simple method to determine the capital backlog needs of the Nation’s transit systems. That said, we know that transit 

agencies in general are facing significant funding shortfalls. For example, an April 

2009 FTA report to Congress identified a $50 billion repair and replacement backlog 

at the seven largest rail transit agencies in the country. Moreover, when you expand 

the universe from the 7 largest rail operators to 690 separate rail and bus systems, 

the estimated funding shortfall to bring the entire transit system in a state of good 

repair grows from $50 billion to $78 billion. 

FTA is proposing to merge its Bus and Bus Facilities and Fixed Guideway Modernization programs into a new $2.9 billion Bus and Rail State of Good Repair program to better address the tens of billions of dollars in rail and bus transit assets 

that are in marginal or poor condition. The funding request represents an 8 percent 

increase above the equivalent 2010 appropriation, which is significantly more than 

is proposed for most other FTA programs—all in a budget that increases funding 

for the FTA by just 1 percent. 

Question. Transit rail passenger cars purchased across the United States are relatively unique. A few cars can be used on different systems, for example, Virginia 

Railway Express (VRE) can use Chicago Metra commuter cars, but many others are 

designed specifically for their systems’ infrastructure and preferences. This uniqueness may increase the costs to procure transit rail cars as it results in smaller orders, sometimes limiting the economies of scale that could be obtained from larger 

orders. 

Has FTA considered supporting efforts to increase standardization in rail cars or 

new systems, to help keep the cost of transit rail cars down? Why or why not? Might 

this also have safety benefits? 

Answer. FTA is supporting the efforts of the American Public Transportation Association (APTA) in developing consensus standards for the North American rolling 

stock industry. APTA, as a Standards Development Organization (SDO), has developed standards for commuter rail cars, light rail vehicles, buses, and other rolling 

stock funded in part by FTA. While FTA encourages the use of these standards by 

our grantees we do not have regulatory authority to require their use. 

FTA’s financial assistance has also enabled APTA to support development of rail 

car crashworthiness standards by another SDO—the American Society of Mechanical Engineers. 

Conceivably standardization in rail cars and new systems, such as improved 

crashworthiness standards and crash avoidance systems, will have safety benefits, 

but there may be additional costs associated with achieving standardization, at least 

initially. 

FTA is statutorily prohibited from directly establishing transit vehicle standards. 

As a result, FTA has been unable to implement recommendations from the National 

Transportation Safety Board related to transit vehicle crashworthiness, event recorders and other vehicle safety features. As a result of this limited authority to improve safety, Secretary LaHood delivered the Obama administration’s legislative 

proposal entitled the Public Transportation Safety Act of 2009 to the Congress this 

past December. We take this opportunity to urge Congress to take prompt action 

on this proposal. 

Question. Has FTA taken steps to support transit agencies’ efforts through joint 

procurement, etc? If so, what are some examples of these steps? 
57 

Answer. Yes, in addition to supporting the APTA standards development efforts, 

FTA has conducted research into joint vehicle procurements and procurement incentive systems for our section 5307 and 5311 Formula Grants. Specification standardization and joint vehicle procurements have been promoted by FTA on a limited 

basis with mixed results. 

FTA recently completed a study for Congress that included an FTA concept for 

a shared procurement for FTA funded rolling stock. See FTA’s Report to Congress 

on the Results of the Cooperative Procurement Pilot Program at: http:// 

www.fta.dot.gov/publications/publicationsl11548.html. 

Based on the results of the five completed final projects, FTA found the following: 

—The additional Federal share allowed in the pilot program did not sufficiently 

induce greater use of pooled procurement; 

—Savings from cooperative procurement are more likely to be realized by agencies 

purchasing a small number of vehicles. Agencies already purchasing a significant number of vehicles are less likely to achieve savings through additional 

economies of scale; and 

—Difficulties in forming consortiums, the administrative burden placed on lead 

agencies and the reluctance of the other participating agencies to relinquish 

control over the process to the lead agencies pose considerable obstacles to the 

use of cooperative procurements. 

In an August 2008 study, FTA addressed joint vehicle procurements in its Report 

to Congress on Incentives in Federal Transit Formula Grant Programs, http:// 

www.fta.dot.gov/publications/publicationsl8674.html. 

Some of the findings from this report were the following: 

—Barriers and difficulties that contributed to the limited implementation of these 

procurement systems include: 

—Transit Culture.—‘‘Agencies Believe They Are Unique... The agencies are 

justifiably proud of their corporate cultures and heritage, and their pride may 

have many positive effects. However, if the industry is to realize the full benefits of standards, the systems must weigh their traditions against the benefits 

of standards and make the collective effort that is necessary to settle on safety standards and adhere to economical design standards.’’ 

—Joint procurements involve significant administrative efforts because the 

agencies must reconcile their requirements and practices to each other’s. 

—Conflicting legal issues, differing operating requirements, and differing professional opinions must be resolved. 

Question. What other options or authorities might FTA consider seeking to reduce 

transit railcar costs? 

Answer. As mentioned previously, FTA has focused on developing standards and 

specifications to reduce the capital and operating costs of new rail vehicles. In recent years, FTA has funded APTA’s efforts to develop technical requirements for the 

design and procurement of new LRV type vehicles. APTA is responsible for coordinating and managing this effort. 

Question. On September 10, 2009, FTA issued an Advance Notice of Proposed 

Rulemaking on capital project management. FTA is considering whether to require 

some type of financial plan for all fixed guideway capital projects. Further, it is considering the extent to which it should use Project Management Oversight Contractors (PMOCs) to oversee projects other than Major Capital Projects (those costing 

$100 million, among other requirements). Finally, transit properties over time have 

indicated that Federal oversight can increase the time, and thus the cost, it takes 

to build a new rail transit line or extension. 

How will these potential changes impact the PMOC and FMOC budgets as well 

as the funds necessary to oversee PMOCs and FMOCs? 

Answer. Several items included in FTA’s ANPRM on capital projects management 

were aimed at soliciting comments and suggestions from the industry on how to improve overall project management of major capital projects based on experiences to 

date. FTA is currently reviewing input provided by stakeholders as it prepares the 

Notice of Proposed Rulemaking, and has not determined what additional oversight, 

if any, is necessary. Looking ahead, FTA will consider resource requirements for its 

oversight program as it develops its fiscal year 2012 budget. 

FTA oversight of public transportation systems is necessary to safeguard the taxpayer’s investment. FTA has designed its oversight process to minimize the intrusion on grantees while protecting tax payers’ dollars. One tool that has provided 

tangible benefits is FTA’s risk-informed project management system, which assists 

grantees in identifying costly risks at a stage of development which subsequently 

allows grantees to mitigate those risks and avoid enormous costs. The latest innovation by FTA is the incorporation of the New Starts Engineering Workshop into our 

outreach program. This workshop is designed to provide a roadmap for prospective 
58 

and existing capital project sponsors on how to prepare for FTA’s project management oversight review process. FTA believes that outreach of this kind will assist 

the grantees in being better prepared to make quality submittals and shorten the 

time it takes for oversight reviews. 

Question. FTA is proposing that funding guidelines for major transit projects be 

based on livability issues such as economic development opportunities and environmental benefits, in addition to cost and time saved, which are currently the primary 

criteria. This would change how projects are selected to receive Federal financial assistance in the FTA New Starts and Small Starts programs. In making funding decisions, the FTA will now evaluate the environmental, community and economic development benefits provided by transit projects, as well as the congestion relief benefits from such projects. 

Will the proposed changes in economic development criteria increase the number 

of projects that may be eligible for New Starts or increase the back log? 

Answer. Because the New Starts program is a complex program and the new criteria under development have not been finalized, it is not possible to predict how 

potential changes to the evaluation criteria would impact the number of projects eligible for funding in the future. That said, the aim of making these changes is to 

more fully recognize the various types of benefits that are generated by investments 

in transit services and to ensure that all prospective projects receive due consideration. 

Question. How will FTA determine the value of the economic development opportunities and community and environmental benefits when making funding decisions? 

Answer. As announced by Secretary LaHood on January 13, FTA plans to use the 

rulemaking process to better capture in its evaluation and rating process the wide 

range of benefits New Starts projects can provide. On Thursday, June 3, FTA published an Advance Notice of Proposed Rulemaking (ANPRM) in the Federal Register 

asking for public comment on how to change the way major transit project proposals 

seeking Federal funding are rated and evaluated. 

Question. In October 2008, FTA issued a report ‘‘Transit State of Good Repair: Beginning the Dialogue’’ highlighting the importance of maintaining the condition of 

our transit and the fact that much of existing bus and rail assets are in poor or 

marginal condition. The fiscal year 2011 budget request includes $2.3 million for bus 

and rail state of good repair program activities (along with decreases in fixed guideway modernization and bus and bus facility grants). 

How does FTA plan to implement this ‘‘program’’ and distribute the funds, and 

how would it differ from the way funds in the existing programs are distributed? 

Answer. Under the proposed State of Good Repair program, funds would be distributed by formula. Though the specifics of such a formula have yet to be developed, the goal would be allocate funds to both rail and bus transit systems by formula. FTA looks forward to working with Congress on developing the program as 

Congress begins work on 2011 appropriations legislation. 

Question. How will this program help rail transit agencies replace aging transit 

car fleets? 

Answer. One of FTA’s highest priorities is to maintain our Nation’s transit assets 

in a state of good repair (SGR) so they can provide safer and more efficient service. 

This new focus will involve emphasizing the SGR activities in our existing programs, initiating new activities to address unique local needs, and providing analysis products that will help decisionmakers better understand their options for managing the condition of their aging infrastructure. Accordingly, for fiscal year 2011 

FTA has proposed to merge its Bus and Bus Facilities and Fixed Guideway Modernization programs into a new $2.9 billion Bus and Rail State of Good Repair program. The funding request represents an 8 percent increase above the equivalent 

fiscal year 2010 appropriation, which is significantly more than is proposed for most 

other FTA programs. The fiscal year 2011 budget also requests $4.61 billion for the 

Urbanized Area Formula Grant Program for allocation of funds to urbanized areas 

(UZAs) around the Nation for maintenance and capital investment in bus and rail 

systems. 

We also very much appreciate that in fiscal year 2010 Congress supported FTA 

using $5 million in research funding to help improve transit asset management 

practices. This critical funding will fund enhanced data collection, asset management, technical assistance, and a pilot SGR project. Because FTA is currently exploring how transit agencies should implement SGR practices, it has not determined 

whether having an asset management plan should be a necessary criterion for receiving Federal funds. 

Question. What is known about the effects of aging infrastructure on rail transit 

safety? 
59 

Answer. Rail transit is statistically among the safest modes of transportation. A 

rail transit passenger is over 100 times less likely to be killed in an accident than 

is an automobile passenger. That said, FTA is aware that there is a backlog of rail 

transit infrastructure maintenance and renewal. FTA’s previous study of the seven 

largest rail transit systems estimated a $50 billion shortfall, but did not correlate 

the investment shortfall to safe operations. There is an obvious intrinsic correlation 

and transit agencies must carefully manage their operations and maintenance to 

keep the system safe in spite of aging infrastructure. If done properly, this will affect frequently service before it affects safety. For example, track infrastructure may 

have more defects as it ages, but operations can continue safely at lower speeds. 

Given the extent that rail transit operators are relying on older equipment and capital stock, the need to enact transit safety legislation is all the more urgent. 

SUBCOMMITTEE RECESS

Senator BOND. Well, with no further questions, the hearing 

stands—is in recess. 

And March 11 at 9:30, we’ll take testimony from Secretary Donovan on the budget request for 2011 Housing and Urban Development. 

[Whereupon, at 11:16 a.m., Thursday, March 4, the subcommittee was recessed, to reconvene at 9:30 a.m. Thursday, 

March 11.] 

(61) 

TRANSPORTATION AND HOUSING AND URBAN 

DEVELOPMENT, AND RELATED AGENCIES 

APPROPRIATIONS FOR FISCAL YEAR 2011 

THURSDAY, MARCH 11, 2010 

U.S. SENATE, 

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, 

Washington, DC. 

The subcommittee met at 9:32 a.m., in room SD–138, Dirksen 

Senate Office Building, Hon. Patty Murray (chairman) presiding. 

Present: Senators Murray, Leahy, and Bond. 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

OFFICE OF THE SECRETARY

STATEMENT OF HON. SHAUN DONOVAN, SECRETARY 

OPENING STATEMENT OF SENATOR PATTY MURRAY

Senator MURRAY. This subcommittee will come to order. 

This morning, this subcommittee will conduct an oversight hearing on the Department of Housing and Urban Development’s budget for fiscal year 2011. We are pleased that Secretary Donovan is 

with us today to discuss his Department and his budget. 

Today, the country faces daunting challenges. Unemployment remains high. Credit is tight. Housing stability is fragile, and the 

number of homeless Americans is growing. HUD programs respond 

to challenges across the spectrum of this crisis from stabilizing the 

housing market to providing assistance to the Nation’s most vulnerable. 

This subcommittee’s job is to provide the oversight and resources 

to make sure that HUD can effectively fulfill its responsibilities. At 

the same time, we must also continue to make investments that 

will strengthen our economy, create jobs, and support our communities, both large and small. 

Just over a year ago, we passed the American Recovery and Reinvestment Act, making key investments in public housing, community development, and affordable housing to help those in need 

and weather the crisis. I commend HUD for getting this funding 

out the door quickly. And today, we can see it making a difference 

in our communities, improving housing, creating new housing, and 

putting people to work. 

I have seen these dollars at work in my own State. For example, 

in Vancouver, Washington, a Housing Authority is using $2.5 million in public housing capital funds to support construction and re-
62 

habilitation of housing. The jobs created from these projects are 

critical to Clark County, where unemployment has now topped 14 

percent. 

In Yakima, Washington, where for years we have struggled to 

provide affordable and adequate housing to local workers, recovery 

funds have gone to renovation efforts that have improved the lives 

of families, many with children, who live well below the poverty 

line. But as this funding goes to work and as our economy moves 

toward recovery, we must remain focused on stabilizing the housing market. 

As we all know, for most Americans, the family home is their 

largest investment, an asset that provides them with a roof over 

their heads and financial security. This security gives Americans 

the confidence to spend and invest and plan for the future. 

FEDERAL HOUSING ADMINISTRATION

Stabilizing and improving the housing market is critical to the 

Nation’s economic recovery, and the Federal Housing Administration has played a vital role in this effort. When the private sector 

became skittish about mortgage lending and credit froze, FHA 

stepped in to make sure that Americans could still get a mortgage, 

and this has helped to stabilize the market. 

That is exactly what FHA was created to do. But taking on this 

increased role comes with risks of its own. FHA has gone from insuring only 2 percent of the market in 2006 to nearly 30 percent 

today. This dramatic increase in business requires sufficient staff 

and the technical capacity to protect FHA from risk and fraud. 

Even as FHA’s new business grows, it must also continue to 

manage loans that were made during the height of the housing 

boom. Unfortunately, FHA is not immune from the wave of foreclosures devastating the housing market. These losses have taken 

their toll on FHA’s finances. 

This fall, FHA’s capital reserve fund fell below the mandatory 2 

percent required by Congress. While this does not mean that FHA 

requires Federal relief, it is a cause for concern. 

For each of these last 3 years, Senator Bond and I have held 

hearings on FHA to focus attention on the solvency of its Mutual 

Mortgage Insurance Fund. The recent losses to the capital reserve 

fund have now brought this issue into focus for others for the first 

time. FHA must continue to seek ways to strengthen the position 

of its capital reserve fund to ensure taxpayers will not be left on 

the hook to pay for risky or fraudulent mortgages. 

Mr. Secretary, I commend you and FHA Commissioner Stevens 

for moving swiftly to assess FHA’s risks and to implement reforms 

to reduce its exposure and recapitalize the reserve fund. These 

changes both protect the American taxpayer and ensure FHA can 

continue to provide needed liquidity in the market. 

Some of the reforms proposed require a legislative change. One 

of these would allow HUD to increase annual premiums on FHA 

mortgage insurance and is included as part of the budget. I will 

have questions today on this change, and specifically, how it would 

protect FHA from future losses. 

Now, despite some positive signs in the housing market, the crisis we face is not over. And for the more than 2.8 million Ameri-
63 

cans facing foreclosure, positive national trends offer little comfort. 

So while I am encouraged today by reports that foreclosure filings 

appear be slowing, and Washington State fell 13 percent from this 

time last year, there are still many people at risk of foreclosure. 

Areas in Washington State continue to experience severe declines 

in home values, and nearly a quarter of a million Washington State 

homeowners are underwater today. So for families living in Clark 

and Pierce County, Washington, we want to know how the Federal 

Government can help them hold onto their homes and regain economic security. 

Providing help isn’t easy, and we don’t want to reward borrowers 

that took on mortgages that they could not afford. But while so 

many of the early foreclosures resulted from subprime and other 

exotic mortgages, many of the homeowners today who are in trouble are those that are impacted by the recession. These are unemployed homeowners and those who owe more on their mortgage 

than the home is worth because of those plummeting home values. 

MORTGAGE MODIFICATION

Several efforts have been launched to help struggling homeowners, including the Home Affordable Modification Program, but 

servicers have been slow to provide permanent modifications. To 

date, only 116,000 homeowners have received permanent modifications, which is far short of the administration’s goal of 3 million to 

4 million. 

The President recently announced a new program to help five 

States that have been particularly hit hard by this crisis. While 

this initiative does attempt to address the problems of unemployed 

and underwater borrowers, its geographic restrictions will limit its 

impact on the overall market, including other parts of the country, 

like Washington State’s Clark and Pierce Counties. 

Your testimony today mentions other ways that we might assist 

struggling homeowners. So, today, I want to discuss how we can 

improve current programs and what other steps may be taken to 

protect families from foreclosure. 

HUD has a broad and important mission. The President’s budget 

requests more than $48 billion in fiscal year 2011 in recognition of 

the role the Department plays in supporting housing, especially for 

some of the most vulnerable in our society. 

SECTION 8 AND NEW INITIATIVES

This funding would maintain critical rental assistance to help 

millions of low-income Americans who rely on section 8 vouchers 

or live in project-based or public housing. The President’s budget 

also provides funding to continue or expand initiatives started in 

2010, such as Sustainable Communities and Choice Neighborhoods. 

The budget also proposes new initiatives, including Catalytic Investment Competition Grants and vouchers for homeless individuals and families. 

The largest new proposal is the $350 million Transforming Rental Assistance initiative. This ambitious proposal seeks to address 

the capital needs of public and HUD-assisted housing. By fundamentally changing the way this housing is funded, the adminis-
64 

tration hopes to leverage significant private sector resources to preserve this irreplaceable stock of affordable housing. 

However, the budget offers few details on the changes HUD 

would make or in the long-term costs. While the concept may have 

merit, this subcommittee does not take its responsibilities lightly. 

We require more information if we are to give the proposal serious 

consideration. So I want to have a discussion about the long-term 

plan for this and the cost of this initiative. 

PROPOSED CUTS

Now, Mr. Secretary, among the promising reforms included in 

the budget, there are several drastic cuts to important programs 

you and I have talked about, including the housing for the elderly 

and disabled. HUD justifies these cuts by citing program deficiencies. If these programs aren’t working effectively, let us fix 

them. But the President’s budget doesn’t propose any changes. Instead, it brings the programs to a halt with a promise to just fix 

them later. 

I am also concerned by other cuts proposed in this budget to programs like the Native American Housing Block Grants and the 

highly successful HOME program. While the President’s budget 

made some difficult choices in order to freeze discretionary spending, this subcommittee may well be forced to consider even further 

reductions. 

The President’s budget assumed receipts from FHA totaling $5.8 

billion. These receipts would offset some of the spending included 

in the HUD’s budget for next year. Last Friday, Congress received 

the Congressional Budget Office’s re-estimate of the President’s 

budget. 

As a result of continued uncertainty about the housing market, CBO concluded the budget would only generate $1.8 billion in offsetting FHA receipts. That means there could be potentially a 

shortfall of $4 billion just to pay for the program increases proposed in the President’s budget. That is a staggering amount, given 

the housing needs of this country. 

This subcommittee is going to face a very difficult task to provide 

resources to this Department so that it can continue the programs 

that serve so many Americans across the country, from homeless 

veterans, to first-time homeowners, to families that need help accessing affordable housing. Secretary Donovan, you have worked 

very hard to improve HUD’s programs, and I hope you can offer us 

suggestions on how to tackle the complex housing and community 

development needs that are facing this Nation with limited resources. 

So thank you so much for being at this hearing today. I look forward to your testimony in just a few minutes. 

But before we have that, I want to turn it over to my partner 

and ranking member, Senator Bond. 

OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you very much, Madam Chair, and thank 

you for holding the important hearing. 

We are always pleased to welcome our distinguished Secretary of 

Housing and Urban Development, Secretary Donovan, who is pas-
65 

sionate about housing and community development. He has been 

working hard to remake the Department, a task that is Herculean, 

to say the least. We wish him well on his efforts, but we do have 

some questions, as the chair has outlined. 

Now it is no surprise to anyone here that there are significant 

deficit issues facing the entire Federal Government. Making an already bad situation worse, the Congressional Budget Office re-estimated the President’s budget would add $8.5 trillion to the national debt by 2020, with a deficit of $1.5 billion in this fiscal year 

and another $1.3 billion in 2011. CBO projects the national debt 

will balloon to some 90 percent of the economy by 2020, while interest payments on the debt will soar by $800 billion over the same 

period. 

But that is only if the interest rates stay the same. And no one 

I know who is versed in finance or economics generally will propose 

that interest rates will not rise significantly when lenders see the 

deficit spending and the tremendous debt we have built up. In 

other words, we are facing a drowning in debt with interest rates 

skyrocketing and adding to an increasingly high debt spiral. 

I do not believe, as some in the administration do, that making 

the Federal Government larger is the solution to fixing our economic woes. Nevertheless, we are in an unprecedented budget crisis, which is domestic and global in nature, something we have 

never faced in my career in Government service. 

And as you know, many of the decisions we make on the budget 

and appropriations will be critical to the future economic health of 

the Nation. That includes finding the right balance of spending in 

HUD with regard to both HUD’s current programs, as well as the 

dramatic new proposals contained in the HUD 2011 budget request. 

I believe a number of your HUD policy and reform initiatives are 

bold and thoughtful, but I am very concerned about the cost of 

these initiatives in both the 2011 budget, as well as the potential 

huge cost in out-years. For the HUD budget, this is of particular 

concern since we recently received word, as the chair has noted, 

that there will be a loss of some $4 billion in FHA receipts. That 

$4 billion hit will make funding many of the HUD initiatives even 

more difficult in 2011 and possibly limit funding for this subcommittee’s other priorities, like transportation and infrastructure 

projects. 

As you well know, Mr. Secretary, I have long warned about FHA 

and the potential consequences to the budget of the Department, 

the appropriations available for this subcommittee, and the impact 

on our national economy. We need to be asking tough questions 

like where is money for new programs going to come from. 

If the President is serious about promising fiscal restraint, he 

has to quit treating taxpayer dollars like Monopoly money. Our 

children and grandchildren are going to have to pay in the future 

for every extra dollar we borrow and spend, and that is not something I want to be able to tell them. 

PROPOSED CUTS

While HUD is proposing to create new or expand existing programs at great cost to the taxpayer, the Department is also pro-
66 

posing to eliminate or cut funding for a number of important and 

proven programs that serve our most vulnerable populations like 

seniors and the disabled, as had been mentioned by the Chair, and 

homeless veterans, something which she and I have led the battle 

to fund. And to say that we are not pleased by the budget recommendations I would say, at least for my part, is a huge understatement. 

Cuts to these programs like section 202 elderly housing, the 811 

housing program for persons with disabilities, and the capacitybuilding funding for LISC and Enterprise will make it more difficult for low-income seniors or disabled Americans to find safe and 

affordable housing. 

Of all the capacity-building entities I have seen, LISC and Enterprise seem to be the ones that are working. I think they should be 

the model, and I think they should continue to have the resources 

they need and not have the funds distributed over a wider area, 

where they do not have the same skills and abilities. 

The HUD staff has claimed all of these programs will receive 

funding once needed reforms are made. It seems much more likely 

the non-profits will begin to lose their experts during a zero funding year, a brain drain that will only get worse if there is not a 

significant infusion of new funds in the very near future. Funding 

in future years will likely be marginal at best, with HUD and the 

administration arguing that 202 and 811 will be unneeded once the 

Transforming Rental Assistance, or TRA, program is fully funded, 

including any provisions targeted to the elderly and disabled. 

RURAL HOUSING FUND

Also, I was disappointed to see the administration wants to eliminate a $25 million rural housing fund, something I fought 

with Senator Harkin to include for many years. This small program offers a unique opportunity for HUD’s housing and community programs to partner with rural development at the USDA. 

It is a mistake for the administration to ignore the housing needs 

in our rural communities. Everybody knows the housing programs 

in the city because people see them all the time. I live in the rural 

areas. I see them. I travel the rural areas, and I know the need 

is great. And this budget does not recognize it. 

In addition to the dollars and cents, rural versus urban questions, I have overall concerns about the proposal we have received 

from HUD. Not to keep using a tired, old analogy, but the proposal 

I received from the Department of Transportation and the budget 

blueprint has left me feeling a little bit like Bill Murray in 

‘‘Groundhog Day.’’ 

In other words, the budget blueprint this year asks for Congress 

to write a big check, fails to provide details on the programs we are 

supposed to fund. I have been there. I have seen that before. I have 

done that. And at least Bill Murray got smart in ‘‘Groundhog Day,’’ 

and I don’t see any of us getting smarter or better as we see 

Groundhog Day come back again. 

TRANSFORMING RENTAL ASSISTANCE

Despite not having the proposed actual language for TRA, HUD’s 

2011 budget calls for some $350 million for the program, with pro-
67 

jected annual costs of some $1.5 billion when fully implemented. 

There is an old story, an old saw about a pig in a poke, but I won’t 

go into that any further. 

Also before Congress is going to sign any check, we need to see 

the program details. Members of Congress need to see specific legislative language for proposed programs, and it has to be passed. 

So there are some guidelines in place. You may have good ideas. 

We may even like those good ideas. We may propose them, and 

they may not come out on the other end of the sausage factory. 

So I, for one, have real concerns about potential unintended consequences of the TRA that could impact low-income families assisted under public housing or other low-income housing programs. 

Broad waiver language will not do the trick since there is a widespread risk of abuse and a great danger of the lack of transparency. 

CHOICE NEIGHBORHOODS VS. HOPE VI

Another program where I need to see some details—and Congress and our constituents, the taxpayers, deserve answers—is on 

Choice Neighborhoods. Now, we have discussed Choice Neighborhoods many times, and you know that I would like to claim some 

credit for HOPE VI. And this $250 million program is replacing 

HOPE VI as the next evolution in affordable housing and revitalizing distressed communities. 

And if we can make it better, that is always good. I am willing 

to do that. But in particular, Choice Neighborhoods proposes to 

transfer and merge into its account for 2011 all remaining HOPE 

VI funding, despite having account language that is very broad and 

which has no metrics for measuring success or for understanding 

the grantmaking and implementation process. 

While Choice Neighborhoods appears to be a much more ambitious program than HOPE VI, we need more information to understand the evolution from HOPE VI to Choice Neighborhoods. I was 

there at the beginning when HOPE VI was a mere idea until it became a major program, ultimately going beyond housing and transforming entire communities. And I personally know how important 

HOPE VI has been to communities across the Nation. 

Some of our great successes have been in HOPE VI. And that is 

why I don’t want to waste the successes of HOPE VI on Choice 

Neighborhoods unless and until we see it is a truly viable successor 

to HOPE VI. I want to ensure this new program is designed and 

implemented in a manner that will revitalize and grow our low-income communities beyond the greatest potential of HOPE VI. You 

have assured me that that will happen. I believe you said that in 

good faith, but it is time that we got to work on the details. 

FHA

In addition to specific program concerns, I remain very concerned, as the Chair has indicated, about the future of FHA mortgage insurance. Mr. Secretary, you inherited the FHA problems. To 

your credit, you acknowledged them. You have taken a number of 

important steps to address them. 

Under your guidance, HUD is proposing a number of new reforms to put FHA mutual mortgage insurance on a solid footing. 
68 

The proposed reforms include an increase to annual premiums, as 

well as credit-related fix, which would allow these borrowers with 

a FICO score of 580 and above to make a 3.5 percent down payment, while borrowers with a FICO score between 500 and 580 

would be required to make a minimum down payment of 10 percent. Borrowers with FICO scores below 500 would be ineligible for 

FHA mortgage insurance. 

It is not that we are not concerned about those people. But before 

we put somebody in housing, try to get them into owning housing 

we need to make sure that they can afford to pay it. When they 

can’t afford to pay it, when they don’t have any skin in the game, 

they don’t have the means to make the payments and then the 

American dream becomes the American nightmare. Their communities suffer, and we have seen the tremendous hardship and harm 

that a whole raft of those mortgages gone badly has caused our entire economy and the world’s economy. 

While the reforms are important, the FHA still faces many challenges. I remain concerned that FHA is a powder keg that could 

explode, leaving taxpayers on the hook for yet another bailout. 

When we look at the numbers, just as recently as 2007, FHA accounted for less than 4 percent of housing and now, as the chair 

indicates, dominates the market with a share of between 30 and 60 

percent, including refinances. This puts FHA smack in the middle 

of the housing crisis, and I want to be sure that FHA is dealing 

with it despite the obvious staffing and expertise shortfall. 

I want to know how HUD is dealing with mortgage default litigation problems, especially in light of proposed new FHA reforms. 

How will these reforms impact homeowners with a mortgage default crisis who are seeking help from FHA? Have mortgage defaults become primarily a Fannie Mae and Freddie Mac problem, 

or is HUD proposing alternative relief? 

While I expect to raise many FHA issues at a scheduled FHA 

budget hearing later this month, an understanding of the foundation of current FHA requirements now would be useful. 

TRANSPARENCY FOR TAXPAYERS

The last point I make is most important, and that is transparency for taxpayers, as we have discussed briefly. I discussed at 

the hearing for the Department of Transportation, on its budget for 

the coming year last week, I am still waiting for real transparency 

in the current administration grantmaking process. Congress has 

role and a responsibility not only in authorizing and appropriating 

Federal funds, but also in ensuring that the funds are awarded according to objective and understandable criteria, including clear 

benchmarks to measure success. 

This was a particular problem for me and others when HUD 

awarded some $2 billion in competitive neighborhoods stabilization 

programs under the stimulus bill. I have yet to receive, and I look 

forward to getting an understanding, how HUD cherry-picked the 

winners. We saw a lot of—we found out later about a lot of good 

projects which failed. And we want to know how the winners were 

chosen. 

Where is the promised transparency in the HUD grant process? 

It is critical that the process be transparent, so Congress and our 
69 

constituents and those seeking the dollars know how the taxpayer 

dollars are being allocated. In fact, I think the process should be 

no less transparent than the current requirements for congressional decisionmaking. 

There has been a lot of criticism of Congress. We cleaned up our 

act. We make it transparent. At a minimum, the criteria and process by which grantmaking decisions are made in the administration should be posted on the Internet for every taxpayer, every potential applicant to see, to understand so that community leaders 

and local people won’t be coming to us, saying, ‘‘What happened? 

Where is it going? Why is it going there?’’ 

Cost shares and leveraging of funds also should be made available. Information should be on the Internet so they and we have 

access to information about other sources of Federal, State, or private funds that may be used to augment grant awards. 

In particular, we in Congress expect to be notified of award decisions 3 days prior to HUD announcement, with backup materials 

and information on the methodology of the award selections, including how these awards meet our housing and community development goals. It is critical that the Nation, Congress, and the administration fully understand the process and decisionmaking of 

how the billions of Federal housing and community dollars are 

spent. 

Mr. Secretary, I thank you very much, and I look forward to your 

testimony. 

Senator MURRAY. Thank you very much, Senator Bond. 

I will turn it over to the Secretary for his testimony. And just 

to forewarn you, both Senator Bond and I also have to go to an energy and water hearing for a short amount of time. We may be 

changing the gavel back and forth. 

But we will both be very attentive to your statement, and we 

both have a number of questions. So, with that, I will turn it over 

to you, Mr. Secretary. 

STATEMENT OF HON. SHAUN DONOVAN

Secretary DONOVAN. Madam Chairwoman, Ranking Member 

Bond, and members of the subcommittee, thank you for the opportunity to testify regarding the fiscal year 2011 budget for the Department of Housing and Urban Development, Investing in People 

and Places. 

I appear before you to discuss this budget in a far different environment than that of a year ago when our economy was hemorrhaging over 700,000 jobs each month, housing prices were in 

freefall, and economic observers warned that a second Great Depression was a real possibility. Today, though there is still a long 

way to go, it is clear that our housing market has made significant 

progress toward stability. 

What that has meant to middle-class families is clear. First, security, as a result of stabilizing home prices and lower financing 

costs, by the end of September, home equity had increased by over 

$900 billion, $12,000 on average for the Nation’s 78 million homeowners. 

Second, confidence, though it is still fragile, homeowner equity is 

key to consumer confidence and to bringing new borrowers back 
70 

into the market, helping the economy grow at the fastest rate in 

6 years and creating jobs. 

Third, money in families’ pockets, mortgage rates, which have 

been near historic lows over the past 10 months, have spurred a 

refinancing boom that has helped nearly 4 million borrowers save 

an average of $1,500 per year, pumping $7 billion annually into 

local economies and businesses, generating additional revenues for 

our Nation’s communities, and benefiting our economy more broadly. 

FHA

The Federal Housing Administration has been essential to this 

improved outlook, in the past year helping more than 800,000 

homeowners refinance into stable, affordable fixed-rate mortgages, 

protecting an additional half million families from foreclosure—and 

that, Senator Bond, I would note, is through our loss mitigation 

programs that you asked about, one-half a million families in 

2009—guaranteeing approximately 30 percent of home purchase 

loan volume and fully one-half of all loans for first-time home buyers. 

With FHA’s temporarily increased role, however, as you said, 

Madam Chairwoman comes increased responsibility and risk. That 

is why HUD’s fiscal year 2011 budget presents a careful, calibrated 

balancing of FHA’s three key responsibilities—first, providing responsible home ownership opportunities; second, supporting the 

housing market during difficult economic times; and third, ensuring the health of the MMI Fund. 

FHA has rolled out a series of measures over the last year to 

mitigate risks and augment the MMI Fund’s capital reserves—first, 

to increase the mortgage insurance premium; second, to raise the 

combination of FICO scores and down payments for new borrowers; 

third, to reduce seller concessions to industry norms; and fourth, to 

implement a series of significant measures aimed at increasing 

lender responsibility and enforcement. 

With the help of Congress, FHA has also begun implementing a 

plan to ensure its technology infrastructure and personnel needs 

reflect this increased responsibility. All of these changes will lead 

to increased receipts for FHA for the 2011 budget. 

Last Friday, as you mentioned, the Congressional Budget Office 

released its re-estimate of the President’s 2011 budget, including 

their view on FHA’s proposed changes. Although the CBO re-estimate includes a more conservative assessment of how new loans 

made through FHA’s MMI Fund will perform in coming years, both 

CBO and the administration forecast that with our proposed FHA 

changes, such credit activity will result in significant net receipts 

to the Government. We differ, however, on the amount. 

While the President’s budget forecasts, as you said, Madam 

Chairwoman, $5.8 billion in net receipts resulting primarily from 

insurance premiums and other fees, CBO re-estimated these net 

savings at $1.9 billion. In addition, CBO agrees with FHA that 

Ginnie Mae and our GI/SRI fund will produce another roughly $1 

billion in receipts. 

While recognizing that such a difference with CBO complicates 

budget resolution development, it is important to note that the 
71 

forecast used in the President’s budget will determine the receipts 

transferred to FHA’s capital reserve account. This will help have 

that fund get back on track to be capitalized with the statutorily 

mandated 2 percent of insurance in force. I would also note that 

based on extensive modeling and analysis, we remain confident in 

our forecast for FHA. 

Even with increased FHA receipts, however, because of broader 

need for fiscal responsibility, we have had to make very difficult 

choices in this budget. We have chosen to prioritize existing rental 

assistance in section 8, public housing—public housing operating 

fund, and other areas, which has required us to propose difficult 

cuts in a number of our capital programs, as you mentioned, and 

to target our funding to the most catalytic uses. 

TRANSFORMING RENTAL ASSISTANCE

On that note, allow me to highlight some key initiatives. The 

first is HUD’s multiyear effort called Transforming Rental Assistance, or TRA. It does not take a housing expert to see that HUD’s 

rental assistance programs desperately need simplification. HUD 

currently provides deep rental assistance to more than 4.6 million 

households through 13 different programs, each with its own rules 

administered by three different operating divisions. 

In my career both in the private and public sectors, it was a constant struggle to integrate HUD’s rental assistance streams and 

capital funding resources into the local, State, and private sector 

financing that was necessary to get the job done. But I dealt with 

HUD subsidy programs for a simple reason—because the engine 

that drives capital investment at the scale needed is reliable longterm, market-based stream of Federal rental assistance. 

No other mechanism has ever proven as powerful at unlocking 

a broad range of public and private resources to meet the capital 

needs of affordable housing. That said the status quo is no longer 

an option. 

With a public housing program that has unmet capital needs upwards of $20 billion, now is the moment to permanently reverse the 

long-term decline in the Nation’s public housing portfolio and address the physical needs of an aging assisted stock. This initiative 

is anchored by four guiding principles. 

First, that the complexity of HUD’s programs is part of the problem, and we must streamline and simplify them so that they are 

governed by a single, integrated, coherent set of rules and regulations that better aligns with the requirements of other Federal, 

State, local, and private sector financing streams. 

Second, that the key to meeting the long-term capital needs of 

HUD’s public and assisted housing lies in shifting from the Federal 

capital and operating subsidy funding structure we have today to 

a Federal operating subsidy that leverages capital from private and 

other public sources. 

Third, that bringing market investment to all of our rental programs will also bring market discipline that drives fundamental reforms. Only when our programs are built, financed, and managed 

like other housing will we be able to attract the mix of incomes and 

uses and stakeholders that we need. 
72 

And fourth, that we must combine the best features of our tenant-based and project-based programs to encourage resident choice 

and mobility. TRA reflects HUD’s commitment to complementing 

tenant mobility with the benefits that a reliable, property-based, 

long-term rental assistance subsidy can have for neighborhood revitalization efforts and as a platform for delivering social services. 

To be clear, this commitment to tenant mobility is not to restart 

old ideological debates about place-based versus people-based strategies. To revitalize neighborhoods of concentrated poverty and segregation, we need the best of both approaches. That is why we look 

forward to continuing to work with the subcommittee and authorizers on our Choice Neighborhoods initiative to make the redevelopment of distressed public and assisted housing the anchor of broader community development efforts. 

CHOICE NEIGHBORHOODS

Choice Neighborhoods builds on and expands the lessons of 

HOPE VI. Not only that investment at scale can affect dramatic 

change at the community level, but also that for an investment to 

be game-changing, it must take into account more than housing 

alone. 

For too long, HUD’s community development programs have 

lacked such a place-based, targeted tool for creating jobs. That is 

why our budget proposes $150 million for a catalytic investment 

fund designed to help distressed communities reorient their economies for the 21st century. HUD can’t afford to make housing investments in isolation from community development investments, 

particularly when so many communities are ahead of us in terms 

of combining housing, economic development, and transportation. 

SUSTAINABLE COMMUNITIES

That is why it was so important that we launched our Sustainable Communities initiative in 2010 to support these efforts. I want 

to thank the subcommittee for making this possible and emphasize 

the need for continued funding in 2011. 

I recognize that I have asked you to help HUD make these investments in a difficult fiscal climate. Our approach has been to 

target resources where we get the biggest bang for the buck, and 

nowhere is this clearer than the area of homelessness, where we 

have seen a 30 percent reduction in chronic homelessness over the 

last 4 years. 

HOMELESSNESS

Our budget request reflects HUD’s commitment to its own targeted homeless programs with a $200 million increase. But as chair 

of the Interagency Council on Homelessness as well, charged with 

producing a Federal strategy to end homelessness later this spring, 

it also reflects a commitment to working across silos to end homelessness, embodied by our joint housing and services for homeless 

person demonstration with the Department of Health and Human 

Services and the Department of Education. 
73 

HUD’S 2010 TRANSFORMATION

Last, let me say a few words about HUD, how it’s transforming 

the way it does business at the agency. With your help, HUD’s 

2010 Transformation Initiative is allowing us to take long-overdue 

steps to upgrade and modernize our Department, helping us replace computer programs written in the 1980s, build the capacity 

of communities—Senator Bond, you mentioned this, and we have 

been growing our resources for technical assistance—and demonstrate what works and what doesn’t. 

It has also begun to provide us with the flexibility we need to 

cross-cutting initiatives. But a critical next step for 2011 is to take 

this approach further. In part, it is a matter of additional funding 

to move forward with large, multiyear projects and demonstrations. 

But just as important is the flexibility to use up to 1 percent of 

HUD’s budget as unexpected needs arise during the year. 

For example, to revamp FHA as it stepped up in the mortgage 

market or to provide technical assistance communities trying to use 

neighborhood stabilization funds in the most impactful way. These 

are the kinds of flexible investments other cutting-edge organizations have the ability to make, and they are essential to building 

the nimble, results-oriented agency our Nation needs and this subcommittee deserves to oversee. 

And so, Madam Chairwoman, this budget continues the transformation begun with your help. With the housing market showing 

signs of stabilization, our economy beginning to recover, and the 

need for fiscal discipline crystal clear, now is the moment to reorient HUD for the challenges of the 21st century. With your help, I 

believe we can and that we will. 

Thank you. 

[The statement follows:] 

PREPARED STATEMENT OF HON. SHAUN DONOVAN

Madam Chairwoman, Ranking Member Bond, and members of the subcommittee, 

thank you for the opportunity to testify today regarding the fiscal year 2011 budget 

for the Department of Housing and Urban Development, Investing in People and 

Places. 

A CHANGING ENVIRONMENT

I appear before you to discuss this budget in a far different environment from that 

faced by the Nation and the Department just 1 year ago. At that time, the economy 

was hemorrhaging over 700,000 jobs each month, housing prices were in freefall, 

residential investment had dropped over 40 percent in just 18 months, and credit 

was frozen nearly solid. Many respected economic observers warned that a second 

Great Depression was a real possibility, sparked of course by a crisis in the housing 

market. Meanwhile, communities across the country—from central cities to newly 

built suburbs to small town rural America—struggled to cope with neighborhoods 

devastated by foreclosure, even as their soaring jobless rates and eroding tax base 

crippled their ability to respond. 

One year later, though there is clearly a long way to go, it is clear that the Nation’s housing market has made significant progress toward stability. Through the 

combination of coordinated efforts by Treasury, HUD, and the Federal Reserve to 

stabilize the housing market, we are seeing real signs of optimism. 

As measured by the widely referenced FHFA index, home prices have been rising 

more or less steadily since last April. As recently as January 2009 house prices had 

been projected to decline by as much as 5 percent in 2009 by leading major macroeconomic forecasters. This is all the more surprising since most forecasters had underestimated the rise in unemployment that has occurred over the past year. 
74 

Allow me to briefly explain what halting the slide in home prices and housing 

wealth has meant to middle-class families. 

First, security. According to the Federal Reserve Board, as a result of stabilizing 

home prices and lower financing costs nationwide, home owner equity started to 

grow again in the second quarter of 2009 and by the end of September home equity 

had increased by over $900 billion, or $12,000 on average for the Nation’s nearly 

78 million homeowners. 

Second, confidence. Homeowner equity is key to consumer confidence and is now 

helping bring new borrowers back into the market. And we all know the important 

role confidence plays in helping our economy grow—which it did in the last quarter 

of 2009 at 5.7 percent, the fastest rate in 6 years. 

Third, money in families’ pockets. Mortgage rates which have been at or near historic lows over the past 10 months have spurred a refinancing boom that over the 

past year that has helped nearly 4 million borrowers to save an average of $1,500 

per year on housing costs—pumping an additional $7 billion annually into local 

economies and businesses, generating additional revenues for our Nation’s cities, 

suburbs, and rural communities. 

At the same time we have taken steps to reverse falling home prices, we have 

also worked to help families keep their homes. In partnership with the White 

House, the Department of Treasury, and other Federal regulatory agencies, HUD 

has helped develop the Making Home Affordable plan, and implement its two major 

initiatives—the Home Affordable Refinance Program and Home Affordable Modification Program (HAMP). These programs have helped to preserve homeownership for 

more than 1 million families. More than 900,000 households in participating trial 

modifications under HAMP currently are saving an average of over $500 per month 

in mortgage payments. To date, program participants have saved more than $2.2 

billion. 

And the Federal Housing Administration (FHA) has stepped up to fulfill its countercyclical role—to temporarily provide necessary liquidity while also working to 

bring private capital back to credit markets. Indeed, the FHA has in the past year 

alone helped more than 800,000 homeowners refinance into stable, affordable fixedrate mortgages and deployed its loss mitigation tools to assist an additional half 

million families at risk of foreclosure. 

Of course, just as this crisis has touched different communities in different ways, 

so, too, have they rebounded at different paces. As a result, some regions continue 

to face difficulty, even as others are moving toward recovery. That is one reason 

why the President recently announced $1.5 billion in funding to help families in 

States that have suffered an average home price drop of over 20 percent from the 

peak—including an innovation fund that will expand the capacity of housing finance 

and similar agencies in the areas hardest-hit in the wake of the housing crisis. 

The President’s announcement continues the administration’s response to assist 

homeowners and stabilize neighborhoods, including through the nearly $2 billion 

that HUD has obligated under the Neighborhood Stabilization Program to address 

the problem of blighted neighborhoods, targeting hard-hit communities across the 

country and including major awards in Ohio, Illinois, New Jersey, Pennsylvania and 

other areas that have been deeply affected by the current housing problems. The 

administration continues to explore and refine ways to assist homeowners and stabilize neighborhoods struggling with foreclosures. 

In addition, HUD has played a key role in implementing the American Recovery 

and Reinvestment Act (ARRA), which, according to the nonpartisan Congressional 

Budget Office is already responsible for putting as many as 2.4 million Americans 

back to work and has put the Nation on track toward a full economic recovery— 

and I would like to say a particular word of thanks to this subcommittee for making 

our role in that effort possible. 

HUD has now obligated 98 percent of the $13.6 billion in ARRA funds stewarded 

by the Department—and disbursed $2.9 billion. I would note that a portion of 

HUD’s ARRA funding is fully paid out, or expended, only once construction or other 

work is complete—just as when individual homeowners pay after they have work 

done on their homes. Therefore, some of HUD’s obligated, but not yet expended, 

funds are already generating jobs in the hard hit sectors of housing renovation and 

construction for the purposes of modernizing and ‘‘greening’’ public and assisted 

housing, reviving stalled low-income housing tax credit projects, and stabilizing 

neighborhoods devastated by foreclosures. Additional HUD-administered ARRA 

funds are providing temporary assistance to families experiencing or at risk of 

homelessness in these difficult economic times. 

While the economy has a long way to go to reach full recovery, and the promising 

indicators emerging steadily are not being experienced by all regions or communities 
75 

equally, it is clear that we have pulled back from the economic abyss on which the 

Nation stood a year ago. 

ROADMAP TO TRANSFORMATION

HUD’s fiscal year 2010 budget, then, reflected a singular economic moment. During the last administration, the Department’s annual budget submissions chronically underfunded core programs, and many observers came to regard the agency 

as slow moving, bureaucratic, and unresponsive to the needs of its partners and customers. HUD’s fiscal year 2010 budget request, $43.72 billion (net of receipts generated by FHA and the Government National Mortgage Association, or ‘‘Ginnie 

Mae’’) was a 7 percent increase over the fiscal year 2009 enacted level of $40.72 billion and sent the clear message that HUD’s programs merited funding at levels sufficient to address the housing and community development needs of the economic 

crisis. It also reflected this administration’s belief that HUD could transform itself 

into the more nimble, results-driven organization required by its increased importance. 

In response to HUD’s fiscal year 2010 budget proposal, Roadmap to Transformation, Congress—with key leadership by this subcommittee, working with your 

counterparts in the House—provided a vote of confidence for which I want to express my deepest appreciation. The fiscal year 2010 appropriations legislation provided HUD programs $43.58 billion (net of receipts), funding needed to stabilize the 

Department’s programs across-the-board. Critically, the budget also targeted $258.8 

million to the Department’s proposed Transformation Initiative, the cornerstone of 

the agency’s efforts to change the way HUD does business. For the first time, HUD 

has the flexibility to make strategic, cross-cutting investments in research and evaluation, major demonstration programs, technical assistance and capacity building, 

and next generation technology investments to bring the agency fully into the 21st 

century. 

I appreciate the level of trust this action showed in the new HUD leadership and 

look forward to updating you on the progress we are making with this new flexibility. 

INVESTING IN PEOPLE AND PLACES

As a result of all this work—by Congress, HUD and across the administration— 

we no longer confront an economy or a Department in extreme crisis. Still, much 

work remains, in much changed fiscal circumstances. Now that the economic crisis 

has begun to recede, President Obama has committed to reducing the Federal deficit, including a 3 year freeze on domestic discretionary spending. HUD’s fiscal year 

2011 budget reflects that fiscal discipline. Net of $6.9 billion in projected FHA and 

Ginnie Mae receipts credited to HUD’s appropriations accounts, this budget proposes overall funding of $41.6 billion, 5 percent below fiscal year 2010. Not including 

FHA and Ginnie Mae receipts, the budget proposal is $1.6 billion above the 2010 

funding levels. These figures meant that we had difficult choices to make—and we 

chose to prioritize core rental and community development programs, fully funding 

section 8 tenant-based and project-based rental assistance, the public housing operating fund, and CDBG. 

Indeed, at the same time, the budget cuts funding for a number of programs, including the public housing capital fund, HOME Investment Partnerships, Native 

American Housing Block Grants (NAHBG), the 202 Supportive Housing Program for 

the Elderly, and the section 811 Supportive Housing Program for Persons with Disabilities. In some instances, these are programs that received substantial ARRA 

funding (e.g., public housing capital and NAHBG), reducing the need for funds in 

fiscal year 2011. In the case of reductions to new capital grants—in public housing, 

section 202, and 811—the Department is recognizing that HUD’s partners must increasingly access other private and public sources of capital as HUD and the Federal Government are facing severe resource constraints. During this fiscal year, we 

will modernize these programs to reflect changed fiscal and operational circumstances. Simultaneously, the Department has made the difficult decision to target HUD’s housing investments and target them to their most crucial and catalytic 

uses, primarily rental and operating assistance that best enables those partners to 

leverage additional resources. 

As such, we believe this is a bold budget, with carefully targeted investments that 

will enable HUD programs to: house over 2.4 million families in public and assisted 

housing (over 58 percent elderly or disabled); provide tenant based vouchers to more 

than 2.1 million households (over 47 percent elderly or disabled), an increase of 

28,000 over 2009; more than double the annual rate at which HUD assistance creates new permanent supportive housing for the homeless; and create and retain 
76 

over 112,000 jobs through HUD’s housing and economic development investments 

in communities across the country. In total, by the end of fiscal year 2011, HUD 

expects its direct housing assistance programs to reach nearly 5.5 million households, over 200,000 more than at the end of fiscal year 2009. 

And in terms of reform, this budget proposes fundamental change beyond the Department’s fiscal year 2010 proposal. A year ago, urgent circumstances called for 

HUD’s programs to be taken largely ‘‘as is’’ in order to pump desperately needed 

assistance into the economy in time to make a critical difference. With the infusion 

of ARRA and fiscal year 2010 funding having stabilized HUD’s programs, the time 

has come to begin transforming them—to make HUD’s housing and community development programs, and the administrative infrastructure that oversees them, 

more streamlined, efficient, and accountable. 

This budget is a major step in that direction. Specifically, it seeks to achieve five 

overarching goals, drawn from an extensive strategic planning process that engaged 

over 1,500 internal and external stakeholders in defining the Department’s high priority transformation goals and strategies. 

GOAL 1.—STRENGTHEN THE NATION’S HOUSING MARKET TO BOLSTER THE ECONOMY

AND PROTECT CONSUMERS

With housing still representing the largest asset for most American households, 

it is essential that home prices continue to stabilize in order to restore the confidence of American consumers. Americans held roughly $6.2 trillion in home equity 

in the third quarter of 2009, up from its lowest point of $5.3 trillion in the first 

quarter of 2009. The central role of housing in the U.S. economy demands that Federal agencies involved in housing policymaking rethink and restructure programs 

and policies to support housing as a stable component of the economy, and not as 

a vehicle for over-exuberant and risky investing. 

With that in mind, the fiscal year 2011 budget represents a careful, calibrated 

balancing of FHA’s three key responsibilities: providing homeownership opportunities to responsible borrowers, supporting the housing market during difficult economic times and ensuring the health of the MMI Fund. 

FHA provides mortgage insurance to help lenders reduce their exposure to risk 

of default. This assistance allows lenders to make capital available to many borrowers who would otherwise have no access to the safe, affordable financing needed 

to purchase a home. As access to private capital has contracted in these difficult 

economic times, borrowers and lenders have flocked to FHA and the ready access 

it provides to the secondary market through securitization by Ginnie Mae—FHA insures approximately 30 percent of all home purchase loans today and nearly onehalf of those for first-time homebuyers. The increased presence of FHA and others 

in the housing market, including Fannie and Freddie, has helped support liquidity 

in the purchase market, helping us ride through these difficult times until private 

capital returns to its natural levels. 

Not only is FHA ensuring the availability of financing for responsible first time 

home purchasers, it is also helping elderly homeowners borrow money against the 

equity of their homes through the Home Equity Conversion Mortgage (HECM). This 

program has grown steadily in recent years, to a volume of $30.2 billion in fiscal 

year 2009. 

It is also providing several outlets of relief for homeowners in distress. First, and 

perhaps most significantly, it is helping homeowners extricate themselves from 

unsustainable mortgages by refinancing into 30 year, fixed-rate FHA-insured loans 

at today’s much lower rates. Given how important this is as a route to greater borrower stability, we are exploring additional ways to leverage the refinance option 

at FHA to help still more distressed homeowners. Further, FHA is continuing to assist those already in FHA-insured loans who are facing difficulty making payments 

to stay in their homes through a variety of aggressive loss mitigation efforts, which 

have assisted more than half a million homeowners at risk of foreclosure since the 

beginning of 2009. 

And finally, FHA is playing an important role in protecting homeowners and helping prospective homeowners make informed decisions. It is providing counseling to 

homeowners to help them avoid falling into unsustainable loans. And it is fighting 

mortgage fraud vigorously on all fronts, having suspended seven lenders, including 

Taylor, Bean and Whitaker, and withdrawn FHA-approval for over 300 others since 

last summer. 

To support these important efforts, the budget includes $88 million for the Housing Counseling Assistance program, which is the only dedicated source of Federal 

funding for the full spectrum of housing counseling services. With these funds we 

also plan to continue our work to expand the number of languages in which coun-
77 

seling is available. In addition, the budget continues FHA’s Mortgage Fraud initiative ($20 million) launched in fiscal year 2010 as well as implementation of sweeping reforms to the Real Estate Settlement and Procedures Act (RESPA) beginning 

in January 2010 and the Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act beginning in June 2010. 

With this budget, HUD is projecting that FHA will continue to play a prominent 

role in the mortgage market in fiscal year 2011. Accordingly, it requests a combined 

mortgage insurance commitment limitation of $420 billion in fiscal year 2011 for 

new FHA loan commitments for the Mutual Mortgage Insurance (MMI) and General 

and Special Risk Insurance (GI/SRI) funds. The proposed total includes $400 billion 

under the MMI Fund, which supports insurance of single family forward home 

mortgages and reverse mortgages under HECM; and $20 billion under the GI/SRI 

Fund, which supports multifamily rental and an assortment of special purpose insurance programs for hospitals, nursing homes, and title I lending. The budget requests a direct loan limitation of $50 million for the MMI Fund and $20 million for 

the GI/SRI fund to facilitate the sale of HUD-owned properties acquired through insurance claims to or for use by low- and moderate-income families. 

With FHA’s temporarily increased role, however, comes increased risk and responsibility. That is why FHA has rolled out a series of measures over the last year to 

strengthen its risk and operational management. It has hired its first chief risk officer in its 75 year history and created an entire risk management organization and 

reporting structure, tightened its credit standards significantly and, as I mentioned, 

expanded its capacity to rein in or shut down lenders who commit fraud or abuse. 

On January 20 of this year, Commissioner Stevens proposed taking the following 

steps to mitigate risk and augment the MMI Fund’s capital reserves: increase the 

mortgage insurance premium (MIP); update the combination of FICO scores and 

down payments for new borrowers; reduce seller concessions to industry norms; and 

implement a series of significant measures aimed at increasing lender responsibility 

and enforcement. And to strengthen its operational capacity, FHA has begun implementing a plan to significantly upgrade its technology infrastructure and increase 

its personnel, to ensure that both are in keeping with the increase of its portfolio 

and responsibility. 

These changes merit additional explanation, as they not only put FHA on firmer 

footing and increase reserves, but also generate additional revenues in fiscal year 

2011 to contribute to deficit reduction. First, insurance revenues from single family 

loan guarantees will grow by increasing the upfront premium to 225 basis points 

across all FHA forward product types (purchase, conventional to FHA refinances, 

and FHA to FHA refinances). The upfront premium increase was implemented by 

mortgagee letter issued on January 21, 2010 and will apply to all applications received on or after April 5, 2010. 

Second, FHA is also proposing a ‘‘two-step’’ FICO floor for FHA purchase borrowers, which would reduce both the claim rate on new insurance as well as the 

loss rate experienced on the claims incurred. Purchase borrowers with FICO scores 

of 580 and above would be required to make a minimum 3.5 percent down payment; 

and those with FICO scores between 500–579 would be required to make a minimum down payment of 10 percent. Applicants below 500 would be ineligible for insurance. These changes are being proposed after an exhaustive review of FHA’s actual claim performance data, which demonstrates that loan performance is best predicted by a combination of credit score and downpayment—simply raising one element without recognizing the impact of the layering of risk factors is not sufficient. 

We are considering how these changes might be applied to refinancing borrowers 

as well. FHA is proposing to publish the two-step FICO proposal in the Federal Register in short order with implementation later in 2010. In combination, these reforms—which are already permitted under current law—can be expected to produce 

$4.2 billion in offsetting receipts in fiscal year 2011. 

In addition, as noted in the proposed budget, while HUD is moving to increase 

the upfront premium to 225 basis points we are ultimately planning to reduce that 

premium to 100 basis points, offset by a proposed increase in the annual premium 

to 85 basis points for loans with loan-to-value ratios (LTV) up to and including 95 

percent and to 90 basis points for LTVs above 95 percent. That change to the annual premium will require legislative authority, and we are looking forward to 

working with the authorizing committees as part of that effort. This new premium 

structure is sound policy. This premium structure is also more in line with GSE and 

private mortgage insurers’ pricing, which facilitates the return of private capital to 

the mortgage market. Indeed, if these changes are adopted during the current fiscal 

year, the estimated value to the MMI Fund would be $200 million in additional 

funds each month, providing better underwriting for FHA loans and replenishing 

capital reserves. 
78 

If implemented, in combination with the two-step FICO floor, this change in the premium structure is projected to result in the $5.8 billion in offsetting FHA receipts reflected in the budget appendix. In sum, FHA has taken the kinds of steps 

necessary to make sure that it will remain strong and healthy enough to continue 

to fulfill its mission of serving the underserved and playing a vital counter-cyclical 

role in the housing market. 

GOAL 2.—MEET THE NEED FOR QUALITY AFFORDABLE RENTAL HOMES

Several recent national indicators have pointed to increasing stress in the U.S. 

rental housing market. Vacancy rates are on the rise as a result of the dampened 

demand and additional supply repurposed from the ownership market. Spreads between asking rents and effective rents are widening. Asking rents are now $65 higher than effective rents (6.6 percent of the effective rent)—the largest gap over the 

past 4 years. While some new renters have been the beneficiaries of this softness, 

drawing concessions from distressed property owners, the budgets of many more 

low-income renters have been strained as household incomes fall, due to unemployment and lost hours worked. 

Loss of income stemming from the recession is likely offsetting affordability gains 

from declining rents. Vacancies in the lower end of the market remain considerably 

lower than market levels overall, and the number of cost burdened low-income renters is on the rise. Based on estimates from the 2008 American Community Survey, 

8.7 million renter households paid 50 percent or more of their income on housing, 

up from 8.3 million renter households in 2007. These figures do not include the over 

664,000 people who experience homelessness on any given night. 

As HUD Secretary, as well as the current chair of the Interagency Council on 

Homelessness under President Obama, I am committed to making real progress in 

reducing these tragic figures. To do so requires substantial investment even in this 

difficult fiscal year. For this reason, the budget provides $1 billion for capitalization 

of the National Housing Trust Fund, to increase development of housing affordable 

to the Nation’s lowest income families. 

In addition, HUD’s rental assistance and operating subsidy programs have never 

been more needed, nor has the imperative to operate them efficiently been clearer. 

This budget takes three critical steps to meet this challenge. 

Increases Investment in Core Rental Assistance and Operating Subsidy Programs 

This budget invests over $2.2 billion more than in fiscal year 2010 to meet the 

funding needs of the Tenant-based Rental Assistance (TBRA) program, the Projectbased Rental Assistance (PBRA) program, and the public housing Operating Fund. 

Tenant-based Rental Assistance 

The section 8 TBRA or Housing Choice Voucher (HCV) program is a cost-effective 

means for delivering decent, safe, and sanitary housing to low-income families in 

the private market, providing assistance so that participants are able to find and 

lease privately-owned housing. In fiscal year 2009, HUD assisted over 2 million families with this program; and, in fiscal year 2010, we plan to assist over 76,000 more 

families through new incremental vouchers. 

This budget continues HUD’s bedrock commitment to its largest program. The calendar year request for 2011 is $19.6 billion, a $1.4 billion increase over the 2010 

Consolidated Appropriations Act and an amount estimated to assist 2.2 million 

households. This represents an increase of 34,466 families from fiscal year 2010 projections and 112,304 more than at the end of fiscal year 2009. 

Of the $19.6 billion request, $17.3 billion will cover the renewal of expiring annual contribution contracts (ACC) in calendar year 2011; with $1.8 billion for administrative fees; $125 million for tenant protection vouchers; $60 million to support 

family self-sufficiency (FSS) activities; and up to $66 million for disaster vouchers 

for families affected by Hurricanes Ike and Gustav. In addition, this budget requests 

$85 million for incremental vouchers to help homeless individuals, at-risk families 

with children, and families with special needs stabilize their housing situation and 

improve their health status, as well as $114 million for the shift of the renewal of 

mainstream vouchers from the section 811 account to the TBRA account. 

Through this budget, the Department reaffirms its commitment to improving the 

section 8 program by designing a comprehensive development strategy to improve 

HUD Information Technology systems to better manage and administer the voucher 

program; implementing an improved section 8 management assessment program 

(SEMAP) that will ensure strengthened oversight, quality control, and performance 

metrics for the voucher program; continuing the study to develop a formula to allocate administrative fees based on the cost of an efficiently managed PHA operating 

the voucher program; developing a study to evaluate current housing quality stand-
79 

ards and improve the unit inspection process; and eliminating unnecessary caps on 

the number of families that each PHA may serve. 

Project-based Rental Assistance (PBRA) 

PBRA assists more than 1.3 million low- and very low-income households in obtaining decent, safe, and sanitary housing in private accommodations. This critical 

program serves families, elderly households, disabled households, and provides transitional housing for the homeless. Through PBRA funding, HUD renews contracts 

with owners of multi-family rental housing—contracts that make up the difference 

between what a household can afford and the approved rent for an adequate housing unit in a multi-family development. HUD is requesting a total of $9.382 billion to meet PBRA program needs. This includes $8.982 billion to be available in fiscal year 2011 (in addition to the $394 

million previously appropriated) and $400 million to be available in fiscal year 2012. 

For fiscal year 2011, HUD estimates a need of $8.954 billion of new budget authority for contract renewals and amendments. The need for section 8 amendment funds 

results from insufficient funds provided for long-term project-based contracts funded 

primarily in the 1970s and 1980s, when long-term contracts (up to 40 years) made 

estimating funding needs problematic, leading to frequent underfunding. The current practice of renewing expiring contracts for a 1-year term helps to ensure that 

the problem of inadequate funded contracts is not repeated. However, some older 

long-term contracts have not reached their termination dates and, therefore, have 

not yet not entered the 1-year renewal cycle and must be provided amendment 

funds for the projects to remain financially viable. The Department estimates that 

total section 8 amendment needs in 2011 will be $662 million. The budget request 

continues the Department’s commitment to provide full 1-year funding for contract 

renewals and amendments. 

Public Housing Operating Fund 

The public housing Operating Fund provides operating subsidy payments to over 

3,100 public housing authorities (PHAs) which serve 1.2 million households in public housing. The fiscal year 2011 budget requests $4.8 billion, which will fully fund 

the operating fund. Full funding is essential to the proper operation of public housing, provision of quality housing services to residents, and effective use of capital 

fund resources. 

Begins to Streamline the Department’s Rental Assistance Programs 

It does not take a housing expert to see that HUD’s rental assistance programs 

desperately need simplification. HUD currently provides deep rental assistance to 

more than 4.6 million households through 13 different programs, each with its own 

rules, administered by 3 operating divisions with separate field staff. Too often over 

time, additional programs designed to meet the needs of vulnerable populations 

were added without enough thought to the disjointed system that would result. This 

unwieldy structure ill serves the Department, our Government and private sector 

partners, and—most importantly—the people who live in HUD-supported housing. 

In my last job, as commissioner of the New York City Department of Housing 

Preservation and Development, I personally experienced the challenges of working 

with HUD rental assistance to preserve and develop affordable housing at a large 

scale. While implementing the city’s 165,000 unit New Housing Marketplace plan, 

it was a constant struggle to integrate HUD’s rental assistance streams, and capital 

funding resources for that matter, into the local, State, and private sector housing 

financing that was absolutely necessary to leverage to get the job done. 

But I was willing to deal with the transaction costs of engaging with HUD’s lessthan-ideally aligned subsidy programs for a simple reason: the engine that drives 

capital investment at the scale needed, in a mixed-finance environment, is typically 

a reliable, long-term, market-based, stream of Federal rental assistance. Historically, no other mechanism—and no other source of Government funding—has ever 

proven as powerful at unlocking a broad range of public and private resources to 

meet the capital needs of affordable housing. While highly imperfect, HUD’s rental 

assistance programs are irreplaceable. 

This said, tolerating the inefficiencies of the status quo is no longer an option. The 

capital needs of our Nation’s affordable, Federally-assisted housing stock are too 

substantial and too urgent. The Public Housing program in particular has long 

wrestled with an old physical stock and a backlog of unmet capital needs that may 

exceed $20 billion. (1) To be sure, nearly two decades of concentrated efforts to demolish and redevelop the most distressed public housing projects, through HOPE VI 

and other initiatives, has paid off. The stock is in better shape overall than it has 

been in some time; and (2) the $4 billion in ARRA funds targeted to public housing 

capital improvements are further stabilizing the portfolio. But this very progress 
80 

has created a unique—but time limited—opportunity to permanently reverse the 

long-term decline in the Nation’s public housing portfolio and address the physical 

needs of an aging assisted housing stock. 

My many years of experience of dealing with affordable housing on a large scale— 

both in New York and overseeing HUD’s multi-family assisted housing programs 

during the 1990s—have drilled home two key lessons. First, it is far more costly to 

build new units than to preserve existing affordable housing. And, second, an affordable housing project can limp along for some time with piecemeal, ad hoc strategies 

to address its accumulating capital backlog, but eventually the building will reach 

a ‘‘tipping point’’ where its deterioration becomes rapid, irreversible and expensive. 

This moment in time calls for a timely, crucial Federal investment to leverage other 

resources to the task of maintaining the number of safe, decent public and assisted 

housing units available to our Nation’s poor families—an objective that at some 

point, soon, will cost the taxpayer substantially more to achieve by other means. 

Nor can we afford to sustain the disconnect between HUD’s largest rental and operating assistance programs, given the disproportionate impact of the recession on 

the recipients of HUD assistance and the communities where much of HUD’s public 

and assisted housing stock remains. More than ever, communities of concentrated 

poverty need their public and assisted housing stock—even the most distressed 

projects that are the targets of our proposed Choice Neighborhoods Initiative—to 

serve as anchors of broader neighborhood revitalization efforts. Simultaneously, in 

this challenging economy, tenants of HUD-subsidized projects also need the option 

to pursue opportunities for their families in other neighborhoods and communities 

as and when they arise, without losing the subsidy that is so crucial to maintaining 

their housing stability. Today, we lack the seamless connection that should exist between HUD’s largest project-based assistance programs—PBRA and public housing—and the Housing Choice Voucher program, which leaves tenants of PBRA and 

public housing with limited ability to move to greater opportunity. 

To address these issues and move HUD’s rental housing programs into the housing market mainstream, HUD proposes to launch an ambitious, multi-year effort 

called the transforming rental assistance (TRA) initiative. 

This initiative is anchored by four guiding principles: 

First, that the complexity of HUD’s programs is part of the problem—and we 

must streamline and simplify our programs so that they are less costly to operate 

and easier to use at the local level. Ultimately, TRA is intended to move properties 

assisted under these various programs toward a more unified funding approach, 

governed by an integrated, coherent set of rules and regulations that better aligns 

with the requirements of other of Federal, State, local and private sector financing 

streams. 

Second, that the key to meeting the long-term capital needs of HUD’s public and 

assisted housing lies in shifting from the Federal capital and operating subsidy 

funding structure we have today—which exists in a parallel universe to the rest of 

the housing finance world—to a Federal operating subsidy that leverages capital 

from other sources. 

Third, that bringing market investment to all of our rental programs will also 

bring market discipline that drives fundamental reforms. Only when our programs 

are truly open to private capital will we be able to attract the mix of incomes and 

uses and stakeholders necessary to create the sustainable, vibrant communities we 

need. 

And fourth, that we must combine the best features of our tenant-based and 

project-based programs to encourage resident choice and mobility. TRA reflects 

HUD’s commitment to complementing tenant mobility with the benefits that a reliable, property-based, long term rental assistance subsidy can have for neighborhood 

revitalization efforts and as a platform for delivering social services. And in a world 

where the old city/suburb stereotypes are breaking down, and our metropolitan 

areas are emerging as engines of innovation and economic growth, we have to ensure our rental assistance programs keep up. 

In 2011, the first phase of TRA will provide $350 million to preserve approximately 300,000 units of public and assisted housing, increase administrative efficiency at all levels of program operations, leverage private capital and enhance 

housing choice for residents. With this request, we expect to leverage over $7.5 billion in other public and private sector capital investment. PHAs and private owners 

will be offered the option of converting to long-term, market-based, property-based 

rental assistance contracts that include a resident mobility feature, which we are 

working to define in close collaboration with current residents, property owners, 

local governments and a wide variety of other stakeholders. 

Most of the fiscal year 2011 downpayment on TRA, up to $290 million, will be 

used to fill the gap between the funds otherwise available for the selected prop-
81 

erties—in most cases the public housing Operating Fund subsidy—and the first-year 

cost of the new contracts. As noted above, a reliable funding stream will help place 

participating properties on a sustainable footing from both a physical and a financial standpoint, enabling owners to leverage private financing to address immediate 

and long-term capital needs, and freeing them from the need for annual capital subsidies. 

Under this voluntary initiative, HUD will prioritize for conversion public housing 

and assisted multifamily properties owned by PHAs. Notably, in this regard, TRA 

delivers on the promise of over a decade’s worth of movement in the field of public 

housing toward the private sector real-estate model known as ‘‘asset-management,’’ 

by finally providing public housing authorities with the resources to successfully implement this model in the projects they will continue to own. Three types of privately-owned HUD-assisted properties will also be eligible for conversion in this first 

phase: section 8 moderate rehabilitation contracts administered by PHAs, and properties assisted under the Rent Supplement or Rental Assistance Programs. With 

this step, we can eliminate three smaller legacy programs that have become ‘‘orphans’’ as new housing programs have evolved. This consolidation will preserve 

these properties for residents, improve property management, and streamline HUD 

oversight to save the taxpayer money. 

Much of the remaining funding, up to $50 million, will be used to promote mobility by targeting resources to encourage landlords in a broad range of communities 

to participate in the housing voucher program and to provide additional services to 

expand families’ housing choices. A portion of these funds also may be used to offset 

the costs of combining HCV administrative functions in regions or areas where locally-designed plans propose to increase efficiency and effectiveness as part of this 

conversion process. 

By the spring of 2010, the administration will transmit to the relevant authorizing committees in Congress proposed legislation to authorize the long-term property-based rental assistance contracts, with a resident mobility feature, that would 

be funded by the budget request. Enactment of a number of the provisions in the 

section 8 Voucher Reform Act is also an integral part of the transforming rental assistance initiative. The administration looks forward to working with Congress to 

finalize this vital legislation. 

Without this subcommittee’s work on HOPE VI and the Quality Housing and 

Work Responsibility Act, this opportunity would never have arisen. In fiscal year 

2011, we can together begin to put both public and assisted housing on firm financial footing for decades to come, and start to meld HUD’s disparate rental assistance 

and capital programs into a truly integrated Federal housing finance system. I hope 

that you will help HUD make this breakthrough by funding the TRA initiative. 

Increases Investment in Proven and Restructured HUD Homeless Assistance Programs 

Fiscal year 2011 also marks the first year for implementation of the Homeless 

Emergency Assistance and Rapid Transition to Housing (HEARTH) Act, which— 

when signed by President Obama in the spring of 2009—restructured HUD’s homeless assistance programs to incorporate nearly two decades of research and on-theground experience in confronting homelessness. To support implementation of this 

important legislation, the budget requests $2.055 billion for homeless assistance 

funding—a nearly $200 million increase compared to fiscal year 2010. 

This additional investment in homeless assistance programs is called for even in 

a difficult fiscal environment. Culminating in the HEARTH Act, HUD’s homeless 

programs have evolved into a more performance-driven, outcome-based system for 

targeting and leveraging Federal resources at the local level to combat homelessness. This subcommittee played an indispensable role in this process. In the late 

1990s, when less than 20 percent of HUD homeless assistance grants were supporting permanent housing solutions for the most disabled homeless individuals and 

families, this subcommittee in fiscal year 1999 joined your colleagues in the House 

in requiring that at least 30 percent of these grants be spent annually on the evidence-based practice of permanent supportive housing, and set forth the ambitious 

goal of creating 150,000 units of permanent supportive housing for the chronically 

ill, chronically homeless. Over time, the research foundation for this targeted investment has only solidified—attached to my testimony is a summary of key studies, 

including several published in the Journal of the American Medical Association, 

demonstrating that permanent supportive housing both ends homelessness for individuals whom many thought would always live on our streets and in shelters, and 

saves taxpayers money by interrupting their costly cycling through shelters, emergency rooms, detox centers, prisons, and even hospitals. 
82 

As a consequence of the permanent housing set aside, maintained each year by 

this subcommittee, HUD’s homeless assistance grants produced an average of 8,878 

permanent supportive housing beds annually from fiscal year 2001 through fiscal 

year 2008, and a cumulative total of 71,000 beds, with an increasing percentage targeted to the chronically homeless (66 percent in fiscal year 2008 compared to 53 percent in fiscal year 2005, the first year HUD tracked such data). The impact was 

clear and dramatic. In the 4 years from 2005 through 2008, the number of chronically homeless individuals dropped by 30 percent, certainly one of the greatest social welfare policy achievements of the past decade. 

One of the key provisions of the HEARTH Act was its codification of the 30 percent permanent housing set aside pioneered by this subcommittee. Coupled with the 

level of funding this budget requests, and the alignment of homeless assistance 

grants with other HUD rental assistance subsidies (1 year terms), this provision is 

projected to yield over 9,500 new units of permanent supportive housing for disabled 

individuals and families. This will enable continued progress toward ending chronic 

homelessness. 

The HEARTH Act also codifies the unique competitive process, known as the continuum of care (‘‘CoC’’), in which HUD homeless assistance funding and priorities 

are incorporated within a robust local planning and implementation process. The 

CoC system provides a coordinated housing and service delivery system that enables 

communities to plan for and provide a comprehensive response to homeless individuals and families. Communities have worked to establish more cost-effective continuums that identify and fill the gaps in housing and services that are needed to move 

homeless families and individuals into permanent housing. The CoC is an inclusive 

process that is coordinated with non-profit organizations, State and local government agencies, service providers, private foundations, faith-based organizations, law 

enforcement, local businesses, and homeless or formerly homeless persons. This 

planning model is based on the understanding that homelessness is not merely a 

lack of shelter, but involves a variety of unmet needs—physical, economic, and social. 

Fiscal year 2011 marks the first year for implementation of this and other key 

features of the HEARTH legislation including: increased investment in the evidencebased practice of homelessness prevention; improvement in the accuracy of the definition of homelessness; support for the project operation and local planning activities needed to continue the movement of the HUD-supported homeless assistance 

system to a more performance-based and outcome-focused orientation; and provision 

of assistance that better recognizes the needs of rural communities. 

In this period of economic hardship, which in many respects mirrors the early 

1980s when widespread homelessness reappeared for the first time since the Great 

Depression, communities will need all of the tools authorized by the HEARTH Act— 

and the additional resources requested in this budget—to meet the needs of those 

experiencing homelessness, including too many of our Nation’s veterans. In particular, I am concerned that HUD’s Annual Homeless Assessment Report data 

showed a 9 percent rise in family homelessness from 2007–2008 and the Department’s more recent quarterly PULSE data from a small number of geographically 

diverse localities across the country that suggests a continued increase in homelessness. 

GOAL 3.—UTILIZE HOUSING AS A PLATFORM FOR IMPROVING QUALITY OF LIFE

A growing body of evidence points to the role housing plays as an essential platform for human and community development. Stable housing is the foundation upon 

which all else in a family’s or individual’s life is built—absent a safe, affordable 

place to live, it is next to impossible to achieve good health, positive educational outcomes, or reach one’s full economic potential. Indeed, for many persons with disabilities living in poverty, lack of stable housing leads to costly cycling through crisisdriven systems like emergency rooms, psychiatric hospitals, detox centers, and even 

jails. By the same token, stable housing provides an ideal launching pad for the delivery of healthcare and other social services focused on improving life outcomes for 

individuals and families. As noted above, a substantial level of research has established, for example, that providing permanent supportive housing to chronically ill, 

chronically homeless individuals and families not only ends their homelessness, but 

also yields substantial cost savings in public health, criminal justice, and other systems—often nearly enough to fully offset the cost of providing the permanent housing and supportive services. More recently, scholars have focused on housing stability as an important ingredient for children’s success in school—unsurprisingly, 

when children are not forced to move from place to place and school-to-school, they 

are more likely to succeed academically. 
83 

Capitalizing on these insights, HUD is launching efforts to connect housing to 

services that improve the quality of life for people and communities. The fiscal year 

2011 budget proposes the following important initiatives: 

Connects Formerly Homeless Tenants of HUD-housing to Mainstream Supportive 

Services Programs 

The Department requests $85 million for incremental voucher assistance for the 

new Housing and Services for Homeless Persons Demonstration to support 

groundbreaking collaborations with the Department of Health and Human Services 

(HHS) and the Department of Education. This demonstration is premised on the administration’s firm belief that targeted programs alone cannot end homelessness. 

Mainstream housing, health, and human service programs will have to be more fully 

engaged to prevent future homelessness and significantly reduce the number of families and individuals who are currently homeless. Two separate initiatives will be 

funded in an effort to demonstrate how mainstream programs can be aligned to significantly impact homelessness. 

One initiative will focus on individuals with special needs who are homeless or 

at risk of homelessness. This initiative is designed to model ways that resources 

across HUD and HHS can be brought to bear to address the housing and service 

needs of this vulnerable population. Recently released data shows that over 42 percent of the homeless population living in shelters has a disabling condition. The 

demonstration would combine Housing Choice Vouchers with health, behavioral 

health and other support services to move and maintain up to 4,000 chronically 

homeless individuals with mental and substance use disorders into permanent supportive housing. 

Vouchers will be targeted to single, childless adults who are homeless and who 

are already enrolled in Medicaid through coverage expansion under State Medicaid 

waivers or State only initiatives. In addition, HHS is seeking $16 million in its fiscal 

year 2011 budget request to provide wraparound funding through grants administered by the Substance Abuse and Mental Health Services Administration to promote housing stability and improvements in health outcomes for this population. 

HUD and HHS will jointly design the competitive process and conduct and evaluation to determine: (1) the cost savings in the healthcare and housing systems of the 

proposed approach; (2) the efficacy of replication; and (3) the appropriate cost-sharing among Federal agencies for underwriting services that increase housing stability 

and improve health and other outcomes. 

Another initiative will establish a mechanism for HUD, HHS and Department of 

Education programs to be more fully engaged in stabilizing homeless families, ultimately resulting in reducing the costs associated with poor school performance and 

poverty. This initiative strategically targets these resources to: (1) identify families 

who are homeless or at risk of homelessness, (2) intervene with the appropriate 

array of housing assistance, income supports, and services to ensure that the family 

does not fall into the shelter system or onto the street (or if already homeless that 

the family is stably housed and does not return to homelessness), and (3) provide 

the tools necessary to assist the family to build on its resources to escape poverty 

and reach its highest possible level of economic security and self-sufficiency. 

HUD will make available a minimum of 6,000 Housing Choice Vouchers on a competitive basis and jointly design the competitive process with HHS and the Department of Education. Winning proposals will have to show that the new vouchers are 

being targeted to communities with high concentrations of homeless families. With 

guidance from HHS, States will need to demonstrate how they will integrate HUD 

housing assistance with other supports—including TANF—these families will need 

to stabilize their housing situation, foster healthy child development, and prepare 

for, find, and retain employment. HHS will provide guidance to State TANF agencies and other relevant programs to explain this initiative and their role in both the 

application for the vouchers and the implementation of the program. DOE will assist with identifying at-risk families with children through their network of school 

based homelessness liaisons, and providing basic academic and related supports for 

the children. Locally, applicants will need to show that they have designed a wellcoordinated and collaborative program with the TANF agency, the local public 

schools, and other community partners (e.g., Head Start, child welfare, substance 

abuse treatment, etc.). 

Collectively, these initiatives represent an unprecedented, ‘‘silo-busting’’ alignment of Federal resources to address the needs of some of the country’s most vulnerable individuals and families. At the same time, we believe they will save the taxpayer significantly in the long run. This innovative approach will also involve some 

collaboration across subcommittee jurisdictional lines, and we look forward to work-
84 

ing with the members of this panel in determining how best to facilitate that joint 

action. 

Modernizes the 202 and 811 Supportive Housing Programs for the Elderly and Disabled 

As the Department begins the process of restructuring its rental assistance programs, it must also ensure that its programs providing capital grants and rental assistance that are sized to the actual costs to operate a project (‘‘budget-based’’ or 

‘‘operating cost-based’’) are well designed for the world of housing finance in the 21st 

century. Beyond public and assisted housing—the focus of the TRA initiative—the 

most prominent examples of such funding streams are the section 202 and 811 programs, which couple housing and services for the Nation’s poor elderly and disabled, 

respectively. 

Although they have provided critical housing for thousands of residents, these 

programs are in need of modernization. Project sponsors no longer receive enough 

funding per grant for the 202 and 811 programs to be a ‘‘one-stop shop’’ to capitalize 

and sustain a project, yet they are subject to a level of bureaucratic oversight that 

suggests they are. This regulatory structure also makes it difficult for project sponsors to work with other financing streams, such as low income housing tax credits, 

even as the average grant size requires accessing other capital sources. As a result, 

project development is slowed and, coupled with outdated geographic allocation formulae, limited resources are spread too thin to reach scale at either the project or 

national programmatic levels. In 2009, the 202 program produced only 3,049 units 

with an average project size of 44 units and the 811 program produced only 661 

units with an average project size of 10 units. 

Already 10 times as many units are produced under the Low Income Housing Tax 

Credit program. And under the status quo, the total annual production of units will 

continue to decrease as the cost of supporting existing 811/202 properties consumes 

more and more of the overall funding allocation. This threatens to make the programs increasingly marginal for the Nation’s elderly and disabled. 

Accordingly, HUD requests a suspension of funding for section 202 and 811 Capital Advance Grants in fiscal year 2011 in order to redesign the programs to better 

target their resources to meet the current housing and supportive service needs of 

frail elderly and disabled very low-income households. The redesigned programs will 

maximize HUD’s financial contribution through enhanced leveraging requirements 

and will also encourage or require partnerships with HHS and other services funding streams to create housing that, while not medically licensed, still effectively 

meets the needs of very low-income elderly and disabled populations unable to live 

fully independently. The program reforms for both 202 and 811 will include the following: (1) new requirements to establish demand to ensure meaningful impact of 

dollars awarded; (2) raised threshold for sponsor eligibility to ensure the award of 

funds only to organizations with unique competency to achieve the program goals; 

(3) streamlined processing to speed development timeframes; (4) broader benefits of 

program dollars achieved by facilitating supportive services provided by Medicaid/ 

Medicare Waiver programs such as the Program of All-inclusive Care for the Elderly 

(PACE) model services to 202 project residents, (5) encouraging better leveraging of 

other sources of funding, such as low income housing tax credits and (6) integrating 

811 programs within larger mixed finance, mixed use projects. 

GOAL 4.—BUILD INCLUSIVE AND SUSTAINABLE COMMUNITIES FREE FROM

DISCRIMINATION

The Department’s approach to this objective is informed by the Obama administration’s landmark, Federal Government-wide review of ‘‘place-based’’ policies for 

the first time in over three decades. 

Place is already at the center of every decision HUD makes. HUD’s programs 

today reach nearly every neighborhood in America—58,000 out of the approximately 

66,000 census tracts in the United States have one or more units of HUD assisted 

housing. But we have taken this opportunity to renew our focus on place, with the 

result that the proposed fiscal year 2011 budget allows HUD to better nurture sustainable, inclusive neighborhoods and communities across America’s urban, suburban, and rural landscape. 

One aspect of HUD’s refined place-based approach involves making communities 

sustainable for the long-term. Sustainability includes improving building level energy efficiency, cutting carbon emissions through transit-oriented development, and 

taking advantage of other locational efficiencies. But sustainability also means creating ‘‘geographies of opportunity,’’ places that effectively connect people to jobs, 

quality public schools, and other amenities. Today, too many HUD-assisted families 

are stuck in neighborhoods of concentrated poverty and segregation, where one’s zip 
85 

code predicts poor educational, employment, and even health outcomes. These neighborhoods are not sustainable in their present state. 

This budget lays the groundwork for advancing sustainable and inclusive growth 

patterns at the metropolitan level, communities of choice at the neighborhood scale, 

and energy efficiency at the building scale. Specifically, the fiscal year 2011 budget 

calls for the following series of programs and funding levels. 

Supports and Improves the Federal Government’s Premier Community Development 

Program 

The economic downturn and foreclosure crisis have significantly depleted resources in State and local governments while increasing demand for services. Revenue declines often turn quickly into layoffs and cuts in services for the poor. Meanwhile, community development investments have a heightened role in economic redevelopment and stabilization for neighborhoods and regions across the country. 

During these difficult economic times, it is critical that the administration support 

and enhance community development programs and to partner with grantees in developing strategies to increase economic vitality, build capacity, and build sustainable communities and neighborhoods of opportunity. Since 1974, the Community Development Block Grant (CDBG) program has provided formula grants to cities and 

States to catalyze economic opportunity and create suitable living environments 

through an extensive array of community development activities. The fiscal year 2011 budget proposes a total of $4.380 billion for the Community 

Development Fund, which includes: 

—$3.99 billion for CDBG formula distribution, to meet the President’s campaign 

promise to fully fund CDBG. Simultaneously, the Department proposes a number of improvements to the CDBG program, including revamping the consolidated plans developed by State and local governments, greater accountability, 

and better performance metrics. 

—$150 million in funding for the second year of the Sustainable Communities Initiative. The initiative has four components in 2011, described below. HUD plans 

to work with the relevant authorizing committees in order to refine these proposals. 

—Sustainable Communities Planning Grants administered by HUD in collaboration with the Department of Transportation (DOT) and the Environmental 

Protection Agency (EPA). These grants will catalyze the next generation of integrated metropolitan transportation, housing, land use and energy planning 

using the most sophisticated data, analytics and geographic information systems. Better coordination of transportation, infrastructure and housing investments will result in more sustainable development patterns, more affordable communities, reduced greenhouse gas emissions, and more transit-accessible housing choices for residents and firms. 

—Sustainable Communities Challenge Grants to help localities implement Sustainable Communities Plans they will develop. These investments would provide a local complement to the regional planning initiative, enabling local and 

multi-jurisdictional partnerships to put in place the policies, codes, tools and 

critical capital investments to achieve sustainable development patterns. 

—The creation and implementation of a capacity-building program and tools 

clearinghouse, complementing DOT and EPA activities, designed to support 

both Sustainable Communities grantees and other communities interested in 

becoming more sustainable. 

—A joint HUD–DOT–EPA research effort designed to advance transportation 

and housing linkages at every level our agencies work on. 

—$150 million for the Catalytic Investment Competition Grants program to create 

jobs by providing economic development and gap financing to implement targeted economic investment for neighborhood and community revitalization. For 

too long, communities have lacked the kind of place-based, targeted, ‘‘gamechanging’’ Federal capital investment program in the community and economic 

development arena that HOPE VI has proven to be with respect to severely distressed public housing. The Catalytic Investment Competition would rectify that 

imbalance by providing ‘‘gap financing’’ for innovative, high impact economic development projects at scale that create jobs. The program will create a competitive funding stream that is responsive to changes in market conditions, 

leverages other neighborhood revitalization resources (including formula CDBG 

funds), and ultimately increases the economic competitiveness of distressed 

communities and neighborhoods. 

Under this proposal, my office would be permitted to consider how much and 

to what extent the project will complement and leverage other community development and revitalization activities such as the Choice Neighborhoods Initia-
86 

tive, Promise Neighborhoods, HOPE VI, Sustainable Communities, or other 

place-based investments in targeted neighborhoods to improve economic viability, extend neighborhood transformation efforts, and foster viable and sustainable communities. Applicants must develop a plan that includes measurable 

outcomes for job creation and economic activity, exhibit capacity to implement 

such plan, and demonstrate approval for the plan from the local jurisdiction. 

Applicants will be required to leverage other appropriate Federal resources, including but not limited to, Community Development Block Grant formula funding and section 108 Loan Guarantees. This will support HUD’s effort to partner 

with grantees to more effectively target community development investments 

toward neighborhoods with greatest need, disinvestment, or potential for 

growth. 

Enhances and Broadens Capacity Building for our Partners 

The fiscal 2011 budget provides $60 million for a revamped Capacity Building program. HUD must embrace a 21st century vision for supporting the affordable housing and community development sector and will reframe the section 4 program, including renaming the program ‘‘Capacity Building’’, in order to reflect that vision. 

The objective is to expand HUD’s funding capabilities, and encourage open competition through mainstream and consistent program funding for these activities. 

Working with cities and States to readily understand how to meet the needs of 

their communities, leverage private and other kinds of resources, and align existing 

programs is fundamental to building resilience in tough economic times. Increasing 

capacity at the local level is critical as jurisdictions partner with the administration 

in implementing key initiatives such as Choice Neighborhoods, Sustainable Communities, and the Catalytic Competition and work to restore the economic vitality of 

their communities. This enhanced program will include local governments as technical assistance service recipients. 

Takes Choice Neighborhoods to Scale 

The administration will also propose authorizing legislation for Choice Neighbor- hoods, funded at $65 million in fiscal year 2010 on a demonstration basis, and at 

$250 million in the budget. I am appreciative that Congress was willing to fund 

Choice Neighborhoods on a demonstration basis in fiscal year 2010, and HUD is 

now requesting that the program be expanded to a level where its impact can be 

significantly broader. 

This initiative will transform distressed neighborhoods where public and assisted 

projects are concentrated into functioning, sustainable mixed-income neighborhoods 

by linking housing improvements with appropriate services, schools, public assets, 

transportation, and access to jobs. A strong emphasis will be placed local community 

planning for school and educational improvements including early childhood initiatives. Choice Neighborhood grants would build upon the successes of public housing 

transformation under HOPE VI to provide support for the preservation and rehabilitation of public and HUD-assisted housing, within the context of a broader approach 

to concentrated poverty. In addition to public housing authorities, the initiative will 

involve local governments, non profits and for profit developers in undertaking comprehensive local planning with input from the residents and the community. 

Additionally, HUD is placing a strong emphasis on coordination with other Federal agencies, with the expected result that Federal investments in education, employment, income support, and social services will be better aligned in targeted 

neighborhoods. To date, the Departments of Education, Justice and HHS are working with HUD to coordinate investments in neighborhoods of concentrated poverty, 

including those targeted by Choice Neighborhoods. Again, we will be working with 

the House and Senate authorizing committees on these efforts. 

Protects Consumers From Discrimination in the Housing Market and Affirmatively 

Furthers the Goals of the Fair Housing Act 

The budget proposes $61.1 million in support of the fair housing activities of HUD 

partners. Some sources estimate that more than 4 million acts of housing discrimination occur each year. To meaningfully address that level of discrimination, the Department, in addition to directing its own fair housing enforcement and education 

efforts, must engage outside partners. Therefore, this budget funds State and local 

government agencies to supplement HUD’s enforcement role through the Fair Housing Assistance Program (FHAP) and provides funding also to nonprofit fair housing 

organizations that provide direct, community-based assistance to victims of discrimination through the Fair Housing Initiatives Program (FHIP). The entities participating in the two programs both help individuals seek redress for discrimination 

they have suffered and help eliminate more wide-scale systemic practices of discrimination in housing, lending, and other housing-related services. This budget pro-
87 

vides $28.5 million to State and local agencies in the FHAP and $32.6 million to 

fair housing organizations through the FHIP. While this budget does not continue a $10 million initiative within the FHIP program, funded in fiscal year 2010, specifically directed at mortgage lending discrimination, fair housing funding, generally, and FHIP funding, in particular, remains 

substantially higher than in fiscal year 2009. Overall, the $61.1 million requested 

this year for fair housing activities overall represents a 12 percent increase over the 

fiscal year 2009 enacted level of $53.5 million, and the $32.6 million requested for 

FHIP, in particular, is fully 18 percent above the $27.5 million in fiscal year 2009. 

Since its passage in 1968, the Fair Housing Act has mandated that HUD shall 

‘‘affirmatively further fair housing’’ in the operation of its programs. This requires 

that HUD and recipients of HUD funds not only prohibit and refrain from discrimination in the operation of HUD programs but also take pro-active steps to overcome 

effects of past discrimination and eliminate unnecessary barriers that deny some 

populations equal housing opportunities. To assist recipients in meeting these obligations, the Department is revising its regulations to clearly enumerate the specific 

activities one must undertake to ‘‘affirmatively further fair housing’’ and the consequences for failure to comply. To support this effort, $2 million of the FHIP budget 

will support a pilot program whereby fair housing organizations help HUD-funded 

jurisdictions comply with these regulations. 

Finally, I want to emphasize that as HUD works through the Choice Neighborhoods initiative and across all of its programs to revitalize neighborhoods, as well 

as enable families to choose to move to other neighborhoods with lower poverty and 

greater economic opportunity, HUD will strive to ensure that newly revitalized 

neighborhoods remain affordable, inclusive places for low-income people to live. 

GOAL 5.—TRANSFORM THE WAY HUD DOES BUSINESS

In light of recent natural disasters and the housing and economic crises, last year 

HUD saw a pressing need for adaptability and change. To become an innovative 

agency with the capacity to move beyond legacy programs, shape new markets and 

methods in the production and preservation of affordable housing, green the Nation’s housing stock, and promote sustainable development in communities across 

America, the Department had to remake itself. 

To accelerate the Department’s transformation, the fiscal year 2011 budget makes 

the following vital reforms. 

Develops a Basic Data Infrastructure and Delivers on Presidential Research and 

Evaluation Priorities 

HUD requests $87 million for the Office of Policy Development and Research, an 

increase of $39 million from fiscal year 2010, to continue the transformation of 

PD&R into the Nation’s leading housing research organization. The role of housing 

issues in starting the economic crisis, and the importance of housing issues to the 

Nation’s economy, shows the urgent need for this housing research. These funds 

would be used for three critical activities: 

Basic Data Infrastructure.—Continue the investment made in fiscal year 2010 to 

support the collection and dissemination of the core data needed to support effective 

decisionmaking about housing. HUD’s request for this purpose is $55 million, which 

is $7 million more than the fiscal year 2010 appropriated level of $48 million. This 

will be used to conduct housing surveys—including full funding for the American 

Housing Survey—support enhanced research dissemination and clearinghouse activities, and underwrite a Young Scholars research program. 

Presidential Research and Development Initiative.—As part of the administration’s 

Research and Development initiative that is tied to the President’s national goals 

of energy, health and sustainability, the Department proposes to administer $25 

million for research on the linkages between the built environment and health, hazard risk reduction and resilience, and the development of innovative building technologies and building processes. 

Presidential Evaluation Initiative.—Also for fiscal year 2011, the President is proposing to fund rigorous evaluations of critical programs to inform future policy discussions. The $7 million proposed will supplement funding from the Transformation 

Initiative set-aside to support rigorous evaluations of the Family Self-Sufficiency 

Program, potential Rent Reform strategies, and the Choice Neighborhoods program. 

Maintains the Department’s Existing Technology Infrastructure 

HUD requests $315 million for the Working Capital Fund, to cover the steady 

State operations, corrective maintenance of HUD’s existing technology systems, and 

the re-competition of HUD’s infrastructure support contract. As with fiscal year 

2010, this does not include the ‘‘next generation technology’’ development that would 
88 

be funded through the Transformation Initiative, as described below. The bulk of 

the fiscal year 2011 request ($243.5 million) would be in the form of a direct appropriation. In addition, HUD seeks a $71.5 million transfer from FHA to pay for its 

share of infrastructure costs and system maintenance. 

Provides Flexibility and Resources Needed to Fuel Agency Transformation 

As in fiscal year 2010, the Department again seeks the authority to set-aside up 

to 1 percent of HUD’s total budget for an agency wide Transformation Initiative. 

HUD’s fiscal year 2010 Transformation Initiative was intended to indeed be transformational. The resources it provides are allowing us to take long-overdue steps to 

upgrade and modernize our Department and allow it to function as a 21st century 

organization. As one example, it is helping us replace computer programs written 

in COBOL in the 1980s with those written in the flexible and powerful languages 

of 2010. In addition, HUD has not conducted a major demonstration since the 1990s, 

when the Moving to Opportunity study was conducted. This demonstration is still 

yielding important evidence on how mobility and rental assistance interact that 

guides policy. And local government capacity to effectively use Federal resources 

varies widely and leaves some communities at risk of always lagging the pack. 

Further, even in the instance that efforts such as technical assistance were adequately funded, they were funded in silos—making cross-cutting initiatives that 

achieve the biggest bang for the buck next to impossible. 

The TI approach we propose—allowing for the flexibility to take up to 1 percent 

of our budget and devoting it to four key areas—is similar to the approach applied 

by most cutting-edge institutions. This recognizes not only the need to have targeted 

funding to overhead—but the ability to respond to changing circumstances that may 

require overhead to consume an increased share of the budget, a change in the mix 

of activities funded and cross-cutting initiatives. 

While reprogramming requests to the Appropriations Committee provide some 

flexibility along these lines, these are inherently limited in comparison to TI funding 

because of absolute caps in statutory appropriations accounts. 

The flexibility inherent in this TI structure allows for the more nimble, responsive 

agency required in a long budget process where individual research ideas or investment proposals made in January might have been usurped by developments through 

the course of the year. A good example would be the $50 million in Neighborhood 

Stabilization technical assistance HUD made available to communities through 

ARRA. Full funding of the Transformation Initiative will enable HUD to take such 

an approach to scale and continue the delivery of a new level of technical assistance 

and capacity building to Federal funding recipients, recognizing that human capital, 

technical competence and institutional support are critical for the success of HUD’s 

partner organizations. 

And while we appreciate that the subcommittee did recognize this reality in funding this effort for fiscal year 2010 at $258 million, which has begun an important 

process of increasing investment and bridging silos, we renew our request for authority to use up to 1 percent. I would note that this past year we received 110 

groundbreaking research, information technology and technical assistance proposals 

internally—but we were only able to fund a little over one-half of these requests. 

Further, of the demonstrations and IT projects that were funded in 2009, many 

were multi-year projects that we have had to plan and operate, in all but the most 

urgent circumstances, with single-year funding. 

Salaries and Expenses Central Fund.—Building on the principle of the Transformation Initiative, the budget requests the creation of a Salaries and Expenses 

Central Fund, funded through a 1 percent transfer from each of HUD’s salaries and 

expenses accounts. The Fund will provide targeted, temporary infusions of resources 

to any of HUD’s program offices in order to increase our responsiveness to unanticipated crises and new challenges through the hiring of staff with appropriate expertise. One example of how this type of funding might be used would be in the instance of a national disaster—in response to which HUD would be expected to play 

a key role. Another would be FHA, which inside of 3 years has temporarily expanded from insuring 2 percent of the market to, as mentioned previously, approximately one-third. 

As you know, HUD staff has been meeting with the bipartisan, bicameral appropriations staff to discuss our plans in this area, and have recently submitted a detailed report on our proposals. And so, while I appreciate the level of trust this subcommittee showed in HUD leadership for fiscal year 2010, I would hope that the 

progress we have demonstrated and the extraordinary need to build on these successes would warrant full funding for the coming fiscal year. 
89 

CONCLUSION

In sum, this budget continues the transformation begun with the 2010 budget— 

a budget I recognize simply would not have been possible absent the leadership and 

commitment of this subcommittee. With the housing market showing signs of stabilization, our economy beginning to recover and the need for fiscal discipline crystal 

clear, now is the moment to reorient HUD for the challenges of the 21st century— 

retooling its programs and initiatives so it can better fulfill its mission to serve 

American households and communities more effectively and more efficiently over 

decades to come. I am proud of the progress we have begun to make in these areas 

with this subcommittee’s support, and I look forward to our continued progress 

through the proposals outlined in the fiscal year 2011 budget. Thank you again for 

the opportunity to appear before you to discuss HUD’s proposed budget. And with 

that, Madam Chairwoman, I would be glad to answer any questions. 

—HUD is currently conducting a definitive Capital Needs study of the public 

housing portfolio. 

—Preserving Safe, High Quality Public Housing Should Be a Priority of Federal 

Housing Policy, Barbara Sard and Will Fischer, October 8, 2008 (noting that ‘‘90 

percent of developments meet or exceed housing quality standards, although 

most developments are more than 30 years old, and many will need rehabilitation.’’). 

FHA

Senator MURRAY. Thank you very much for your statement, Mr. 

Secretary. 

Let me start because you talked a little bit about your opening 

statement, I did as well, that OMB and CBO differ considerably on 

the amount of receipts that they estimate FHA mortgages are 

going to generate in fiscal year 2011, a difference of about $4 billion. How would a reduction of that magnitude impact HUD programs? 

Secretary DONOVAN. Obviously, that kind of reduction would be 

substantial. Again, let me point to the fact that CBO does agree 

that the changes we are proposing in legislation would have a positive impact on the fund. 

My FHA Commissioner is testifying today on the House side in 

front of the authorizing committee on those changes. I believe it is 

critical that we do get the authority to increase our annual premium and that we continue to do the kind of risk management 

changes and others that we need. CBO fundamentally agrees that 

those changes will add to the receipts. 

We have begun to work closely with CBO to look at the reasons 

for the discrepancy. We would be happy to work closely with this 

subcommittee, as well as the Budget Committee, to look at the reasons for that discrepancy. Obviously, as you know, while the CBO 

view is important, it is ultimately advisory, and the Budget Committee can make a determination on its own about which of the 

forecasts make the most sense and what it is going to choose as 

the path for the budget. 

And I would further add that, as I mentioned in my testimony, 

we have substantially increased our capacity at FHA to monitor 

the health of the fund, made numerous changes and improvements 

in the way we project it. And in fact, thus far this year, we are running ahead of our projections in terms of losses and receipts to the 

FHA Fund. 

I would also add that to ensure that we were being conservative 

in the President’s budget we did use a relatively conservative house 
90 

price forecast that has been below what has actually happened in 

the housing market since then. 

So for all of those reasons, I continue to be confident in our projections, and we would be happy to provide whatever information 

you and the Budget Committee might need to make a final determination about the path of the budget. 

Senator MURRAY. And are you working with the Budget Committee on that? 

Secretary DONOVAN. We have been working closely with OMB on 

it, and they have been leading discussions with the Budget Committee. 

Senator MURRAY. Okay. Well, one of the paths that you just 

talked about had to do with increasing the premiums on the FHA 

mortgages, those premiums that are used to cover any claims on 

mortgages. But the losses in recent years have caused the capital 

reserve for the FHA to fall below that mandatory 2 percent. In 

order to recapitalize that, you are planning on increasing the premiums. 

Under existing authority, FHA will increase up front, I think, 

2.25 percent in April. But you also are saying you need authorizing 

language to do that. How is your progress going with the authorizing language, with the authorizing committees on that? 

INCREASE IN ANNUAL PREMIUM

Secretary DONOVAN. So we have proposed and we do have the 

current authority to raise the upfront premium to 2.25 percent. We 

believe, and I think there is broad agreement, however, that it is 

a better approach, both safer for homeowners and ultimately better 

for the health of the FHA Fund, to have a combination of an increased upfront premium, as well as an increase in the annual premium. And we currently do not have the authority to raise the annual premium. That is the authority that we are seeking through 

legislation. 

We have had numerous meetings with both sides of the aisle on 

the authorizing committees; have heard a lot of support. In fact, 

Ranking Member Capito introduced her own bill yesterday that included a broad range of the proposals that we have. And so, I am 

encouraged by the progress that we are making with the authorizing committees on that. 

I would make two other notes. One is that not only is increasing 

the premiums something that is important for the health of the 

fund, but in addition to that, increasing the premiums, I think, is 

the single most important thing FHA can do to encourage the private market to return. We are already hearing, once we announced 

the increase in our upfront premiums, a number of private mortgage insurers and others beginning to move back into the market. 

And so, I think it—— 

Senator MURRAY. Once you announced the 2.25 percent? 

Secretary DONOVAN. The 2.25 percent. And so, I believe it is important, given that we believe FHA’s current role is a temporary 

role, that we want to see the private market return, that raising 

the premiums sends the right signal to the broader market and 

will help others return to the market. 
91 

The last thing I would note is that we do have the current authority to raise the upfront premium even further. So increased receipts along the lines proposed in the budget are not completely dependent on the legislation. 

Senator MURRAY. Increase above the 2.25? 

Secretary DONOVAN. Above the 2.25. 

Senator MURRAY. Do you have authority to do that without—— 

Secretary DONOVAN. We do have the ability to go up to 3 percent 

currently. However, and again, there is wide agreement on this, it 

is a better path not to raise the upfront premium that far or even 

to keep it at the 2.25 that we have already proposed to raise it to, 

but to increase the annual premium further in order to provide 

more security for homeowners as well and a better deal for homeowners and to build the fund more quickly. 

Senator MURRAY. Are you making any progress in the Senate 

Banking Committee? 

Secretary DONOVAN. We have had very good discussions with 

them on it as well. The House has taken the lead with their own 

bill, but we have heard bipartisan support around many of the 

changes that we have proposed. 

Senator MURRAY. If we were to get that kind of legislation 

passed, when would you anticipate the capital reserve funds will be 

at or above the required 2 percent? How long would it take? 

Secretary DONOVAN. Based on our numbers, we believe that the 

2 percent is achievable by 2012 or 2013, based on conservative assumptions in house prices. 

Senator MURRAY. When would the legislation have to be enacted 

in order to have that date? 

Secretary DONOVAN. One of the keys about getting the legislation 

enacted as quickly as possible is that our estimates are that every 

month sooner we get the legislation is another $300 million in net 

receipts to the FHA Fund. So every month that we get that either 

later or earlier has a $300 million impact on those funds. 

STATE OF THE HOUSING MARKET

Senator MURRAY. Okay, all right. Well, let me move on. 

It seems that every day there is a new report out there on the 

state of the housing market. But the reality is that economists 

often arrive at completely different conclusions from the same 

housing market data. 

You have testified that housing prices have held steady or risen 

since last April, which provides reason for optimism. However, in 

January, new home sales plummeted to the lowest level in 50 

years, and many regions in my State continued to experience some 

severe home value losses. 

Do the reductions in home sales that we saw in January make 

you concerned about the stability of the market, and when do you 

expect that we may see home prices stabilize? 

Secretary DONOVAN. What I would say about that data, widely 

expected with the original expiration of the home buyer tax credit 

that there would be a decline in sales during December and January. I would say that the decline in January was somewhat worse 

than expected. Part of that was weather driven, frankly. But even 
92 

beyond that, there were, I think, notes of concern that we took 

from those numbers. 

I think what it highlights most of all is that the levels of prices 

in home sales continue to be fragile. They are still above where 

they were a year earlier, which is, I think, an important benchmark. But one of the reasons we supported the extension of the 

home buyers tax credit, as well as we continue to support the importance of FHA, the GSEs, and other interventions keeping interest rates low is that we are concerned about the fragility of the 

housing market. 

Overall, again—and this goes to your point earlier—when we 

came into office, widely predicted economists on both sides of the 

aisle, and more broadly across the spectrum, expected on average 

another decline of 5 percent in home prices last year. That did not 

happen with the support of the administration. Home prices were 

basically level during last year. 

So I think we have had the impact of stabilizing the market. But 

it is fragile, and we need to continue to focus and do more to ensure that we are on the right path with home prices. 

Senator MURRAY. One of the programs that the Federal Reserve 

is going to end is the purchase of mortgage-backed securities that 

has helped quite a bit, and the home buyer tax credit is going to 

expire here shortly. Are you concerned that if we don’t extend those 

important initiatives, we are going to add to that fragility? 

Secretary DONOVAN. Typically, the home buying season is slowest during these winter months, and we will all be watching very 

closely the sales numbers as we move into the spring and as we 

get closer to the expiration of the tax credit. I would say that it is 

too early to decide that. 

My strong belief based on the indicators that we have seen is 

that the Federal Reserve is taking a very measured approach to 

stepping back that program and will be watching the market very 

closely. We will be doing the same. 

But I think it highlights the fact that with FHA, while we have 

significantly stepped up our risk management, increased underwriting requirements, down payments, raising premiums, that we 

must take a balanced approach and not go too far to exclude buyers 

that can be successful in the market. And so, that balanced approach, I think, is critical, as well as watching the numbers over 

the next few months in the spring buying season very, very closely. 

Senator MURRAY. Okay. Senator Bond? 

Senator BOND. Do you want to continue your questions and do 

those, and then let me do mine? Then go on, go to E&W, and let 

me—I will, if you trust him to my tender mercies? 

MAKING HOME AFFORDABLE PROGRAM

Senator MURRAY. All, Mr. Secretary, we have reached a gentleman’s agreement here. I am going to finish the question that I 

need to ask you right now and then turn the gavel over to Senator 

Bond, who is going to ask his questions and then come to the Energy Committee, if that is okay with you? 

So I wanted to ask you about the Making Home Affordable Program. One of the programs in that, the Home Affordable Modification Program, HAMP, reduces a homeowner’s monthly payments by 
93 

lowering interest rates or spreading a mortgage out over a longer 

period of time. 

That program was supposed to help about 3 million to 4 million 

families by 2012. But as of January, only about 116,000 homeowners have received permanent modifications under that. We are 

hearing that servicers have been struggling with burdensome 

changing rules, and borrowers are confused. And wondered what 

changes you were looking at on that program? 

Secretary DONOVAN. So, first of all, I would say that there is no 

question that there were early implementation problems with 

servicers who did not have the capacity to be able to reach borrowers and that there has needed to be, and there has begun to 

be, a significant increase in focus, as well as resources, at the 

servicers. We have also taken a number of steps to streamline the 

process, streamline documentation, and simplify the process. 

One of the most important changes is that we have announced 

that we will be requiring all documentation to be gathered up 

front, rather than at two different points—at the beginning of the 

trial modification and before permanent. That should greatly simplify the process. 

And we have also done an enormous amount of outreach in locations around the country to bring homeowners and servicers together with fairs and a whole range of other events and direct connections. We have folks under the direction of the servicers literally 

going door-to-door to try to get homeowners qualified. 

What I would point out is that based on all of those efforts, we 

were able to reach just 1 year after the creation of the program— 

just 1 year after the creation of the program more than 1 million 

homeowners with trial modifications. And I think it is very important to point out that those trial modifications are having a significant positive impact for those families, average savings per month 

of over $500 and significant benefits to them. 

So, based on that, we are on track to reach the 3 million to 4 

million homeowners that we originally committed to. We are concerned that the permanent modifications have not been moving 

quickly enough. We have significantly increased the pace of that. 

And we today are seeing about 50,000 new permanent modifications a month, based on our recent experience. And so, I do believe 

while we still have some improvements to go, that we are making 

significant progress in terms of home affordable modification. 

I would finally just say that—and by the way, we have almost 

20,000 of those in the State of Washington. I would be happy to 

share more detailed information with you on that. 

Finally, I would say that that is only a part of the broader strategy. And with the announcement the President made that you referenced in Nevada just 2 weeks ago, as well as a number of other 

steps that we are taking, I believe we are—— 

Senator MURRAY. Yes. Let me ask you about that. You announced this program to help these five States that—in Nevada a 

few weeks ago. What is the specific timetable for implementing 

that program, and when would we start seeing results on that? 

Secretary DONOVAN. So, on that program, what we determined is 

that we have a number of national efforts. We continue to examine 

new national efforts, but that the challenges facing those places are 
94 

quite different depending on the State. For example, Michigan’s 

challenges are very different from Nevada’s or California’s. 

And so, what we did was to ask the five States, their State housing finance agencies, to come in and propose tailored programs for 

those States that would most effectively target the problems that 

they are seeing. We have seen very effective State programs in a 

number of places, Pennsylvania and others, along these lines, particularly targeted at unemployed homeowners and underwater 

homeowners. 

We have asked the States to come in and propose to us within 

the next few weeks plans. We will then review those plans, and we 

hope to be able to approve them within the next month to 6 weeks 

and then to be able to start implementing those programs immediately at that point. Again, many of these State agencies already 

have programs up and operational that we could enhance or change 

that could get going very quickly. 

Senator MURRAY. Okay. Are you looking at expanding that all? 

In my home State, we have about a quarter of a million Washington State homeowners today who are underwater, representing 

about 16 percent of our homes, especially in two of our counties, 

Pierce and Clark Counties. Are you looking at expanding this to 

any of the other States? 

Secretary DONOVAN. What we are looking at, Madam Chair, is 

broader national efforts around negative equity and unemployment 

that could target the issues that you are talking about in your 

State. 

One of the reasons we wanted to take the approach on the program that the President announced in Nevada is to test models 

that then potentially could be used in other States. So we don’t 

have any immediate plans to expand it until we have begun to see 

the results. But we are working on other efforts, which I would be 

happy to follow up with you on, and talk more about, that would 

nationally target the negative equity issue and unemployment that 

could have real benefits in Washington. 

BACKLOG IN PUBLIC HOUSING CAPITAL IMPROVEMENTS

Senator MURRAY. Okay. We would like to hear more about that. 

I wanted to ask you about the backlog in capital improvements 

needs in public housing now estimated at over $20 billion. The 

President’s budget proposes the first phase of an ambitious plan 

designed to leverage significant private sector resources to tackle 

that backlog and preserve those assets. 

I agree. We have got to find a long-term solution on this, but I 

am concerned about the absence of detail in the proposal so far and 

its cost. 

For 2011, the administration is looking for $290 million in additional subsidies in order to leverage those private sector dollars. 

When fully implemented, I understand the program is going to cost 

about $1.4 billion each year. How would you accommodate this 

major new requirement, given the President’s commitment to 

freeze discretionary spending over the next 3 years? 
95 

PUBLIC HOUSING CAPITAL FUND

Secretary DONOVAN. I think one of the important points to make 

about this initiative is that the fundamental change that we are 

talking about is shifting from an operating and capital approach to 

one which has only an operating stream. So while there are increases that we are proposing in operating subsidies in the budget, 

we will have, particularly over the longer term, significant savings 

and, ultimately, not require any capital funding for public housing 

in a separate account. And so, that is one way that we have offsetting savings that come from the way that we are proposing this. 

A number of other points, though. That does not account for efficiencies that this will achieve. I talked in my testimony about the 

enormous complexity of the current range of programs and how difficult it is to achieve mixed financing and other things. Part of that 

are operational costs at the Department, which we have the potential to do significant savings on. We have begun to estimate those. 

Those are not simple to estimate. 

Senator MURRAY. Sure. Are you going to put forward proposals 

to cut the operating stream side of it, expenses? 

Secretary DONOVAN. The capital? 

Senator MURRAY. Yes. 

Secretary DONOVAN. Yes. There will be offsetting reductions possible in the public housing capital stream as a result because we 

will be moving to a system where there would only be operating 

subsidy going to those developments. And they would use—just as 

is currently done in almost every other program that we have, 

funding could be raised privately or from tax credits or other 

sources to pay for the capital needs. 

And so, that we would go from this more complex two-subsidy 

system that we have today with public housing to a one-subsidy 

stream. It would require the operating subsidy to be higher, but it 

allows us to offset to a great extent that increased cost to the operating subsidy with reductions and, ultimately, elimination of the 

capital stream. 

There will also be significant savings in terms of reduced complexity for the developments themselves. The management, oversight, the soft costs of hiring lawyers, and all kinds of other things 

around transactions that—— 

Senator MURRAY. It sounds really good. I just want to see how 

it works on paper so we have accountability in the system and we 

know it works. 

Secretary DONOVAN. And I know that we have been working with 

your staff to try to get more details about the long-term costs and 

savings around the proposal. 

TRANSFORMING RENTAL ASSISTANCE

Senator MURRAY. We will need to see those. Okay, good. 

One of your proposals is to transform rental assistance to make 

sure that tenants have mobility options, even though from what I 

see, the funding is going to be tied to a particular unit. Now I understand that you are modeling this proposal on one of the provisions of the section 8 Tenant Based Rental Assistance Program. 
96 

Under the existing program, PHAs are allowed to commit or 

project-base a voucher to a particular unit. 

Secretary DONOVAN. That is right. 

Senator MURRAY. This enables the PHAs to leverage private resources to finance the construction or rehabilitation of those units. 

But with project-based vouchers, PHAs are able to make sure residents have mobility by providing them with another tenant-based 

voucher from their existing supply if a person decides to move. 

However, your proposal would allow participation by entities that 

don’t have voucher programs, whether they are public housing authorities or owners of other HUD-assisted housing. The lack of 

vouchers would appear to be a barrier to mobility in these systems. 

In these cases, how do you provide residents living in this type of 

housing with mobility options? 

Secretary DONOVAN. It is an excellent question. And mechanically working out the operations of linking those housing developments with vouchers is a very important part of the proposal. And 

I would just say broadly, we have been spending a lot of time working with stakeholders, talking with OMB, within the administration, and also reaching out to the authorizers, as well as your staff, 

to discuss a lot of these issues. And we expect not only to have authorizing language, but also far more detail based on the input that 

we are getting from stakeholder meetings and others that we are 

doing. 

On this mobility point specifically, first of all, what we are looking to do is to make sure that if a housing authority or another entity does not have control of a voucher program themselves, that 

we link them with a voucher program in the area where the project 

is located to ensure that there are vouchers available for those families that would move. What we are looking at is sizing exactly how 

big that pool would be and to ensure that we are not creating too 

much of a need for additional vouchers to be able to do that because, as you rightly said, the cost of that and the potential pressure on the voucher program overall is important. 

We believe based on our latest modeling that we can achieve significant mobility, if not complete mobility, with the existing resources that we have. But we want to come back to you with a 

number of options on that that would say if we want to do this 

amount of mobility, here is what we could do. 

Senator MURRAY. This is what it would cost. 

Secretary DONOVAN. If we wanted to do further mobility among 

a broader population, here is what the cost would be, and here is 

how we might be able to work it. So we are working through a lot 

of detail on that and look forward to sitting down with you. 

Senator MURRAY. Okay. We want to be continually updated on 

where you are with that. 

Secretary DONOVAN. As always, you have hit on a very important 

piece of this, an important point about how we achieve that mobility. 

HUD–VASH PROGRAM

Senator MURRAY. Okay. And lastly, I wanted to ask you about 

the HUD–VASH program. You know this is really important to 
97 

both Senator Bond and I. We have worked very hard to include it 

in our budgets and appropriations over the last several years. 

I have heard wonderful stories from veterans in my home State, 

in Walla Walla, Washington, that have gotten jobs, gotten 

healthcare, and gained sobriety because they have these vouchers. 

There are similar stories across the country. But I know this program has faced some challenges in implementation in some parts 

of the country, and the VA is, as you know, struggling to quickly 

hire case managers and adapt to this new model of permanent supportive housing. 

Based on the most recent data, it appears that now only about 

half of the vouchers that we provided in fiscal years 2008 and 2009 

are actually being used. Can you tell me what HUD and VA are 

doing to overcome these problems and make it successful? Because 

we know when it gets out there and people are using it, it makes 

a huge difference for our veterans. But having administrative challenges at any level here on the ground is a disservice to the veterans. 

If you can talk to me about what HUD and VA are doing? 

Secretary DONOVAN. Absolutely. And let me just start by saying 

your support and championing of this program has been absolutely 

critical, and we believe it is having a tremendous impact on veterans, despite some of the challenges that you talked about. 

I also would put it in the context of the commitment that the 

President and Secretary Shinseki have made to end veterans’ 

homelessness. VA has included a $265 million increase in funding 

for veterans homelessness in its proposal for 2011. So this is in the 

context of broad support for the intent of the program and, more 

broadly, ending veterans homelessness. 

The way I would characterize the challenges largely are that VA 

is an expert in healthcare. What has been required in order to 

make the program effective and to fully utilize the vouchers has 

been building a capacity beyond healthcare that includes community-based outreach and the ability to connect the healthcare and 

other services available at VA hospitals with the housing and other 

support services that may be necessary. 

Where we have seen great success is where VA hospitals have 

built that capacity, and we have begun to connect them with our 

continuums of care, community-based providers where they can 

form links to ensure they are finding veterans where they are, 

whether it is on the streets or in shelters, as well as helping to 

build their capacity and understanding about the latest techniques 

of whether it is housing first, supported housing, and others. 

And so, whether it is in Washington, DC or in many other places, 

we are seeing significant increases in utilization of those vouchers 

with those targeted strategies. And we have now developed with 

VA a plan to try to more broadly spread those. We have spoken 

about this, and you had a number of good points the last time we 

spoke about this that we are incorporating into that thinking, and 

we want to come back with you with a response on that. 

Senator MURRAY. Okay. Well, my subcommittee really wants to 

work with both you and the VA to get this out. I was really disappointed the President’s budget didn’t include any funding for 
98 

2011. We can’t let administrative lack of dialogue or lack of working on problems keep these vouchers from going to our vets. 

So we want to keep working with you on the implementation, 

and clearly, that remains a high priority for this subcommittee, 

and I thank you for being committed to that and working with the 

VA on that. 

Secretary DONOVAN. Thank you. 

Senator MURRAY. Senator Leahy has joined us. Senator Leahy, 

I will just let you know I have to run to the Energy and Water 

Committee really quickly. Senator Bond is on his way back. I am 

going to, without asking you, turn the gavel over to you and allow 

you to go ahead and question the Secretary. 

Senator HUD will be—Senator HUD, he would love that. 

Senator Bond will be back shortly. And if you finish before he 

gets back, if you could just put it in temporary recess, he will be 

here within—— 

RURAL AMERICA

Senator LEAHY [presiding]. Of course, and I am going back to a 

mark-up in Judiciary. But I was able to get permission to leave the 

Judiciary meeting, funny how that works. 

Thank you, Madam Chair. And thank you for the tremendous job 

you do on this and other appropriation matters. 

Secretary, it is good to see you, and I appreciate having you here 

to discuss the administration’s budget request. So many of the programs in your Department have served my State very well, you 

have got one heck of a portfolio, and there are probably days when 

you wish it wasn’t quite as much. But I would welcome you up to 

Vermont sometime to see the good things HUD has done to provide 

affordable housing, especially in our rural communities. 

We always think of housing in urban settings, but my home 

State has only 660,000 people, and a lot of it is very rural. But 

something that works in rural Vermont could also work in rural 

California, or New York, or Texas, or elsewhere. 

Now I know others have asked you about the Department’s proposal to cut the budgets of the 811 and 202 programs and the 

HOME program. I worry about this because as I look at the budget, I am afraid there is a shift of priorities from rural areas, rural 

America to urban areas, and I remind everybody that rural America still is a third or more of America’s population. 

Of course, back at the time of Franklin Roosevelt, they were concerned about rural America, and we had rural electrification, a 

number of other programs that made an enormous difference in society. I know it did with my grandparents in Vermont and others. 

But Vermont and other rural States rely on these programs to 

build affordable housing for low-income, elderly, and disabled residents. So if Congress agrees with your budget proposals, how are 

you going to deal with the problems of rural America? 

Secretary DONOVAN. Senator, thank you for the question. I look 

forward to visiting you in Vermont. It is, I probably shouldn’t say 

this in a Senate hearing, one of my favorite States. I spent a lot 

of time there—— 

Senator LEAHY. Mine, too. 
99 

Secretary DONOVAN [continuing]. Growing up, and just a beautiful, beautiful place. 

So let me say a couple things about this. First of all, we had to 

make some very difficult choices in the budget this year, given the 

broader outlines of the Federal budget deficit, and we made a fundamental choice to focus on existing households that we serve and 

ensuring that we were fully funding our major rental assistance 

programs. That required capital cuts in a number of different 

areas. Just to be clear, those rental assistance programs are critical 

in rural areas of the country as well, and we would be happy to 

get you more detail on how they support rural areas. 

I would also say that, today, the single most important way that 

we fund housing for the elderly and disabled in rural areas and 

other areas is through the tax credit program. Eight times more 

senior housing is developed through tax credits than through 202 

and over 10 times more for people with disabilities. And so—— 

Senator LEAHY. But I still come back to my basic point. I worry 

about the way this is set up, that we are seeing a shift from rural 

to urban, and that is what I am going to be most concerned about. 

Because there is no way I could support—I could support an appropriation that did that. 

Secretary DONOVAN. And I believe that that is, in fact, not the 

case. Section 202 and 811 are equally available in a range of areas. 

But let me point to a few things that I think are particularly targeted to rural areas in the 2011 budget proposal. 

SUSTAINABLE COMMUNITIES

First of all, we will, for the first time ever, be establishing a program specifically targeted to rural homelessness in 2011. That has 

never been done before. We have—because of the work of this subcommittee, in our 2010 budget, we will be making Sustainable 

Communities funding available for the first time with a specific 25 

percent set-aside for smaller communities, and that is a critical effort. We are also building on our experience in investing in rural 

economic development through a proposed catalytic investment 

fund, which will be an important resource available in rural areas 

as well. 

So not only do I believe that we have housing resources specifically for constructing senior housing and housing for people with 

disabilities in rural areas, but that we are actually increasing our 

focus on rural areas with a number of different proposals in the 

budget. 

SHARED EQUITY PROGRAMS

Senator LEAHY. Thank you. I look at some of the different things 

you have done—the administration has done and Congress has 

supported to promote home ownership. In HUD’s previous budget 

request, the Department expressed interest in an innovative home 

ownership model known as shared equity. It is typically run by 

nonprofits. 

They promote home ownership among low- and middle-income 

families by providing down payment assistance. The affordability of 

the home is retained. When the buyer eventually sells the home, 

the nonprofit recoups what they put for the down payment and also 
100 

part of the appreciation. They also usually have the right of first 

refusal to buy the property. If Congress included funding for a pilot 

program to increase shared equity programs, is that something 

your Department would support? 

Secretary DONOVAN. We certainly not only believe in shared equity models, but there are a number of ways that we have begun 

to support those. What I would suggest is that we would love to 

sit down with your staff and explain what we are already doing 

around shared equity and see if there is a way we could get to a 

pilot of the kind that you are talking about, even under existing 

authority, and then describe, be able to figure out what additional 

authority might be needed to achieve what you are—— 

MAKING HOME AFFORDABLE PROGRAM

Senator LEAHY. Thank you. And we will. Whenever you would 

like, we will make sure we have our folks ready. 

And in your prepared remarks that were read earlier, you spoke 

about the housing market. You noted that a lot has been done by 

the administration to right the ship, and I am pleased that many 

Americans have been helped by the Making Home Affordable Program. I think we all know the societal value of home ownership 

and community value and everything else, to say nothing about the 

economic well-being of the country. 

I am concerned about some who have slipped through the cracks. 

One of the concerns I hear most often on housing when I am home 

in Vermont is that some of the lenders in the program aren’t abiding by the rules. The homeowner has been having a hard time getting straight answers, and it is frustrating because I will hear 

questions, whether walking down the street or at the grocery store 

or wherever. They say, ‘‘We can’t get a straight answer.’’ 

Is your Department and Treasury looking at this issue of whether this is happening in States? Because it is to all our benefit if 

people can be homeowners, but they are going to have to have— 

they are going to have to be able to get the answers they need. 

Secretary DONOVAN. There is no question that particularly in the 

early months of the program, servicers—there were significant 

problems with servicers. There continue to be significant problems 

in some cases. 

We have both pushed servicers to create better communication, 

more resources, and more people in their call centers, going doorto-door to do that. But we have also created very specific standards 

for exactly what the timelines need to be for servicers to get back 

to homeowners with a clear response on whether they are eligible 

or not. We did that just a month or so ago. 

And in addition to that, we have begun to impose penalties on 

servicers who are not following those guidelines. So, yes, we are 

hearing those issues, and we are taking action on them. 

Senator LEAHY. Good. I must admit, and as Senator Bond knows, 

when somebody corners you in the grocery store and they have got 

a concern, they have got a concern. And I sometimes find those— 

actually, I like that. In a small State like ours, everybody knows 

everybody. And nobody hesitates to come up and ask you the questions. And this thing is occurring too often to make me think it is 

just a random issue. 
101 

Senator Bond is here, who knows these issues as well as anybody, and I am going to turn the gavel over to him. 

Senator BOND. Well, I appreciate getting the gavel back from my 

good friend. Senator Leahy has outlined the concerns we have in 

rural America. I had raised those earlier, Pat, before you came, and 

they had—we had one little $25 million rural housing program for 

HUD to work with USDA, and that was gone. 

So I was interested to know that the Secretary had said while 

they have zero budgeted, that something new is going to spring 

full-blown out of somewhere. And I can assure you that those of us 

who live in places where we don’t have a rush hour, we have a 

rush minute, there are—they can’t even—radio stations can’t even 

sell drive time advertising because nobody is in the car that long 

unless they are driving to another city. And then that is—— 

Senator LEAHY. If the Senator would yield? Last week, Marcelle 

and I were in Vermont, and I got in the car. We were driving somewhere. And as I go out of the driveway, I started to reach for the 

radio to hear the traffic report, as I do when I am driving back and 

forth in Washington. And I am like, ‘‘What am I doing? There is 

no traffic.’’ 

But I have been in some of the rural areas of your State, which 

is so beautiful, it made me think of home. But the needs are the 

same. And with that, now that we have done our bit—— 

Senator BOND. A little soft shoe there. 

Senator LEAHY [continuing]. To show you that we care about 

rural America, but Secretary Donovan, I know you do, too. So 

thank you. 

RURAL HOMELESSNESS

Senator BOND. Thank you, Pat. 

And Mr. Secretary, maybe you would want to comment on that? 

You have got a new rural housing initiative to replace rural housing? 

Secretary DONOVAN. Well, I mentioned as you were coming in, a 

range of efforts in the budget. That is an issue I know you care a 

lot about. We will be implementing the first-ever rural homelessness effort specifically in the budget and that is something that, 

particularly given that we have seen a 56 percent increase in rural 

and suburban family homelessness over the last year, absolutely 

critical. 

We are expanding efforts for economic development. The $25 million that you talked about was targeted to economic development, 

and we are proposing a $150 million fund in the budget, which 

would have a portion of it specifically targeted for rural areas. So 

I don’t believe that we are not going to have the kind of effort—— 

Senator BOND. I will just ask the question. Are you going to work 

with the USDA on rural development? 

Secretary DONOVAN. Absolutely. 

TRANSPARENCY IN HUD PROGRAMS

Senator BOND. That is one of the secrets because you need the 

housing. You need what USDA can bring. And I think it is important that you maintain that collaboration. If you are talking about 

moving 25 to 150, I am happy with that. But I just—I want to work 
102 

with you to make sure that it continues to work because, as Senator Leahy said and I know, there are problems there. 

Let me go to the issue of transparency, and I mentioned to you 

before I sat down that I am concerned that HUD decisionmaking 

is open and objective. Are there political decisions which enter into 

that? Do you get directives from either the top of the administration or Congress on how you make those? Are those transparent? 

Secretary DONOVAN. Absolutely. 

Senator BOND. And to what extent are those involved in the decisionmaking? 

Secretary DONOVAN. Let me be very clear. My ‘‘absolutely’’ was 

to the transparency. We make our decisions, particularly on competitive grants, in a highly transparent way. We publish the criteria for those as we did with NSP2. We have—with every single 

Recovery Act grant, have made those available on recovery.gov, our 

Web site, with detailed information about where the money is 

going, how it is being used. 

We have every applicant who wants to sit down with us and go 

through the details of how their application was reviewed and 

scored, we respond to those requests. We would be happy to sit 

down with you about any specifics around that. 

As you know, whether it is HOPE VI or a range of others, we 

run competitions, and we follow very, very strict guidelines in 

terms of how they are evaluated and—— 

Senator BOND. Is there any notification or transparency as to 

those who apply? We hear about some, but we don’t even know if 

we know all of the ones that are coming from our State so we can 

follow them. Is there a posting of the applications? 

Secretary DONOVAN. We notify members in advance of making 

those announcements. 

Senator BOND. Yes. But when you get the applications, do you 

notify? Is there any public notice of the application? Who is in 

there? Do you advise the representatives in Congress of those in 

advance of the process? 

Secretary DONOVAN. I will say I am not sure if we have a standard process for notifying members about applications in advance. 

We can certainly get back to you with more detail on the process 

we do follow. 

Senator BOND. My staff has some questions about that, and we 

are a little concerned. We look forward to working with you on 

that. 

Secretary DONOVAN. Okay. 

SUSTAINABLE COMMUNITIES INITIATIVE

Senator BOND. Because I think most members, certainly over on 

the Senate side and, I would assume, on the House side, would like 

to know if there are 3, 10, 15, or 20 coming in from our State. Because we want to work with them, and we may be able to shed 

some light on community support because we are out there. We are 

listening to the people. We know some of the challenges they face, 

what the State and local priorities are as well, and we want to see 

those taken into account. 
103 

If the State is putting money into it and the locality has some 

skin in the game, to me, that is a very good indicator that this is 

something the Feds should look at carefully. 

Let me ask some questions about—a major question about sustainability. Your DOT friends call it ‘‘livability.’’ I don’t know if 

that debate has been going on for a long time. But I want to make 

sure, once again, that the Federal Government is not forcing conclusions on local communities. 

How do you make these sustainability decisions? Do you do it 

with DOT and EPA? How much involvement do the State and the 

local governments have in working with you to make those sustainability determinations? 

Secretary DONOVAN. Let me say two things about that. First of 

all, we here—the fundamental issue here is that more and more 

American families are spending a huge portion of their budgets— 

the average family today spends 52 percent of their budget on 

housing and transportation combined. And not only that, they are 

sick of sitting in traffic rather than seeing their family or having 

long commutes in rural areas in some cases to get to jobs. There 

is a whole range of challenges that we see. 

And so, we feel we are responding to local needs and choices on 

that front. But the problem has always been that housing and 

transportation investments haven’t been coordinated at the Federal 

level because there wasn’t the kind of partnership that we are talking about. 

So we have begun to coordinate very closely with the Department 

of Transportation, with DOE—Department of Energy—and Environmental Protection Administration, just to give you an example. 

On the recent TIGER grants that were awarded as part of the Recovery Act, we had HUD staff and EPA staff actively involved in 

the process, first time it has ever happened, of evaluating TIGER 

grants, to look at the connection of those to housing. So that is an 

example of that. 

On the State and local piece of this, we believe very strongly that 

this is not a one-size-fits-all. And so, the very first initiative we are 

undertaking in our Sustainable Communities initiative is to provide, thanks to the subcommittee’s leadership, planning grants for 

local communities to be able to decide how they want to coordinate 

housing and transportation. This is not about us telling them. This 

is us providing help to them so that they can do the kind of planning and coordination, provide technical assistance. What are the 

best practices? 

And in fact, I don’t know if you were here, 25 percent of that 

planning money is specifically directed to smaller places to ensure 

that this isn’t just an urban or even suburban investment, but that 

we are doing planning. Tom Vilsack is very eloquent about this. We 

have worked a lot with him and his Department. 

Is how do we ensure in rural areas, whether it is main street 

where stores are leaving, that main street, whether it is figuring 

out what to do with upper floors of buildings along those main 

streets in small towns, whether it is connecting seniors to the services that they need, with kinds of transit that you wouldn’t see in 

larger urban areas. A whole range of ways that we can work together and those planning grants are the key first step, funded by 
104 

our 2010 budget, to be able to help local communities decide how 

they want to meet these challenges. 

STAFFING FOR INITIATIVE

Senator BOND. Well, I think that is very important that you have 

a right to ask of the local communities or regional areas what their 

plans are, and that is something I have worked on for about 40 

years. And making sure they have it all together and know what 

they are doing is important. And we would hope that the Federal 

agencies would make sure there are good plans that support the 

plans. 

Now, how many FTEs at HUD are working on this? Are you adding people? Are you reallocating people from other areas? How 

many folks do you have working on that? 

Secretary DONOVAN. I just asked my folks to get me the precise 

details. We have established an Office of Sustainable Housing and 

Communities. It is a small office. And the idea of that office is to 

coordinate, as I just talked about, with other departments that are 

working on this, as well as within the agency. 

So, for example, where we are retrofitting public housing, what 

we want to make sure of is we don’t have three different standards 

or different approaches to our multifamily programs, our public 

housing programs. So we are creating unified best practice standards that we would apply across the Department. And so, that is 

the nature of that office. 

For 2010, and this was a discussion I believe we had in some significant detail with your staff on the subcommittee, we have 20 

FTEs in total for 2010. And we expect for 2011 to have 23 FTEs. 

So it is a relatively small office, again coordinating just policy and 

programs across—between the departments, as well as across different silos within HUD. 

Senator BOND. I know the coordination is very good. You ought 

to decide with DOT whether it is sustainability or livability would 

be helpful. If you could at least agree on a title, that would be a 

good—a good start. 

On the FTEs, our big deal is are you dealing with the overall 

staff problems, making sure you have enough in FHA while you are 

moving people around? We know you need help, but do you have 

the FTEs you need? 

Secretary DONOVAN. Thanks to both the investments you made 

in the 2009 budget, as well as the investments in 2010 and some 

flexibility that you gave us in 2010, one of the concerns that I had 

when I came in—and we have worked very collaboratively with 

you—is that we had created very specific restrictions across nine 

different pieces of HUD in terms of FTEs. And the flexibility that 

you have given us has allowed us to increase hiring substantially. 

In FHA, we have literally hundreds of additional staff that we 

are bringing on to do that while trying to make sure that we are 

not overall increasing the size of the staff of the Department beyond what is necessary. 

SECTIONS 202 AND 811 PROGRAMS

Senator BOND. Now I have—as I indicated, I have some concerns 

about if there is a cutback in the 2012 budget based on problems 
105 

with the deficit. I would like to know how HUD plans to deal with 

it, and when you have put funding on hold for 202 and 811. Are 

you going to make sure that those programs—we will not overlook 

the people who are served by 202 and 811 while you push the current priorities. How are we going to make sure that those people 

are covered? 

Secretary DONOVAN. So, first of all, I think one of the most important things to recognize is that the vast majority of housing for 

seniors and people with disabilities today gets produced not by 202 

and 811, but by the tax credit and other funding sources. 

The issue—and I will tell you very honestly, I dealt with this 

very directly in my prior work, both in the private and public sector. It is very, very difficult, close to impossible in some communities to develop new 202 and 811s because the program is really 

designed, frankly, for the 20th century, not the 21st century. 

And because of the amount of funding that is available, the way 

that it is distributed, the rules that apply there is almost no case 

where a community can develop a 202 or an 811 without finding 

tax credits and a range of other sources to complement it. And yet, 

at the same time, the rules are not built so that you can combine 

those funding sources. 

So what we are proposing, just to be very clear, is not that we 

eliminate the program. We believe the intent of the program is absolutely critical. But what we need to do is reform the program so 

that it works efficiently with today’s way of producing affordable 

housing for seniors and people with disabilities. 

There is a reform bill that is being discussed on the House side 

where we agree with a large number of those changes. In addition, 

we believe there are other steps that could be taken, for example, 

to link up with the health funding streams at HHS that are often 

necessary, like PACE, for seniors as they age in 202s. And we need 

to make sure that we get the program right, we believe, before we 

continue to build new units under 202. 

Senator BOND. What I am worried about, I guess we are letting 

loose of the trapeze bar, and I want to see a trapeze bar there to 

hang onto. And the other thing is to manage, to continue the services and providing services in many of these target populations is 

critical. 

That is why Senator Murray and I promoted the VASH program 

to bring the VA and HUD together because the homeless veterans 

are very near and dear to my heart. They have some very serious 

problems that cannot be fixed with housing alone. I want to make 

sure that we continue those services. 

Certainly, you will have no argument from me on a need to clarify, consolidate, and simplify the HUD programs. That has been— 

that has been the thicket that every HUD Secretary I have known 

has found to be unmanageable. At the same time, as Senator Murray referred to it, I personally have a minimum amount of high 

confidence in the authorizing committees’ ability to deal successfully with these legislative changes in time to ensure there is not 

a gap. 

And we are going to have to work with you on that because anybody who looks at the legislative calendar in the United States 

Congress knows that even getting our appropriations bills done is 
106 

going to be a challenge. And we are going to have to have some 

discussion because the banking committees are trying to bite off financial regulation and that one is not going to be a simple markup in 2 days on the floor, at least in the Senate. And man, there 

is not enough time to do it. 

TRANSFORMING RENTAL ASSISTANCE

So we need to work with you on that. The TRA program, it is 

very optimistic. I would just ask you, what do you see as the key 

elements and the advantages of the TRA program over current programs? 

Secretary DONOVAN. So, today, given the way particularly let us 

take public housing as an example operates. Because it functions 

with both an operating subsidy and a capital subsidy, it is essentially 100 percent Government funded. And because of that, it is 

almost impossible, short of HOPE VI, to create with public housing 

the kind of mixed income, mixed use, 21st century housing that I 

believe our residents deserve and that our communities deserve. 

And so, fundamentally, what TRA is trying to achieve, beyond 

the simplification and all the benefits that come with that, is to 

bring public housing and our other programs into the mainstream, 

to stop having them be in some ways a parallel universe, if you 

will, from the way the rest of our housing market operates. 

And if you look at whether it is tax credits or the new ways that 

we develop affordable housing, they have all of those benefits public housing has not been able to get. At the same time, public housing has been underinvested in because it hasn’t been able to access, 

whether it is tax credits or, more broadly, private capital or other 

forms of public capital. 

The fundamental reason for that is because we have this dual 

system of operating subsidy and capital subsidy. So what may seem 

deceptively simple at one level, but I think has very, very powerful 

benefits is not just consolidating all these programs, but shifting to 

a system where we have one operating stream that allows public 

housing to leverage private debt, mix uses, mix incomes. All of the 

things that we do in the best public—best affordable housing today, 

we can achieve by shifting from this. 

And the last thing I would say is the fact that a low-income family has to make a choice between keeping their subsidy or moving, 

whether it is to get a job in a different community or a different 

neighborhood, to follow family, or for whatever reason they may 

choose to move, that fundamental choice that they have to make 

today, I believe, isn’t fair. And so, one of the key areas of the program would try to change that is to say let us give families more 

choices for mobility as we do in certain of our programs today but, 

at the same time, ensure that we keep the project-based, long-term 

stream of funding available for that property that I know you believe, and I agree, is so important to our efforts to keep communities strong. 

Senator BOND. I think when TRA was promised, was proposed— 

the legislation was promised this month—it is clearly a big and 

controversial effort, had lots of questions with it. And I think we 

need to have discussions with you about it and debate, I hope, 
107 

sometime. I don’t know when we can ever get floor debate, but 

have it brought up for thorough congressional debate. 

So when are we going to see it, and how much legislation is 

needed? My staff is saying that perhaps 90 percent of it can be 

done by regulation. What do you see as the process? When will we 

see the product? When will we get to start on the process? 

Secretary DONOVAN. So, first of all, let me just say I completely 

agree with you that this is an ambitious, large-scale effort, and I 

want to be clear, this will not be achieved in 1 year or one budget 

cycle. And so, what we have proposed is to begin it in 2011, focused 

on 300,000 units out of a much broader stock that is probably 10 

times that size. 

So we don’t believe that it is achievable, I think this aligns with 

what you just said, that all of this cannot be done in 1 year. It is 

going to take some time. Having said that, we will—we have been 

working very closely within the Department with stakeholders, 

begun discussions with the authorizing committees as well about 

legislation. 

We are committed to meeting the timeline that we laid out to get 

draft legislation put forward, and I would suggest that we would 

be happy to sit down as soon as possible with you and your staff 

to begin to answer any questions that you have and go through the 

details. 

Senator BOND. Well, we want to see what needs to be done. And 

if you are focusing on 300,000 units, that goes back to my initial 

concern. All the other programs that are being zeroed out, what is 

going to happen to those needs in areas that are not covered by the 

300,000 units? 

So, I mean, there are a lot of questions, and I think we will have 

to—we will know the scope of the questions when we see your proposal. 

So we need to have that soon, and at least in the appropriations 

process, we need to have that and to deal with it where we can and 

see what regulations need to be done, what has to be fixed legislatively or by appropriations or by regulation. 

Secretary DONOVAN. Yes. 

CHOICE NEIGHBORHOODS PROGRAM

Senator BOND. And the other thing, I appreciate you mentioning 

my old friend, HOPE VI again. How is Choice Neighborhoods better, bigger, longer, stronger an improvement, and what is going to 

be different about Choice Neighborhoods? 

Secretary DONOVAN. So let me try and be as specific as possible 

in terms of some of those changes. 

Senator BOND. Capsulize it, if you can. 

Secretary DONOVAN. I go to places all the time and hear how 

great HOPE VI is. And I want to be very clear; this program is 

building on HOPE VI, not doing away with it in any means. 

One of the constant issues I hear is we have done this wonderful 

HOPE VI redevelopment. But across the street is a project that is 

assisted with a different HUD program that we have no tool to be 

able to redevelop. And specifically, what I mean is our multifamily 

programs don’t have that same option. 
108 

Or there are 10 or 20 foreclosed homes on the next block that are 

the real problem in that neighborhood. They are creating crime. 

They are bringing down values. And yet we don’t have the flexibility in HOPE VI today to be able to include that kind of housing 

as well. 

So what we want to do with Choice Neighborhoods is to say it 

has been so effective on public housing, let us allow it to be used 

for our privately owned assisted housing or for other housing in a 

community. And that could be combined with public housing. 

In other words, the housing authority could come in and say, ‘‘We 

are going to do this public housing development, but we are also 

going to do the assisted housing across the street.’’ We have got 

many examples where they are in the very same neighborhood or 

even across the street. 

Or if the most challenging thing that you have in St. Louis or 

any other community is not a public housing development—and I 

know a number of them in St. Louis, for example, or Kansas City. 

But it is, in fact, a privately owned housing development that is 

the real problem. This would be a tool available to redevelop that 

housing. 

So I think that, in some ways, is the most fundamental change 

is that it takes what has been so successful in HOPE VI and expands it to our broader program. It just doesn’t make sense to me, 

frankly, Senator, that if simply because we fund something with a 

different program at HUD—and this is a little bit the theory behind TRA—that we ought to have totally different rules and programs available to them. This is trying to spread the lessons and 

broaden HOPE VI to other forms of housing. 

Senator BOND. Is that something, what you are talking about in 

needing to reach out and deal with others; is this something that 

should be fixed? Can it be fixed by the HOME funds that are given 

to localities? 

Secretary DONOVAN. I don’t believe, fundamentally, that it can be 

fixed by the HOME funds. Because traditionally, the way HOME 

funds are used is either in moderate rehabilitation or new construction. These are much more complex, really neighborhood revitalization schemes and redevelopments. And so—— 

Senator BOND. We want to know how—I mean, are we wasting 

money on HOME. I thought that HOME was going to do that. So 

we have a limited pot of money available, and I want to work with 

you to make sure we use those dollars the best way we can. 

Secretary DONOVAN. You know HOPE VI as well as anybody, and 

I think you know that what has been the secret of it is that it goes 

beyond just the bricks and mortar. HOME is a bricks and mortar 

program. And so, I think the fundamental difference is that whether it is HOPE VI or Choice Neighborhoods allows you to build in, 

whether it is a community room that has computer services available, whether it is the services that are available for literacy or 

other things for families, educational programs—all of those pieces 

that have really made HOPE VI so successful because it is about 

more than the bricks and mortar is something that Choice Neighborhoods would allow us to do. HOME is a bricks and mortar program. 
109 

FHA MORTGAGE REFORM

Senator BOND. As you know, I have worked long and hard to get 

child care centers and education centers and community centers. 

But when you are talking about a bunch of foreclosed houses, you 

have got a bricks and mortar problem in the community. 

Well, anyhow, this is a lot more discussion to be had later. Let 

me ask a final question on FHA mortgage insurance reform. How 

are you dealing with the mortgage default problems, especially in 

light of the proposed FHA reforms? 

How will the reforms impact the homeowners who are seeking 

help with mortgage defaults? Are these defaults primarily a GSE 

problem, or is FHA going to get in and start and put more taxpayer 

credit cards on the line explicitly rather than the implicit situation 

we have now? 

Secretary DONOVAN. So, going forward, we clearly believe—and 

this is why we have proposed the legislation and the changes that 

we have—that there are things we need to be doing to tighten to 

avoid future defaults. It is why we have suspended over 170 lenders last year, to say we would no longer do business with them. 

We have taken a number of steps that we are proposing legislatively to allow us to have greater powers to get rid of not just lenders, but the principles of those lenders from our programs. So we 

have a range of things we need to do more strongly. 

What I would say, though, is if you look at what has happened 

over the last year, defaults in FHA have certainly risen, but they 

have risen much more slowly than subprime and even prime mortgages at the GSEs to the point where, today, subprime defaults are 

triple what we see in FHA. 

So there is definitely more that we can do, but I think our full 

underwriting, fixed rate, no liar loan, all of the things that we have 

done traditionally and that we are strengthening to ensure we 

don’t make the same mistakes that were made in the subprime 

movement have helped us not have the same level of defaults. 

The only other thing I would say is we have the most extensive, 

most aggressive loss mitigation set of tools that exist. They allowed 

us to help about a half a million homeowners, last year, stay in 

their homes, despite the fact that they were struggling to make 

their payments. 

And so, that, along with the Home Affordable Modification Program and other new options that we have introduced, I believe 

allow us not just to avoid future defaults, but also to ensure that 

existing families that are struggling with unemployment remain in 

their homes where possible. We are not going to stop every foreclosure, nor should we. But I think we have taken very aggressive 

actions to do that. 

Senator BOND. I appreciate knowing about that. In Missouri, we 

had a very aggressive U.S. attorney who files a number of criminal 

indictments, and some of these are not just people who should be 

disbarred. But I hope where you find the requisite potential criminal intent, you refer them for criminal prosecution because some of 

this is shoddy, but in some instances, it is criminal. 

Obviously, there is much more to discuss. But the good news is 

I am being advised that I am running late for a whole bunch of 
110 

things that are stacked up. So we will have to let you go with 

thanks. We look forward to continuing to work on many of these 

things. We have just started the discussion. 

ADDITIONAL COMMITTEE QUESTIONS

The hearing record will remain open for additional questions. 

[The following questions were not asked at the hearing, but were 

submitted to the Department for response subsequent to the hearing:] 

QUESTIONS SUBMITTED BY SENATOR PATTY MURRAY

AFFORDABLE HOUSING FOR SENIORS

Question. Thank you for your testimony Mr. Donovan. The Nation’s shortage of 

affordable housing for seniors is significant. Currently, there are at least 10 seniors 

vying for every available section 202 unit. By 2020, an additional 730,000 senior 

housing units will be needed to address the growing housing needs of low-income 

seniors. Yet, the administration has proposed to eliminate construction funding for 

new 202 developments in order to redesign the 202 program. While I support efforts 

to reform the section 202 program, there is no doubt redesigning the program will 

be a lengthy process. How long does HUD propose to continue this funding freeze? 

Answer. HUD intends to return back to Congress in June with a legislative proposal. In addition, HUD will be working concurrently to implement a range of administrative reforms. While the goal is to effect the reform of the program as quickly as possible, at this point it is too soon to forecast how long this implementation 

process will take. 

Question. Why is HUD not able to work on redesigning the program while continuing to fund new projects? 

Answer. HUD is currently working on developing a roadmap for reform of the section 202 and 811 programs. This reform and redesign will increase the programs’ 

cost effectiveness. While this redesign effort is underway, given overall budgetary 

constraints, HUD must focus its limited resources on its core rental and operating 

assistance programs (including renewals for existing section 202 programs). It is 

these programs that can best leverage additional private and public resources. 

Question. What is the administration’s interim plan to address the growing demand for affordable senior housing while the redesigning process takes place? 

Answer. The administration’s fiscal year 2011 budget preserves critical resources 

for the elderly by maintaining full funding of core rental assistance programs such 

as section 202 operating renewals, Project Based Rental Assistance, the Public 

Housing Operating Fund, and Housing Choice Vouchers. In addition, new units will 

continue to come on line through the low-income housing tax credit program which 

produces approximately 10 times the number of affordable senior housing units as 

section 202. In addition, approximately 5,800 units of section 202 will become available to for the elderly in fiscal years 2011 and 2012 as a result of prior year funding 

commitments. 

SUPPORTIVE HOUSING FOR THE ELDERLY ACT

Question. As you may know, Senator Schumer and I have introduced the section 

202 Supportive Housing for the Elderly Act (S. 118), which would promote new construction, preservation, and conversion of section 202 housing by streamlining and 

simplifying administrative processes. Is it possible for HUD to make any of the suggested reforms to the section 202 program through report language or bill language 

included in S. 118? 

Answer. HUD generally supports the direction that S. 118 takes the section 202 

program. S. 118 includes facilitation of mixed finance structures, enhances preservation of existing projects, and refines the geographic allocation issues. However, a 

number of further items are currently being reviewed by HUD staff which are not 

fully addressed in S. 118. For example, we need more work to be done on building 

synergies with Health and Human Services and State Medicaid and Medicare programs to make sure that we bring into our section 202 projects elderly residents 

who can best take advantage of PACE and other Medicaid home and community 

based waiver programs. Staff will be looking at all of the items contained within 

S. 118 and can certainly work with the Congress to determine whether the reform 

plan can best be effected as stand alone legislation or as part of a revised S. 118 

bill. 
111 

SECTION 202 SUPPORTIVE HOUSING FOR THE ELDERLY ACT

Question. Alternatively, can HUD implement any of the proposed changes administratively through the processing of applications or in the notices of funding availability (NOFAs)? 

Answer. Yes. HUD anticipates implementing a wide range of administrative 

changes, in addition to proposing statutory changes, to affect a comprehensive reform of the section 202 program. 

SECTION 202 AND LOW-INCOME HOUSING TAX CREDITS

Question. Based on your testimony, HUD will make it easier to take advantage 

of low-income housing tax credits (LIHTCs). While I am supportive of this effort, 

I want to be clear that the neediest seniors, such as those eligible for section 202 

housing, may not benefit from this change given that section 202 units must be affordable to tenants at or below 30 percent of area median income, as opposed to 

LIHTCs, which require that housing be affordable to those at or below 60 percent 

of area median income. Can you expand on this initiative? Specifically: How does 

HUD plan to account for the housing needs of the most vulnerable seniors, such as 

the 202-eligible population, through increased use of LIHTCs? 

Answer. As part of the overall reform vision, HUD anticipates modernizing the 

section 202 program to make it easier for sponsors to work with other funding 

sources, such as the Low-Income Housing Tax Credit program (LIHTC). This reflects the fact that the section 202 program is no longer a ‘‘one-stop shop’’ to capitalize and sustain a project but rather serves as the critical final piece of an overall 

financing structure. Layering LIHTC with section 202 funding does not reduce affordability relative to section 202 program requirements; rather it makes LIHTC 

work to support a lower-income population. By leveraging LIHTC, which in recent 

years produced 10 times as many units of low-income housing for the elderly as the 

section 202 program, more projects can be made financially feasible and the reach 

of the section 202 program can be effectively expanded. 

Question. Current law allows section 202 developers to use LIHTCs in conjunction 

with HUD funding. How will HUD specifically make this a more streamlined and 

accessible process? 

Answer. The level of regulatory oversight associated with section 202 is commensurate with that which would be associated with full Federal funding of the development costs of construction. Yet even today, the program is expected to leverage a 

range of funding sources, often including low income housing tax credits. These 

other sources of funds bring with them important oversight, whether through State 

Housing Finance Agencies or local municipal lenders or from the involvement of tax 

credit investors and commercial lenders. These parties provide layers of accountability which HUD should generally not need to duplicate. As part of HUD’s ongoing review of the program, HUD will be looking to simplify its processing and 

oversight to better reflect its expected role in these kinds of projects. 

LOW-INCOME HOUSING TAX CREDITS

Question. Does HUD envision using 202 and 811 project rental assistance contract 

(PRAC) to subsidize LIHTC units as is currently done with tenant-based section 8 

assistance? 

Answer. For sponsors who are able to bring other sources of funds to a project 

such that they don’t require any capital advance funds from HUD, but otherwise 

are able to comply with the requirement of the section 202 or section 811 programs, 

HUD may consider the option of providing them with operating assistance only. 

Under this scenario, these projects would still serve the same populations, but at 

a much lower upfront cost to HUD. It’s not clear at this time that this scenario 

would have significant utilization given the challenges sponsors generally face in 

identifying capital funds. 

SECTION 202

Question. Lastly, I want to applaud HUDs proposed changes to make section 202 

a platform for the delivery of supportive services so that seniors can age in place. 

However, section 202 housing must serve a varied senior population, not just frail 

elders that qualify for nursing home-level care. In your testimony and budget submission you mention the Program of All Inclusive Care for the Elderly (PACE). Is 

it HUD’s intent to limit the section 202 program to seniors who are frail and/or participants in the PACE program? 

Answer. HUD is working with stakeholders and its counterparts at the Department of Health and Humans Services to answer that question. It’s HUD’s under-
112 

standing that PACE must be considered only one of a number of programs serving 

frail or near frail elderly in the community, particularly because PACE is only available in 30 States. Medicaid Home and Community-Based Service (HCBS) waivers 

is another program that has applicability to the section 202 program; HCBS waivers 

are found in 49 States. The section 202 program is an independent living program 

which does not require licensure, so it is unlikely that it would make sense for HUD 

to require all residents in a given building to be frail. Today, estimates suggest that 

38 percent of current section 202 residents are frail or near-frail. 

SELF-HELP HOUSING PROGRAM

Question. The Housing Assistance Council, as authorized by Public Law 110–246, 

receives funding to help support housing efforts in rural communities through the 

Self-Help Housing program. The HUD budget removed the funding for the Self-Help 

Housing program and instead merged it with the Capacity Building program in 

HUD. Unfortunately, the Capacity Building program as proposed by HUD is only 

funded at $60 million for fiscal year 2011, a decrease of $12 million from last year. 

I am deeply concerned about cutting funding to this program. Self-help housing and, 

more specifically the Housing Assistance Council have helped create affordable 

housing for rural communities across the country. These cuts may defer much needed resources to rural communities and limit housing options for rural residents. 

How is HUD going to ensure that rural communities will be able to access funds 

as the programs are merged together? 

Answer. The Self-help Homeownership Opportunity Program (SHOP) is not proposed for merger into the Capacity Building program. In the fiscal year 2011 budget 

request, HUD proposed to merge SHOP into the HOME Investment Partnerships 

Program (HOME). Self-help housing, including activity costs for land acquisition 

and infrastructure improvements, is already eligible under both HOME and the 

Community Development Block Grant Program (CDBG). Significant amounts of 

HOME and CDBG funding are already available to State and local grantees to fund 

self-help housing opportunities for low-income households, including in rural areas. 

In fact, the State CDBG program provides funding exclusively to all non-metropolitan areas of the State, including rural areas, far exceeding the coverage area, and 

funding level, of all of the SHOP grantees combined. It is true that self-help housing 

will be competing with other eligible activities for State or local HOME or CDBG 

funding, but Housing Assistance Council and other SHOP providers should be able 

to make a case for a share of the funding based on their past successful performance 

in SHOP. 

In addition, HUD has requested increased funding for a newly designed Capacity 

Building program totaling $60 million, $10 million more than the $50 million appropriated to the current section 4 Capacity Building program within HUD’s SHOP account. 

Finally, $25 million of fiscal year 2010 funding is being made available for competition in HUD’s Rural Housing Innovation program specifically targeted to rural 

communities. 

Question. How will HUD split the funding between self-help housing and the capacity building entities such as LISC and Enterprise Community Partners? 

Answer. In the fiscal year 2011 budget request, the Self-help Homeownership Opportunity Program (SHOP) is proposed to be merged into the HOME Investment 

Partnerships Program (HOME). Self-help housing, including activity costs for land 

acquisition and infrastructure improvements, is already eligible under both the 

HOME and the Community Development Block Grant Programs (CDBG). Significant amounts of HOME and CDBG funding are available to State and local grantees 

to fund self-help housing opportunities for low-income households, in both urban 

and rural areas. 

The fiscal year 2011 budget HUD has requested increased funding for a newly designed Capacity Building program totaling $60 million, $10 million more than the 

$50 million appropriated to the current section 4 Capacity Building program within 

HUD’s SHOP account. These funds would be made available for competition through 

a Notice of Funding Availability. 

Recipients will include national and regional intermediaries with local affiliates 

and partnerships, and consortia of intermediaries with demonstrated expertise. 

Funding for assistance will support organization and core skills of line staff and 

management so they can be partners with the administration as they implement 

key initiatives such as Choice Neighborhoods, Sustainable Communities, and the 

Catalytic Competition and work to restore the economic vitality of communities with 

significant needs. 
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QUESTIONS SUBMITTED BY SENATOR PATRICK J. LEAHY

SECTION 811

Question. The Final Rule for the HUD 811 program published in the Federal Register on September 13, 2005 section 891.809 lists a number of limitations on capital 

advances under that program including: (c) facilities currently owned and operated 

by the sponsor as housing for persons with disabilities, except with rehabilitation 

as defined in 24 CFR 891.105. However, recent HUD NOFAs for the 811 program 

essentially precludes funding applications involving such rehabilitation by stating 

that the refinancing of any Federal funded or assisted project or any project insured 

or guaranteed by a Federal agency is not permissible under section 811 and also 

that if the housing already serves persons with disabilities it can be rehabilitated 

as long as it hasn’t operated as housing for persons with disabilities for longer than 

1 year prior to the application deadline. Recognizing the importance of supportive 

housing to prevent homelessness and the fact that it is at least half as expensive 

to preserve existing units as to create new ones, would HUD consider allowing in 

the next NOFA the possibility of funding capital advances when rehabilitation is occurring as defined in 24 CFR 891.105? If not, would HUD entertain an 811 pilot 

in Vermont in which rehabilitation of units housing people with disabilities takes 

place? 

Answer. Section 891.809 is in subpart F of the regulations and these regulations 

govern the mixed finance feature of the section 811 Program. HUD’s understanding 

is that the intent of this mixed finance feature was to encourage the construction 

of additional units. The Department believes that it is important to use its limited 

resources to increase the supply of affordable housing for this population of very 

low-income households. Various policy changes for the overall program are currently 

under review. 

SECTION 202

Question. In Vermont, as well as in other rural and urban areas of the country, 

section 202 housing serves a varied senior population, including a substantial number of very frail elders. In my home State we are developing a service delivery model 

that would layer very nicely onto HUD 202 housing and meet the wide range of 

needs our seniors have—needs that no single existing program can meet. In the Department’s budget submission to Congress, the rational for zeroing out the 202 was 

program is that it needs improvement. I understand that most of the reforms to the 

section 202 program can be made administratively in your processing of applications 

or in the NOFAs. What is HUD’s timeline for the internal process of reform and 

is it possible to finish these reforms in time for the fiscal year 2011 funding round 

if Congress provides funding for section 202 this year? Can we help implement any 

of those changes through report language or bill language included in the subcommittee’s bill? 

Answer. We plan to return back to Congress in June with a legislative proposal. 

Our proposal will be based on analysis of the section 202 program by HUD staff 

as well as feedback solicited from stakeholder groups. We look forward to working 

with Congress to determine the best way to implement these recommended changes. 

QUESTIONS SUBMITTED BY SENATOR DIANNE FEINSTEIN

NEIGHBORHOOD STABILIZATION PROGRAM FUNDING DISTRIBUTION

Question. California is at the center of the home foreclosure crisis. The California 

metro areas of Stockton, Merced, San Bernardino and Riverside in particular have 

among the highest foreclosure rates in the country. And while the national annual 

increase in foreclosures appears to be leveling off, nearly 140,000 foreclosures were 

filed in California this year—one of the highest rates in the country. 

It is concerning to me that some of the hardest-hit areas of the country, such as 

Fresno, Merced, and Stockton, have been entirely left out for funding under the 

Neighborhood Stabilization Program (NSP) under the American Recovery and Reinvestment Act. 

On January 14, 2010 the Department announced the second round of NSP awards 

totaling $318 million in investment for California, yet nearly all applications submitted by projects in the Central Valley were rejected, despite a foreclosure rate of 

13 percent in that area. This raises serious concerns to me that a Federal program 

designed to stabilize and rehabilitate the hardest-hit communities could have completely overlooked the Nation’s epicenter for foreclosures. 

Why are areas with the highest foreclosure rates being denied NSP funding? 
114 

Answer. The Neighborhood Stabilization Program 2 (NSP2) funds were distributed on a competitive basis as required by the Recovery Act. The Department reviewed 482 applications that requested, in aggregate, more than $15 billion, more 

than 71⁄2 times the available funding. The Department established a thorough process to review applications and was ultimately able to fund 56 applications, less than 

12 percent of total. Of the funded applications, 31 received less than the amount 

requested in order to increase the total number of applications receiving funding. 

NSP2 applicants had to respond to six factors: Need in Target Geography; Demonstrated Capacity; Soundness of Approach; Leveraging of Other Funds or Removal 

of Substantial Negative Effects; Energy Efficiency Improvement and Sustainable 

Development Factors; and Neighborhood Transformation. Every applicant for NSP2 

funding had to demonstrate a high level of need in order to be eligible to apply for 

assistance but this was only one aspect of the competition. The bottom line is that 

NSP2 was a competition and some grantees responded in a more comprehensive 

manner than others. Ultimately, HUD’s review process awarded funds to the highest rated applications and need represented only one aspect of that competition. 

Question. What specific measures is the Department using to determine the funding distribution for NSP? 

Answer. The Neighborhood Stabilization Program 1 funding was distributed 

through a formula, and the criteria for that formula were identified in the Housing 

and Economic Recovery Act (HERA) of 2008. The criteria included: number and percent of foreclosures; number and percent of subprime mortgages; and number and 

percent of mortgages at risk of default. 

Neighborhood Stabilization Program 2 funding was distributed through a competitive program, using 6 factors: Level of need in Target Geography; Demonstrated Capacity; Soundness of Approach; Leveraging of Other Funds or Removal of Substantial Negative Effects; Energy Efficiency Improvement and Sustainable Development 

Factors; and Neighborhood Transformation. Further detail on the factors can be 

found in the Notice of Funding Availability (NOFA) issued on May 4, 2009. This 

NOFA can be viewed on the HUD Web site at: http://www.hud.gov/offices/cpd/ 

communitydevelopment/programs/neighborhoodspg/pdf/nsp2.nofa.pdf. 

Question. What is main rationale for not including additional funding for this important program in the fiscal year 2011 budget? 

Answer. While the Department did not request NSP funding as part of the fiscal 

year 2011 budget, Secretary Donovan has announced his support for an additional 

$2.1 billion for NSP funding to continue efforts already in place and to help address 

foreclosure and abandonment problems in communities that have not been reached 

via NSP1 or NSP2. 

The administration also announced plans to reallocate funds awarded through 

NSP1 that have not yet been committed to specific projects in order to drive more 

funding to the hardest hit communities. HUD has already awarded nearly $6 billion 

in NSP grants to help State and local governments respond to rising foreclosures 

and falling home values. Nearly $4 billion funded NSP1 through the Housing and 

Economic Recovery Act of 2008 (HERA) and an additional $2 billion funded NSP2 

through the American Recovery and Reinvestment Act of 2009 (Recovery Act). The 

initial NSP1 funds provided each State government with a ‘‘base allocation’’ of $19.6 

million without regard to varying degrees of need. Eighteen months later, the Department will recapture money from communities that have not yet committed 

NSP1 funding, and reallocate it to city and county governments with very high foreclosure and/or vacancy rates and their jurisdiction, based on the most recent data. 

HUD estimates that 70 percent of the $3.9 billion in NSP1 funds would be obligated 

by the 18-month deadline this Fall, in September and October 2010, for a recapture 

of approximately $1 billion. 

Through the recapturing process, HUD is working to use the resources we have 

already received and build on the success and lessons from NSP1 and NSP2, ideally 

with additional funding for a third round, to best target the recovery in hard hit 

areas based on their foreclosure and delinquency rates, vacancy problems and unemployment. We also want to go a step further by providing funds to help homeowners avoid foreclosure. 

COMMUNITY DEVELOPMENT FUND CATALYTIC INVESTMENT COMPETITION GRANT

DISTRIBUTION

Question. The new Catalytic Investment Competition Grant program proposed 

under the Community Development Fund in the administration’s budget request 

would provide economic development and gap financing to implement targeted investments for neighborhood revitalization. I am encouraged to see HUD further its 

efforts to help communities with the greatest need and potential for growth. How 
115 

would the proposed $150 million grant program take into account areas that are 

high-cost, such as California, to ensure they are not left out? 

Answer. The Catalytic Investment Competition will use the authorities of CDBG 

to provide capital for high impact, innovative economic development projects and to 

capitalize meaningful investments for neighborhood and community revitalization. 

Unlike CDBG, consortia including high capacity non-governmental entities may 

apply along with governmental entities. 

While HUD has not fully developed the competition framework, please be assured 

any program design will provide a level playing field for all applicants including 

those in high cost areas. Applicants will be required to develop a plan that includes 

measurable outcomes for job creation and economic activity and exhibit capacity to 

implement the plan. They will be encouraged to leverage other public and private 

community development and revitalization programs and to augment other placebased strategies, such as Choice Neighborhoods, Promise Neighborhoods, HOPE VI, 

and Sustainable Communities to help strengthen existing and planned investments 

in targeted neighborhoods to improve economic viability, extend neighborhood transformation efforts, and foster viable and sustainable communities. 

SECTION 202 HOUSING FOR LOW-INCOME SENIORS

Question. The administration’s budget proposes to reduce funding to support the 

construction of housing for very low-income elderly. The Department’s section 202 

housing program was funded at nearly $825 million in fiscal year 2010, but the administration has requested $274 million for fiscal year 2011. This is a cut of nearly 

67 percent to a program that many elderly Californians rely on for affordable housing. How will the Department continue to offer affordable rental housing to low-income seniors despite such a major budget cut? 

Answer. The $274 million requested for section 202 in fiscal year 2011 will cover 

the cost of project renewals only; no new production funds are being requested. 

These renewal funds will support the nearly 400,000 elderly residents who currently 

live in section 202 housing. In addition, in fiscal year 2011, HUD expects to house 

over 2.4 million families in public and assisted housing of which 58 percent are elderly or disabled and provide tenant based vouchers to more than 2.1 million households of which 47 percent are elderly or disabled. As well, HUD anticipates approximately 5,800 new units of section 202 will come on line during fiscal years 2011 

and 2012 because of prior year funding commitments. The Department will submit 

a section 202/811 legislative proposal in June that will address these issues. 

SELF-HELP HOME OWNERSHIP PROGRAM (SHOP) FUNDING

Question. The administration’s proposed budget does not request funding for the 

Self-help Home Ownership Program, which helps non-profit organizations leverage 

funds from outside private organizations to assist home buyers. 

The budget request proposes that the HOME Investment Partnerships Program 

could instead fund SHOP projects, yet the funding for HOME is also proposed to 

be cut from $1.82 billion in fiscal year 2010 to $1.64 billion in fiscal year 2011. 

It is my understanding that SHOP makes revolving funds available to non-profit 

organizations for future land development. In many urban areas, there are local 

funds that work in cooperation with HOME. In small and rural communities, however, there are seldom such funds available, making SHOP particularly important 

for these communities. 

How will the Department help support non-profit organizations that assist low income families despite eliminating the SHOP program and reducing funding for the 

HOME program? 

Answer. HOME funds are distributed by a needs based formula and all States, 

including those with significant rural area, are guaranteed a minimum HOME formula allocation. By statute, HOME funding for housing programs must be used for 

low-income families, including those that live in rural areas. In addition to HOME 

funds, a significant amount of State Community Development Block Grant funding 

is made available to local communities that are rural in nature. 

Most current affiliates of SHOP grantees (non-profit organizations) already qualify, or can easily qualify, as a Community Housing Development Opportunity 

(CHDOs) in the HOME program. This would make them eligible for funding for selfhelp home ownership activities from the 15 percent minimum set-aside of HOME 

funds specifically for qualified CHDOs, giving them an advantage over other groups 

competing for funds. In addition, CHDOs are eligible to retain proceeds from development activities, and annual funds for CHDO operating expenses. The CDBG program may also be used to create revolving loan funds at the State and local level 

for community development and housing activities in rural areas. The State CDBG 
116 

program provides funding for these activities exclusively to jurisdictions in non-metropolitan areas. 

SHOP funding is structured as direct funding to grantees for immediate use—it 

does not provide funding specifically for revolving loan funds. Two current SHOP 

grantees, the Housing Assistance Council and Habitat for Humanity, are national 

organizations that require their local affiliate organizations to repay 20 and 25 percent of the SHOP funds distributed to them for local self help home ownership programs back to these national organizations for deposit in their revolving loan funds. 

However, these loan funds are not necessarily used for self-help housing, but for a 

variety of other community development activities. 

QUESTIONS SUBMITTED BY SENATOR FRANK R. LAUTENBERG

PUBLIC HOUSING CAPITAL FUND

Question. The President’s budget request proposes a $456 million cut in the Public Housing Capital Fund. The $4 billion provided for the fund in last year’s economic 

recovery act was meant to supplement regular appropriations, not replace them. 

Given the substantial backlog of capital needs—estimated by your own agency to be as high as $24 billion—what is the justification for cutting funding that is so critical for the long-term sustainability of public housing? 

Answer. The Department agrees that there is a substantial backlog of deferred 

capital needs in the public housing program. Given fiscal constraints, the Department cannot realistically request enough funding to solve the backlog of capital 

needs through annual Capital Fund appropriations. For this reason, the Department is proposing to launch a multiyear effort called Transforming Rental Assistance (TRA). This initiative will preserve HUD-funded public and assisted housing, 

stem the loss of affordable units, enhance housing choice for residents and streamline the administration of HUD’s rental assistance programs. In 2011, the first 

phase of this initiative would provide $350 million to preserve approximately 

300,000 units of public and assisted housing by leveraging over $7 billion in private 

investment. 

At this point, PHAs have access to post transfers for operating purposes from Recovery Act formula funding ($3 billion), Recovery Act competitive funding ($1 billion) 

and Capital Funds allocated pursuant to the standard annual appropriation for 

2009 ($2.2 billion). In June, the Department will post transfers for operating purposes ($2.3 billion) from the Capital Funds pursuant to the 2010 appropriation. 

PHAs, therefore, will have access to more Capital Funds in 2011 because of the 

large amount of Capital Funding made available in 2009 and 2010. 

In previous years, PHAs have funded 8–11 percent of their Capital Funds to operations in order to make up for a shortfall in Operating Funds. The Department’s 

fiscal year 2011 budget request for the Operating Fund is for 100 percent of the eligible costs. Given the higher level of funding for the Operating Fund, PHAs will be 

able to keep an extra 8–11 percent in the Capital Fund account rather than funding 

it and will, therefore, be able to address more Capital Fund needs. 

Furthermore, PHAs continue to be able to obtain private financing through the 

Capital Fund Financing Program (CFFP) and through mixed finance transactions. 

PIH anticipates that PHAs will be able to borrow over $100 million in CFFP financing alone in 2011 (not including amounts leveraged in mixed finance transactions). 

Ultimately the Department believes that PHAs will have their best opportunity 

to address the backlog in capital need through participation in the Transforming 

Rental Assistance (TRA) initiative. PHAs that convert properties from the public 

housing program to a project based contract model under TRA can expect to position 

those properties to take advantage of private sector financing and leveraging to address capital needs backlog in a way that is not possible under the conventional 

public housing program. 

DRUG ELIMINATION PROGRAM

Question. Public housing authorities in New Jersey and around the country continue to face safety and security issues as a result of drugs and criminal activity. 

Prior to fiscal year 2002, public housing authorities were able to fund safety, security, and drug- and gang-prevention activities through the Public Housing Drug 

Elimination Program (PHDEP). Since that program has been eliminated, public 

housing authorities have struggled to find the funding they need to keep their properties free of drugs and crime. Does HUD have any plans to reinstate PHDEP? Is 

your agency willing to work with this subcommittee to get this program restored 

this year? 
117 

Answer. Safety and security of the public housing residents is part of the overall 

mission of the Department. Any capital improvements that improve the safety and 

security of public housing developments are an eligible use of the Capital Fund. 

However, some PHAs face greater needs stemming from unanticipated immediate 

needs that increase the threats to the safety and security of their residents. Emergency Capital Need in the amount of $5 million of the 2009 funding had been made 

available to address the needs for 2009 and $2 million of the 2010 funding is being 

made available to address the needs in 2010. The 2010 amount may be increased 

depending on the demand for funds from other types of emergencies and non-presidentially declared disasters. The Department is issuing a notice in June 2010 that 

defines the safety and security emergencies that will be covered by this funding and 

details the application process. The Department is always willing to discuss any 

ideas that will effectively improve the safety and security of our program recipients. 

EMERGENCY CAPITAL NEEDS

Question. In both fiscal year 2009 and fiscal year 2010, Congress allocated $20 

million to address the emergency capital needs of public housing authorities, including ‘‘safety and security measures necessary to address crime and drug-related activity.’’ As of February of this year, no applications had been received for this funding, largely because HUD had not issued any notices or guidance. Last December, 

I sent you a letter requesting that you make this guidance available as soon as possible. In your response dated February 5, 2010, you stated that you intended to 

‘‘make this information available to PHAs in the near future.’’ 

Has HUD provided public housing authorities with a formal notification of this 

funding? 

When do you expect eligibility guidelines, especially as they relate to the safety 

and security portion of this funding, to be made available to public housing authorities? 

Answer. Safety and security of the public housing residents is part of the overall 

mission of the Department. Any capital improvements that improve the safety and 

security of public housing developments are an eligible use of the Capital Fund. 

However, some PHAs face greater needs stemming from unanticipated immediate 

needs that increase the threats to the safety and security of their residents. Five 

million dollars of the 2009 funding had been made available to address the needs 

for 2009, and $2 million of the 2010 funding is being made available to address the 

needs in 2010. The 2010 amount may be increased depending on the demand for 

funds from other types of emergencies and non-presidentially declared disasters. 

The Department is issuing a notice in June 2010 that defines the safety and security emergencies that will be covered by this funding and details the application 

process. 

SECTION 202 SUPPORTIVE HOUSING FOR THE ELDERLY

Question. The President’s budget request includes a drastic cut to the section 202 

Supportive Housing for the Elderly program. Although I understand the need to redesign and modernize this program, demand for section 202 housing remains high 

and I am concerned about the effect this proposal will have on the Nation’s stock 

of senior housing. Why is it necessary to suspend funding in order to reauthorize 

and modernize section 202? 

Answer. In the context of severe resource constraints, the administration’s fiscal 

year 2011 budget targets housing investments to their most crucial and catalytic 

uses, primarily rental and operating assistance that best enable HUD’s partners to 

leverage additional resources. HUD requested the suspension of sections 202 and 

811 Capital Advance Grants in fiscal year 2011 in order to put both programs 

through a thorough review. Both programs have suffered from a lack of updating 

and an overhaul was needed to better target HUD’s resources to more cost-effectively meet the current housing and supportive service needs of frail elderly and disabled very low-income households. The Department will submit a section 202/811 

legislative proposal in June that will address these issues. 

QUESTION SUBMITTED BY SENATOR SUSAN COLLINS

HOUSING FIRST

Question. Housing First is an approach to ending homelessness that centers on 

providing homeless people with housing quickly and then providing services as 

needed. Maine has one Housing First model called Logan Place, a low income housing property serving 30 chronically homeless people. A second Housing First model, 
118 

Florence House, is expected to open at the end of this month and will serve 25 

chronically homeless women. 

Studies have shown that the Housing First model is highly effective at helping 

people maintain housing stability when they have a history of homelessness and disabilities. The Housing First approach does not require tenants to be sober or engage 

in services at the time of entry; rather, they are moved directly from the streets or 

emergency shelters and the services required to help them remain housed are provided to them. 

An in-depth study was performed in Maine on the cost of housing people vs. their 

remaining homeless, which assessed 99 participants, including most of the residents 

at Logan Place. The study concluded that housing people cost less than allowing 

people to remain homeless, and services were delivered in a more cost-effective manner. 

Is the administration considering the advantages of a Housing First approach to 

help address the growing number of homeless people? 

Answer. HUD’s McKinney-Vento funded Permanent Supportive Housing (PSH) 

program grantees are given flexibility to design programs that meet the community’s needs—including PSH programs that use the Housing First model. New 

HEARTH Act legislation allows this flexibility to continue for PSH programs. In 

general, communities have moved away from offering shelter-only alternatives, into 

service-based interventions such as safe havens, outreach, housing first and permanent supportive housing. By encouraging Continuum of Care (CoC’s) to shift from 

funding services to housing activities, HUD shifted millions of dollars from services 

funding into funding for housing activities. Persons with disabilities, including the 

Housing First target population of primarily chronically homeless persons, will continue to be targeted with 30 percent of annual homeless assistance awards. In the 

past, HUD has met and exceeded the Congressional requirement of 30 percent for 

permanent housing for persons with disabilities, which remains a requirement 

under HEARTH. 

QUESTIONS SUBMITTED BY SENATOR THAD COCHRAN

MANUFACTURED HOUSING

Question. Mr. Secretary, manufactured housing production has dropped to an annual rate of fewer than 50,000 homes, compared to nearly 400,000 units in 1998. 

Can you explain why the new FHA title I program rules for manufactured housing, 

which were authorized by Congress in the Housing and Economic Recovery Act of 

2008, have not been issued? 

Answer. The new Federal Housing Administration (FHA) title I program rules for 

the Manufactured Home Loan Program were issued on April 14, 2009, by title I letter, TI–481. 

The Housing and Economic Recovery Act of 2008 (HERA) provided for several 

changes to FHA programs to be initially implemented by notice in order to facilitate 

implementation of long-desired changes to FHA programs without having to wait for 

the often 12-month period it takes for a formal rule to be issued. On this basis, 

HUD implemented the HERA changes to FHA title I Manufactured Home Loan Program by title I letter. Although HUD implemented the new requirements by letter, 

HUD solicited comment on HUD’s implementation of these requirements through an 

April 21, 2009 Federal Register publication. 

HUD is currently developing the final rule, which takes into consideration the 7 

public comments received in response to the April 21, 2009 solicitation of comments. 

HUD believed that it was prudent to ensure sufficient public comment and did not 

rush to codify new regulations based on the title I letter, TI–481, issued April 14, 

2009. HUD believed that before codifying these requirements, it would benefit by 

seeing how the new requirements worked in practice, and whether clarifications or 

modifications would be needed before formal codification. HUD believes that it has 

benefitted from the year-long experience it has had in seeing how the rules in the 

title I letter have worked. HUD is developing the rule for codification, and will not 

only take into consideration the 7 public comments received, but also the experience 

to date of HUD and industry operating under the new requirements for the past 

year. However, until that rule is issued, title I Letter, TI–481, dated April 14, 2009, 

remains the rule implementing document. 

Question. You say in your statement that ‘‘the Federal Housing Administration 

(FHA) has stepped up to fulfill its countercyclical roll—to temporarily provide necessary liquidity while also working to bring private capital back to credit markets’’, 

but this has not been the case for manufactured housing. Do you believe that a non- 
119 

career administrator for the manufactured housing program would address this disparity? 

Answer. The FHA Commissioner has taken the leadership to address this disparity by responding to an invitation from Representative Donnelly of Indiana. Both 

the Congressman and the Commissioner will be meeting on June 2 in Elkhart, Indiana with key lenders along with Ginnie Mae, Fannie Mae, Freddie Mac and manufacturers to identify the issues for which these parties are seeking further clarification and information regarding the complex financial problems in both the primary 

and secondary markets. 

Question. Manufactured housing plays an important role in the housing market 

by providing families, often with a limited income, an opportunity for home ownership. What is HUD doing to help promote the manufactured housing marketplace, 

including international opportunities? 

Answer. HUD has worked to highlight the home ownership and community opportunities available with manufactured housing. This has included reports to help 

builders understand how manufactured housing could be used in their construction 

efforts. It is HUD’s general position that factory built construction (including manufactured, modular, and panelized) provides many opportunities and can contribute 

to local development activities. In addition, HUD provides Federal insurance 

through the FHA for loans to finance the purchase of manufactured homes. 

Also as noted in the response to question No. 4, HUD is working closely with the 

State Department and USAID on a variety of international housing development 

and urban policy issues. In meeting with representatives of other governments, 

HUD officials will take advantage of these new opportunities to highlight the benefits of U.S. factory built housing and related construction materials and products. 

Moreover, many housing products produced in the United States can be used 

internationally. HUD has worked with builders and manufacturers to help them understand how they might take advantage of opportunities for international sales. 

The manufactured housing building code (the HUD-code) is unique to the Unites 

States and may not be accepted in other countries. Therefore, manufacturers of 

HUD-code homes may elect to offer similar products produced on the same production line or produce other types of factory-built housing that can be more easily 

shipped such as panelized housing. In many cases, the manufactured housing production line could be used for many similar products. 

Question. I understand that you will be attending the United Nations World 

Urban Forum. This is especially unusual as HUD seldom, if ever, plays a role in 

international housing issues. Nevertheless, this is an opportunity to note the potentially inexpensive cost and housing opportunities represented by manufactured 

housing in many parts of the world. I urge you to use this opportunity to highlight 

the benefits and promote the use of manufactured housing to the international audience. 

Answer. HUD has engaged in international exchange programs for several decades. However, under the Obama administration, HUD has considerably expanded 

the scope and nature of its contacts with other governments and international organizations. The administration believes that many lessons can be learned from experience of other countries, and has seen value in these relationships. HUD is working 

closely with the State Department and USAID on a variety of international housing 

development and urban policy issues. In meeting with representatives of other governments, HUD officials will take advantage of these new opportunities to highlight 

the benefits of U.S. factory built housing and related construction materials and 

products. 

Moreover, many housing products produced in the United States can be used 

internationally. HUD has worked with builders and manufacturers to help them understand how they might take advantage of opportunities for international sales. 

The manufactured housing building code (the HUD-code) is unique to the Unites 

States and may not be accepted in other countries. Manufacturers of HUD-code 

homes may elect to offer similar products produced on the same production line or 

produce other types of factory-built housing that can be more easily shipped such 

as panelized housing. In many cases, the manufactured housing production line 

could be used for many similar products. 

Question. There have been a number of articles recently regarding the sale of 

thousands of manufactured housing units by FEMA into the marketplace. People 

have raised serious concerns about environmental and cost issues regarding these 

units. As the housing regulator for the Nation, what is your opinion on the potential 

impact on the marketplace for new manufactured units? What is HUD’s role in the 

resale of units, especially since another Federal agency is involved? If there are environmental issues, who is looking at those issues, and who is responsible for any 

related decisions? 
120 

Answer. HUD has no role in GSA’s resale of the temporary housing units as 

HUD’s regulatory role is limited to new sales and not resale. HUD regulates only 

how the home was designed, the compliance of the home when the manufacturer 

provided it to the first purchaser, and the first installation of the home. A small 

fraction of the units FEMA is selling through GSA are HUD-code manufactured 

housing. These manufactured housing units were produced to the same standards 

as all manufactured housing and have received periodic inspections and maintenance during their use. The small size of the FEMA manufactured homes is in stark 

contrast with the size of most of the manufactured housing units available in the 

United States. It appears unlikely a home buyer interested in a larger home would 

purchase one of these units instead of a new manufactured home. We anticipate the 

FEMA manufactured homes entering the resale market will be less expensive than 

new units, a result of the units being used and the smaller, single wide form. This 

could provide to some degree, increased home ownership opportunities for families 

of modest means. Following Hurricane Katrina, many manufacturers in the region 

produced units under contract to FEMA that are now available for resale. It is reasonable to expect that local retailers would be involved in the purchase, inspection, 

resale and installation of the units. HUD is not involved in the safety aspects of 

the units being sold through GSA and these issues rest with FEMA and questions 

should be addressed to FEMA. 

SUBCOMMITTEE RECESS

Senator BOND. The subcommittee will hold the next hearing on 

Thursday, March 25, at 9:30 a.m., on the Federal Housing Administration. 

Thank you very much, Mr. Secretary. 

Secretary DONOVAN. Thank you, Senator. And let me just recognize the great work and partnership that we have with Ken 

Donohue, who is our inspector general, around a lot of these fraud 

issues. I don’t want to let the record close without recognizing his 

partnership. 

Senator BOND. A very important additional tool that you and we 

have and we appreciate his good work. 

Thank you. 

Secretary DONOVAN. Thank you. 

[Whereupon, at 11:20 a.m., Thursday, March 11, the subcommittee was recessed, to reconvene at 9:30 a.m., Thursday, 

March 25.] 
(121) 

TRANSPORTATION AND HOUSING AND URBAN 

DEVELOPMENT, AND RELATED AGENCIES 

APPROPRIATIONS FOR FISCAL YEAR 2011 

THURSDAY, APRIL 29, 2010 

U.S. SENATE, 

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, 

Washington, DC. 

The subcommittee met at 9:30 a.m., in room SD–138, Dirksen 

Senate Office Building, Hon. Patty Murray (chairman) presiding. 

Present: Senators Murray, Dorgan, Lautenberg, and Bond. 

DEPARTMENT OF TRANSPORTATION 

FEDERAL RAILROAD ADMINISTRATION

STATEMENT OF HON. JOSEPH C. SZABO, ADMINISTRATOR 

OPENING STATEMENT OF SENATOR PATTY MURRAY

Senator MURRAY. Good morning. The subcommittee will come to 

order. 

This morning, we are going to be holding a hearing on the President’s budget request for the Federal Railroad Administration 

(FRA) and the budget request of the National Passenger Railroad 

Corporation, Amtrak. 

We’re going to be hearing testimony from two panels this morning. The first panel will include the Administrator of the Federal 

Railroad Administration, Mr. Joseph Szabo. The second panel will 

consist of three witnesses: Amtrak’s President and CEO, Mr. Joe 

Boardman; Amtrak’s inspector general (IG), Ted Alves; and the 

deputy inspector general for the Department of Transportation, Ms. 

Ann Calvaresi-Barr. 

I want to welcome all of our witnesses at this time and thank 

you for being here this morning. I look forward to hearing all of 

your testimony. 

Efficient rail transportation in America ties our community together. It creates jobs and boosts the economy and reduces the 

prices of goods being shipped. And it helps commuters around the 

country get to work. That’s why I’m so glad this administration has 

expressed a level of interest in rail transportation we haven’t seen 

in a long time. They understand the important role railroads play 

in our transportation system. 

This subcommittee has seen too many budget requests from previous administrations that would have guaranteed the bankruptcy 
122 

of Amtrak, which would have been devastating to commuters and 

communities across the country. 

I know families in my home State of Washington deeply value 

our Amtrak service. The Cascade line has set a new record for ridership this year. And I’ve personally heard from a lot of people who 

depend on it. 

I know that communities around the country value their rail 

service, as well. That’s why I’m so glad that this year the administration’s request for grants to Amtrak would support the railroad, 

although it does not meet all the needs identified by Amtrak itself. In addition, the administration is again requesting $1 billion for 

grants to support intercity and high-speed rail. This funding builds 

on the $10.5 billion provided for these purposes through the fiscal 

year 2010 appropriations act and the American Recovery and Reinvestment Act, including $590 million to improve high-speed rail in 

Washington State. 

And finally, rail transportation is being included with roads and 

mass transit in discussions about the Nation’s larger network of 

surface transportation. 

In the Recovery Act, we were able to provide States with the 

flexibility to invest their formula grants in freight and passenger 

rail. Rail transportation has also played an important part in the 

Department’s Transportation Investment Generating Economic Recovery [TIGER] grant program that I fought to include. 

But, we still need to recognize that all of this work, as well as 

recent proposals for additional funding, are happening at a time 

when financial constraints are increasing and likely to become even 

greater. As families across the country look for ways to tighten 

their belts, leaders here in Washington, DC need to redouble our 

efforts to get Federal spending under control and reduce our debts 

and deficit. That’s why the budget President Obama sent to Congress freezes domestic discretionary spending, and the budget resolution recently passed in the Senate Budget Committee goes a step 

further by reducing the spending by an additional $4 billion. 

We owe it to future generations to not burden them with debt. 

But, we also owe it to them to continue making the investments 

we know will strengthen our economy and make our country more 

competitive in the long term. That’s why I’m looking carefully for 

areas to cut spending. But, I also know that lower spending levels 

will make it more difficult for Congress, and for this subcommittee, 

in particular, to find ways to pay for important infrastructure programs. 

I know many people think the answer to this problem lies in 

funding—finding a source of funding outside of the annual appropriations process. The Highway Program and the Highway Trust 

Fund offer an easy example of a dedicated, and what has historically been a stable source of funding for transportation infrastructure. But, we should all understand that the financial constraints 

are just as real outside of the appropriations process. The Highway 

Trust Fund has been threatened with insolvency for more than 2 

years, and we still have not seen any realistic proposals to stabilize 

the Trust Fund throughout the next authorization period. 

This subcommittee has turned to appropriating funds directly 

from the general fund in order to provide additional investments in 
123 

our Nation’s roads and transportation infrastructure during the 

current fiscal year. 

So, there is no silver bullet and there’s no way to avoid making 

difficult decisions in setting priorities. And while I believe that the 

administration’s budget request would make important investments in rail transportation, there are still significant concerns 

that this subcommittee will have to consider for fiscal year 2011. 

The administration has failed to request any funding for positive 

train control, an important new technology for preventing rail collisions and derailments. And the administration’s budget request for 

grants to Amtrak does not address the railroad’s need to modernize 

its aging fleet. 

During this hearing, we will have the opportunity to look at 

those important issues. In addition, we’ll be able to get additional 

details on the administration’s effort to improve rail safety, and 

specifically its progress in implementing a risk-based safety program. 

However, one of the biggest questions is how well the new leadership at the Federal Railroad Administration and at Amtrak can 

manage our investments in rail transportation over the long term. 

In the very beginning of the Obama administration, the FRA was 

tasked with awarding $8 billion in grants for intercity and highspeed rail. The program was brand new and, as part of the Recovery Act, it needed to be set up immediately. 

Adding to these challenges, the FRA had never before administered such a significant grant program. Recent rail legislation has 

also added significantly to the agency’s workload. FRA needs to 

manage its new responsibilities and build a workforce that has the 

skills necessary to successfully complete all of that work. 

Amtrak also has new leadership, and there’s a new level of cooperation between its board and management team. They’ve 

worked aggressively to complete a new strategic plan, build the 

system for prioritizing capital needs, and develop a plan for modernizing its fleet. But, the real test of Amtrak’s new leadership 

team will be as the railroad implements its new plans. 

This subcommittee needs to see that the leadership at the FRA 

and at Amtrak administer their programs and manage their funding effectively and responsibly. Both organizations face significant 

challenges in the years ahead, but we cannot afford to waste taxpayer dollars or squander this unique opportunity to make our railroads work better for commuters, businesses, and communities 

across the country. 

With that, I will turn it over to my ranking member, Senator 

Bond. 

OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you very much, Madam Chair. 

And I join you in welcoming all of our witnesses today. 

And I thank you for outlining the tremendous budget squeeze 

we’re going to be facing this year. And it is going to take a great 

deal of work to deal with the challenges we have and the limits 

on—which are placed on us. 

And as the Chair said, making an already bad situation worse, 

the Congressional Budget Office projects that the national debt will 
124 

balloon to 90 percent of the economy by 2020. If interest payments 

on the debt remain at this same interest-rate level, we’ll have to 

pay $800 billion. Nobody who knows anything about finance thinks 

we won’t have a significant increase in interest rates when our 

debt gets that high. 

In other words, we’re drowning in debt. And the situation is 

going to get worse. The decisions we make on the budget and appropriations will be critical to the future economic health of our 

Nation. And we have to find the right balance, spending to fund 

critical national priorities. 

And, Madam Chair, as you’ve—as you have already described, 

our general revenue programs compete against one another. It’s 

transportation versus housing. Both programs have strong proponents, as well as very compelling needs. And they seek to maximize funding for their priorities. High-speed rail, Amtrak capital 

assistance, and fleet are all in direct competition for funding with 

other transportation priorities, as well as critical housing and community development programs for the poor. 

HUD is also in this same pool—is seeking significant funding for the coming year: $250 million for Choice Neighborhoods, $350 million for transforming rental assistance. In addition, these programs, in total, are likely to cost several billion dollars more in 

each subsequent fiscal year. 

At the same time, HUD is proposing the elimination of dedicated 

funding for housing programs that help the elderly and disabled. 

These are very important programs. There is great need, and obviously there’s great support in Congress for them. How we balance 

those funding needs, both old and new programs in HUD, are difficult, under whatever allocation we receive for the year, let alone 

in competition with substantial old and new transportation funding 

requests, and especially rail, which are likely to require not just 

significant, but huge increases in the subsequent fiscal years. 

Personally, I grew up as a railroad fan. I always loved trains. 

First time I got a chance to ride on a train, I loved it. I rode on 

a train. When I got to be Governor, I started State funding for Amtrak. And there was nothing greater than taking my very young 

son from Jefferson City to Kansas City, or to the State fair at Sedalia. So, I come here as a rail fan. 

But, at the same time, if we increase funds for transportation 

projects like Amtrak, when we have these other needs, we are, in 

a very real way, in danger of railroading the poor, using limited 

general revenues to pay for rail, rather than housing programs. 

And housing programs are not optional. We have people who depend on housing. And we can’t walk away from them. 

I think it’s important, first, to take a look at the unprecedented 

amount of money rail projects have already received. No one can 

deny that there’s a lot of money going to fund the rail these days, 

following the passage of the American Recovery and Reinvestment 

Act of 2009 [ARRA]. In fact, the biggest winner within the Department of Transportation, government-wide, has been the FRA. They 

are trying to manage grants, beyond their wildest dreams, when 

the Passenger Rail and Investment Improvement Act of 2008 was 

signed into law. Who would have anticipated the rail would be the 

beneficiary of so much general revenue paid for by the American 
125 

taxpayer? These are not dedicated funds, as the chair has pointed 

out, paid for by users of passenger rail or freight. These are general 

funds paid by all our taxpayers. Amtrak received a record $1.3 billion in 2009 for capital grants, while high-speed rail received $8 billion, with an additional $2.5 

billion in 2010. FRA had some experience in managing Amtrak 

grants, but a whole new $10.5 billion program on top of Amtrak 

and all of the safety programs they are responsible for overseeing 

has to be a work in progress for any modal administration. 

With this sudden new influx of billions of taxpayers’ dollars, I 

want to ensure American taxpayers that not only are they getting 

what they are paying for, but also know what they’re paying for. 

With billions more taxpayer dollars poured into Amtrak, which 

has—let’s be honest—has had management problems in the past, 

I want to ensure that these dollars are not victims of waste, fraud, 

and abuse. 

To ensure that taxpayers get the oversight and transparency 

they deserve, I’ve asked the Government Accountability Office to 

review the first $8 billion awarded for high-speed rail grants. I believe the American taxpayers need to know how the administration 

chooses the projects to fund with their money. That includes how 

projects are reviewed, ranked, and scored within the Department. 

Taxpayers also deserve to know how the Department applied its 

criteria for selection and the process used in evaluating awardees. 

They need to know how the score is given to each of these projects 

selected, and those which were rejected for funding in the first 

round. It’s critical for our subcommittee to understand the nature 

of the projects funded and to what extent they represent a departure from, or a continuation of, existing rail service and networks, 

and how they will fit in to the National Rail Plan due to the subcommittee on September 15 of this year. 

What’s the future of rail in America? What does the unprecedented amount of new funding mean? This, to me, is a very important question. The American public and the private sector are unclear on if the recent funding for rail in America is just a blip or 

if rail is here to stay. Are we looking to fund beyond the $1 billion 

proposed, per year, by the administration, for high-speed rail? Are 

we supportive of Amtrak’s new fleet proposal, which, over the period of 2040, will cost approximately $23 billion, in 2009 dollars? 

When taxpayer dollars are already scarce, where’s the money coming from? Will it come at the expense of critical programs under 

HUD or the fund—the funding needs of traditional transportation 

programs, like highways, roads, and bridges? 

Last year, $1 billion in the budget for high-speed rail turned into 

$2.5 billion when we went to conference with the House. This was 

due, in part, to artificially inflated budgets for transportation without any details or plans for a National Infrastructure Bank. When 

the National Infrastructure Bank failed to get—garner needed congressional support, we had general fund money on the table that, 

in my view, should have gone to critical programs to help struggling families or deficit reductions, rather than the rail industry. 

If Congress goes even further to fund high-speed rail this year, 

we’re definitely railroading the poor to pay for passenger rail. Especially true this year, when there’s not a unified National Rail Plan 
126 

that includes passenger rail, high-speed rail, Amtrak, State rail 

plans, freight rail, and a cost-to-complete estimate. 

Right now, when it comes to rail, no one has a complete picture— 

we’re looking—of what we’re looking to build; a map of the plan; 

how we’re going to pay for it, or how much it will cost us. 

Under last year’s appropriations bill, we’re supposed to get the 

plan on September 15. That plan should contain a map—which corridors have been identified as high-speed rail investment priorities 

for the administration. We need cost estimates for these corridors, 

and we should have benchmarks, an idea of how incremental improvements along existing rail networks will benefit the traveling 

public. And they have to be fully integrated with State rail plans 

and Amtrak existing lines. 

We should know the full cost of the equipment necessary to run 

the system. Today, to be quite honest, despite our inquiries, we 

don’t know what we’re building, how much it will cost, and whether 

or not rail investment in America is here to stay, without dedicated 

funds, because the cost seems to be going out the roof. 

The proposals, so far, have been just a handout of general revenue, with no funding source attributed to it, when our country, as 

I have indicated earlier, is going further and further into debt. 

The worst part is, under the Recovery Act and grants in 2010, 

we don’t even know what they’re building and whether the use of 

taxpayer dollars for this purpose is an appropriate use of funds, because, as I said, we don’t have the plan. 

In March, Secretary LaHood testified before us on the budget, 

and claimed that, quote, ‘‘When President Eisenhower signed the 

Interstate Highway bill nobody knew how we were going to pay for 

all of it. So, I’m not going to sit here and tell you that I know 

where all the money’s going to come from for high-speed rail’’. 

Well, I was impressed with that statement. It turned out—but, 

it turns out that statement is simply false. According to research 

done by Transportation Weekly, the national interstate map predated the Interstate Act—the map predated the act by 10 years. 

The 1944 Highway Act directed 48 States to designate, jointly, a 

map for a national system of interstates, up to 40,000 miles. The 

State—the States designated 37,700 miles. And a map was approved by Congress in August 1947. The map remained pretty 

much unchanged, although added miles have been designated and 

constructed, throughout the years. 

On the cost of the map, Congress did have an idea of the cost, 

because Congress asked the Department of Commerce to conduct 

a comprehensive highway study—a cost study—and submit it by 

February 1995. And Congress required an updated State-by-State 

cost estimate of the interstate system every 4 years. 

Will your National Rail Plan due to us September 15 include a 

detailed map, a cost-to-complete estimate? I’m afraid I must assume the answer to those questions is ‘‘no.’’ 

For that reason, in this year’s appropriations bill, I asked that 

you provide us with a description of the funds necessary for you to 

complete a true cost—add a true cost-to-complete study map. We 

have to have that. 

In addition, I’d like your input, Mr. Administrator, on how much 

you believe a study would cost, and how this could be worked into 
127 

you current plans for completion of the National Rail Plan. Until 

we have this information, in my view, it would be irresponsible for 

the subcommittee to give the high-speed rail program any additional funds. 

Along with the high-speed rail plan, we have Amtrak, which 

should be included in the National Rail Plan. And I think you 

would agree. I think the Department would include Amtrak’s capital needs and fleet requirements in the plan. 

I’m pleased that, for the first time, Amtrak submitted a 5-year 

capital budget plan along with its annual appropriations request. 

However, as soon as we get a comprehensive plan, we find an addendum to the plan, which is a sizable investment of $446 million 

in the Amtrak fleet. Is Amtrak going to amend this year’s capital 

budget request to include fleet where we can see what priority new 

fleet plays, versus Amtrak traditional capital requirements and 

Americans with Disability Act requirements? When we’re dealing 

with general fund appropriations, I think we need the answer to 

these questions before we provide the resources. 

Amtrak sent our subcommittee its addendum to their budget 

submission on March 22 of this year. It’s not been cleared by OMB, 

and is not part of Amtrak’s regular 5-year capital plan. These are 

additional capital funds Amtrak’s seeking for its aging fleet. It’s not 

included in all of the planning and included in the budget on 

which—with which we have to work. 

I’m thankful that—don’t get me wrong—they’ve finally submitted 

a fleet plan. At least there’s a plan and a cost-to-complete estimate, 

unlike our National Rail Plan and high-speed rail plan. But, once 

again, there are no funding sources identified other than general 

funds and loans paid with paid interest by the general fund. In 

other words, these loans are going to be a burden on future general 

revenue. 

Once again, Amtrak is competing with HUD and, potentially, 

other forms of transportation and, potentially, railroading the poor, 

if this subcommittee agrees to pay $446 million in additional capital for a fleet or agrees to incur additional debt service using general funds for loans they may take out on fleet in 2011 and beyond. 

All of these resources should be contained in one comprehensive 

National Rail Plan. If you agree with Amtrak’s fleet plan, Congress 

will agree, over the next 30 years, to pay $23 billion, in 2009 dollars—$46 billion in escalated dollars—or more, to provide replacement fleet to Amtrak’s system by 2040. Whichever approach is 

taken, it will be a very costly endeavor to acquire the fleet replacement at the same time that we’re attempting to build high-speed 

rail and, in the mind of the administration, enhance State service 

of passenger rail. 

What’s the priority? We’ve got to establish some priorities. Rail 

supporters have to know that there are limits, even in the best of 

times, to these pie-in-the-sky requests and to those of us who are 

rail fans, or who used to be, I’d have to say. Given our current deficit, you have to admit, the initial request of $446 million outside 

of the budget and capital plan is inappropriate. Why is Amtrak 

asking for replacement of locomotives on the Northeast corridor 

and single-level long-distance cars? 
128 

Now, replacing aging locomotives along the Northeast corridor 

might be acceptable, because at least they’re operating on a much 

lower cost per mile and per passenger subsidy than other routes for 

Amtrak. But, long-distance service last year only had 1.7 million 

riders, with a cost-per-passenger subsidy of $153. Replacement of 

long-distance cars in Amtrak’s fleet, in 2009 dollars, is $4 billion. 

These are the most costly routes on the current Amtrak system. 

And Amtrak is proposing to ask for some of these cars first. 

Where’s the proposed money supposed to come from? Who’s going 

to pay? Will it be the taxpayer paying for rail once again, at the 

expense of the poor? If Amtrak chooses to go the loan route for the 

fleet, this subcommittee would have to pay for debt service far into 

the future. We’re really bilking the poor in the future to pay for 

rail. Long after I have stepped aside, general funds would be needed to pay for out-year budgets for funding decisions that would be 

made now. 

My closing note is that all this doesn’t even touch the safety side 

and unmet funding needs for positive train control by 2015. Last 

year, our subcommittee provided $50 million in grants for positive 

train control. The new regulation is estimated to cost upwards of 

$13 billion to $15 billion for the rail industry alone, and $2 billion 

for the transit industry, and there’s nothing in the budget for the 

safety program. With a $12-trillion-and-growing Federal budget, we 

just can’t throw Federal funds at projects willy-nilly. We need to 

answer these tough questions. We need a roadmap for the future. 

And we need to balance scarce taxpayer dollars. 

I apologize, Madam Chair, for the time, but I think the magnitude of the problems—of the prioritizing problems we face deserve some answers. 

With that, I look forward to the testimony of the Administrator. 

Senator MURRAY. Thank you very much, Senator Bond. I appreciate it. 

And, Mr. Szabo, we will turn to you for your opening statement. 

STATEMENT OF HON. JOSEPH C. SZABO

Mr. SZABO. Very good. Thank you, Madam Chair, Ranking Member Bond, and members of the subcommittee. 

Appreciate the opportunity to appear before you today to discuss 

FRA’s fiscal year 2011 budget request. 

Our $2.9 billion request reflects the administration’s commitment 

to keeping the national rail transportation system safe and supports the administration’s pledge to provide the traveling public 

with sound transportation alternatives to flying or driving. 

Without question, this is a transformational time at FRA. The 

impact of the Rail Safety Improvement Act, which requires more 

than 40 rulemaking studies and reports, the passenger—the passage of the Passenger Rail Improvement and Investment Act and 

its new initiatives in bringing the States in as partners if the development of passenger rail, and then, of course the American Recovery and Reinvestment Act has just set about an unprecedented 

time at our agency. 

Over the past year, FRA has executed its rail safety regulatory 

mission while simultaneously implementing an entirely new line of 

business, the design and management of a multibillion-dollar high- 
129 

speed rail grant program. And transformation does not come without obstacles, challenges, and lessons learned. 

Considering FRA’s fiscal year 2011 budget request, I hope the 

subcommittee recognizes the care that was taken to present a request that supports our key mission—rail safety—while also enhancing our capacity to manage high-speed rail programs. 

And I want to emphasize that when we put this budget together, 

we didn’t just take last year’s budget and start making adjustments to it; we sat down with a blank sheet of paper and started 

from scratch, taking a look at all of our new requirements, all of 

our priorities, and from there, developing a fresh budget. 

For fiscal year 2011, we’re proposing a strong blend of safety program enhancements and technical budget changes. Currently, all of 

FRA’s administrative and operational expenditures and several 

safety-related programs are funded under a single account entitled 

‘‘safety and operations.’’ 

In fiscal year 2011, we propose to eliminate this account and 

break it into two new accounts: Railroad Safety and Federal Railroad Operations. The proposed new account structure is more 

transparent and will provide greater insight into the cost of FRA’s 

safety-specific program activities and internal administrative operations. 

Programmatically, under the new Rail Safety account, a total of $49.5 million is requested to carry out FRA’s mission-critical railroad safety functions and activities. A total of $153.8 million and 

948 full-time equivalents [FTEs] are requested under the new Federal Railroad Operations account to fund FRA’s administrative activities, such as payroll, information technology infrastructure, and 

other shared costs, and provide the necessary human resources to 

ensure sound stewardship of our FRA safety programs. This includes 62 new positions that will enable FRA to make measured 

progress on the responsibilities mandated by the Rail Safety Improvement Act, PRIIA, and the administration’s high-speed rail initiative. 

Finally, FRA’s 2011 budget activities include a rail safety user 

fee, which is modeled after the FRA-administered fee between 1991 

and 1995. FRA estimates that $50 million could be generated for 

defraying the salaries and benefit costs of up to 330 of our rail safety inspectors across the country. 

A total of $40 million is requested to support FRA’s Railroad Research and Development Program. Specifically, in fiscal year 2011, 

FRA will focus added resources on railroad system safety, train 

control testing and evaluations, and the newly authorized Rail Cooperative Research Program. 

Although the foundation for a Federal-State partnership began 

with the passage of the Passenger Rail Investment and Improvement Act [PRIIA], it was the $8 billion provided in ARRA that has 

truly advanced the high-speed rail initiative. This year’s $1 billion 

request continues funding to advance passenger rail infrastructure 

and includes up to $50 million for program administration and 

oversight activities, $50 million for planning grants, and $30 million for high-speed rail research and development. 

FRA and Amtrak have shared a strong partnership for decades. 

The fiscal year 2011 budget request for Amtrak, which totals 
130 

$1.637 billion, is a reflection of this administration’s continuing 

support of this relationship. Within the overall request, $563 million is requested for Amtrak operations and to support their ongoing efforts to reshape the company by undertaking meaningful reforms. 

A total of $1.052 billion is requested for Amtrak’s capital needs 

and debt service. And this includes $281 million to finance Amtrak’s ADA requirements. 

Finally, $22 million is requested for a direct grant to the Amtrak 

Office of Inspector General. 

PREPARED STATEMENT

The past 18 months have just been filled with exciting but challenges at FRA. But, it’s been a great challenge. And it’s—even 

though it’s been a challenge, it’s been fun. And we’re continuing to 

enhance the safety of our Nation’s freight and passenger rail systems, while also driving forward this vision of investment in highspeed passenger rail. 

So, with that, I look forward to the subcommittee’s questions. 

[The statement follows:] 

PREPARED STATEMENT OF HON. JOSEPH C. SZABO

Chairwoman Murray, Ranking Member Bond, and members of the subcommittee: 

Thank you for the opportunity to appear before you today to discuss the Federal 

Railroad Administration’s (FRA) fiscal year 2011 budget request. 

This request, which totals $2.9 billion, reflects the administration’s commitment 

toward keeping the Nation’s rail transportation systems safe, secure, and efficient. 

In addition, this request supports the administration’s pledge to provide the traveling public with a practical, energy efficient, and environmentally sound alternative 

to flying or driving, particularly where there is congestion in the air or on the roads, 

through strategic investments in high-speed rail. 

As you know, in April 2009, I was appointed as the FRA Administrator. I arrived 

to find FRA in the midst of a grand realignment. The entire organization was focused not only on the effective implementation of the Rail Safety Improvement Act 

(RSIA) and the Passenger Rail Improvement and Investment Act (PRIIA) that were 

enacted in October 2008, but on the requirements of the American Reinvestment 

and Recovery Act (ARRA), which was passed in February 2009. The impact of these 

mandates on FRA has been significant. RSIA and PRIIA mandated new and expanded safety mission responsibilities and programs, while ARRA appropriated an 

unprecedented $9.3 billion in resources for intercity passenger rail programs. 

Over the past year, FRA has executed its rail safety regulatory mission, while simultaneously implementing an entirely new line of business—the design and management of a multibillion-dollar, discretionary high-speed rail grant program. As expected, this transformation has not come without obstacles, challenges, and lessons 

learned. However, the support this subcommittee has given to FRA has enabled our 

agency to acquire the staff and resources to fortify our continued success. In fact, 

we are making good progress in building our workforce. We have hired and/or made 

offers to nearly one-half of the 20 new positions that were funded in fiscal year 2010 

and have active recruitments for the remaining positions. I expect within a few 

months, FRA will have the majority of the new staff in place. 

In considering FRA’s fiscal year 2011 budget request, I hope the subcommittee 

recognizes the great care that was taken to present a request that fully supports 

the heart of our mission—rail safety—while continuing to enhance our capacity to 

manage the comprehensive management and oversight requirements of the highspeed rail grant program. 

RAILROAD SAFETY

For fiscal year 2011, we are proposing a strong blend of safety program enhancements and technical budget changes. 

Currently, all of FRA’s administrative and operational expenditures (i.e., salaries, 

benefits, GSA rent, Working Capital Fund contributions, etc.) and several safety-re-
131 

lated programs (Automated Track Inspection Program (ATIP) and Railroad Safety 

Information System (RSIS)) are funded under a single account titled ‘‘Safety and 

Operations.’’ In fiscal year 2011, the major technical change proposed is the elimination of the overarching Safety and Operations account and the establishment of 

two new, more targeted accounts: (1) Railroad Safety; and (2) Federal Railroad Operations. The proposed new account structure is more transparent and provides insight into the cost of FRA’s safety-specific program activities, as well as FRA’s internal administrative operations. The new structure will allow FRA to be more precise 

in its reporting and accountability and directly supports the administration’s transparency initiatives. Programmatically, under the new Railroad Safety account, a total of $49.5 million 

is requested to carry out FRA’s mission-critical railroad safety functions and activities. This new account captures the costs associated with FRA’s major rail safety 

program activities, which were previously funded under Safety and Operations. Activities proposed to be funded under the new Railroad Safety account include: Automated Track Inspection Program (ATIP), the Risk Reduction Program (RRP), and 

FRA’s safety inspector-related travel. 

FRA MANAGEMENT AND ADMINISTRATION

A total of $153.8 million and 948 full-time equivalents (FTE)/979 positions are requested under the new Federal Railroad Operations account to fund: (1) FRA’s administrative activities such as, payroll, information technology infrastructure, and 

other shared costs; and (2) provide the necessary human resources needed to accomplish a myriad of priorities and to ensure the sound stewardship of FRA rail safety 

compliance, research and development, and financial assistance programs. 

Included in this request are 62 new positions that will enable FRA to continue 

to make measured progress on accomplishing the responsibilities mandated by 

RSIA, PRIIA, and the administration’s high-speed rail initiative. These new positions minimize FRA’s operational risk and will allow the agency to hire additional 

staff with the specialized skills and experience (e.g., civil and mechanical engineers, 

environmental specialists, and financial analysts) necessary to fully support FRA expanding programs and mission-essential activities. 

Finally, FRA’s fiscal year 2011 budget includes a rail safety user fee. The rationale for this fee is consistent with that of other DOT Modal Administrations that 

have a fee structure to help finance, in whole or in part, costs associated with safety 

mission programs and activities. This user fee is modeled after a rail safety user 

fee FRA administered between 1991 and 1995. As proposed, in fiscal year 2011, FRA 

estimates $50 million in collections could be generated for use in defraying the salary and benefit costs of up to 330 rail safety inspectors across the country. 

RAIL RESEARCH AND DEVELOPMENT

A total of $40 million is requested to support FRA’s railroad research and development program and agenda. Specifically in fiscal year 2011, FRA will focus added resources in the areas of railroad systems safety, train control testing and evaluations, 

and the newly authorized ‘‘Rail Cooperative Research Program.’’ This new initiative 

will enable FRA to efficiently gather input from stakeholders to identify and validate rail research priorities and accelerate the real-world impact of FRA’s research 

and development program by strengthening the academic and industrial railroad 

technical communities. 

HIGH-SPEED RAIL

In less than 2 years, we have witnessed the notion of intercity transportation 

change across the county. Although the foundation for a Federal-State partnership 

to focus on the development of high-speed rail began with the passage of PRIIA, it 

was the $8 billion provided in the ARRA that has truly advanced this initiative. Delivering on the administration’s vision and realizing the benefits of high-speed rail 

requires a long-term commitment at both the Federal and State levels. For this reason, last year, the administration proposed a multiyear initiative to invest $5 billion 

over the next 5 years to leverage resources at the State and local levels, as well as 

in the private sector. This initiative will fund strategic investments that yield tangible benefits to intercity rail infrastructure, equipment, performance, and intermodal connections over the next several years, while building capacity for future 

corridor development. This particular program is also expected to have a positive 

impact on the Nation’s rail-related manufacturing sector, which has declined over 

the past two to three decades. As the major corridor projects are awarded, the steel 

and rolling stock necessary to build and operate the infrastructure can be supported 

by our country’s factories and a talented workforce. 
132 

The $1 billion requested in the 2011 budget is the second year of the administration’s 5-year high-speed rail initiative. These resources will continue support of the 

administration’s vision to provide a sustainable 21st-century rail transportation solution that is energy-efficient, environmentally sound, and leverages State, local, 

and private sector resources and partnerships. This request continues funding to advance the high-speed rail infrastructure capacity across the Nation and includes up 

to $50 million for program administration and oversight activities, $50 million for 

planning grants and activities, and $30 million for high-speed rail research and development activities. 

NATIONAL PASSENGER RAIL CORPORATION (AMTRAK)

FRA and Amtrak have shared a strong partnership for decades, and we continue 

to successfully collaborate on critical issues such as: (1) ensuring rail safety; (2) promoting environmental quality; and (3) addressing national passenger rail transportation priorities and policies. The fiscal year 2011 budget request for Amtrak, which 

totals $1.637 billion, is a reflection of this administration’s continuing support of 

this partnership. 

Within the overall request, $563 million is requested for Amtrak operations and 

to support Amtrak’s ongoing efforts to advance its mandate to reshape the company 

by undertaking meaningful reforms and controlling spending. This Federal assistance will supplement Amtrak’s traditional corporate revenues, which are generated 

through passenger revenue (ticket, food and beverage sales), State-supported revenues (State contracts related to route performance), and its ancillary business revenue. 

A total of $1.052 billion is requested for Amtrak’s capital needs and debt service. 

Included in this funding level is $281 million to finance Amtrak’s fiscal year 2011 

Americans with Disabilities Act (ADA) requirements. Finally, $22 million is requested for a direct grant to the Amtrak Office of Inspector General. 

CONCLUSION

The past 18 months have been filled with exciting challenges for FRA. We have 

continued to enhance the safety of our citizens and communities that live and use 

the Nation’s freight and passenger rail systems, while designing the policies, programs, and infrastructure necessary to advance the vision and investment of highspeed passenger rail across our country. With this, I am happy to respond to your 

questions and concerns. 

AMTRAK FLEET

Senator MURRAY. Well, thank you very much, Mr. Szabo, for your 

testimony. 

Let me start by mentioning that, last February, Amtrak published its plan for replacing its aging fleet of locomotives and rail 

cars. And as part of that plan, they requested $446 million to fund 

the fleet plan in fiscal year 2011. Can you explain to the subcommittee why the Department’s request had no additional funding 

for replacing Amtrak’s fleet? 

Mr. SZABO. Well, I think, as you know, that anytime you’re putting a budget together, there are a lot of very, very hard and very 

difficult choices that have to be made. But, clearly, we think that 

that fleet plan is a—you know, it’s an excellent plan. And it’s a 

good vision. It has the opportunity to invigorate domestic manufacturing. And we’re sitting down with Amtrak and trying to discuss 

some financing alternatives. 

Senator MURRAY. Well, they have structured their fleet plan so 

that it could support a domestic industry for manufacturing rail 

equipment by spreading the orders over a 30-year period. Their demand for rail equipment may be large enough and reliable enough 

to actually support a domestic industry. Right now, we don’t have 

any domestic manufacturers of rail equipment, but that could help 

revitalize a very important sector of American manufacturing, and 
133 

support the kinds of jobs we all want to see to get our economy 

back on track. 

But, for this plan to work, manufacturers have to believe that 

Amtrak really is going to be a reliable source of funding for its rail 

orders. I know they’re looking at a variety of ways to pay for the 

fleet plan, and have requested funding from this subcommittee, 

and understand that it may apply for a loan through the FRA’s 

Railroad Rehabilitation and Improvement Financing (RRIF) program. 

Can you share with us what kind of financing you think would 

help give our domestic manufacturers the kind of assurance they 

need to be confident that Amtrak will actually be able to purchase 

rail equipment well into the future? 

Mr. SZABO. Yes. Let me say, first, Madam Chair, that I think 

you’re absolutely on the mark, that, in order to reinvigorate domestic manufacturing, there needs to be the belief that this is going 

to be sustainable. 

You know, the Secretary pulled in all of the foreign manufacturers, domestic manufacturers, all rail manufacturers into a summit 

over at the DOT, back in December. And if we heard one thing, it 

was, they, you know, clearly articulated the need to ensure that 

these orders can be smoothed out over a period of time. And so, 

you’re not constantly going through these peaks and valleys, and 

that, if the orders were truly smoothed out over a period of time, 

and they believed it was sustainable, that this would be what it 

would take to truly make the investment, as a businessman, that 

they would need to make in the plant and equipment, you know, 

and sink these costs into establishing these types of facilities here 

in the United States. 

As far as the financing solutions—again, we’re at the table with 

Amtrak, and I think it’s going to have to take a blend. I’m not sure 

that there’s this one single silver bullet that’s going to just solve 

all the problems for financing the other plan. But, you know, certainly there’s the potential for possibly a RRIF loan, commercial 

lending, direct appropriations. I mean, I think we need to take a 

look at all of the alternatives and make sure that we come up with 

a sound financing plan. 

Senator MURRAY. Well, this is really important. This subcommittee is a strong supporter of infrastructure spending. That’s 

what we do, and we believe in it. But, we have to have consistent 

priorities and know that that funding is going to be consistently 

there, if we want domestic manufacturers to begin to develop that. 

And if we get a request this year, and we fund it, but we don’t 

know what’s going to happen next year, I don’t think that is going 

to be enough for a domestic manufacturer to make a decision to 

make that kind of investment. Wouldn’t you agree? 

Mr. SZABO. Yes. I would agree. I mean, again, your remarks directly align with what we heard from the manufacturers back in 

December. They need to know that there is stability. 

Senator MURRAY. So, what I’m saying to you is, we all need to 

have a concrete plan, not just for an appropriation here or there, 

but for how we’re going to do this, long into the future, if we want 

to really achieve the goal I think some of us want to achieve. 
134 

Mr. SZABO. Yes, I would agree that there needs—again, there 

needs to be the appropriate mix. We need to find what that appropriate mix is. 

POSITIVE TRAIN CONTROL

Senator MURRAY. Okay. 

Well, let me turn to another issue, because, under the Rail Safety 

Improvement Act, railroads are supposed to deploy the positive 

train controls (PTC) by 2015. Senator Bond mentioned it in his 

opening statement. We know that’s an important safety technology 

designed to prevent train collisions and derailments. But, this is 

going to cost billions of dollars. Now, you announced, I think, $50 

million in the 2010 appropriations request for Rail Safety Technology grants. I want to know what you hope to accomplish with 

that funding, and what are some of the additional challenges that 

need to be resolved so we can deploy the PTC? 

Mr. SZABO. Well, what we intend to do with this initial $50 million is, instead of giving grants out to a single railroad or a small 

combination of railroads, using it for those kind of things that can 

be broadly shared; those initial costs that, in essence, would benefit 

the industry as a whole. 

And so, I—frankly, that was part of the reason why we didn’t 

make an additional request for 2011. We wanted the opportunity 

to roll out the initial $50 million in 2010, kind of test the waters 

with that. And then the opportunity exists for these broader-based 

funding programs that the DOT—whether it’s the TIGER grants, 

whether it’s through the high-speed rail program, or whether it’s 

through the proposed Infrastructure Bank for the—you know, for 

the funding of positive train control. 

Senator MURRAY. Well, as Senator Bond mentioned, we’re talking 

about billions of dollars. Do you have a plan for how to get there? 

Mr. SZABO. Well, at this point, those funding requirements belong to the railroads. And, you know, certainly we’re looking at 

those alternatives that might offer some help. But, again, the responsibility, at this point, belongs to those rail carriers that the 

regulation applies to. 

Senator MURRAY. Well, according to FRA’s regulations, railroads 

have to deploy positive train control on any line that carried passengers or certain hazardous materials in 2008. But, for a lot of 

reasons, these routes shift before the 2015 deadline that’s coming 

at us. In that case, the original rationale for deploying positive 

train control on those lines may no longer exist. Now, railroads will 

be given the opportunity, I understand, to apply for an exemption 

to the PTC requirement along those rail lines. But, can you share 

with the subcommittee what criteria you will use to determine 

whether or not to grant an exception? 

Mr. SZABO. The key is that it’s all about safety. And there has 

to be a baseline from where you start. And so, we believe that the 

regulation that we’ve drafted has a sufficient level of flexibility that 

we start with where we’re at today. But, as those routes change, 

there’s the ability to come in and verify—you know, they—the carriers would need to verify to us the fact that the routes have 

changed. And it allows for the appropriate level of checks and balances that—as modifications are made, for us to ensure that 
135 

they’re the appropriate modifications and that public safety is 

maintained. 

Senator MURRAY. Okay. Thank you very much. 

Senator Bond. 

ALTERNATIVE FUNDING SOURCES/GRANTS

Senator BOND. Thank you very much, Mr. Administrator. 

I am concerned that you talked about, ‘‘We need to find some alternatives. We don’t know what they are. We have a request for 

$446 billion—million out of the—outside of the budget for—OMB’s 

budget—for Amtrak. And yet, we don’t know how that’s going to be 

paid for.’’ We don’t have our budget allocation. And I can guarantee 

you that we’re going to have to start making some hard choices, because there are a whole lot of wonderful things out there for railroad, but we need some specifics to know what your priorities are. 

No. 1, if you have plans for the alternative source of funding, 

what are they? I mean, don’t just tell us ‘‘alternatives,’’ because 

we’re appropriating what we have. If you’re going to get us more 

money, how are you going to get us more money? 

Mr. SZABO. Well, I’d say we’ve just recently sat down and started 

those discussions with Amtrak. So, you know, again, we need to 

flesh out what those alternatives are and get you—— 

Senator BOND. Yes. 

Mr. SZABO [continuing]. The answers. 

Senator BOND. I can’t approve any dollars that haven’t been 

flushed out—or fleshed out—whichever way you put it—sorry. On, 

you know, ARA—ARRA gave Amtrak $1.3 billion, and apparently 

the inspector general of Amtrak is going to tell us that these programs are, perhaps, not meeting—going to meet the February 17, 

2011, timeline. Would you comment on the oversight that FRA provided in making this grant—making these grants to Amtrak? 

Mr. SZABO. Well, let me say this. First off, I had a sitdown with 

the Amtrak inspector general just this week, and we discussed 

some of his findings in the report. And we welcome that. You know, 

that’s the purpose of the inspector general, is to uncover potential 

areas of problems, whether the problems exist today or whether it’s 

the potential of developing. And they did identify one that they 

have a concern with, you know, regarding the extraordinary measures that FRA is requiring—— 

Senator BOND. Paying double overtime, I understand, on some 

of—— 

Mr. SZABO. Yes. 

Senator BOND [continuing]. Those projects? 

Mr. SZABO. And I think the key is—what they said was, it has 

the ‘‘potential.’’ We’re comfortable that, through our discussion with 

Amtrak and through the oversight that we’re providing, that we’re 

going to achieve that appropriate balance between the need to 

quickly create jobs—because that was the intent of these projects— 

while also ensuring that there isn’t any waste. So—— 

Senator BOND. But, what did you do in advance? You’re talking 

about the IG looking at the—have you ever turned down—denied 

a grant to Amtrak? 

Mr. SZABO. I don’t know, but I can get you that answer. 

Senator BOND. What criteria—— 
136 

Mr. SZABO. I mean, have I, in the past year? I have not. But, we 

can get an answer of what FRA’s history is on that. 

Senator BOND. Maybe you can tell us what criteria you used, 

what judgment you excised in making that money available. If 

you’d provide that for the record, what criteria do you go through 

before making those grants to Amtrak, to make sure they were 

shovel-ready? 

Mr. SZABO. Definitely. 

5-YEAR CAPITAL PLAN

Senator BOND. And, in your view, should the 5-year capital plan 

include fleet, other rail assets, and the ADA requirements in one 

comprehensive fleet plan? Is that part of—is that going to be part 

for the plan? 

Mr. SZABO. Well, let me say this. One of the challenges, historically, in preparing our budget request is that, historically, there 

has been a mismatched cycle between FRA’s budget request and 

the budget that Amtrak has prepared. And the good news is that, 

under Joe Boardman’s leadership, and D.J. Stadtler, their Chief Financial Officer, that’s changing, which means their budget cycle 

will be more in sync with ours. So, in the future, when FRA makes 

its budget application to this subcommittee, it’ll be based on more 

sound facts, rather than us trying to estimate what we believe Amtrak might need, and then, their budget being developed a month 

or two later. And—— 

Senator BOND. Yes. Well, Mr. Administrator, I suggest that’s 

your problem, not ours. But, when you pass that—— 

Mr. SZABO. Well, and—like I say—— 

Senator BOND [continuing]. Off onto to us—— 

Mr. SZABO [continuing]. And the good news is—— 

Senator BOND [continuing]. We’re up against—— 

Mr. SZABO [continuing]. It’s being addressed. 

Senator BOND [continuing]. We’re up against the wall now. 

Mr. SZABO. Right. 

Senator BOND. And should we—— 

Mr. SZABO. But, it’s being addressed. 

Senator BOND. Are there things in your budget request that you 

have submitted that you would like to reduce, to offset, and to 

cover some of the $446 million fleet request for Amtrak? 

Mr. SZABO. We believe that we have a very sound budget request 

that appropriately—— 

Senator BOND. Okay. 

Mr. SZABO [continuing]. Directs—— 

Senator BOND. So, we should absolutely ignore the $446 million 

request for Amtrak. 

Mr. SZABO. I don’t think you ever ignore any information 

that—— 

Senator BOND. Well, unless the—— 

Mr. SZABO [continuing]. Somebody brings—— 

Senator BOND [continuing]. Unless—— 

Mr. SZABO [continuing]. To this subcommittee. 

Senator BOND [continuing]. Unless—— 

Mr. SZABO. Well, sir? No, wait a minute, please, please. 

Senator BOND. Yes. 
137 

Mr. SZABO. Please allow me to answer. 

You know, as I said, when we develop our budget, there’s always 

difficult choices that we have to make. And so, we make some decisions, and we present our vision to you. But, that doesn’t mean 

that you should ever ignore new information or additional information or different information that somebody else brings to you. 

Senator BOND. I assure you, Mr. Administrator, we will have to 

do that. But, what we want to have, going in, is your best assessment. If you think the budget should be amended to take account 

of the $446 million request from Amtrak, or some part of it, we 

would ask you to provide that to us, because, at least we would 

have some grounds to know. We need to look at your budget request as a whole. And I—this coming in over the transom gives us 

mixed signals on what the administration’s priorities are. And 

based on what you’ve said, and what we’ve seen in the past, I 

would have to say that this subcommittee is being asked by the administration to fund other things, but not—at—to the exclusion of 

the Amtrak request. So, that’s something you’re going to have to 

resolve, is whether you think that some of the requests for locomotives on the Northeast corridor should be included, and other 

projects that you’ve requested should be eliminated to make room 

for them. 

And finally, you’re telling me that positive train control and all 

that is totally the freight rail—the $13 billion to $15 billion—is the 

freight rail’s responsibility, and you’re not going to recommend 

money for it. 

Mr. SZABO. No, that’s not what I said. What I said was, we do 

have other funding alternatives that are available through these 

broadbased transportation programs, whether it’s the TIGER grant 

process for passenger rail, potentially through the high-speed rail 

program, through the proposed Infrastructure Bank, or even 

through RRIF loans. So, we do have some alternatives. But, again, 

the responsibility—now, we can give some help—we can give some 

help—but, the responsibility does remain with those rail carriers. 

Senator BOND. Well, I’d be—I hope we will see that in the plan. 

And I’m sure the rail carriers will want to know how much they’re 

going to be expected to pick up. 

Thank you, Madam Chair. 

Senator MURRAY. Thank you, Senator Bond. 

Senator Lautenberg. 

EQUIPMENT REFRESH

Senator LAUTENBERG. Yes. Thanks, Madam Chairman. 

One thing, I think, that’s generally acknowledged, and that is 

that Amtrak is critical for our society to function—critical. And, 

you know, when you see a disaster, like September 11 or Hurricane 

Katrina, it’s Amtrak that is called upon to move Americans out of 

harm’s way. 

And in the Northeast corridor, Amtrak operates the only highspeed rail service in the country. And, as a matter of fact, if we 

didn’t have Amtrak running there, be in the Northeast corridor, 

you’d have to run 243 more flights every day, with the densely congested airspace in our country. You’d also have to add, as an after-
138 

thought, 30,000 more cars on highway I–95. Amtrak offers so many 

positive additions to our well-being. 

And included in that is the commitment that all of us have made 

here, and that is to create jobs in this society. And you’re not going 

to build the rail cars overnight. You’re going to—how long does it 

take, do you think, Mr. Szabo, to—from the time equipment’s ordered until the time that it’s delivered? 

Mr. SZABO. Well, actually, Mr. Boardman could probably give you 

a more accurate line on that. 

Senator LAUTENBERG. Do you—— 

Mr. SZABO. But, certainly—— 

Senator LAUTENBERG. You don’t know—— 

Mr. SZABO. I’d say, roughly—Mark, what are we talking about— 

a year—from order to delivery. Roughly 3 years. 

Senator LAUTENBERG. Roughly 3 years. And the fact of the matter is, that as we look at what Amtrak adds—reduces our dependence on foreign oil, reduces the cost of—reduces pollution. It adds 

so many things and also says, ‘‘You can get there on time.’’ Surprise, you can get where you’re going on time, if—98 percent of the 

time—if you take Amtrak. 

I took an airplane flight the other day, Madam Chairman. It was 

a 45-minute flight up to LaGuardia Airport, but it took us an hour 

and a half to take off. So, that made the 45-minute flight a heck 

of a lot longer. 

Amtrak’s fleet of cars is rapidly deteriorating. The average age 

of an Amtrak passenger car is over 24 years old. And some are 

more than 60 years old. The fact that I regard that as young has 

nothing to do with—what we’ve—with what happens in a railcar. 

And I ask you, do we—how essential is it, in your judgment, for 

us to get replacements for the cars that we have on the railroad 

right now in order for Amtrak to be the functioning railroad we’d 

like to see? Is it important? 

Mr. SZABO. It’s important, I would say, from both a safety standpoint, as well as a reliability standpoint. 

Senator LAUTENBERG. Is it critical, would you say? 

Mr. SZABO. It’s getting very close to critical. 

Senator LAUTENBERG. You mean it’s—we’re not yet at criticality? 

Mr. SZABO. It’s close. 

Senator LAUTENBERG. Mr. Szabo, you’re too well informed not to 

be able to say yes to that. 

Ride the railroad. I don’t—do you ever take the railroad? 

Mr. SZABO. Every chance I can get. 

Senator LAUTENBERG. How often is that? 

Mr. SZABO. I would say at least a couple of times a month. You 

know, when I—— 

Senator LAUTENBERG. Well, I—— 

Mr. SZABO [continuing]. Lived in Chicago, several times a month; 

now that I’m out here in the District of Columbia—— 

Senator LAUTENBERG. Yes. 

Mr. SZABO [continuing]. A couple of times a month, whether it’s 

to go to—— 

Senator LAUTENBERG. I do it—— 

Mr. SZABO [continuing].—New York. 
139 

Senator LAUTENBERG. I do it every week. And I can tell you—my 

handwriting was never my best skill, but when I get off of the Amtrak train, and I try to write some things that I have to take care 

of, it’s barely readable, because it shakes, rattles, and rolls. And it 

is ridiculous. If we want to make this railroad the thing that America should be proud of, invest like China or Spain or the countries 

that are far less able to do these things than we. And we’re like 

a third, or even a fourth-rate country, in terms of railroading. It’s 

shameful what happens with us. 

So, I agree with my colleagues here when we talk about replacing equipment. We need that $400-plus million for new equipment. 

And we’ve got to get those orders out there. 

How much cash does it require on the barrelhead in order to get 

these orders going? 

Mr. SZABO. For—— 

Senator LAUTENBERG. For when you pay a deposit—you know, 

like if you want to buy a car, you pay a deposit. 

Mr. SZABO. It would be roughly $70 million. 

Senator LAUTENBERG. Okay. So, that sounds like a start to me, 

and we ought to work like the devil. And I—I’ve heard you say that 

it was—that there’s no silver bullets and it’s—then these are difficult decisions. All of that, those tales of woe, Mr. Szabo, they’re 

interesting, but they don’t get the job done. 

And so, when we looked further—I wrote a rail safety law that 

mandated that railroads install positive train control on certain 

routes by the end of 2015. And it created a grant program to help 

railroads meet this safety requirement. However, the President’s 

budget eliminates funding for this critical grant program. What’s 

the administration going to do—I think, Senator Bond, that—to 

help public and private railroads meet this deadline? Are they 

going to do anything about it? 

Mr. SZABO. Yes. Again, we would have funding available 

through, potentially, the TIGER Program for the passenger railroads, possibly the high-speed rail program, the proposed Infrastructure Bank, and potentially through RRIF loans. So, we do believe that there are some options out there. 

Senator LAUTENBERG. Do you have any idea as to the amount of 

resource or funding that might be available? 

Mr. SZABO. Well, again, that would—it would depend on the 

amount of TIGER money that is made available. You know, these 

different pools—it would vary over time. 

Senator LAUTENBERG. Everything depends on something else. We 

know that. 

In my State, New Jersey, we have a rail bridge known as the 

‘‘Portal Bridge.’’ It’s over 100 years old, in critical need of being replaced. One of the biggest factors is—in delays on the Northeast 

corridor—is the Portal Bridge. What’s FRA’s plan to replace this 

bridge so that high-speed rail service on the Northeast corridor can 

be seriously developed? 

Mr. SZABO. Well, as I think you’re aware, we, through our highspeed rail program, have already allocated $38.5 million, which is 

also being matched by $16.5 million from the State of New Jersey 

to fund the final design of the replacement to the bridge. And we’ll 
140 

continue to work with the State DOT to see what alternatives are 

appropriate. 

Senator LAUTENBERG. The—if I might, Madam Chairman, just 

one last thing. 

The last environmental impact statement for the Northeast corridor was completed in 1978, in order for the corridor to receive 

this kind of high-speed rail investment that it needs, this assessment will need to be updated. Last year, Congress provided $50 

million to the Department of Transportation to move forward on 

this assessment. Do you know what the status of this review is and 

when it will be complete? 

Mr. SZABO. Yes. The Secretary has asked for submissions from 

the Governors to establish the Northeast Corridor Commission, the 

study commission. That’s been established and we’ll be putting together the appropriate plans to bring the corridor to the—you 

know, to the next step, to the next level. So, we’re committed to 

that. 

Senator LAUTENBERG. Madam Chairman, thank you very much. 

I assume that we’ll have the record open so that we can submit 

questions for the record. 

RAIL SAFETY

Senator MURRAY. Absolutely. Thank you. 

Mr. Szabo, funding for high-speed rail has dramatically changed 

the workload at the FRA. We can’t forget that the FRA is a safety 

organization. You are requesting 26 new positions for rail inspectors and rail safety staff. Can you describe for us your workforce 

strategy for those new positions? 

Mr. SZABO. Roughly one-half of those will be field inspectors, and 

then the remaining will be at headquarters, being utilized to make 

this shift away—you know, we have to always maintain a strong 

inspection program while we also shift to the more creative approaches through our risk reduction programs and the direction 

that the Congress sent us on, under the Rail Safety Improvement 

Act. And so, the remaining half would be the bench strength that 

we need to put together our new rail safety initiatives. 

Senator MURRAY. Okay. Well, you’ve proposed covering part of 

that with the $50 million in user fees from the industry. That’s a 

lot of money, especially when we’re asking them to also do positive 

train control. Can you explain to us the rational for charging user 

fees? 

Mr. SZABO. Well, it’s not unprecedented, when it comes to safety 

inside the DOT. Not only is it utilized in a couple of other modes 

at DOT, but there’s some history of using it at FRA. As I—as you 

might be aware, we had such a user fee through the mid-1990s— 

roughly from, I think, 1990 to 1995. And so, again, there’s a basis 

for doing this. And we believe it’s appropriate to try and come up 

with revenue sources and that, in some way, we try and supplement the cost of the railroad safety program. Again, it’s about public safety. It’s about ensuring that we have the resources and the 

inspectors that we need to keep the Nation’s railroads safe. 
141 

HIGH-SPEED RAIL

Senator MURRAY. Okay. In another arena—before the Recovery 

Act, States didn’t expect the Federal Government to provide a significant amount of money for high-speed rail; and in less than 2 

years, the Federal Government has now committed $10.5 billion to 

intercity and high-speed rail. That is an important long-term investment. We all know it’s not realistic to expect high-speed rail 

corridors to begin operations in the next year. But, can you give us 

an idea of what timeframe you think will be necessary to see the 

development of high-speed rail corridors, and the beginning of service? 

Mr. SZABO. Well, I think you need to keep in mind that Congress 

developed this program as a State-driven process. And so, it’s the 

States and the regions that develop their vision for their service, 

and then they apply to the Federal Government for capital money 

to construct. And I would say each of those States and regions are 

in a different maturity level, as far as where they’re at with their 

plans. 

You know, in the case of those that got some of the early awards, 

these are State DOTs that have been investing and planning in 

rail, through their State programs, for many years. In the case of 

California, the case of your State, Washington State, in the Midwest, North Carolina—these States have been at this for almost a 

decade. 

You know, true 200-mile-an-hour service like California is going 

to take a long time to build out. Now, there can be small pieces 

that can be up and running and carrying passengers much more 

quickly. But, frankly, it’s going to be projects more like the Midwest plan, the Midwest Regional Rail Initiative that can have service at 110-mile-an-hour quickly in the next couple of years, as it 

continues to build out and develop. And Washington State, too. 

Senator MURRAY. Well, you’ve requested a billion dollars. Can 

you tell us how much you expect to use for intercity projects and 

how much for high-speed rail corridors? 

Mr. SZABO. Well, under the $2.5 billion that we rolled out this 

year, we allocated, roughly, about 85 percent of that to high-speed 

rail and, roughly, about 15 percent more toward the intercity 

projects. And if you take a look at the percentages on the $8 billion 

that we put out, you know, roughly—I want to say, roughly, about 

45 percent was in that category of true high-speed rail of over 150 

miles per hour. Roughly, another 40 percent went to what I would 

call ‘‘emerging high-speed rail,’’ you know, those in that 110- to 

125-mile-an-hour category, and then, roughly, about 15 percent 

into the smaller projects and conventional service. So, that seems 

to be, you know, a good balance, a good match. 

Senator MURRAY. Okay. Well, in order to decide which projects 

you’re going to fund through this program, you’re going to have to 

rely on forecasts of ridership levels and revenues and public benefits, projects costs. And, so far, we haven’t seen you develop these 

strong requirements. And I know the Department’s inspector general is starting to investigate best practices. Can you tell us what 

you’re doing to make sure that the grant awards are based on 

sound forecasts of projects based on costs and benefits? 
142 

Mr. SZABO. Yes. I mean, clearly, it has been, from day one, a 

merit-driven process. And we do make these types of analyses. But, 

again, there has to be an acknowledgment that this is a brand new 

program. You know, it’s in its infancy. In less than a year’s time, 

we’ve just—— 

Senator MURRAY. Well, are you—— 

Mr. SZABO [continuing]. Given birth to the program. 

Senator MURRAY [continuing]. Developing those? 

Mr. SZABO. Precisely. 

Senator MURRAY. And when will we—— 

Mr. SZABO. Precisely. And that’s kind of why I go back to its— 

a lot of it is about the lessons learned. You know, when it comes 

to ridership forecasts—— 

Senator MURRAY. Well, will we see this in writing? 

Mr. SZABO. Well, I think ultimately, we will be developing rules. 

But, again, we’re just going through—— 

Senator MURRAY. Do you have a timeframe for that? 

Mr. SZABO [continuing]. Utilizing the grant guidance. We really 

need to get this first round under our belt, you know, and experience the—you know, the—we have to execute the first round before 

we can start taking a look at those tweaks that need to be made 

in future rounds. 

AMERICANS WITH DISABILITIES ACT

Senator MURRAY. Okay. Well, I have one more question. Under 

the Americans with Disabilities Act (ADA), all Amtrak stations are 

supposed to be accessible by July 26 this year. Amtrak has already 

admitted that it will not be able to meet that deadline, and started 

a 5-year effort to invest in station improvements and come into 

compliance. Do you believe that, over the years, Amtrak did everything it could have done to comply with ADA? 

Mr. SZABO. Well, I think, as this subcommittee is probably 

aware, historically, no administration has ever made an ADA request on behalf—— 

Senator MURRAY. Right. 

Mr. SZABO [continuing]. Of Amtrak. And so, I mean, it really put 

them behind the eight ball. You know, and that is one of the reasons why we came forward this year and have, in fact, made the 

$281 million request to start funding those legitimate needs. 

Senator MURRAY. Okay, all right. Thank you. 

Senator Bond. 

Senator BOND. Thank you, Madam Chair. 

I would just note one thing. As a former Governor, I can tell you 

that looking to the States to make massive investments in highspeed rail is not going to happen anytime soon, until the States get 

out of the holes they’re in. And California, you’ve mentioned, probably is in—somewhere up there between Greece and Spain in having budget problems. 

But, Madam Chair, I’m going to submit questions in writing for 

the record, and I need to have a lot more specifics—firm priorities, 

amounts—not just, ‘‘We’re going to work on a plan,’’ but a plan, criteria, priorities—before I can support any of these requests. I need 

to know how they fit in our overall budget. 
143 

So, thank you for your testimony, Mr. Administrator. And we 

have other witnesses. And we’ll be communicating with you. 

Thank you. 

Senator MURRAY. Thank you very much, Senator Bond. 

Mr. Szabo, that would—will conclude our questions at this time. 

There will be questions from the subcommittee that we will need 

responses from you in writing. 

Thank you very much for your testimony today. 

And with that, I’d like the second panel to come forward. 

Mr. SZABO. Thank you. 

(145) 

NATIONAL RAILROAD PASSENGER CORPORATION 

(AMTRAK) 

STATEMENT OF HON. JOSEPH H. BOARDMAN, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER 

Senator MURRAY. All right. I’d like to welcome our second panel 

today. 

And, Mr. Boardman, we’ll begin with you. 

You want to turn your microphone on, please. 

Mr. BOARDMAN. Okay. Thank you, Madam Chair. 

And I appreciate the opportunity to speak with you today. 

Before I begin the discussion about Amtrak’s funding needs, I’d 

like to share with the subcommittee some good news that was announced on April 8. Amtrak is on pace to break its annual ridership record, carrying a best-ever 13.6 million passengers during the 

first 6 months of fiscal year 2010. And with the historically busier 

summer travel season ahead, comparing March 2010 to 2009, ridership increased by 131⁄2 percent to a record 2.4 million passengers 

for the month. In addition, every single Amtrak route carried more 

passengers, with several experiencing double-digit growth. 

Furthermore, one of the, I think, important things to see today 

is that we’ve had other wins. A win with Moody’s—Moody’s has upgraded the rating for Amtrak from an A2 to an A1 just this last 

month. There have been no material weaknesses found in our audits. This is the first time since 2004 that that’s occurred. And ridership on long-distance trains increased by 16 percent in March, 

and is up 5.2 percent for the first two quarters of 2010. 

In every one of the services, whether the Missouri River Runner, 

where Senator Bond is, it’s up by 24.2 percent for March, to—and 

15.8 percent for the first half of Amtrak year. Cascade’s increased 

by 11.4 percent. And March saw a 16.7 percent increase for the 

first 6 months of the fiscal year. 

These numbers reinforce what so many of us know about passenger rail; if you provide a safe, reliable, user-friendly system, the 

traveling public will use it. 

What I’d like to do, though, is spend time talking about what I 

think is the most important piece of what we’re asking for. And I 

know, in the last hearing, there were several questions on it. And 

it’s the ‘‘Amtrak Equipment Plan and Needs,’’ which is by your 

table right now. 

And just as an introduction, the fleet truly is the key for customer perception and willingness to use our system. The operating 

reliability is particularly important. And the cost of maintaining a 

fleet is critical for us for the future. 

The railroad belongs to you. It belongs to the United States. It 

belongs to the administration and the Congress, and it has for the 

last 40 years. We cover 80 percent of our operating costs from revenue. We are the most efficient railroad in the United States. We 
146 

cover none of our capital costs. Just like highways, capital support 

comes from the Federal Government. And the payment on debt 

comes from the Federal Government. And that will continue to be 

that way for as long as you, the owners of this railroad, decide to 

operate a railroad. 

Amtrak has suffered insufficient Federal capital investment over 

the full 40 years that it’s been here. ADA has been around for 20 

years, and every administration has failed, and every Congress has 

failed, to deliver what it passed as a law to fund the ADA requirements for Amtrak. And that is not the case with highway. It is not 

the case in the rest of the modes. These modes are not pitted 

against the poor. These modes are pitted against highways and 

aviation and rail. Nowhere is that more evident in the railcar fleet 

and locomotive fleet. 

AMTRAK’S AGING FLEET

The fleet needs to be recapitalized. The average age of the fleet 

was already said to be 25 years old—or ‘‘more than 24’’ are, I think, 

the words that were used. Domestic production is needed both for 

employment and to secure a Nation as we enter a much higher cost 

of energy for the future. We need railroads and passenger railroads. 

In the first table, just to identify for you the planned car locomotive procurement, you can see as red and yellow lines. The yellow lines are the cars, and the red lines are the locomotives. And 

the two high marks on the yellow lines are when you replace train 

sets, like the Acela services, and that’s why they’re higher. 

In the second table, what you see is the average annual miles, 

in thousands, that the cars operate for Amtrak. And on the far 

right of this table, what you find is that all of the Amtrak cars are 

operating, in some cases, 180,000 miles a year, in comparison to all 

the transit operators, which are on this side of the table, Tri-Rail 

being the most, at 66,000 miles a year. And the utilization, then, 

for Amtrak—all of these Amtrak cars—is much higher than any 

other operation in the United States, period. And they’re all older. 

If you look at the third page, you find the same kind of information for the average annual mile—locomotive mileage. And what 

you see is, the closest competitor—and they aren’t a competitor, 

they’re a host—is BNSF, which has an 83,000 mile annual locomotive use, where Amtrak is 160,000 mile—almost double what the 

mileage is by our private railroads. 

But, I think perhaps the most compelling slide in the deck that 

you have in front of you is the last one, because it’s a snapshot of 

the present. It is the locomotives that we’re talking about replacing, which is the electric locomotive on the Northeast corridor. It’s 

the AEM–7—from the 1980s category in utilization you saw a couple of minutes ago. It’s the Heritage baggage car that was built in 

the 1950s. It is the Viewliner sleeper cars, which are the newest 

ones on this fleet. The Heritage diner, which is the same age I am. 

I was born in 1948, and this diner was born in 1948. 

PREPARED STATEMENT

And it’s one of the things that keep our speed down on the 

Northeast corridor. You can only operate 177 kilometers per hour; 
147 

that’s 110 miles an hour. And when we replace these, we’ll be able 

to immediately go to 200 kilometers per hour, or 125 miles an hour, 

by replacing these older cars, which then reduces the time it takes 

to travel on the Northeast corridor. And then the Amfleet coaches 

and the lounge cars, from 1981 to 1983. This is the Florida-bound 

Silver Star, at Seabrook, Maryland, and I think it really demonstrates what we need for fleet for the future. 

Thank you for the opportunity to speak. 

[The statement follows:] 

PREPARED STATEMENT OF HON. JOSEPH H. BOARDMAN

Good morning, Madam Chair, Ranking Member Bond, and members of the subcommittee. Today is my first time appearing before this subcommittee as President 

of Amtrak, and I thank you for the opportunity to testify on Amtrak’s fiscal year 

2011 operating and capital needs. I took this position in November 2008; prior to 

that I was the Federal Railroad Administrator. 

Before I begin the discussion about Amtrak’s fiscal year 2011 funding needs, I 

would like to share with the subcommittee some very good news that was announced April 8. Amtrak has posted the best first half in its history, carrying 13.6 

million passengers during the first 6 months of fiscal year 2010. Comparing March 

2010 to March 2009, ridership increased by 13.5 percent to a record 2.47 million 

passengers for the month. In addition, every single Amtrak route carried more passengers, with several experiencing double-digit growth. 

Ridership on long-distance trains increased by 16 percent in March and is up 5.2 

percent for the first two quarters of fiscal year 2010. In the Chicago hub, ridership 

on the Lincoln Service (Chicago to St. Louis) showed significant growth with an 18 

percent jump in March and 11.6 percent for the 6 month period. The Hiawatha 

Service (Chicago—Milwaukee) continues to grow with a 14.3 percent increase in 

March over the previous year and a 4.8 percent increase for the fiscal year to date. 

Elsewhere in the Midwest, the Missouri River Runner (Kansas City—St. Louis) is 

up 24.2 percent for March and 15.8 percent for the first half of the Amtrak fiscal 

year, while the Blue Water (Chicago—Port Huron) increased by 21.7 percent in 

March and 5.2 percent for fiscal year to date. In the West, Amtrak Cascades (Eugene, Oregon—Vancouver, B.C.) increased by 11.4 percent in March and saw a 16.7 

percent increase for the first 6 months of the fiscal year. 

These numbers reinforce what so many of us know about passenger rail. If you 

provide a safe, reliable, and user-friendly system, the traveling public will use it. 

I want to personally thank Chairwoman Murray and this subcommittee for the 

funding that has helped make this growth possible and helped prove our belief in 

this system and mode to be well founded. Between the funding provided by this subcommittee to Amtrak and the Federal Railroad Administration’s (FRA) High Speed 

and Intercity Passenger Rail Grant Program through the fiscal year 2010 appropriations bill and the Recovery Act, you have truly ushered in a new era of intercity 

passenger rail development in the United States. 

With the funding you have provided Amtrak, we have rededicated ourselves to our 

mission of developing the Nation’s intercity passenger and high speed passenger rail 

system, aiming to grow the quality, utility, and breadth of our network. We are also 

working intensely on this year’s capital investment program, split-funded with $420 

million in General Capital Funds and $590 million in Recovery Act funds. Equally 

important, we are also working with our State partners and the FRA to implement 

the first round of grants awarded under the High Speed and Intercity Passenger 

Rail grant program and are in the midst of collaborating with State for secondround applications due this spring and summer. Together with the Northeast Corridor States, we have also just completed the first phase of our 3 year Northeast 

Corridor Master Planning Process, and will be transmitting the final version of the 

Master Plan document to Congress and the administration in mid-May. 

Supplementing this effort, we have also just begun an initial phase of our Northeast 

Corridor Next Generation High Speed Rail Study, led by our new High Speed Rail 

department, to look at the feasibility of a new dedicated high speed system in the 

NEC to serve as successor to the Acela service, with greatly reduced trip times, increased frequencies, and top speeds of 200 mph or more for our high speed express 

trains. 

Central to all of these endeavors to strengthen or grow the Amtrak system is our 

need to replace our aging and hard-run fleet with modern equipment. Per 

Congress’s instructions, we completed our first comprehensive fleet strategy for the 
148 

entire system and provided it to the subcommittee on February 1. I testified before 

the House Appropriations Committee last month to explain the urgency of our financial needs, particularly our need to replace aging rolling stock, and I want to 

repeat and, if possible, amplify this appeal. New equipment is an urgent need. We 

must begin replacement of our aging cars and locomotives next year, and the arrangement of financing for these acquisitions is a priority. If we continue to delay, 

we risk a significant worsening of the mechanical problems and failures that degrade our service quality and increase the already considerable maintenance expenses associated with the maintenance and repair of a fleet far past its prime. 

FISCAL YEAR 2011 REQUEST

For fiscal year 2011, Amtrak initially requested a total of $2.1 billion, consistent 

with the Passenger Rail Investment and Improvement Act of 2008 (PRIIA) authorizations. About $592 million of that total is requested for operating support, and 

$1.025 billion will cover capital needs, while a total of $305 million would go for 

debt and debt retirement opportunities. Another $231 million will be needed for 

ADA compliance requirements. On March 22, Amtrak submitted a supplemental request to Congress for an additional $446 million to address our most urgent unfunded need, replacement of our aging fleet. This will raise our total fiscal year 2011 

request to about $2.5 billion. 

FLEET PLAN

The $446 million requested for new equipment represents the first and most urgent investments we need to make in replacing our aging rolling stock. It will include the cost of purchasing 130 single level long distance cars to replace our 1950sera ‘‘Heritage Fleet’’ of dining and baggage cars—the last rolling stock we inherited 

from the freight railroads that’s still in daily revenue service. The average annual 

mileage of these cars is enormous, as you will see on this first slide (see attachment). The typical Heritage car averages 451 miles per day—that’s like running it 

from Washington to Boston every single day of the year. And we’re putting these 

miles on cars whose automotive equivalent would be a Studebaker or Packard. This 

is the fleet we are going to replace. If you go to the next slide, you can see the situation we face with our locomotive fleet. Our diesel electric engines are comparatively 

new, but the electric fleet that powers our Northeast Regional and Keystone trains 

is aging and requires replacement. 
149 

The plan we have put together is shown on this third slide. Many stakeholders 

have been anxious for the release of this plan, which was required by Congress in 

the fiscal year 2010 THUD appropriations bill. Amtrak has spent a year developing 

a comprehensive fleet plan that’s designed to replace all of our existing rolling stock 

as it reaches the end of its useful life. It calls for the replacement of equipment in 

manageable annual increments, which will allow us to identify and fix issues with 

new designs before they become problems. This is not only a procurement plan but 

a strategy designed to develop and support a domestic rail manufacturing industry. 

It supports an administration goal and an Amtrak goal, as a stable domestic manufacturing and supply base should help spur innovation and reduce costs for us. Our 

fleet strategy affords States an opportunity to join their orders to ours, with unit 

cost savings for everyone—a goal set by Congress with passage of PRIIA. To further 

this, we are working with the FRA and the States through the PRIIA section 305 

Next Generation Corridor Train Equipment Pool Committee to ensure that our new 

fleet shares common designs and specifications with the equipment needed by the 

States so that this equipment is interoperable and easily maintained. All of these 

are excellent goals, and Amtrak supports them wholeheartedly—but we need to take 

the first step, which is funding the initial procurement of a new single-level long 

distance fleet. We must give potential suppliers reason to believe there is a longterm commitment to retain Amtrak and to fund additional State procurements of 

intercity passenger rail equipment in the United States. Otherwise, they will not 

make the type of investments in facilities and workers necessary to bring the United 

States back to the position it once occupied, in the forefront of railcar manufacturing, and the 60-year old cars you see in this fourth slide, which date from that 

era, will remain in service as long as our maintenance and operating crews can keep 

them rolling. 
150 

Amazingly, Amtrak managed to increase its ridership by 32 percent between 2002 

and 2008 without buying new equipment and our ridership continues to grow today. 

We are using ARRA funding to return stored and wreck-damaged equipment to 

service, and I’m very pleased with the job that our Beech Grove and Bear shop 

staffs have done. This extra equipment now back in service is a contributing factor 
151 

to our increased ridership. But there are limits to what we can accomplish, and we 

can’t put cars that don’t exist back into service. Right now the margins for our 

equipment, particularly our single-level sleeper and diner fleets, are razor-thin. A 

single major accident could potentially require us to terminate or reduce certain 

services, particularly on the long-distance trains. 

ACCESSIBLE STATIONS DEVELOPMENT PLAN

This July 26 will mark the 20th anniversary of the enactment of the Americans 

with Disabilities Act (ADA), and Amtrak is proud of its role as an important mode 

of travel for people with disabilities and of our special services to the disabled community. We look forward to celebrating this ADA milestone, but there remains much 

work to be done. Last year, 288,000 riders took advantage of the discounted pricing 

Amtrak offers to passengers with disabilities, and that number is on pace to increase by 6 percent this year. All of our front-line employees are trained to provide 

special service to passengers with disabilities, and we have resources and policies 

in place to accommodate those with unique service requests, such as at-seat meals. 

All of Amtrak’s trains meet or exceed the requirements of the ADA, while each and 

every one of our new rail cars is designed to be accessible. Amtrak offers reserved 

spaces to park wheelchairs, accessible seating into which passengers can transfer 

from a wheelchair, accessible bedrooms on all long-distance trains, accessible restrooms, and other accessibility features and services. We’re also in the process of 

modifying our train cars to allow for on-board storage of Segway devices for those 

passengers who use them for mobility assistance. 

Currently, 94 percent of Amtrak passengers board at accessible stations. While 

our stations must be fully compliant with the terms of the act by July 26, 2010, 

unfortunately, as the subcommittee knows, we will miss this deadline. But we are 

focused on making each of the 529 stations we serve fully accessible, a challenge 

that requires significant funding. We are conducting a capital improvement program 

to bring all covered stations we serve up to the necessary standards at a cost of 

nearly $1.6 billion based on the comprehensive study we completed in February 

2009. In this fiscal year alone, Congress allocated $144 million for station accessibility improvements. 

Adding to this complication is the annual funding challenge. On February 1, 2009, 

Amtrak advised in our report under section 219 of the PRIIA that nearly $1.6 billion 

was needed to bring the entire system into compliance with ADA, assuming that 

current ADA regulations on platform boarding remain unchanged. (As the Congress 

may well be aware, a proposed Federal Department of Transportation rulemaking 

is pending that would call for level boarding at all stations covered by the ADA. If 

that rule were to be promulgated and become law, the basic assumptions and parameters of Amtrak’s current stations compliance program would be nullified and 

both the time and cost to achieve compliance would be increased exponentially.) 

This investment amount represents a year-old estimate for both Amtrak’s responsibility and third-party responsibilities. 

In our fiscal year 2011 request, we asked for $281 million for our fiscal year 2011 

Accessible Stations Development Plan, to continue the work to bring the stations 

we serve into compliance with the ADA. However, today I am here to report to you 

that we are revising that number downward to $231 million. Due to the challenges 

of reaching agreements with all parties with ownership interests at the stations, we 

have to take into consideration the 3 months of experience since our fiscal year 2011 

request was submitted, and we do not think it will be feasible for us to spend $281 

million in fiscal year 2011. If you or your staff would like more details on this issue, 

we can certainly follow up with you on that. 

In closing, I am optimistic about our future and the future of intercity and highspeed passenger rail. Our intercity passenger rail system is one of the few readily 

available solutions to the transportation challenges facing our country—and we are 

ready to turn investments in rail into benefits for the environment, the economy, 

and our mobility. What it needs is continued investment and leadership. We look 

forward to working together in the coming months to ensure that Amtrak obtains 

the public funding it needs to sustain its system and fleet for generations to come 

and to realize the goals of a stronger Amtrak and a stronger intercity passenger rail 

network. 

Senator MURRAY. Thank you very much, Mr. Boardman. 

Mr. Alves. 
152 

STATEMENT OF THEODORE ALVES, INSPECTOR GENERAL 

Mr. ALVES. Good morning, Madam Chair, ranking member, and 

members of the subcommittee. And thank you for the opportunity 

to discuss Amtrak’s 2011 budget request. 

I’d like to start by thanking Mr. Carper, Amtrak’s Chairman, its 

Board of Directors, President Boardman, and members of this subcommittee for the support I’ve received during the past 5 months 

as Amtrak’s new inspector general. 

I’m also pleased to report that Amtrak management and the OIG 

have agreed to a new relationship policy, and that the inspector 

general of the Farm Credit Administration found that the new policy is consistent with the letter and spirit of the IG Act. I want to 

thank the subcommittee for including this very helpful requirement 

in last year’s appropriations act. 

Today, I will discuss the significant opportunities Amtrak has to 

provide increased levels of high-quality passenger rail service and 

four important challenges management must address to take advantage of these opportunities. 

First, the opportunities. The Passenger Rail Investment and Improvement Act fundamentally changed Amtrak’s role within the national passenger rail system. Rather than relying on Amtrak to 

lead development of new intercity passenger rail services alone, 

PRIIA calls on States, supported with Federal grants, to share in 

developing new corridor and high-speed rail services. As a result, 

Amtrak will become one of many choices States have to provide rail 

services, rather than the only practical option. 

The first challenge is that Amtrak needs to organize properly 

and operate more efficiently. Amtrak is making organizational 

changes to help it successfully compete for new contracts, and has 

taken steps to operate more efficiently. 

To illustrate, the company has made significant progress implementing reliability-centered maintenance practices in response to a 

2005 OIG report. Using reliability-centered maintenance on the 

Acela fleet reduced costs and generated $16 million in new revenue 

in 2009. Amtrak should continue applying this maintenance concept across its fleet. 

However, Amtrak can do more. For example, we recently identified opportunities to adopt European best practices, including better asset management systems and more advanced technologies. 

Second, Amtrak needs to improve its human capital management 

practices. In a May 2009 report, we made several recommendations 

that management agreed to implement. As a result, Amtrak is focusing on strategic workforce planning, including identifying its 

critical skills and competencies, implementing a total compensation 

philosophy, and improving recruitment and retention practices. 

Fully implementing these corrective actions will require a concerted effort over several years. 

Third, significant IT investments always involve risks. Amtrak 

has four major technology initiatives underway, and has taken a 

number of measures to address the risks, including: establishing 

disciplined procedures to guide both project management and technology development; forming an independent team to enforce 

standards; and implementing reviews to ensure that projects meet 

quality standards before proceeding to the next development phase. 
153 

To ensure that these projects stay on track and achieve anticipated 

benefits, Amtrak should closely watch progress, address emerging 

problems quickly. 

The fourth challenge is managing risks associated with the Recovery Act projects. Specifically, Amtrak may have to take measures that could reduce productivity, adversely impact project quality, or significantly diminish railroad operations in order to finish 

some projects by February 2011. 

Amtrak faces this issue, in part, because the terms of the FRA 

grant are stricter than the terms in the act. The act requires Amtrak to take measures to complete the projects by February 2011. 

The FRA grant, on the other hand, requires Amtrak to take continuing measures, and even extraordinary measures, to complete 

projects by that date. 

As projects face slippages, Amtrak is now considering taking extraordinary measures to meet the completion date. These measures 

include adding second or third shifts, which studies indicate have 

a negative impact on productivity, and reducing the scope of 

projects, which reduces the benefits associated with the final product. Although the term ‘‘extraordinary measures’’ has not been defined, we do not believe that Amtrak should take actions that 

would significantly reduce productivity, adversely impact the quality of the final products, or significantly diminish railroad operations. 

PREPARED STATEMENT

Madam Chair, this concludes my testimony, and I’ll be happy to 

answer any questions. 

[The statement follows:] 

PREPARED STATEMENT OF THEODORE ALVES

Good morning Madam Chair, ranking member, and members of the subcommittee 

and thank you for the opportunity to testify about Amtrak’s fiscal year 2011 operating and capital budget request. Amtrak has made considerable progress positioning itself to meet the challenges it faces to compete effectively in this new era 

of intercity passenger rail. The intercity passenger rail system includes the long distance routes, High Speed Rail corridors, State sponsored corridors, and the Northeast Corridor (NEC). Accomplishments include completing a new strategic guidance, 

a 5 year financial plan, and a long-range fleet plan. Although fiscal year 2009 saw 

a decline in ridership and revenue from fiscal year 2008 as the economy continued 

to struggle, both ridership and ticket revenues came in at the second highest level 

in company history. The last several months have also seen sustained increases in 

passengers and revenue. 

Before I discuss Amtrak’s funding request, let me thank Mr. Carper, Amtrak’s 

Chairman, its Board of Directors, President Boardman, and members of this subcommittee for the support I have received during the past 5 months as Amtrak’s 

new Inspector General (IG). Last year’s appropriations act directed Amtrak management and the OIG to agree upon a set of policies and principles for working together 

that are consistent with the letter and spirit of the IG Act. On March 17 of this 

year, Carl Clinefelter, the IG of the Federal Credit Administration and Vice Chairperson of the Council of the Inspectors General on Integrity and Efficiency, reported 

that the new relationship policy is consistent with the letter and spirit of the IG 

Act. I want to thank the subcommittee for inserting this very helpful requirement. 

Amtrak is requesting $2.6 billion for fiscal year 2011. A total of $592 million is 

for operating support, $1.8 billion for capital needs—including $446 million for replacing its aging fleet, and $281 million to meet the Americans with Disabilities Act 

requirements—and the remaining $277 million for debt retirement. This amount, 

along with last year’s American Recovery and Reinvestment Act (Recovery Act) 

funding of $1.3 billion would be a significant infusion of funds and would help Am-
154 

trak move toward its long-term goal of providing efficient, high quality passenger 

rail service that is cost and trip time competitive with other modes. 

Today, I would like to discuss the significant opportunities that Amtrak has to 

provide increased levels of high quality passenger rail services, as well as important 

challenges it must address to take advantage of these opportunities. 

First, the Opportunities.—Congress passed the Passenger Rail Investment and Improvement Act (PRIIA) in October 2008. PRIIA recognized that passenger rail services, particularly connecting large cities, can provide significant public benefits, including road and air congestion reductions, environmental benefits, fuel usage reductions, and increased mobility choices for the travelling public. 

PRIIA not only reauthorized Amtrak; it fundamentally changed Amtrak’s role 

within the national passenger rail system. PRIIA also contains many provisions 

aimed at spurring Amtrak to operate more efficiently and to improve services on its 

existing routes. In addition, the Recovery Act provided $8 billion through PRIIA 

grant programs to States to assist in improving Amtrak’s national network and 

begin developing new High Speed Rail corridors. Amtrak also received $1.3 billion 

through the Federal Railroad Administration (FRA) to improve its infrastructure, 

facilities, and security. 

Essentially, rather than relying on Amtrak to lead the development of new intercity passenger rail services alone, PRIIA calls on States, supported with Federal 

grants from FRA, to share in the development of both new corridor services and 

High Speed Rail services. While Amtrak is still presumed to be the national operator, PRIIA provides greater flexibility to the States in determining who will plan, 

develop, and operate these new services. 

With States playing a larger role in planning for and funding passenger rail service, Amtrak will become one of many choices States have to provide services, rather 

than the only practical option. Amtrak can still be the provider of choice in this new 

competitive environment, but only if it is perceived as an efficient organization that 

provides quality and cost-effective service. 

In fact, Amtrak has many competitive advantages, including its statutory access 

to host railroads, existing liability regime, and experience in planning, engineering, 

maintenance, and operations. For example, Amtrak already operates a number of 

commuter rail routes in key markets and has a nationwide reservation system that 

can be extended to support new services, allowing significant economies of scale. 

Amtrak can leverage these advantages to help States plan for these new services 

and to become the operator of choice for new services. 

Now, the Challenges.—As Amtrak moves into this new era of passenger rail, it 

faces four interrelated management challenges. Those challenges include: 

—Competing successfully for new State supported corridor and high speed rail 

services and then delivering high quality cost-effective service. 

—Improving human capital management practices, including strategic workforce 

planning, and training and development. 

—Managing risks associated with the modernization of Amtrak’s information 

technology systems and infrastructure. 

—Managing risks associated with projects funded through the Recovery Act. 

CHALLENGE 1.—COMPETING SUCCESSFULLY FOR NEW STATE SUPPORTED SERVICES AND

THEN DELIVERING HIGH QUALITY COST-EFFECTIVE SERVICE

Growth in State supported services, including the development and operation of 

new high-speed rail corridors, creates new challenges for Amtrak. To retain its dominant position in the market, Amtrak must elevate its customer focus, improve service quality, and become a more nimble and dedicated partner. Competition for 

routes should also challenge Amtrak to implement significant operating efficiencies 

that will improve all lines of business. 

The strategic direction and additional Federal funding that PRIIA authorized, 

along with appropriations support, has given Amtrak a unique opportunity to expand and enhance its rail passenger operations. However, Amtrak will face challenges to compete successfully in a market place that has increasing levels of both 

domestic and foreign competition. The competition is evidenced by two recent examples: 

—The Virginia Railway Express operating and maintenance service contract was 

recently awarded to the U.S.-based subsidiary of a French firm. Amtrak had 

been providing the services since the commuter rail operations began in 1992. 

—Caltrans selected a different French firm to renovate all 66 bi-level intercity 

passenger vehicles from its California car fleet. The renovations will take place 

in a newly-opened maintenance facility in California. While Amtrak did not 
155 

1 ‘‘Amtrak’s Infrastructure Maintenance Program’’, September 2009, OIG Report Number E– 

09–05. 2 ‘‘Amtrak Mechanical Maintenance Operations’’, October 2005, OIG Report Number E–05–04. 

compete for this work, it represents the growing marketplace for equipment-related work. 

To thrive in this newly competitive environment, Amtrak must significantly improve its operating efficiency. In fact, we believe the very existence of competition 

will provide the incentive Amtrak needs to focus more attention on operating more 

efficiently. 

Amtrak deserves to be commended for its recent decision to establish a new High 

Speed Rail department reporting directly to Mr. Boardman. This new department 

should help the company focus on the planning and development activities required 

to successfully compete for high speed rail contracts. As it implements this new organization, Amtrak will need to also focus on ensuring that it is positioned to deliver efficient and high quality services. A heightened emphasis on operating more 

efficiently and controlling costs will be needed to ensure that Amtrak remains the 

service provider of choice. 

Amtrak has taken some commendable steps to improve operating efficiencies in 

recent years, but more needs to be done. For example, a recent OIG report 1 concluded that, although Amtrak’s Engineering department has effectively reduced its 

operating expenses by 15 percent between 2002 and 2007, the company still spends 

about $50 million more per year than the average comparable European railroad, 

and $150 million more per year than the ‘‘best’’ European railroads to maintain and 

renew its infrastructure assets. Although American and European railroads are not 

entirely comparable and some of these opportunities are outside Amtrak’s direct 

control, Amtrak can implement many European practices that would reduce costs. 

For example, we recommended that Amtrak implement better asset management 

systems and procure more advanced technology/equipment. 

Amtrak is well along in implementing a new asset management system but it will 

be several years before it is fully operational. Additionally, Amtrak is exploring new 

technologies along the Northeast Corridor. The key now is for Amtrak to follow 

through on these recommendations to ensure that these changes are implemented 

effectively. 

In 2005, we issued a report on Amtrak’s Mechanical Maintenance Operations.2

We estimated that Amtrak had an opportunity to save $100 million per year by 

adopting a Reliability Centered Maintenance strategy along with other efficiency 

improvements. Amtrak has made significant progress in this area. For example, implementing Reliability Centered Maintenance for the Acela fleet allowed Amtrak to 

reduce maintenance costs and to increase available train sets from 14 to 16 per day, 

generating additional revenues of $16 million during fiscal year 2009 alone. The experience with the Acela fleet is a strong indicator that significant additional benefits 

can be realized as this practice is expanded throughout Amtrak’s conventional fleet. 

Amtrak needs to ensure that momentum is maintained to apply this important 

maintenance concept across all Amtrak fleet assets. We are currently conducting a 

follow-up review on this important program. 

We also note that Amtrak’s financial projections do not reflect significant improvements in operating efficiency. One key indicator of efficiency that Amtrak uses is 

loss per passenger mile. The chart below shows the operating loss per passenger 

mile increasing by approximately 45 percent from fiscal year 2008 to fiscal year 

2010, and then remaining relatively constant from fiscal year 2010 to fiscal year 

2014. During a period when ridership is expected to grow beyond the levels experienced in fiscal year 2008, we would expect to see the loss per passenger mile return 

to the levels experienced in fiscal year 2008 or even improve on those levels. Only 

through a renewed focus on efficiency improvement will Amtrak be able to achieve 

this. 
156 

3 ‘‘Human Capital Management’’, May 2009, OIG Report Number E–09–03. 

CHALLENGE 2.—IMPROVING HUMAN CAPITAL MANAGEMENT PRACTICES, INCLUDING

STRATEGIC WORKFORCE PLANNING, AND TRAINING AND DEVELOPMENT

Improved human capital management and strategic workforce planning are critical to ensure that Amtrak has the right people with the right operational and leadership skills to improve services and expand operations efficiently and effectively. 

Historically, Amtrak had been operating on budgets that allowed it to maintain 

the railroad and deliver adequate passenger services, but provided limited resources 

to invest in long-term planning, including human capital initiatives. It maintains a 

relatively stable work force, with long-term employees who operate the railroad with 

reasonable efficiency, instituting improvements as time and resources allow. 

Two significant factors will change this environment: 

—Amtrak’s workforce is aging. Over the next 5 years, 30 percent of its work force, 

representing thousands of employees, will be eligible to retire. Replacing them 

will be a daunting task considering Amtrak employs about 20,000 people. 

—Amtrak has received a large injection of capital funds to improve its infrastructure, facilities, and security capabilities—this has strained its ability to provide 

people with the right skill sets to oversee these investments while continuing 

to run the railroad. 

Strengthening human capital practices remains a significant challenge across Amtrak, a challenge which will intensify as workloads increase at the same time that 

experienced employees in key positions retire or migrate to other business opportunities. 

In May 2009, we issued a report that compared Amtrak’s human capital management practices to other companies.3 In preparing the report we interviewed over 125 

Amtrak managers and employees, obtained results from benchmarking studies, and 

visited two other Class I railroads to see how they managed their human capital. 

Our report made specific recommendations that covered four critical areas. Amtrak agreed with all major recommendations and has been taking steps to implement them. However, fully implementing these recommendations will require a concerted effort over several years. 

Strategic Work Force Planning.—We found that Amtrak lacks a strategic workforce planning process to ensure that it has a workforce with the knowledge and 

skills to meet future needs. We recommended a stronger focus in this area that includes identifying the critical skills and competencies needed to achieve Amtrak’s 

current and future business requirements. The company has made progress by identifying employees who are eligible to retire and preparing talent profiles for nonagreement covered positions. While this is a good start, the company has not yet 

identified its mission critical and other key positions or developed a strategic workforce plan. 

Total Compensation.—Amtrak also lacks a total compensation approach to ensure 

that pay practices are applied consistently and are aligned to support Amtrak’s strategic goals. Total compensation is the complete pay package an employee receives, 
157 

4 ‘‘Training and Employee Development’’, October 2009, OIG Report Number E–09–06. 

including money, benefits, and services. Our recommendations focused on the need 

to define and implement an overall compensation philosophy and strategy. Since our 

report, the Human Resources Department has conducted a compensation review as 

part of an effort to develop a new pay structure that will help attract, motivate, and 

retain highly skilled and talented employees. Amtrak has not yet, however, revised 

its pay structures. 

Recruitment.—Successful companies recognize the importance of having a clearly 

defined recruiting strategy linked to the company’s identified workforce needs. Recruiting at Amtrak is decentralized and manually driven. While the company has 

been successful in filling its recruitment needs during the past 2 years, as the economy recovers Amtrak risks losing skilled craftsman and technical expertise faster 

than it can replace them. Our recommendations focused on how the company could 

improve the recruitment process to reduce the cost and time to hire while attracting 

highly qualified candidates. The company is working to deploy an automated system 

that should help improve recruitment. 

Retention.—Each time a company loses an employee, it costs money. Amtrak’s 

overall turnover rate has averaged about 10 percent annually, which is lower than 

most companies. Once employees reach 5 years of service with Amtrak, the majority 

tend to stay for the entire career. The problem is that in recent years a high proportion of Amtrak employees leave before completing 5 years, resulting in an overall 

workforce that tends to be skewed toward employees approaching retirement age. 

Amtrak’s challenge, therefore, is to retain employees beyond the first 5 years of employment in order to smooth out this imbalance. Our recommendations focused on 

the need for a corporate retention strategy that aligns with and supports an overall 

strategic human capital plan. 

Amtrak is heavily engaged in implementing the Employee Information Management (EIM) system, a sophisticated human resource management system that provides a basis to more effectively track and guide the career paths for its employees. 

Amtrak needs to ensure that it also makes timely progress in addressing the strategic Human Capital issues by continuing to implement our recommendations. 

We also recently completed a separate and more detailed review focusing specifically on training and employee development. Our October 2009 report,4 found that 

because Amtrak’s training program is largely decentralized, it cannot ensure that 

training efforts are aligned to meet the company’s strategic needs. We also found 

that Amtrak needs to develop an effective corporate-wide strategy for developing 

management employees to assume the future leadership roles in the company. 

We made a series of recommendations to improve the effectiveness and efficiency 

of training and employee development, focusing on developing and implementing a 

corporate-wide training and employee development strategy. This would ensure that 

training aligns with the overall corporate strategy and provides employees with the 

skills needed to assume leadership roles in the future. 

Management recently agreed with all of our recommendations and provided a 

plan to implement them. It is important, however, for management to stay focused 

on making near-term improvements, because effective training and development 

practices will be a key component of Amtrak’s ability to deliver high quality services. 

CHALLENGE 3.—MANAGING THE RISKS ASSOCIATED WITH AMTRAK’S GOAL OF

MODERNIZING ITS INFORMATION TECHNOLOGY SYSTEMS AND INFRASTRUCTURE

Significant IT investments always involve risks, and achieving anticipated benefits depends on managing the risks and implementing business process improvements to streamline and improve internal operations. 

Amtrak recognizes that a number of its key information systems and the underlying technological infrastructure are outdated and increasingly prone to failure. 

Modernizing these information systems also provides a major opportunity for Amtrak to better harness information to make decisions and operate more efficiently. 

Amtrak is, therefore, taking measures to mitigate the potential for system problems 

while at the same time leveraging more up-to-date systems technology to drive operational improvements and more effective decisionmaking. 

Amtrak currently has four major technology initiatives under way: 

—Strategic Asset Management (SAM).—SAM is a multiyear program to transform 

and integrate key operational, financial, supply chain, and human resource 

processes. SAM is expected to help Amtrak meet managerial accounting requirements mandated by PRIIA and replace legacy financial, procurement, materials management, and operational systems. 
158 

—eTicketing and Next Generation Reservation (RES–NG).—Amtrak’s current reservation and ticketing system is critical for sales booking, ticketing, customer 

service, and train operations. eTicketing is a major program that aims to replace current paper-based ticketing processes with an airline-style electronic 

ticketing system. This program will also automate the onboard ticket processing 

and simplify and streamline the revenue recognition and accounting functions. 

—Amtrak Information Management (AIM).—The objective of this program is to 

make critical business information reliable and easily accessible to Amtrak’s 

managers and executives. It will integrate information from various internal 

and external sources, and will include sophisticated capabilities such as business intelligence, document management, and train communications. 

—IT Infrastructure Improvement (ITII).—This initiative focuses on upgrading Amtrak’s IT infrastructure to improve service levels and lower current costs. Under 

new outsourcing contracts signed during 2009, IBM is responsible for data center operations and seat management, while AT&T is responsible for data and 

voice networks. Amtrak is also moving its current data center to two new locations over the next several months. 

Because large IT acquisitions involve significant risk, they must be carefully managed. The fact that these programs are taking place concurrently and have a number of inter-dependencies heightens these risks. For example, the AIM program will 

need to make use of information that is being made available by other programs 

such as SAM and eTicketing. Also, many changes to business processes and operational procedures will occur in quick succession, challenging the organizations ability to absorb the changes. 

Amtrak is aware of these risks and has taken a number of measures to manage 

them, including: 

—Reorganizing the IT department to foster partnerships and improve communications with business customers. 

—Establishing a Project Management Office, separate and distinct from the technology delivery team, to establish standardized, disciplined procedures to guide 

both project management and technology development. 

—Forming an independent Enterprise Architecture team to develop, monitor, and 

enforce architectural standards. 

—Dividing each major project into phases and implementing comprehensive peer 

reviews for each phase, to ensure that projects meet quality standards before 

proceeding to the next development phase. 

—Instituting progress reports to keep management and the Board informed about 

the status of each technology project. 

To ensure that these projects stay on track, Amtrak will need to closely watch 

progress and take steps to address emerging problems quickly. We also recently initiated an audit of the largest and most complex of the four programs—the SAM 

project—to evaluate how well management and control measures are mitigating 

risks. 

CHALLENGE 4.—MANAGING RISKS ASSOCIATED WITH PROJECTS FUNDED THROUGH THE

RECOVERY ACT

Recovery Act spending creates many opportunities to improve infrastructure, facilities, and security, but the large amount of funds combined with tight spending 

deadlines create a challenge to spend money efficiently and effectively and to ensure 

that projects provide long-term economic benefits. 

The Recovery Act included $1.3 billion in capital grants to fund a variety of 

projects to help Amtrak improve its infrastructure, facilities, and security posture. 

The act also required the Secretary of Transportation to take measures to ensure 

that projects would be completed within 2 years of enactment (February 17, 2011). 

In March 2009, the Federal Railroad Administration (FRA) provided a $1.3 billion 

grant to Amtrak. The grant agreement requires Amtrak to complete all projects 

funded through the Recovery Act no later than February 17, 2011 and to continuously take actions to ensure projects are completed by that date. Amtrak is allowed 

to request a waiver for projects that cannot be completed by February 17, 2011, but 

must demonstrate that it has taken ‘‘extraordinary’’ measures to complete the 

project on time. 

Amtrak currently has hundreds of individual projects under way that are funded 

through the Recovery Act. Examples of important projects include: replacement of 

the Niantic River Bridge, refurbishments of several other bridges, improved communications, power upgrades, modernization of stations, improvements for customer 

and workplace safety, and the return to service of dozens of locomotives and passenger cars. 
159 

This week we plan to issue a draft report to Amtrak that analyzes project risks 

associated with key engineering projects funded by the Recovery Act. Of the nine 

projects (totaling $293 million) that we evaluated, five contained a significant number of high-risk areas that need to be managed effectively to ensure the project’s 

success. These projects included the Niantic River Bridge project and Positive Train 

Control projects. Of the 10 risk categories that we examined, risk associated with 

acquisition, environment, schedule slippage, and technology were identified by program managers as areas of the highest concern. In general the program managers 

were quick to recognize the high-risk items and to put forward tactics that they believed would adequately manage the associated risk. 

However, neither the program managers nor Amtrak’s executives are in a position 

to mitigate the most significant concern, which is that the grant between the FRA 

and Amtrak requires Amtrak to take extraordinary measures to ensure that all 

projects are completed by February 17, 2011. Although the Recovery Act requires 

that Amtrak take measures to complete the projects by February 2011, it does not 

require ‘‘extraordinary’’ measures. The March 19, 2009, FRA grant not only requires 

that Amtrak take continuing measures to complete projects within 2 years, but requires Amtrak to identify the extraordinary measures taken to meet the February 

17, 2011, completion date when applying for a waiver. 

This requirement to take extraordinary measures may have the unintended consequence of encouraging Amtrak to take actions that increase the risk of waste and 

inefficiency or even to take shortcuts that could increase the risk that the project 

will not perform as well as expected and will not provide the benefits expected. Although the term has not been defined, we consider extraordinary measures as any 

action that would significantly reduce productivity, increase the potential for waste 

or inefficiency, negatively impact the quality of the final products, or significantly 

impact the smooth operation of the railroad. 

Amtrak executives, including the President and the Chief Financial Officer, are 

committed to ensuring that funds are utilized effectively and represent an appropriate use of taxpayer funds. They are in the process of making decisions about how 

to balance the need and desire to implement these projects against the need to 

spend taxpayer funds efficiently and effectively. In fact, when Amtrak awarded contracts, it had taken measures to complete the projects on time—those measures 

were reflected in a contract completion date that met the requirement. 

However, as projects face slippages that threaten the completion date, which is 

not unusual for large construction projects, Amtrak executives are faced with either 

taking extraordinary actions to meet the completion date, or cancelling the project 

and identifying a substitute project that can be completed in time. Extraordinary 

actions that have been proposed by Amtrak include the addition of second or even 

third shifts on construction projects and reducing the scope of projects to accomplish 

less than originally planned. Identifying substitute projects at this point in time also 

involves risks and might result in spending on lower priority projects that will bring 

fewer benefits than the originally selected project. 

Because the grant agreement is driving these ‘‘extraordinary’’ measures rather 

than the Law, we are recommending that Amtrak apply to the FRA to amend the 

grant provisions that require Amtrak to continue to take ‘‘extraordinary’’ measures 

to complete projects by February 17, 2011, if those measures would significantly increase the risk of waste, inefficiency, reduced project benefits, or disrupt operations. 

In closing, let me briefly discuss the OIG’ s budget request. 

We are requesting $22 million as a direct appropriation to the OIG for fiscal year 

2011, which is consistent with our authorized funding level. Although it represents 

a $3 million increase over our 2010 appropriation, I would note that the OIG appropriation has not kept pace with inflation for the prior 3 years. 

The request will provide additional leadership positions to support needed restructuring of our operations as well as positions to strengthen our internal operations. 

For example, in the past, the Amtrak OIG relied heavily on support from Amtrak 

management units for Human Resource and procurement activities. While I plan to 

continue to rely on Amtrak support, it is essential that we have adequate in-house 

capabilities to ensure that we can operate independently and effectively. Finally, our 

request funds required upgrades to our IT systems. 

We have developed a new strategic plan for the OIG that will help us to focus 

on the major goals Amtrak is trying to achieve and we have provided that plan to 

the subcommittee. This additional fiscal year 2011 funding will help us to implement our new strategy of focusing our attention on the most significant issues Amtrak faces. We expect to identify significant cost savings and program improvements 

in important areas, including Amtrak’s $250 million annual healthcare expenditures. 
160 

We are also working closely with Congress and this subcommittee to provide timely information that will be helpful in the legislative and oversight process. We hope 

you agree that your investment in the Amtrak OIG serves to strengthen Amtrak’s 

operations, improve efficiency, prevent and deter fraud and abuse, and provide the 

transparency needed in an organization that receives large Federal subsidies. To illustrate, in February of this year, Amtrak released a Fleet Strategy outlining a 

multibillion-dollar plan to replace its aging fleet and to provide additional fleet to 

handle the growth in demand. At the request of this subcommittee, we plan to review this important initiative. 

Madam Chair, this concludes my testimony and I will be happy to answer any 

questions. 
(161) 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF INSPECTOR GENERAL

Senator MURRAY. Thank you very much. 

Ms. Ann Calvaresi. 

STATEMENT OF ANN CALVARESI-BARR, DEPUTY INSPECTOR GENERAL 

Ms. BARR. Chairman Murray, members of the subcommittee, 

thank you for the invitation to discuss ongoing efforts to strengthen 

the Nation’s passenger rail network. 

As you know, recent legislation calls for significant investment in 

rail, an investment that demands rigorous oversight to ensure passenger rail goals are achieved and taxpayer dollars are used wisely. 

My statement today focuses on FRA’s expanded role and responsibilities under PRIIA and the Rail Safety Improvement Act, the 

challenges FRA faces in effectively carrying out its new role, and 

the progress Amtrak has made in improving its operating and capital financial management processes. 

PRIIA and the Safety Act dramatically expanded FRA’s role. Together, these mandates call for FRA to develop, from the ground 

up, a multibillion-dollar high-speed rail program and to undertake 

several new safety and passenger rail service enhancement initiatives. 

Among the tasks set out for FRA are the development of performance metrics for minimum passenger rail service requirements, such as on-time performance levels, and the establishment 

of a discretionary grant program to develop and deploy positive 

train technologies. This expanded role presents several challenges 

for FRA, especially as they relate to implementing the high-speed 

rail program. To ensure program success, FRA must develop a 

sound implementation strategy. 

While FRA has developed project selection criteria, it has yet to 

provide grant applicants with the detailed methodologies needed to 

adequately complete their applications. For example, FRA has not 

issued guidance on how to prepare forecasts of project ridership 

and revenue, costs, and public benefits for high-speed and intercity 

passenger rail. Without such guidance, FRA is not positioned to effectively assess the merits of rail grant applications and ensure 

sustainability of the service. 

FRA must also enhance its internal policies and practices in 

order to effectively oversee these larger project grants. According to 

the Office of the Secretary of Transportation [OST], plans for program monitoring and administration are in development. 

Finally, FRA must obtain adequate staff with the right skill mix 

to oversee program implementation. 

The Recovery Act greatly accelerated FRA’s rollout of the highspeed rail program, further exacerbating FRA’s challenges. Within 
162 

10 months after its enactment, FRA was required to issue a strategic high-speed rail plan, establish interim guidance, and process 

all applications for the $8 billion stimulus investment. 

Balancing other PRIIA responsibilities with its traditional responsibilities create even more challenges for FRA. For example, 

PRIIA requires FRA to coordinate with hundreds of public and private stakeholders to establish a National Rail Plan that addresses 

interconnectivity with other modes of transportation, informs the 

development of State rail plans, and recognizes the need for a sustainable funding mechanism. At the same time, FRA must not lose 

sight of its traditional responsibilities; chief among them, ensuring 

rail safety and oversight of Amtrak. 

Effectively managing these critical rail programs will require 

sustained focus and oversight by FRA and the DOT OIG. We have 

begun to shift resources accordingly. Specifically, we have underway an evaluation of best practices for forecasting high-speed rail 

ridership and revenue, costs, and public benefits; an audit of infrastructure access agreements between the States and freights to ensure access agreements adequately address cost, schedule, and performance goals; and a quantitative analysis of Amtrak’s delays that 

will help FRA ensure investments yield the highest return. 

Given the important role Amtrak plays in intercity passenger 

rail, our work on Amtrak’s financial management is relevant to 

FRA’s efforts. Amtrak established key performance indicators to 

measure both the efficiency and effectiveness of its operational and 

financial performance. For example, Amtrak developed a cost-recovery indicator to measure the proportion of expenses covered by 

revenues and ridership growth. This approach appears to be a more 

efficient way to monitor and improve operating and financial performance than its previous approach of tracking savings from specific reforms. 

Our ongoing work also indicates that Amtrak has improved its 

long-term capital planning. Specifically, Amtrak has developed 

long-term plans for its fleet and infrastructure, a transparent process for prioritizing its capital needs, and guidance on conducting 

post reviews of its capital investments. Clearly, Amtrak’s success 

hinges on effective implementation. 

PREPARED STATEMENT

In closing, while we are dedicating additional resources to oversee FRA and its expanded role, we are encouraged that the Amtrak’s OIG, under its new leadership, will enhance its oversight of 

Amtrak-related work. 

Chairman Murray, this concludes my prepared statement. I 

would be happy to answer any questions that you or other members of the subcommittee may have. 

Thank you. 

[The statement follows:] 

PREPARED STATEMENT OF ANN CALVARESI-BARR

Madam Chairman and members of the subcommittee: Thank you for inviting me 

here today to discuss ongoing efforts to strengthen the Nation’s passenger rail network. As you know, recent legislation has called for significant investment in rail— 

an investment that demands additional scrutiny and oversight to ensure legislative 

goals are achieved and taxpayer dollars are used wisely. 
163 

1OIG Report MH–2009–046, ‘‘American Recovery and Reinvestment Act of 2009: Oversight 

Challenges Facing the Department of Transportation,’’ issued March 31, 2009 and OIG Report 

MH–2010–024, ‘‘DOT’s Implementation of the American Recovery and Reinvestment Act: Continued Management Attention is Needed to Address Oversight Vulnerabilities,’’ issued November 30, 2009. OIG reports and testimony are available on our Web site: www.oig.dot.gov. 

My testimony today focuses on: (1) changes in the Federal Railroad Administration’s (FRA) role and responsibilities under the Passenger Railroad Investment and 

Improvement Act of 2008 (PRIIA) and the Rail Safety Improvement Act of 2008 

(RSIA); (2) the challenges FRA faces in effectively carrying out its new role; and (3) 

the progress Amtrak has made in improving its operating and capital financial management. My testimony is based on our recent and ongoing work related to FRA, 

Amtrak, and rail issues in general. 

IN SUMMARY

PRIIA and RSIA dramatically realigned FRA’s role and expanded its responsibilities. Together these two pieces of legislation have called for the implementation of 

a high speed rail program, improvements in intercity passenger rail services, and 

safety enhancement initiatives. Each new mandate carries a unique set of challenges for FRA, especially as they relate to implementing the high-speed rail program. Challenges include developing written policies and practices to guide the program’s grant lifecycle process and oversight activities, and obtaining adequate staff 

to oversee implementation. The American Recovery and Reinvestment Act of 2009 

(ARRA) exacerbated these challenges by accelerating timelines and providing FRA 

an additional $8 billion. At the same time, FRA must continue to carry out its prior 

responsibilities, including its oversight of Amtrak. While our work has found that 

Amtrak has improved its financial management of operating and capital planning 

activities, new PRIIA mandates and ARRA funding could require Amtrak to heighten its improvement efforts. In light of these issues, the Department of Transportation (DOT), Office of Inspector General (OIG) has several audits—completed or 

under way—to monitor FRA’s efforts to carry out its traditional and new roles and 

responsibilities. 

BACKGROUND

Within the last 2 years, new legislation has been enacted with major ramifications 

to intercity passenger rail in the United States. On October 16, 2008, the President 

signed into law RSIA, or the Safety Act, and PRIIA. The Safety Act is the most comprehensive new railroad safety law in the past 30 years. In addition to reauthorizing 

FRA, the Safety Act contains new mandates for freight railroads, commuter railroads, and the National Railroad Passenger Corporation, better known as Amtrak. 

PRIIA reauthorizes Amtrak and strengthens the U.S. passenger rail network by 

tasking Amtrak, DOT, FRA, States, and other stakeholders with improving service, 

operations, and facilities. PRIIA focuses on intercity passenger rail, including Amtrak’s long-distance routes and the Northeast Corridor, State-sponsored corridors 

throughout the Nation, and the development of high speed rail corridors. 

ARRA was signed into law on February 17, 2009, to preserve and create jobs and 

promote economic recovery through investments in transportation, environmental 

protection, and other infrastructure. ARRA provided $8 billion to FRA for discretionary grant programs to jump start the development of high-speed rail corridors 

and enhance intercity passenger rail service. ARRA also directed $1.3 billion to Amtrak for capital investments. In addition, ARRA designated $20 million to DOT OIG 

through fiscal year 2013 to conduct audits and investigations of DOT projects and 

activities funded by ARRA. In response, OIG developed a work plan using a threephase approach to conduct audit and investigative work by emphasizing high-risk 

areas and promptly reporting results. Between March and December 2009, OIG 

issued two reports outlining the risks and challenges to DOT program offices related 

to ARRA, including FRA.1

LEGISLATION DRAMATICALLY EXPANDED FRA’S ROLE

Historically, FRA was a small agency, focused primarily on promoting and overseeing railroad safety. FRA was responsible for: (1) promulgating railroad safety 

regulations; (2) administering several small grant and loan programs, such as the 

Rail Line Relocation grant program and the Railroad Rehabilitation and Improvement Financing loan program; and (3) overseeing Amtrak’s operations and disbursing Amtrak’s annual grant funds. PRIIA and RSIA, however, dramatically realigned FRA’s role and expanded its responsibilities. Together, these mandates call 

for FRA to undertake several new safety and passenger rail service enhancement 
164 

initiatives and to develop from the ground up a multi-billion dollar high-speed rail 

discretionary grant program. 

PRIIA Added Several New Initiatives to Enhance Intercity Passenger Rail Service 

PRIIA tasked FRA with numerous significant responsibilities—among them the 

creation of a new High-Speed Intercity Passenger Rail (HSIPR) grant program. 

Other new PRIIA mandates include initiatives to improve existing intercity passenger rail service and to promote the expansion of intercity passenger rail. PRIIA 

requires FRA to design a long-range national rail plan that promotes an integrated, 

efficient, and optimized national rail system for the movement of people and goods. 

FRA issued its preliminary plan on October 15, 2009, and must submit the final 

plan to Congress on September 15, 2010. 

PRIIA also required FRA to develop performance metrics that establish minimum 

passenger rail service requirements—such as minimal on-time-performance levels 

and other service quality measures—and provide a framework for improved passenger rail service. The metrics were developed in conjunction with Amtrak and in 

consultation with the Surface Transportation Board, Amtrak’s host railroads, States, 

Amtrak’s labor organizations, and rail passenger associations. FRA is required to 

publicly report performance results quarterly. Other Amtrak-related responsibilities 

that PRIIA requires FRA to carry out include monitoring and conducting periodic 

reviews of Amtrak’s compliance with applicable sections of the American’s with Disabilities Act and monitoring Amtrak’s development and implementation of performance improvement plans for its long-distance routes. 

RSIA Highlighted and Expanded FRA’s Traditional Safety Role 

RSIA amended existing railroad legislation to make the safe and secure movement of people and goods FRA’s highest priority. Most notably, RSIA requires FRA 

to establish a discretionary grant program, with authorized funding of $50 million 

per year for fiscal years 2009 through 2013, to support the development and deployment of positive train control technologies. FRA issued a Notice of Funds Availability, Solicitation of Applications for this program on March 29, 2010; a status report on positive train control implementation is due to Congress by December 31, 

2012. 

RSIA also requires FRA to perform several safety-related studies. One study will 

assess the risks posed to passengers with disabilities boarding and alighting from 

trains where there is a significant gap between the train and the platform. Another 

study addresses the risks associated with the use of personal electronic devices by 

railroad personnel while on duty. This body of work will position FRA to carry out 

its role as the Nation’s rail safety enforcement agency as it undertakes increasing 

passenger rail responsibilities. 

FRA FACES SIGNIFICANT CHALLENGES IN MEETING ITS MANDATE

The new legislative mandates present unique challenges for FRA. Effectively implementing the HSIPR program is key among these challenges. Specifically, FRA 

must: (1) assess the net benefits of high-speed rail; (2) develop written policies and 

procedures for grant management; and (3) determine staffing needs. The $8 billion 

in ARRA funding exacerbated these vulnerabilities as it accelerated implementation. 

In addition to implementing the HSIPR program, FRA must balance its increased 

workload under PRIIA with prior legislative requirements, including its oversight 

of Amtrak. While FRA has made several steps toward meeting these challenges, it 

has recognized that more resources are needed to successfully carry out its mandate. 

HSIPR Success Depends on an Effective Implementation Strategy 

To ensure HSIPR project grantees follow sound management practices, FRA must 

develop a sound implementation strategy. First, FRA must develop guidance for 

forecasting project ridership, revenue, costs, and public benefits for high-speed and 

intercity passenger rail. According to DOT’s Office of the Secretary (OST), FRA has 

developed detailed evaluation criteria to determine a proposed project’s merit and 

feasibility. However, FRA has yet to issue formal guidance for grant applicants to 

use in preparing forecasts. 

Second, FRA must develop written policies and practices to guide the program’s 

grant lifecycle process and oversight activities. We identified certain risks associated 

with awarding grants without a fully documented program implementation strategy 

and grant lifecycle process. As a result, FRA delayed the awards until early 2010. 

However, according to OST, FRA is still in the process of reviewing its grants management manual for final approval and developing monitoring plans and grant administration standard operating procedures. 
165 

2The Transportation/HUD Division of the Consolidated Appropriations Act of 2010, Public 

Law 111–117 changed OIG’s reporting requirement on Amtrak’s savings from quarterly to semiannually. 

Finally, FRA must obtain a sufficient number of staff with the skills needed to 

oversee program implementation. To address its initial lack of capacity to start up 

and effectively manage the HSIPR program, FRA has completed a workforce assessment, which we have yet to validate. As a result of that assessment, FRA requested 

and received funding for 27 additional staff resources in its fiscal year 2010 budget. 

However, FRA has been slow to fill these vacancies. 

ARRA’s tight deadlines for spending funds have greatly accelerated FRA’s rollout 

of HSIPR, exacerbating program challenges. Deadlines for obligating funds under 

Track 1 (‘‘ready to go projects’’) and Track 2 (‘‘corridor development programs’’) are 

September 2010 and September 2011, respectively. Within 10 months after ARRA’s 

enactment, FRA issued a strategic plan, established interim guidance, and processed 

all Track 1 and 2 applications, as required. 

Managing Other New and Traditional Legislative Responsibilities Further Challenge 

FRA 

Balancing new PRIIA responsibilities with its traditional responsibilities create 

additional challenges for FRA. With regard to PRIIA, FRA must coordinate with 

hundreds of public and private stakeholders to establish a national rail plan that 

addresses interconnectivity with other modes of transportation and recognizes the 

need for a sustainable funding mechanism. As the market for intercity passenger 

rail carriers grows, tracking and reporting their performance results could become 

a challenge for FRA. For example, FRA will have to establish a standardized mechanism for collecting performance data from multiple carriers who may have different 

procedures than currently used for reporting the proposed metrics and standards. 

At the same time, FRA must continue to carry out its prior administrative responsibilities for its existing grant and loan programs. Specifically, FRA must effectively 

manage the Rail Line Relocation discretionary grant program, the Railroad Rehabilitation and Improvement Financing loan program, and the Amtrak grant program. Together, these programs account for 37 percent of FRA’s $4.374 billion fiscal 

year 2010 budget. 

Effectively managing these critical rail programs in the face of the public scrutiny 

of the HSIPR program will require sustained focus and oversight by FRA and OIG. 

OIG has begun to shift resources to provide the appropriate level of oversight in 

order to inform FRA’s efforts and monitor its progress. For example, our evaluation 

of best practices for forecasting high-speed ridership, revenue, and public benefit 

should assist FRA in its efforts to assess the economic and financial viability of proposed projects and ensure Federal investments are allocated to the most worthy 

projects. Our audit of the risks private freight railroads pose to the HSIPR program 

should help FRA ensure that access agreements adequately address cost, schedule, 

and performance goals, and that HSIPR benefits are achieved. Finally, our quantitative analysis of the causes of Amtrak delays will inform efforts by Amtrak and 

the freight railroads to improve Amtrak’s on-time performance and clarify the relative value of investing Federal funds to expand freight rail capacity as a means 

to address delays. 

AMTRAK HAS MADE IMPROVEMENTS IN FINANCIAL MANAGEMENT

Our work on Amtrak’s financial management is extremely relevant to the HSIPR 

program, given the important role Amtrak will play in FRA’s development of intercity passenger rail service. Since we began reporting regularly to Congress 2 on Amtrak’s operating performance and its progress in reducing Federal operating subsidies, Amtrak has shifted its financial management approach from implementing 

various strategic reform initiatives (SRI) to establishing key performance indicators 

(KPI). The KPIs appear to be a more efficient way for management to monitor operating performance. Results of our mandated audit on Amtrak’s 5-Year Capital Planning, which we are finalizing, also indicate that Amtrak has made significant improvement to its long-term capital planning including a more transparent 

prioritization process. 
166 

3Transportation, Treasury, Housing and Urban Development, the Judiciary, District of Columbia, and Independent Agencies Appropriations Act (TTHUD), 2006; Public Law 109–1 15. 4March 31, 2010, semi-annual review. 

5OIG Report CE–1999–116, Report on the Assessment of Amtrak’s Financial Needs Through 

fiscal year 2002. Issued July 21, 1999. 

Management’s New Approach to Measuring Reform Initiatives Through Key Performance Indicators Appears Reasonable 

Since fiscal year 2006, we have reported on Amtrak’s savings achieved as a result 

of operational SRIs at the corporate level, by business line, and at the route level.3

The SRIs were intended to improve Amtrak’s operating efficiencies and lower its dependence on Federal operating subsidies. For example, one SRI aimed to reduce 

losses through enhanced service flexibility and the outsourcing of certain services, 

such as food and beverage. The SRI approach was established to provide a comprehensive analysis of potential and realized operating savings for the longer term 

provision of a more efficient and financially feasible intercity passenger rail service. 

However, as we stated in our fiscal year 2009 fourth quarter report, Amtrak did not 

include any new savings from operational reform initiatives in its fiscal year 2009 

budget. 

Amtrak’s 2009 Strategic Guidance provided further details on possible savings 

from future operational reforms through KPIs—criteria that will measure both the 

efficiency and effectiveness of Amtrak’s operational and financial performance. For 

example, Amtrak established cost recovery ratio KPIs to measure the proportion of 

Amtrak expenses covered by revenues and ridership growth. Recently, officials told 

us that because the KPIs are derived from the annual budget and Amtrak operates 

to its budget targets, the KPIs provide a more streamlined way of evaluating performance to budget.4 Amtrak officials also noted that because KPIs are linked to 

monthly financial statements, KPIs are tracked and updated much more frequently, 

allowing management to react quicker to changes in operating and financial conditions. The updates should also allow management to drill down into KPI detail in 

real-time to determine what is driving any changes, and consequently react quicker, 

rather than waiting until the next month for the next round of financial statements. 

The Strategic Guidance states that KPIs will be used to evaluate management and 

to ensure that leadership’s attention and effort are properly focused. 

While Amtrak’s new approach appears to be a more efficient way to monitor and 

improve operating and financial performance, Amtrak has continued to pursue improvement initiatives tied to the original SRIs. Further, Amtrak officials stated that 

management will not measure the net impact of individual initiatives because it is 

too difficult to determine the incremental impact of any given initiative or project 

on one metric. For example, if Amtrak’s marketing department invests additional 

funds to promote Acela and revenues increase for that route, there is no clear way 

to determine if or what portion of the increase is due to higher gasoline prices, deteriorating airline service, or the marketing campaign. Instead, executives will discuss 

the results of improvement initiatives, and when intended outcomes are not 

achieved, they will require the relevant departments to take action to address the 

targeted KPIs. If the departments achieve the KPIs, then the improvement initiatives will be deemed successful. 

Because the KPIs have only been in place for 6 months, the ultimate success of 

this new approach has yet to be determined. As we stated in our fiscal year 2009 

fourth quarter report, in addition to reporting on a semi-annual basis Amtrak’s financial performance, we will track and evaluate Amtrak’s efficiency KPIs. Our Amtrak semi-annual report, which will be issued next month, will provide more detail 

on our evaluation of Amtrak’s operating performance through March 2010. 

Progress Has Been Made in Long-Term Capital Planning, but the Measure of Success 

Will Be Determined Through Implementation 

Since 1999, we have also reported 5 on Amtrak’s progress in determining its longterm capital needs. Previous reviews by our office, GAO, and Amtrak’s OIG have 

looked at various aspects of Amtrak’s capital budget and requirements and outlined 

concerns, including a number of which focused on Amtrak’s lack of a comprehensive 

long-term planning strategy with clearly defined goals, as well as a process for monitoring performance. 

In our current review, we have found a number of operational changes that have 

been implemented to improve Amtrak’s long-term capital planning process, which 

are primarily due to legislative requirements dictated by PRIIA and leadership from 

its Board of Directors and senior management. Specifically, Amtrak has developed 

long-term plans for its fleet and infrastructure, a transparent process for prioritizing 

its capital needs, and guidance on conducting post-reviews of its capital projects. 
167 

However, the success of these efforts depends on Amtrak’s ability to effectively implement and sustain many of its new policies and procedures. We look forward to 

issuing our full report within the next couple of months. Our office is also in various 

stages for other PRIIA mandated reviews, which are planned for issue over the next 

12 months. 

CONCLUSION

High-speed intercity passenger rail is expected to greatly enhance the Nation’s 

transportation system. Yet meeting the goals of PRIIA, RSIA, and ARRA will be a 

significant challenge, especially given the transformation required of FRA. While 

ARRA was enacted to jump start the U.S. economy, FRA’s decision to move forward 

deliberately is prudent and should help it make the most of its ARRA funds. Further, it has given OIG a unique opportunity to ensure proper oversight controls are 

built into the program. We have begun to position ourselves to oversee FRA developments while continuing our ongoing and newly mandated work on Amtrak. However, we are hopeful that Amtrak’s OIG, under new leadership, will pick up appropriate work, allowing us to dedicate additional resources to oversee FRA’s implementation of the HSIPR program. 

Senator MURRAY. Thank you very much. 

Mr. Boardman, under Amtrak’s new leadership, we’ve seen some 

important improvements in how the railroad has been managed, 

and instead of limiting its focus to getting through each day, the 

management team now has a strategic vision and has started to 

look at long-term planning. 

Amtrak’s overall capital plan and the accompanying fleet plan reflect that new priority on strategic decisionmaking, but Amtrak is 

still making separate requests for its capital plan and for its fleet 

plan. If you do not get all of the funding you’ve requested for fiscal 

year 2011, how are you going to decide on funding between these 

two separate plans? 

CAPITAL PLAN AND FLEET PLAN FUNDING

Mr. BOARDMAN. I think you’re referring to—basically—we’re almost a billion dollars over where the request came in from the administration. And it’s accounted for, all in capital. We’re talking 

about fleet, and we’re talking about all the projects that are capital-related on the Northeast corridor and on ADA and on all the 

other projects that are needed. So, as Amtrak has done in the past, 

and as Amtrak needs to look, today, to the future, we look at every 

opportunity for us to gain those dollars, one of them being the appropriation process, another being—and I think the Administrator 

talked about it a little bit—we are in discussion with the administration about—either a Federal loan or even going out into the 

commercial market to borrow money. 

But, in the end, it all comes back to Congress, because all capital 

is subsidized by Congress, in one fashion, form, or another, just 

like all capital for the highway or the aviation side is subsidized 

through Congress. They have a different methodology. They have 

a program that provides user funds for highways, but those user 

funds also are distributed to transit, which are not necessarily— 

and I think we talked about it a little bit earlier—they’re not paid 

for by the transit rider, they’re paid for under the same structure 

that the highway receives those funds and the same way that aviation receives those funds; it all comes back to the Congress in making a decision. 
168 

The need for Amtrak is to put on the table to Congress what our 

capital needs are, and we have not been bashful about doing that, 

because we need to rebuild the railroad. 

Senator MURRAY. Okay. Well, in addition to replacing your aging 

locomotives and railcars, as I talked about earlier, this could revitalize a domestic industry for manufacturing rail equipment and 

really help us focus on manufacturing jobs here in the country. 

But, realizing that goal, as I mentioned earlier, is going to require 

companies to have the confidence that Amtrak has a reliable, longterm source of funding for its fleet plan. What will it take, do you 

believe, for U.S. manufacturers to believe that passenger rail 

equipment is a viable line of business? 

Mr. BOARDMAN. Like that commercial on television says, ‘‘Buy 

my product.’’ Fund my plan. 

Senator MURRAY. So, you need to know that there’s a—that they 

will need to know that there is—— 

Mr. BOARDMAN. Yes. And—— 

Senator MURRAY [continuing]. A consistent—— 

Mr. BOARDMAN [continuing]. There’s a new—— 

Senator MURRAY [continuing]. Source of funding. 

Mr. BOARDMAN. Chairwoman, there is a new understanding 

across the world today, I think, that we are in a very different competitive environment for—not only the economy, but for energy for 

the future. And every country today is looking at how they are 

going to solve this problem. And rail becomes a key part of that. 

We’ve already seen that, as a key part of it, in terms of what the 

investments are with transit. But, transit needs to be connected to 

the rest of the country and there are two key elements that Amtrak brings to the table. One is its workforce, its key competitive 

advantage in the people that operate this railroad and know what 

needs to be done. And the other is the connectivity across this 

country, up and down from border to border and from coast to 

coast. This railroad will be a key reason why this Nation can live 

in a more prosperous position in the future. 

Senator MURRAY. So, what you’re saying is, if we have that goal, 

as a country, and it’s very clear and consistent, it will send a message to domestic manufacturers that we’re in it. 

Mr. BOARDMAN. Yes. And I think that message is already getting 

there. 

Senator MURRAY. Okay. 

In the past, Amtrak has purchased rail equipment from Bombardier, a company based in Canada. Is Amtrak currently purchasing rail equipment or overhaul service from Bombardier, and 

will it do so in the near term? 

UPGRADING THE AMTRAK FLEET

Mr. BOARDMAN. Yes. We continue to enhance our relationship 

with Bombardier, with GE, and with other manufacturers across 

the United States. 

Senator MURRAY. Okay. I understand that Amtrak is still trying 

to decide on the best strategy for replacing the Acela fleet, which 

was originally provided by Bombardier. One option is to purchase 

additional cars for the Acela fleet in order to expand capacity along 

the Northeast corridor, even though these new cars would be re-
169 

placed after just a couple of years, along with that original Acela 

fleet. How likely is it that Amtrak would purchase additional Acela 

cars from Bombardier, before updating all of the equipment for the 

Northeast corridor? 

Mr. BOARDMAN. Well, what we really looked at was that the 

Acela fleet on the Northeast corridor actually covers 121 percent of 

its costs. So, you’re actually making money on Acela, as compared 

to—— 

Senator MURRAY. Right. 

Mr. BOARDMAN [continuing]. Other modes and services on the 

corridor. So, we looked at that. We can improve the amount of revenue and enhance ridership if we could extend the number of 

trains that we operated that were Acela-like train sets. So, the opportunity is for us to increase our revenues, if we can find about 

five train sets that we could add to the corridor for high-speed service. 

Certainly, the Bombardier products that exist are already a proven design, and we don’t have to spend the time to go through to 

test an entirely new technology to provide that service. So, there’s 

a great—I’m trying to find the right word—there’s a great opportunity for us to be able to do that with Bombardier. But, we 

haven’t made that decision. We haven’t decided that that’s—— 

Senator MURRAY. Not decided. 

Mr. BOARDMAN [continuing]. What we’re going to do. 

Senator MURRAY. Okay. 

In my opening statement, I talked about the fact that I’m glad 

the administration is not submitting budget requests that would 

guarantee the bankruptcy of Amtrak anymore. But, their request 

for capital grants is still lower than the railroad’s own request, by 

about $500 million. What impact would the administration’s budget 

have on your capital investment? 

Mr. BOARDMAN. It’ll just make more shovel-ready projects available for us to do for the future, if funding becomes available. And 

I—what I mean is that we have, as every State DOT, and at— 

every competent operation has a list of projects that need to be 

done, especially when you have a $5 to $7 billion backlog, just on 

the Northeast corridor. 

But, there are a lot of other projects that could be done. I know 

Senator Dorgan may be here, talking to me about one in particular, 

in Devils Lake. So, we have opportunities, should the money become available, to get a—— 

Senator MURRAY. On the capital—— 

Mr. BOARDMAN [continuing]. Job done. 

Senator MURRAY. What about on the operating side? I think their 

request is $40 million less than yours. Will that have an impact? 

Mr. BOARDMAN. It will not cause, if the question really is, us to 

cut back services. 

Senator MURRAY. That’s what I’m asking. 

Mr. BOARDMAN. We’re looking for a way that we can make sure 

that those services are continued to be provided. 

But, some decisions—for example, I still get messages, from 

those who ride from Albany to New York City, asking, ‘‘When are 

we going to return the cafe car?’’ which we don’t have on there any 

longer. We eliminated that in order to reduce costs. 
170 

Senator MURRAY. Right. 

Mr. BOARDMAN. But, it—so, it impacts us, that it’s not as convenient for people to ride the service now as it was before. 

Senator MURRAY. Okay. Thank you very much. 

Senator Bond. 

Senator BOND. Thank you, Madam Chair. 

Mr. Boardman, we just heard Mr. Alves testify that second and 

third shifts are reducing productivity and compromising the work 

that’s done. We thought that—I understood that the $1.3 billion in 

ARRA funds were for shovel-ready projects. Were they not shovelready? Was Amtrak not shovel-ready? Why have you had to take 

these extraordinary steps, which apparently are more costly and 

less productive? 

ARRA PROJECTS

Mr. BOARDMAN. I think all the projects were shovel-ready. And 

I think that the IG did an excellent job looking at the risks for us 

along the way. But, of the nine projects that he really looked at— 

one of them was the Niantic Bridge, there were two positive train 

control projects, and there was a frequency converter replacement 

project and the Los Angeles maintenance facility—there were the 

top five that they were worried about for risk. 

When you looked at the number of points—and they looked at acquisition, environment, schedule, objectives, technology, size, complexity, financial, human capital, management, and fraud—what 

you wound up with was 10 points for each of the first 3 that they 

were worried about, 9 for 4, and 8 for 5. And when you look at the 

10, what you find is the risk is really environmental and size and 

complexity. The things that Ted and his staff found is it’s costing 

us more, as it does in every capital area, when you try to get it 

done as quickly as we were really trying to get it done and you had 

to put on the second or third shift. 

Senator BOND. So, that was a mistake, trying to put the time 

deadline on it. That had—— 

Mr. BOARDMAN. Well, if—— 

Senator BOND. That was a mistake, in terms of cost, productivity. So, that is a signal not to put timelines on it. I would hope 

that the requests you have would have reasonable timelines that 

are achievable. And I didn’t have any—— 

Mr. BOARDMAN. Absolutely. We agree with you. 

Senator BOND. I didn’t have anything to do with that bill, so I 

can’t speak to that. 

You’ve mentioned you’re taking a look at different types of funding for Amtrak. And you mentioned, as it—high on the priority list, 

borrowing in the private market. Correct me if I’m wrong; if you 

borrow, that means this budget—this subcommittee’s budget will 

have to pay the interest costs and the debt service every year. So, 

that will really be a charge on this budget. 

Are there any dedicated sources of funding that you’re looking at, 

outside of putting Acela-type trains on, that generate a profit, making things profitable that will give you the money you need? 

Mr. BOARDMAN. No. 

Senator BOND. Thank you—— 
171 

Mr. BOARDMAN. All capital comes from this—from the Federal 

Government. 

Senator BOND. Okay. Well, I would urge you to find out ways to 

emphasize that—what is profitable, and de-emphasize that which 

is not profitable, because we are up against the wall, as you probably heard me say, earlier. 

Mr. BOARDMAN. None of it is profitable, Senator. 

Senator BOND. Okay. Well—but, it has to be less costly. Right 

now—— 

Mr. BOARDMAN. And that is happening. But, it’s not—— 

Senator BOND. Yes. Well, it’s not—— 

Mr. BOARDMAN. Even if it—— 

Senator BOND. But—— 

Mr. BOARDMAN. Even if it’s less costly, though, sir, it doesn’t 

mean we can pay the capital with it. It means we can pay the operating. We—— 

Senator BOND. Well, it’s—we—— 

Mr. BOARDMAN. We—— 

Senator BOND. They come out of the same pot of funds. If you’re 

looking here—doesn’t matter whether you call them capital or operating, your capital is going to compete with your operating, which 

is going to compete with housing. 

Let me turn to Mr. Alves. This is sort of a two-part question. 

I know you’re new to the office at—of inspector general. We welcome you. The—in 2009, Amtrak outlined a strategic guidance document, and I’d like to know how it is being implemented. And to 

what extent are Amtrak managers or others being held responsible 

for achieving the key performance indicators that have been developed? And are they affecting pay and promotion? 

Mr. ALVES. I’m not sure I can fully answer that question, but I’ll 

do my best. 

The strategic guidance identifies the key things that Amtrak is 

trying to achieve. And Amtrak has been taking steps, under a new 

performance measurement system, to develop performance measures and goals for its key executives, and to—and then to flow 

those through the system to subordinates to be able to—— 

Senator BOND. Are there—is there tie-in between pay, or—is 

there any performance bonus for those who meet it or penalties for 

those who don’t? 

Mr. ALVES. I’m not sure about a bonus, but I do know that the 

rating and the pay is going to be tied to those measures. 

Senator BOND. All right. 

Ms. Barr, welcome. You have spoken about the problems that apparently came from putting too much money, too many requirements on FRA. In other words, you were—I think I understood you 

to say that a bunch of money was dumped on them with a bunch 

of requirements that were impossible to meet. And that’s why there 

have been failures to achieve what is expected from FRA. Is that 

a fair assessment? 

ROLE OF FRA

Ms. BARR. Yes, I think the assessment, and the point that I really want to make is, looking at FRA and what its traditional role 

really was, was a small regulatory agency that’s been asked to 
172 

transform into a large grant-making organization. So, not only do 

they have to issue their own grants, develop their own internal 

policies for good, solid project management and oversight, but they 

have to oversee a larger grant operation on behalf of Amtrak. 

Overlay that with all of the new safety requirements that came 

out of the Safety Act as it relates to positive train control, as it relates to the Americans with Disabilities Act, and a whole host of 

other things, that is a big challenge. That’s a hugely expanded role. 

And I think if I had to characterize what it’s like, it’s like needing 

to design and implement at the same time. That’s very difficult. 

Senator BOND. Are they able to handle the resources and the demands that they are expecting now? Are they still have a—are they 

able to handle it? 

Ms. BARR. I think they’re on their way. 

Senator BOND. Okay. 

Ms. BARR. They’ve requested the FTEs, but they’re nowhere close 

to where they need to be. 

Senator BOND. Okay. 

And finally, who’s going to—with the DOT IG, Amtrak OIG, how 

are you going to relate the roles of the two IGs? 

Ms. BARR. Okay. I can start first. Ted and I had discussions 

about this, as well. We’re thrilled that he is in place and can pick 

up, traditionally, what—where we’ve been focused, on some of the 

Amtrak issues. The way—I guess I would divide the responsibilities. I think it laid out pretty well the challenges that FRA has 

before it. And I think you, Senator, indicated this National Rail 

Plan is something that needs to be looked at very, very closely. 

Senator BOND. That will be your—— 

Ms. BARR. That would be something we would look at. We would 

look at all of the other mandates, the requirements, how well 

they’re overseeing project oversight. And we would hope that the 

Amtrak IG can continue doing what he’s doing, looking at some of 

those internal policies and practices and management challenges, 

going forward, with their new requirements. 

Senator BOND. Okay. You’ve got the FRA ball. Mr. Alves, you’ve 

got the Amtrak ball. 

Mr. ALVES. I would like to say a couple words about this, if I 

could. I agree with what Ann is saying. And the Amtrak inspector 

general, I think, has some very capable people, and has done some 

very good work. But, I think that our focus needs to be on the 

major challenges that Amtrak faces and its strategic goals that are 

outlined in that strategic guidance. And we have put together a 

new strategic plan that builds on that strategic guidance and, basically, directs us. Our goal is going to be to spend much more of our 

resources addressing the big, major issues. And so, I think that will 

fit with what you’re looking for. 

Thank you—— 

Senator BOND. We look forward to your sharing with us. My 

apologies, Madam Chair, to you and my colleagues. 

Senator MURRAY. Senator Lautenberg. 

Senator LAUTENBERG. One of the things that has been talked 

about with a degree of frequency, and that is, searching for new 

corridors, where we can bring rail—good quality rail service to 

these places. 
173 

Where would we—how would we fund the equipment, the tracks, 

the infrastructure, we—when we can’t handle the equipment needs 

for Amtrak, as it exists? We’re talking about other corridors. How 

is that going to be paid for? 

Mr. BOARDMAN. No, no. Directed to me, Senator? 

Senator LAUTENBERG. Yes. 

Mr. BOARDMAN. It’s good to see you. 

Senator LAUTENBERG. Please. 

FUNDING CORRIDORS

Mr. BOARDMAN. First of all, I think there are a lot of those corridors that we can extend the use of our existing equipment. For 

example, Springfield, Mass., to New Haven, for example—that’s 

one of the things being funded. And, certainly, there has been a lot 

of activity about how that’ll get financed for the future. When we 

extended the corridor to Lynchburg, Virginia, we were able to use 

equipment that was available that extended from the Northeast 

corridor to provide that service. 

But, there are areas, as you say—for example, one of the corridors that I think has great promise is the Milwaukee-to-Madison 

corridor, for example, for the future. That will require the rebuilding of the tracks, and it will require additional equipment. And you 

have a State that’s made a strong commitment, in regard to that, 

being Wisconsin, and—both in terms of equipment that they would 

buy and pay for—in some cases, on their own—and also applying 

for and rebuilding the line between Milwaukee and Madison, or at 

least part of that line that they own. 

And I think that’s where the key for PRIIA came, was that the 

States would take a leadership role in those corridors, for the future, not only with adding tracks and facilities, but also with the 

equipment. We’re there to help them, but they’re going to have to 

take a role in that process and also use the Federal money that’s 

become available. 

Senator LAUTENBERG. The question that arises here—you know, 

I look at this, and one thing that we all know, here, whether we 

like to look back and talk about all of the years of neglect in investment that we made—I mean, if you compare what Amtrak—what’s 

happened with Amtrak on an annual basis, I think it runs something over a billion dollars a year, over the—since the 1970s, when 

it became Amtrak, as we know it. 

And when you look in other places and commitments that are made—$10 billion a year in Germany for—get—to get high-speed 

rail to—going. And they did it. And it doesn’t do us a lot of good 

to beat our chests here about that. But, the fact of the matter is, 

this has been a case of sheer neglect on our part, to step up to the 

plate. 

So, when you look at these amounts of money, this isn’t something that is coming in out of the blue. It’s trying to make up for 

some lost time. 

Mr. BOARDMAN. Well said, sir. 

FLEET MAINTENANCE

Senator LAUTENBERG. And, you know, when we look at, for instance—I want to ask a couple questions about the equipment. You 
174 

were—you pretty well gave an endorsement to the continuation of 

a—buying Bombardier equipment. 

And how about the maintenance costs for Bombardier, how about 

the durability of the equipment, because I’ve heard, chatting 

around, that the maintenance costs right now are outrageously 

high. Is that not true? That’s—is that because the equipment was 

over—has been overworked? Or—— 

Mr. BOARDMAN. Well, right now—and I don’t mean to interrupt 

you, if you’re—— 

Senator LAUTENBERG. No. 

Mr. BOARDMAN. Right now, we’re actually rebuilding them at the 

midlife—it’s 10 years. So, the cost, right now, is somewhat higher. 

We expect these trains have to last 20 years. 

One of the things we did with the fleet plan was we began to recognize that there was a commercial life and there was a useful life. 

There were no manufacturers, other than Bombardier, in the 

United States that really built the heavy-duty, long-lasting, intercity rail cars in the United States. So, we really had to have a spec 

on regular—I’m kind of mixing terms here—but, we’re—we really 

had to have a spec that was heavy-duty for the future that would 

drive domestic manufacturing. 

Part of the reason that we’re committed to Bombardier is because we’re committed to Bombardier. We have 20 train sets out 

there that are operating, and I want to get things done and keep 

things moving. And I truly believe that—right to my core that 

we’re sitting on the precipice of huge increases again in fuel cost, 

and our need to deliver for our Nation and for the community is 

going to mean that we need to move faster. 

Somebody said—asked the question earlier, how long does it take 

to get these cars in here? Three years? Maybe, if we push them, 

2 years? We’re at $80 a barrel. We’re going to be headed to 100, 

at least by some estimates, and maybe beyond that. It’s when that 

happens that you begin to see a total breakdown in the aviation 

business model for short distance. And those are the kinds of 

things that railroads can provide in the most efficient manner. 

So, I don’t want to say that we have to buy Bombardier for the 

high-speed rail sets. And I want a new generation of high-speed 

rail that’s open and competitive. But, right now, in order for us to 

really move things the way we think we need to move them, we 

need the relationships with Bombardier. And we also need relationships—and we are improving our relationships with General Electric, for example, that we have—over 200 of our diesel locomotives 

are General Electric locomotives that—we’re improving our relationship with them so that they will become longer-lasting, and 

we’re looking at the potential for a new-generation tier-3—— 

Senator LAUTENBERG. In the meanwhile, can we get any acceleration of the speeds—you held out some hope there, and made me 

glad for a minute; in this environment, that’s pretty hard. But, the 

fact is that, with new equipment, you projected a real shortening 

of the trip from here to New York. The example that—— 

Mr. BOARDMAN. We believe the time savings can be improved. 

Senator LAUTENBERG. If we—the midlife repairs that you talked 

about. Does that give you the kind of equipment advantage that in 
175 

any way enhances the amount of time that we have to go on the 

Northeast corridor to get to destination? 

Mr. BOARDMAN. Well, some, but it doesn’t get us up to the speed 

of the Acela. And it’s not going to improve your handwriting, because we need to have that infrastructure fixed, as well. 

Senator LAUTENBERG. We don’t do old habits like that, huh? 

Mr. BOARDMAN. Yes, sir. 

Senator LAUTENBERG. Thank you. Thank you, Mr. Boardman. 

Thank you, all of you. 

Senator MURRAY. Senator Dorgan. 

Senator DORGAN. Thank you very much. 

So, Mr. Boardman, thank you for being here. And Senator Lautenberg and I were just talking about the fact that both of us think 

you’re doing a good job, and we were reminiscing, with Mr. Gunn, 

who used to run Amtrak, who I thought was a superb leader, as 

well. But, thanks for sinking your teeth into this. 

This is a big challenge, because you’ve not gotten the money from 

the Congress for capital to do what’s necessary. 

I was in Russia recently, and was on a fast train from Moscow 

to Saint Petersburg, and I’m thinking, ‘‘Wait a second. Why is it 

there’s a fast train, with faster and better equipment in Russia 

than here?’’ It makes no sense to me. 

Well, I’m a big supporter of Amtrak. I think rail passenger service is an important part of the transportation network. And I think 

Congress just has to do better. And I know we have some among 

us, here in Congress, who believe we shouldn’t do this at all, ‘‘The 

private sector won’t do it, it shouldn’t be done.’’ I’m not one of 

those. I think this is a very important adjunct to America’s transportation system. 

Now, having said all that, and complimented you sufficiently, let 

me—— 

Mr. BOARDMAN. Is Devils Lake on your mind, Senator? 

Senator DORGAN. Yes it is. Yes it is. 

You know, you mentioned, I think that the Empire Builder is 

probably one of the most successful long-distance trains in—— 

Mr. BOARDMAN. Yes, sir. 

DEVILS LAKE

Senator DORGAN [continuing]. On the Amtrak system. The Senator from Washington knows that, because that’s where the Empire 

Builder ends up. Over a half a million people get on that train, 

from Chicago to Seattle. It goes through North Dakota. And we 

face a problem. As you know, we have a chronic lake flooding that’s 

been going on for a dozen years now in what is called ‘‘Devils 

Lake.’’ It’s dramatic flooding. I think it’s the only circumstance, 

other than that of the Great Salt Lake, where you have a closed 

basin. We don’t quite understand where all this is going to go, but 

the Lake has increased in height, I think, 25 feet now. And it just 

continues to rise. This year, it’s expected to rise again. 

We have a bridge, near Churchs Ferry, on a track owned by 

BNSF Railway where Amtrak, I believe, slows down to 25 miles an 

hour in order to—— 

Mr. BOARDMAN. Yes. 
176 

Senator DORGAN [continuing]. Go over that bridge. But, if the 

water goes much higher, perhaps another foot and a half, you won’t 

be able to go over that bridge. And we met, in January, about that. 

I’m hoping that quick action can be taken to begin the work to resolve that issue. 

I don’t think you want to avoid stopping at Grand Forks, Devils 

Lake, Rugby, along the route of the Empire Builder. You get a lot 

of traffic in that area. 

So, tell me where we are, in your minds, and what can we do 

to fix this, and do it on an urgent basis? 

Mr. BOARDMAN. We’ve been regularly meeting, in regard to 

this—— 

Senator DORGAN. I’m aware of that. 

Mr. BOARDMAN [continuing]. With the State and with BNSF and 

so forth. And nobody has stood up and volunteered to pay for a new 

bridge, for example, which is perhaps understandable. But, it’s 

time. It’s time for all the parties to decide, what part of this do 

they need to help pay for? And how do we move this forward? 

So, I would propose to you—with your blessing, I hope—that we 

meet with the State, in a more structured way, with our senior 

folks, to find a way to not only design and engineer, but finance, 

the appropriate bridge that solves this problem for the future. 

Senator DORGAN. Now, the track and the bridge belong to BNSF? 

Mr. BOARDMAN. They do. 

Senator DORGAN. And what will the design and the engineering 

cost be? 

Mr. BOARDMAN. You know what, I had it and—— 

Senator DORGAN. All right. 

Mr. BOARDMAN [continuing]. Was supposed to remember it, and 

it’s gone. But, I can provide that to you for the record. 

I think the construction of the bridge was around $60 million, 

and usually it’s about 10 percent of that, but I think—I think it 

was, like, between $4 and $6 million to design it; and then, the 

more—maybe more difficult part for the future was, we had to replace some rails for the future, and maintain it, which brought the 

whole thing up to, maybe, in the $100,000-plus-or-minus category. 

Senator DORGAN. You mean $100 million. 

Mr. BOARDMAN. Yes, $100 million. If it was 100,000, we’d take 

care of it. 

Senator DORGAN. Yes, we’d—— 

Mr. BOARDMAN. Sorry. I was trying to convert, you know—— 

Senator DORGAN. Senator Murray—— 

Mr. BOARDMAN [continuing]. Kilometers per hour to—— 

Senator DORGAN [continuing]. Would fund that out of personal 

funds, $100,000. 

Mr. BOARDMAN. You got me. 

Senator DORGAN. We seldom ever hear numbers like that. 

Well, let me make a suggestion. I wonder if perhaps we shouldn’t 

do a conference call next. My staff has been involved with all of 

these calls. I mean, we’ve had some weekly calls; but, frankly, 

nothing is happening. 

Mr. BOARDMAN. Yes, sir. 

Senator DORGAN. I mean, nothing constructive is happening, and 

I wonder if we shouldn’t do a conference call with the CEO of 
177 

BNSF, Mr. Rose, yourself, the Governor, the congressional delegation; and, in that call, decide who’s going to do what, when, and 

how we’re going to get this fixed. Because, I worry very much that 

we could come up to a time here, in just a matter of weeks, when 

something—structural issues or others—could persuade you that 

you can’t any longer run that Amtrak train through Grand Forks, 

North Dakota—Devils Lake, North Dakota—Rugby—— 

Mr. BOARDMAN. You were persuasive to me, in the meeting we 

had in January, that I would continue to operate—— 

Senator DORGAN. Well, I tried to be persuasive. 

Mr. BOARDMAN. Yes. 

Senator DORGAN. But, let me suggest that we put together a conference call of principals, first. Make some judgments there about 

who’s going to do what and when. 

Mr. BOARDMAN. Yes, sir. 

Senator DORGAN. But, again, you want this railroad to run well. 

You believe in passenger service, as I do. And I think that the 

chairman of this subcommittee, I know, has very strong feelings 

about it. You just heard Senator Lautenberg—nobody’s been 

stronger in the Senate than Senator Lautenberg. You understand 

you’ve got a very strong supporter in the Vice President’s office. 

Mr. BOARDMAN. Yes. 

Senator DORGAN. We watched him, as a Senator, spend a lot of 

time on Amtrak, as well. 

So, I really want you to succeed. We need to find a way to get 

enough capital into this rail passenger system so that you can 

make decisions in the intermediate and longer-term. It’s the only 

way we’re going to get to where we want to be, and need to be, to 

have a healthy rail passenger system that works well. 

So let me, Madam Chairman, thank you for the time. 

And I’ll look forward to talking to you either late today, Mr. 

Boardman, or tomorrow. 

Mr. BOARDMAN. Yes, sir, Senator. 

Senator DORGAN. And we’ll set up that call. 

Thank you very much. 

Mr. BOARDMAN. Thank you. 

Senator MURRAY. Thank you very much. 

I have one final area, and that is in fiscal year 2010, Amtrak committed to spending $144 million on station improvements to 

bring the rail system into compliance with the ADA. The original 

budget request for 2011 included $281 million for the second year 

of its 5-year plan for ADA compliance, but, today Amtrak is lowering that estimate, I understand, by $50 million, because of difficulty getting the money out the door this year. And I understand 

that part of that is due to the fact that you don’t own all the facilities. 

But, I wanted to ask you today, Mr. Boardman, if you still believe that Amtrak will be able to bring all of its stations into compliance with the ADA within the next 5 years. 

Mr. BOARDMAN. I don’t know that we can, Chairwoman. I’m not 

happy with my organization that reduced the amount from the 

$281 million down to the $231 million. And I don’t yet have the answers from them as to what we’re going to do to make that 5 year 

deadline. If we have to drop it—$50 million right this minute—for 
178 

me to testify to you that we can deliver it in 5 years, I don’t think 

would be the appropriate thing for me to do. 

Senator MURRAY. Well, I just want you to know, this is a high 

priority for me. 

Mr. BOARDMAN. Yes. 

Senator MURRAY. It’s about people’s civil rights. And it’s not 

going to get any easier in the next 5 years, so I’m going to continue 

to press you on this. 

Mr. BOARDMAN. Yes, ma’am. 

Senator MURRAY. With that, I don’t believe we have any other 

members that have questions. So, I want to thank all of our witnesses for their testimony. 

SUBCOMMITTEE RECESS

And I will recess this hearing until May 6, at 9:30. At that time, 

we will be taking testimony from HUD Secretary Donovan and 

DOT Secretary LaHood on the administration’s fiscal year 2011 

budget request related to community livability and sustainability. 

Thank you very much. 

[Whereupon, at 11:24 a.m., Thursday, April 29, the subcommittee 

was recessed, to reconvene at 9:30 a.m. Thursday, May 6.] 
(179) 

TRANSPORTATION AND HOUSING AND URBAN 

DEVELOPMENT, AND RELATED AGENCIES 

APPROPRIATIONS FOR FISCAL YEAR 2011 

THURSDAY, MAY 6, 2010 

U.S. SENATE, 

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, 

Washington, DC. 

The subcommittee met at 9:30 a.m., in room SD–138, Dirksen 

Senate Office Building, Hon. Patty Murray (chairman) presiding. 

Present: Senators Murray and Bond. 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY

STATEMENT OF HON. RAY LAHOOD, SECRETARY 

OPENING STATEMENT OF SENATOR PATTY MURRAY

Senator MURRAY. Good morning. This subcommittee will come to 

order. 

I want to welcome both of our witnesses today and thank you for 

coming here and being a part of this today. 

Last year, the administration launched the Interagency Partnership for Sustainable Communities. This partnership, among the 

Departments of Transportation, Housing and Urban Development, 

and the Environmental Protection Agency, represents an effort to 

use Federal resources more effectively to help our communities create livable and sustainable communities. 

This morning, we are pleased that DOT Secretary LaHood and 

HUD Secretary Donovan are here today to talk about their Departments’ funding requests to support that partnership. This hearing 

provides us a very important opportunity for us to hear how these 

Departments are working together and how their budget proposals 

will help communities across the country. 

All across the country, Americans are making decisions about 

where to live, where to work, where to raise their families. They 

are evaluating where they can get a job, where they can afford to 

live, how much time and money their commute will cost, and what 

schools and services a community can offer. 

As the most significant expenses for most families, transportation and housing are central to those decisions. But the costs 

aren’t limited just to dollars and cents. The tradeoffs impact quality of life and future opportunities. 
180 

In communities across our country, in small towns and large 

urban centers, local leaders understand the issues facing their communities, and they are seeking ways to address the challenges of 

congestion and affordable housing, pollution, and lack of jobs. Importantly, they recognize that the health of their communities depends on taking a comprehensive approach to those challenges. 

The economic crisis has made the obstacles to affordable housing 

and economic competitiveness that much greater. We have seen 

millions of families become overwhelmed by unaffordable housing 

costs, entire communities devastated by the foreclosure crisis, and 

local economies struggle with the loss of entire industries. 

But as we know, efforts to create sustainable communities can be 

part of the solution. Many of our communities are still growing and 

need to decide for themselves what they want to look like as they 

develop. This isn’t always about whether or not we should build a 

road, but where and how to build those roads so they get people 

where they need to go and how to create transportation alternatives so people don’t have to get in their car if a bus or a bike 

or a subway could work better. 

Other communities aren’t growing. Instead, they are trying to 

figure out the right way to reduce their size and create viable 

neighborhoods and a smaller footprint, ones that are connected to 

jobs in retail and essential services. Taking a comprehensive approach to housing and transportation is not about dreaming and 

idealism. It is about real decisions that our communities make each 

day. 

There is a perfect example of this in my home State of Washington. For years, leaders of the city of Bellevue have worked with 

residents and local businesses on a coordinated approach to developing the Bellevue-Redmond Corridor, which serves as a major 

thoroughfare connecting Bellevue and the city of Redmond. 

This Bell-Red Corridor plan is a perfect example of the type of 

comprehensive approach to sustainable, environmentally conscious 

development we are trying to encourage with the Sustainable Communities Initiative. It is a plan that melds housing, transportation, 

and investments to support economic growth and job creation. 

By better aligning Federal programs, this partnership among 

HUD, DOT, and EPA can support the work that is already happening in Bellevue and other communities across the country, unfortunately, because many of our Federal programs are based on 

outdated rules and regulations and thinking, they do not reward 

innovation and collaboration. 

Distinct programs and funding sources managed by different 

agencies and governed by different and often conflicting rules can 

make it difficult to coordinate funding streams. And sadly, the Federal Government provides little incentive for communities to think 

comprehensively about housing and transportation. That is why I 

worked last year to include the TIGER program in the Recovery 

Act and in the fiscal year 2010 appropriations act. 

That program offers communities the opportunity to fund the 

best solution to their transportation needs without the Federal 

Government prescribing whether that solution should be a road or 

a transit service or railroad. But I believe that traditional pro-
181 

grams should also help communities coordinate their housing and 

transportation plans. 

On the Federal level, we need to do more to reward and promote 

innovation. These incentives should not change the fundamental 

principle that choices about housing and transportation and economic development are best made at the local level. At the same 

time, Federal policies do impact the choices that communities 

make, and we should be designing policies that promote economic 

competitiveness, affordable housing, and energy efficient and 

healthy communities. 

HUD, DOT, and EPA have developed livability principles to 

serve as a foundation for their partnership. But the hard work will 

come in applying those principles. The President’s budget includes 

several new proposals for sustainable communities, including $527 

million for programs at the Department of Transportation and $150 

million for programs at the Department of Housing and Urban Development. This is a significant investment, and the budget materials provide few details on how these resources would be used. 

I want to understand the long-term benefits of those investments 

to our communities and our transportation system and our economy. This subcommittee must decide how to allocate resources to 

meet the various transportation and housing needs across the 

country, and because our resources are so limited, we need to closely examine all budget proposals. So I will have questions today on 

the specific criteria for each of these programs and the standards 

that we will be using to evaluate their success. 

I will also have questions on the appropriate role for each of the 

Departments. The administration has laid out a framework by 

which HUD will be the lead on planning, DOT will provide capacity 

building, and EPA will deliver technical assistance. While I understand the importance of defining clear roles for each of the agencies, I am concerned that these roles may unintentionally reinforce 

existing silos. 

Within HUD, the fiscal year 2011 budget requests an additional 

$150 million for the Sustainable Communities Initiative, which 

Congress first funded in fiscal year 2010. This funding is intended 

to help communities on a regional and local level gain the tools and 

capacity to develop and implement comprehensive plans that integrate transportation and housing. 

In order to develop its NOFA for the fiscal year 2010 funding, 

HUD has spent a great deal of time working with DOT and EPA 

to get feedback from communities and other stakeholders on how 

to most effectively design these programs. I support these efforts 

to make sure these policies are designed to meet the needs of communities. But at the same time, there needs to be clarity of purpose for this initiative and for these Federal resources. 

So I will have questions on how to balance the need to provide 

communities with the flexibility to address their specific needs with 

the need to have some structure at the Federal level to make sure 

they are sound Federal investments. 

The budget proposal from the Department of Transportation includes $200 million for grants to provide transportation planners 

with the analytical tools to develop more reliable forecasts. The administration has proposed paying for these grants with funds taken 
182 

from the regular highway program, and I have very serious concerns about that. 

DOT’s proposal also includes $307 million in existing transit 

funds that have been combined into a new livable communities account, but without any apparent change in the purpose. I look forward to hearing more rationale for this proposal, and I will also 

have questions about how these proposals for DOT fit into our larger debate over reauthorization. 

Americans have long realized that quality transportation and 

housing are critical elements for vibrant communities that can foster private sector investment and create good jobs. I believe this 

interagency partnership has the potential to address many of the 

challenges that communities are facing and help them achieve 

those goals. 

There is no one-size-fits-all approach to the many transportation 

and housing challenges our communities face. The Federal Government cannot prescribe the solutions, but it should be able to assist 

communities in developing them and prove the appropriate incentives to do so. 

Changing practices and thinking in our Federal Departments 

and local communities will not be easy. People are always comfortable with what they know, and change is difficult. So I commend each of you for the leadership you have demonstrated in 

breaking down silos and pushing for leaders on the Federal and 

community level to think in a new way about the best way to make 

Federal investments. 

With that, I will turn it over to my ranking member, Senator Kit 

Bond for his opening statement. 

OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you, Madam Chair. 

And welcome, Secretary LaHood and Secretary Donovan. We appreciate both of them coming today, good friends who are working 

with us on things that are very, very important in our States and 

throughout the country. 

And today’s hearing is about coordinating Federal housing and 

transportation investment in our communities. If done properly, 

this cooperation between Government agencies could be a way to 

stretch responsibly taxpayer dollars and truly get the best bang for 

the buck. 

However, as I indicated to you gentlemen prior to the hearing, 

I have a philosophical question about that because this seems to 

indicate that the Federal Government is the one that is going to 

decide what makes a community livable. And I am concerned that 

we are looking to the Federal Government to be involved in the decisionmaking. 

Now we already know that the Federal Government helps fund 

the planning agency. We have got planning agencies at home, the 

MPOs, the RPCs. Their job is to work local officials and get local 

input and decide which way their communities should grow, what 

they need, and I want to support that effort. 

The chair mentioned Bellevue, Washington, and I could go 

around the State of Missouri to tell you about Columbia, Missouri, 

which wants bike paths. Everybody else wants roads. They want 
183 

bike paths. We fought to get them bike paths. St. Charles needs 

a river dredged. We want to try to help St. Charles get the river 

dredged. 

I am not as confident that entrusting Federal decisionmakers in 

Washington to lead the process and tell communities how they 

should go is the right way to grow. I have fought for years to say 

that we have the plans at the local level, and we want to work with 

you to make sure that your agencies carry out their core responsibilities to provide our communities the roads, highways, and 

bridges they need and the affordable, low-cost housing and public 

housing that are needed. 

And I want to make sure that these decisions are supported by 

the Federal Government. I do not see it as the responsibility of any 

Federal agency to tell our towns and cities what would make their 

communities more livable or sustainable or even to try to define 

the term of what they want their communities to be. 

They want it livable. They want it sustainable. I am concerned 

about it, and I have, for example, I have mentioned previously 

when you asked people in Missouri, the part of Missouri I live in 

what makes—how DOT can help us make a livable community. 

Their answer is going to be to make the highways safer because, 

well, in rural areas people have to travel. 

They work on farms. They live in dispersed cities. They have to 

travel. Their children have to go to school. Their elderly have to get 

healthcare. Our roads and bridges in Missouri are out of date. We 

kill over 1,000 people a year, almost 3 people a day, and at least 

one-third of those deaths are attributable to unsafe highway conditions. 

And on the other side, there are housing shortages. There are 

rental housing shortages in some areas. There are things that we 

need to work on, and we appreciate the working cooperation with 

HUD to make sure we take care of those needs. 

But I want to see these decisions made at the local level, but I 

want to thank HUD especially for the efforts that you have made. 

We have got some, what is it, 900 pages of comments on what they 

want at the local level. 

Well, I—just to be frank, I don’t have any question—I know planners, and I have worked with planners. And if you go out and tell 

a bunch of planners that we would like to get your plans to see how 

you could spend the money to plan to take care of our priorities, 

they would be more than happy to submit plans for how they are 

going to use more money to plan. And if it is only 900 pages, they 

are just not trying. 

But I want to see those planning efforts focused on planning at 

the local level for what they need to do. 

And again, I share the same concerns that the chair mentioned 

that we have a very tight budget, and I have complained about this 

before. We have got so many demands at the same time we have 

a record budget this year of $1.6 trillion, 10.6 percent of our GDP. 

We are borrowing that from our children and grandchildren, and 

we have to keep our spending under control. 

And I am concerned about committing scarce dollars, an $827 

million program that we can’t even name, when we have really 

pressing needs in transportation and housing that we have already 
184 

identified. And I would like to see the money in highways spent on 

highways. We need a lot more of it there, and we have tremendous 

needs in the housing area. 

And I am still looking, Mr. Secretary, for the rationale on which 

HUD awarded the $2 billion in competitive neighborhood stabilization program grants. I would like to see some more transparency 

in that process. And I would like to see the criteria on which the 

TIGER grant applications were awarded and what were their ratings. 

Basically, we want to see more transparency at the Federal level. 

But I am very interested in making sure that the dollars that we 

have available go to the core responsibilities that you have and 

that we don’t take money away from programs which I believe are 

already pressed, and that is the housing program, the transportation program. We have got more needs than we can reasonably 

afford with what is likely to be people tell me a tight budget allocation. 

And I would close by just saying that we hope that you will go 

back to the process that we have specified in law before and will 

again that Congress be notified 3 days prior to announcement with 

backup materials and information on how awards were made, 

where they are discretionary awards made by HUD, where those 

monies are going, and we would like to know—and how they were 

selected. We would like to know the same thing from the Department of Transportation. 

But I thank you very much for the work that you have done on 

it. I am still confused about what we are trying to do. If you all 

can’t agree whether it is livability or sustainability and the fact 

that you will know it when you see it, if that is going to be the 

criterion, I think that is a criterion that the local leadership can 

choose and can apply better than we in Washington can. 

Thank you, Madam Chair. 

Senator MURRAY. Thank you very much, Senator Bond. 

With that, again we welcome both of our witnesses today, and 

Secretary LaHood, we are going to begin with your testimony. 

STATEMENT OF HON. RAY LAHOOD

Secretary LAHOOD. Madam Chair and Ranking Member Bond, 

thank you for your leadership on so many of these issues that we 

deal with on a daily basis. We are grateful to you for all that you 

do to enable us to carry out the mandates of Congress, and we also 

thank you for the opportunity to discuss the Department of Transportation’s efforts to promote livable communities through our current programs and to highlight our related budget request for fiscal 

year 2011. 

Over the last 16 months, I have traveled to 80 cities in 38 States, 

and everywhere I go, Americans are asking for more public transportation, more walkable neighborhoods, less congestion, and less 

sprawl. Livable communities are in great demand because they 

make financial and economic sense. 

Transportation and housing are the two largest household expenses for the average American family. In order to reduce those 

costs and strengthen our communities, we must rethink our plan-
185 

ning, our priorities, and our investments in the Nation’s transportation infrastructure. 

We need a new approach that will improve the quality of life in 

cities and towns across this country while helping us to save billions in infrastructure and energy costs through the application of 

livable and smart growth principles we have developed with our 

friends at HUD and EPA. We are already making substantial 

progress by creatively leveraging our existing programs, and we 

have clearly demonstrated that the American people believe we are 

headed in the right direction. 

We recently funded a project in Dubuque, Iowa, to design streets 

that are attractive, convenient, and safe for a broad range of transportation users. Dubuque’s efforts helped to attract an IBM employment center of more than 1,500 people to the city. 

In Seattle’s Mercer Corridor, a hub for biotechnology companies, 

we are investing in better roads with bicycle lanes, improved access 

to transit, and upgrading local water, sewer, and electrical infrastructure. These improvements will help attract and retain a wellqualified workforce to Seattle’s biotech community. 

And one other noteworthy project, which I have mentioned before 

when I have been here, Kansas City, Missouri, where they are taking a 150-block distressed urban community called Green Impact 

Zone to significantly expand transit and pedestrian facilities for the 

first time in the community’s history. This offers residents brandnew access to clean, reliable transportation to get to jobs, schools, 

hospitals, and connect with the rest of downtown. 

This project in particular is a national model demonstration of 

integrating place-based investments—how place-based investments 

can apply the principles of sustainability to help transform a community. In addition, our decision earlier this year to include a 

range of livable criteria evaluating transit capital projects through 

FTA’s New Starts program also elicited a huge outpouring of support. 

Meanwhile, we are helping to educate and empower local communities on how to make livable projects a reality by providing information and training in new ways. This includes guidance on transit-oriented development we have prepared with HUD. Elected officials, planners, and developers should find this information very 

valuable. 

We released a notice of finding for a pilot program administered 

by the FTA that will enable urban and rural communities to put 

more buses, trolleys, and other local transit on the street. And 

along with our friends at EPA, we are sharing our expertise in support of HUD’s efforts to award planning and challenge grants to 

help communities become laboratories for sustainability. 

Looking ahead to 2011, the President’s budget includes $520 million for a livable community program that will accomplish several 

key objectives. It will establish an Office of Livability to ensure we 

lead and coordinate our livable-related programs and grants DOT 

wide and create appropriate performance measures. 

Too often local governments and planners do not have access to 

the best, most comprehensive information that is essential to making better, more informed transportation investments that generate 
186 

the desired outcomes. We must remedy that in partnership with 

our friends at HUD and EPA. 

PREPARED STATEMENT

We will fund transit and capacity-building initiatives that give 

State and local governments the tools, resources, and assistance 

they need to better coordinate transportation, housing, land use 

planning, and water infrastructure. Our livable proposal is a starting point for a bold new approach to revitalize the Nation’s transportation infrastructure. The President’s budget and the administration’s future surface transportation proposals reflect these and 

many other innovative ideas. 

We look forward to your questions following Secretary Donovan’s 

testimony. 

Senator MURRAY. Thank you very much, Mr. Secretary. 

[The statement follows:] 

PREPARED STATEMENT OF HON. RAY LAHOOD

Thank you for inviting me to appear before you today to discuss the Department 

of Transportation’s (DOT) current efforts to promote livable communities through 

our existing programs and our budget request for fiscal year 2011. 

INTERAGENCY PARTNERSHIP FOR SUSTAINABLE COMMUNITIES

As a Nation, we pride ourselves on the livability of our communities, one in which 

every American has access to affordable housing, good transportation choices and 

access to jobs. Making America’s communities more livable is a key part of the 

President’s agenda, and the administration is already making important advancements in this area. Last June, DOT joined forces with the Department of Housing 

and Urban Development (HUD) and the Environmental Protection Agency (EPA) to 

stimulate comprehensive regional and community planning efforts that integrate 

transportation, housing, energy and other critical investments. Together, we will 

help State and local governments make smarter investments in their transportation 

infrastructure, in order to better leverage that investment, and to advance sustainable development. 

The Department’s budget allocates over $500 million toward this effort. It’s an investment that is already receiving national attention. As I have traveled around the 

country soliciting input on our Surface Transportation Reauthorization, I heard resounding support for our livability initiative. The feedback has been clear: it’s time 

to rethink how we are investing in our Nation’s communities. 

Toward this effort, DOT, HUD, and EPA have developed the following principles 

to guide our shared efforts to promote livability: 

—Provide More Transportation Choices.—Develop safe, reliable and economical 

transportation choices to decrease household transportation costs, reduce our 

Nation’s dependence on foreign oil, improve air quality, reduce greenhouse gas 

emissions and promote public health. 

—Promote Equitable, Affordable Housing.—Expand location- and energy-efficient 

housing choices for people of all ages, incomes, races and ethnicities to increase 

mobility and lower the combined cost of housing and transportation. 

—Enhance Economic Competitiveness.—Improve economic competitiveness 

through reliable and timely access to employment centers, educational opportunities, services and other basic needs by workers as well as expanded business 

access to markets. 

—Support Existing Communities.—Target Federal funding toward existing communities—through such strategies as transit oriented, mixed-use development 

and land recycling—to increase community revitalization, improve the efficiency 

of public works investments, and safeguard rural landscapes. 

—Coordinate and Leverage Federal Policies and Investment.—Align Federal policies and funding to remove barriers to collaboration, leverage funding and increase the accountability and effectiveness of all levels of government to plan 

for future growth, including making smart energy choices such as locally generated renewable energy. 
187 

—Value Communities and Neighborhoods.—Enhance the unique characteristics of 

all communities by investing in healthy, safe and walkable neighborhoods— 

rural, urban or suburban. 

CURRENT DOT AND PARTNERSHIP EFFORTS

DOT has already begun using these principles in its programs. 

For example, the recent change in the criteria for FTA’s New Starts grants will 

ensure that the Department considers livability in its funding recommendations of 

transit capital investments. Previously, cost-effectiveness was the primary factor 

used in making a recommendation for construction funding, a criterion that uses 

travel time savings to quantify a project’s benefits as a comparison to project cost. 

FTA will now equally consider cost-effectiveness, and economic, environmental, and 

livability factors to determine the best use of funds. 

We are also making tools available to transportation professionals and the public 

to build their capacity to implement livability projects at the community level. For 

example, DOT and HUD produced an action guide last November to help planners 

implement mixed-income transit oriented development and regional transit corridor 

planning. This guide, now available online, takes planners step-by-step through the 

data gathering and planning process. DOT is also working to develop an online 

database for transit-oriented development, which includes over 4,000 existing and 

planned rail/transit stations. This database will provide a central resource of transit 

planning information for developers, and will be available to the public by the end 

of the summer. 

To foster the preservation and enhancement of urban and rural communities by 

providing better access to jobs, healthcare and education, DOT released a Notice of 

Funding Availability (NOFA) in December for two new pilot programs that would 

provide funding for livability projects from existing funds: up to $150 million is 

available for bus livability projects and $130 million for urban circulator grants. 

DOT and EPA are also supporting the development of HUD’s NOFA for sustainable community grants authorized in the fiscal year 2010 budget. DOT and HUD 

collaborated in the grant selection process and are providing staff to assist communities that received EPA’s smart growth technical assistance grants. Through these 

discretionary grant and technical assistance dollars, DOT, HUD, and EPA are providing States and communities with opportunities to build the livable communities 

that are so important to their economic growth and quality of life. 

LIVABLE COMMUNITIES PROMOTE QUALITY OF LIFE

Citizens are changing their preferences toward livable communities, and State 

and local governments are responding to constituent demands. In fact, EPA has 

found through consumer surveys that at least one-third of the consumer real estate 

market prefers a mixed use, transit-oriented community. The needs and desires of 

the U.S. home buyer also are changing: many consumers in the early 1990s had a 

preference for golf courses and other recreational amenities. Today, surveys indicate 

that many consumers prefer walkable communities—communities characterized by 

pedestrian access and a sense of connection, community, and diversity. 

Livable communities are in high demand because they make financial and economic sense. Transportation and housing are the two largest expenses for the average American household. Reducing the need for private motor vehicle trips by providing access to other transportation choices can lower the average household expenditure on transportation, freeing up money for housing, education, and savings. 

Realtors, developers, and investors recognize that an increase in walkability translates into a higher home value. 

The application of livability strategies can also save billions in infrastructure investment. For example, Envision Utah brought together residents, elected officials, 

developers, conservationists, business leaders, and other interested parties to participate in the development of a growth plan for Salt Lake City and the surrounding 

area. The process, which included outreach and comprehensive planning efforts, will 

help preserve critical lands, promote water conservation and clean air, promote public health, improve the region-wide transportation systems, and provide housing options for all kinds of residents. By coordinating investments, the plan saved $4.5 billion in infrastructure costs over the last decade. This example shows that as we 

make our communities more livable, we can also decrease the strain on natural resources, decrease greenhouse gases, improve air quality, and promote public health 

by supplying more efficient options for transportation and housing—all while decreasing infrastructure costs and the burden on the American taxpayer. 
188 

LIVABLE COMMUNITIES’ INVESTMENTS SUPPORT BOTH RURAL AND URBAN COMMUNITIES

Livability also can play a substantial role in small towns and rural communities. 

The concept of livability comes from rural towns with a town center that is walkable 

and accessible to all ages and income groups. Rural communities, however, face special challenges that threaten traditional community design. Past transportation policies have resulted in many rural Main Streets being bypassed by the interstate 

highway system, which contributed to the decline of once-vibrant business centers. 

Many rural communities located close to cities have lost farm land and open space 

as urban areas subsume them. Transportation costs are often significantly higher 

for residents of rural communities, especially those with longer commutes to employment centers. Better coordination of housing and transportation will lead to 

policies and programs that protect and safeguard open space and agricultural land 

in rural areas, preserve the historical culture of rural city centers, and provide rural 

residents with transportation options that decrease their household costs. 

Livability will certainly take a different form in rural areas than in urban city 

centers, but a small town with a walkable, main street lined with spaces for retail, 

employment and housing is something we can all picture. Franklin, Tennessee is a 

small city 25 miles southwest of Nashville that has adopted land-use plans and has 

adjusted their zoning ordinances to promote higher density mixed-use development. 

Bath is a small town in southwest Maine whose historic downtown area is a model 

of a livable community. The town provides two trolley loops to transport residents 

and tourists through downtown, reducing the need for on-street parking. Bath’s 

street design encourages citizens to get out of their cars, which in turn supports 

local merchants through increased foot traffic. 

My favorite example is Dubuque, Iowa, which I had the pleasure of visiting last 

year. In its Historic Millwork District, Dubuque is redeveloping old factories and 

mills—dormant since the early part of the 20th century—to create new mixed income housing, workplaces and entertainment. Sustainable transportation options 

are important to this plan. The city’s trolley bus now connects the Millwork District 

to downtown. We also funded a project to design streets in this district that are attractive, convenient and safe for a broad range of users, including drivers, public 

transit, pedestrians, bicyclists, people without access to automobiles, children and 

people with disabilities. Dubuque’s efforts, in part, attracted IBM to move its employment center to the area, where it will provide over a thousand new jobs for the 

city. With its ‘‘Smart City’’ partnership with IBM, Dubuque has become a model for 

other cities seeking new livable uses for its established infrastructure. 

We are seeing this emphasis on livability not only in rural communities, but in 

urban and suburban communities as well. 

In September, Secretary Donovan, Administrator Jackson, and I visited Denver’s 

La Alma/Lincoln Park neighborhood, which is a predominantly Latino neighborhood 

and also one of Denver’s oldest. The 10th and Osage station, which adjoins an industrial area, a diverse existing housing stock, and the Sante Fe Arts District, is 

serving as a catalyst for Lincoln Park’s redevelopment. The South Lincoln Park 

Homes redevelopment, planned around the 10th and Osage station, calls for developing mixed-use, mixed-income housing within walking distance of the station, to 

create a more dense and walkable community. It also focuses on improving transportation connections within the La Alma/Lincoln Park neighborhood for its residents to improve job access. 

Portland is planning for the growth and development of its city center and transit 

systems, strengthening policies to form a denser bike network, and investing in 

streetcar and light rail. Our TIGER grant program has helped them with this by 

funding over $23 million toward the reconstruction of a complete street on their waterfront—including three traffic lanes, dual streetcar tracks and pedestrian and bicycle facilities—allowing increased access to the central business district. 

In Seattle, we are helping to invest in turning a major roadway into a multimodal boulevard. They have instituted smart growth policies and transportation investments that encourage urban living and reduce dependence on cars, as well as 

encourage strong sustainable building standards. 

When I was in Minneapolis in January, I got a chance to tour a 9.8 mile light 

rail transit line between the downtowns of the twin cities, Minneapolis and St. Paul. 

By balancing our cost-effectiveness criteria with equity considerations in our transit 

program, we will be able to help fund three additional stops on this line to serve 

underserved and lower income communities that otherwise would not have had access to this mode of transportation. 

Kansas City, Missouri, is another great example. DOT recently awarded a $50 

million TIGER grant to Kansas City for their Green Impact Zone project, which will 

provide better access to regional opportunities through expanded transit and pedes-
189 

trian facilities. This project will improve infrastructure in a 150-block area in the 

urban core of Kansas City, Missouri that has been impacted over the years by high 

rates of poverty, unemployment, crime, and high concentrations of vacant and abandoned properties. Partners in the Green Impact Zone are creating a national model 

that demonstrates how integrated, place-based investments, centered on principles 

of sustainability, can transform a community. 

FISCAL YEAR 2011 BUDGET REQUEST

The President’s Budget includes $527 million for livable community efforts in 

DOT. This funding will support three areas: a Livable Communities Program within 

the Office of the Secretary (OST); transit funding to support livable communities in 

the Federal Transit Administration (FTA); and a capacity-building grant program 

in the Federal Highway Administration (FHWA). The purpose of these programs is 

to provide transportation practitioners with the tools, resources, and capacity they 

need to develop a transportation system that provides transportation choices, saves 

people money, protects the environment, and efficiently moves goods. 

This budget request was developed in coordination with the requests for HUD and 

EPA. As you will hear from Secretary Donovan, HUD’s program focuses on improving regional planning to integrate housing and transportation decisions. EPA’s role 

is designed to administer technical assistance to communities to pursue infrastructure improvements in ways that protect public health and the environment. 

DOT’s program supports two vital needs: capacity building in transportation planning and financial assistance to initiate innovative infrastructure investments. This 

benefits State and local governments, which currently use outdated planning and 

regional models and poor data to make their transportation investment decisions. 

Because of competition for scarce resources, sometimes innovative solutions can take 

a back seat to the more pressing needs of maintenance and repair. By targeting 

some investment funding, DOT hopes to demonstrate that smart investment up 

front can save communities tax money over time by strengthening communities and 

lowering infrastructure costs. 

The President’s budget includes $20 million to establish a new Livable Communities Program, including a new Office of Livability within OST. This Office will 

lead and coordinate livability programs across the Department’s modal administrations and provide grants and technical assistance for improving local public outreach. It will serve as the focal point for interagency efforts such as the Partnership 

for Sustainable Communities and spearhead efforts such as developing metrics and 

performance measures for livability. 

Three hundred and seven million dollars is requested to refocus existing FTA programs to expand transit access for low-income families, provide effective transportation alternatives and increase the planning and project development capabilities 

of local communities. Consolidating the Job Access and Reverse Commute formula 

grants, Alternatives Analysis grants, and formula grants for State and metropolitan 

planning will allow DOT to better coordinate efforts with HUD and EPA to develop 

strategies that link quality public transportation with investments in smart development. 

The President’s budget requests $200 million to fund a competitive livability program within FHWA. This discretionary grant program aims to improve modeling 

and data collection, provide training, and support organizational changes to better 

carry out integrated planning. This assistance would be available to States, local 

governments, and tribal partners. 

LOOKING FORWARD

What I have described so far is just the starting point for what we hope to be 

a robust livability initiative, both within DOT and among our partnering agencies. 

The President’s budget marks a bold new way of thinking about investments in our 

transportation infrastructure and will become a key component of the administration’s future surface transportation proposal. The programs requested in the President’s budget have been designed to further the goals of the Partnership for Sustainable Communities and to assist regions and communities in need of Federal assistance to pursue their own planning and development needs. By providing capacity building, planning funds, and technical assistance, DOT, HUD, and EPA can 

help communities meet the demands that they face for developing these types of 

neighborhoods. 

Looking forward, reauthorization of our surface transportation programs will provide an important opportunity to focus on livable community investments that foster 

transit-oriented, pedestrian and bike-friendly development, provide more transportation choices, and offer better access to jobs and housing. 
190 

Thank you for the opportunity to appear before you today to discuss the efforts 

of our Partnership for Sustainable Communities and the Department’s fiscal year 

2011 budget request to support this effort. We look forward to working with Congress and our stakeholders to make this a reality. 

I will be happy to answer any questions you may have. 
(191) 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

OFFICE OF THE SECRETARY

STATEMENT OF HON. SHAUN DONOVAN, SECRETARY 

Senator MURRAY. Secretary Donovan. 

Secretary DONOVAN. Thank you, Chairwoman Murray, Ranking 

Member Bond. I want to thank you for this opportunity to provide 

an update on HUD’s efforts to help urban and rural areas across 

the country create more sustainable homes and communities. 

I also want to take a moment to thank Ray and his entire team, 

as well as Lisa Jackson, for their just tremendous partnership on 

this effort. 

I have submitted more complete testimony for the record, but 

today I would like to use my time to report on the progress we 

have made, thanks to this subcommittee’s support through the Recovery Act and the $200 million Office of Sustainable Housing and 

Communities appropriation for our fiscal year 2010, and to share 

with you our plans in the coming months. 

OFFICE OF SUSTAINABLE HOUSING AND COMMUNITIES

In February, HUD launched this office to help coordinate our investments with the Departments of Transportation, EPA, and Energy, and other agencies at the Federal level, as well as allowing 

us to work directly with communities to support innovation at the 

local level. 

With a combination of housing and transportation costs now 

averaging more than 50 percent of income for American families, 

we formed a sustainability partnership with DOT and EPA because 

when it comes to housing, environmental, and transportation policy, it is time the Federal Government spoke with one voice. And 

the partnership is working. 

In addition to the examples that Ray cited, in cities like Detroit, 

you can see that we are not only talking to one another, we are 

making funding decisions together that improve outcomes for local 

communities. In the first round of DOT’s TIGER grant program 

under the Recovery Act, DOT awarded $25 million for the Woodward Avenue Streetcar Project in Detroit. All three agencies reviewed the city’s application. 

HUD brought to DOT’s attention community development activities already planned or underway in the Woodward Avenue Corridor, which made the site a more attractive investment for DOT. 

The EPA was able to highlight brownfield remediation efforts in 

the vicinity of the project, which will allow abandoned properties 

along the streetcar line to be recycled for economic development 

and affordable housing. 
192 

As a result, we believe this transportation investment has the potential to fundamentally transform one of the most historic neighborhoods of the city and is an example of the more effective award 

process in communities throughout the country. 

A similar process will unfold with the selection of HUD’s regional 

planning and local challenge grants this year. With this subcommittee’s support, we are preparing to launch a $100 million 

sustainability planning grant program to encourage metropolitan 

and rural regions to plan for integration of economic development, 

land use, and transportation investments. 

We issued an advance notice and request for comment for the 

program, inviting feedback through a new online Wiki accessible 

via HUD’s Web site and through an extensive listening tour around 

the country. We wanted communities to tell us what works, what 

isn’t working, and how we can better help them build sustainably. 

Just as important, we hope to send a very important signal that 

we in the Obama administration are serious about being the kind 

of partner that listens and learns. And the response has exceeded 

even our expectations. We received over 900 written comments, 

met with over 1,000 stakeholders in 7 listening sessions, and 

staged Webcasts that touched thousands more. 

And the feedback we received was overwhelmingly positive as 

well, from mayors and other officials of both small and large communities to business leaders in growing regions to Governors of 

States that have been hit hard economically. One example of how 

this feedback changed our thinking is with respect to small towns 

and rural areas. The White House convened a special focus group 

to discuss the needs of such communities, and in this session and 

the many letters we received, we heard concerns that larger communities in central cities might receive preference for these funds 

despite the great need in rural America. 

Indeed, Madam Chairwoman, while rural communities generally 

have less access to public transportation, higher poverty rates, and 

inadequate housing, at HUD we recognize that residents of these 

communities also face unique challenges when it comes to accessing healthcare, grocery stores, adult education opportunities, and 

many other services. This is something it is with communities like 

St. Peter, Minnesota, which Deputy Secretary Sims visited last 

month with the Department of Agriculture, and how they have responded to these challenges that we will ensure that small towns 

and rural regions have a better shot at competing in this NOFA 

through a special category of funding. 

ENERGY INNOVATION FUND

While these funds are targeted at the regional level, another $40 

million will support local efforts through a Community Challenge 

Planning Grant. With these funds, HUD has chosen to issue a joint 

NOFA with DOT for its TIGER II planning grant program. At the 

same time, with our $50 million Energy Innovation Fund as part 

of the 2010 budget, we are developing new and innovative low-cost 

financing for single and multifamily programs, including taking an 

energy-efficient mortgage product to scale. 

It could provide key incentives to both buyers and sellers who 

want to make much-needed energy improvements in their homes. 
193 

But this office isn’t limited to the successful implementation of 

these funds alone. The Office of Sustainable Housing and Communities is also active in other partnerships as well. 

Over this past year, HUD has been working with the Department of Energy to eliminate duplicative rules that sharply limited 

the $5 billion in Federal weatherization funds from being available 

to retrofit multifamily properties. By simply cutting through red 

tape, we have helped pave the way for Rhode Island to allocate $7 

million, one-third of its weatherization funding, to multifamily 

housing, and Colorado to weatherize an expected 1,000 multifamily 

units by June of this year and another 1,600 in the next fiscal year. 

As a result, thousands of low-income families living in multifamily housing across the country stand to see their utility bills reduced. The President has set a goal of weatherizing 1 million 

homes per year. As part of the HUD–DOE partnership, we have 

made income eligible more than 1.5 million units of HUD-qualified 

homes that could potentially use weatherization funding. 

Indeed, we at HUD have set a goal of retrofitting or building 

159,000 energy-efficient homes over the next 2 years, including 

85,000 funded through the Recovery Act. Obviously, this is only a 

sample of the work we are doing. My written testimony offers a 

more complete picture of the scope of our sustainability work to 

date. 

As you know, we are requesting $150 million for the second year 

of the Sustainable Communities Initiative in our fiscal year 2011 

budget, including a second round of regional planning grants administered by HUD in collaboration with DOT and EPA and additional investment in challenge grants to help localities implement 

these plans. 

Senator Dodd has also introduced legislation that would make 

some of our initiatives permanent and look forward to working 

with him and your counterparts on authorizing committees toward 

that end. 

But Madam Chairwoman and Ranking Member Bond, I hope you 

can see that this funding is producing real results at the same time 

it is helping to fundamentally transform the way the Federal Government does business. It is helping us prove that the Federal role 

isn’t about dictating what localities can or can’t do and how to do 

it, but rather offering them the resources and tools to help them 

realize their own visions for achieving the outcomes that we all 

want, outcomes like less time commuting and more time with family, neighborhoods where kids can play outside and breathe clean 

air, and communities with opportunities for people of all ages, incomes, races, and ethnicities. 

PREPARED STATEMENT

That is the goal of these efforts, and it is why I am so proud to 

work with my partners in the administration and this subcommittee. 

Thank you for this opportunity. 

[The statement follows:] 
194 

PREPARED STATEMENT OF HON. SHAUN DONOVAN

Chairman Murray, Ranking Member Bond and distinguished members of the subcommittee, thank you for this opportunity to provide an update on HUD’s expanding 

efforts to help urban and rural areas across the country create more sustainable 

homes and communities. Thanks to this subcommittee’s support, both through the 

American Recovery and Reinvestment Act and through this year’s appropriation to 

support new sustainable housing and communities grant programs, we have been 

able to make substantial progress on an ambitious agenda in our first year. I am 

pleased to share with you today our early results and plans for the future. 

My testimony has three main sections. The first highlights the results to date of 

HUD’s Recovery Act investments in sustainable housing and communities, which 

has laid the foundation for much of our continuing commitment. The second summarizes the groundbreaking sustainability partnerships HUD has formed with other 

Federal agencies, building the framework for unprecedented collaboration and impact on the ground. The third describes the major activities HUD has underway, 

led by the new Office of Sustainable Housing and Communities, which will focus 

our efforts to ensure this agenda remains an enduring priority for the Department. 

First, however, I want to provide context for HUD’s commitment in this area. 

THE NEED FOR FEDERAL LEADERSHIP TO ADVANCE SUSTAINABLE HOMES AND

COMMUNITIES

While the consequences of climate change are complex and far reaching, we know 

that the increasing emissions of greenhouse gases, the primary cause of global 

warming, are largely a result of energy use in our ‘‘built environment.’’ 

As a Federal cabinet agency focused on the built environment, strengthening communities, and expanding opportunity for all Americans, HUD recognizes the urgent 

need for aggressive action to combat climate change. The positive news, and the 

powerful opportunity, is that we can cut greenhouse gas emissions, while creating 

jobs and expanding opportunity for all Americans through proven strategies for creating more sustainable homes and communities. 

Residential housing and the built environment are major contributors to energy 

consumption and global warming. Residential buildings alone account for 20 percent 

of U.S. carbon emissions, with the vast majority coming from detached single-family 

houses. It may be surprising to many, but all types of buildings combined actually 

account for more emissions than the entire transportation sector. The transportation 

sector accounts for about another one-third of carbon emissions, among many factors 

because sprawling development patterns separate jobs and houses that, without 

adequate public transportation systems, necessitate long commutes and increased 

dependence on car travel. 

This is no coincidence. During the housing boom, many real estate agents suggested to families that couldn’t afford to live near job centers that they could find 

a more affordable home by living farther away. Lenders bought into the ‘‘Drive to 

Qualify’’ myth as well—giving easy credit to home buyers without accounting for 

how much it might cost families to live in these areas or the risk they could pose 

to the market. While some home buyers were aware of the risk they were taking 

on, others were not. And all of these families found themselves vulnerable to gasoline price fluctuations, as they drove dozens of miles to work, to school, to the movies, to the grocery store, spending hours in traffic and spending nearly as much to 

fill their gas tank as they were to pay their mortgage. And some places more—like 

Atlanta, where housing and transportation costs total 61 percent of family income 

or East Palo Alto, California where they consume over 70 percent of family budgets. 

The social equity implications of current growth patterns have also become more 

apparent. As metropolitan areas continue to sprawl outward and jobs become increasingly dispersed, fewer low-wage earners and renters are able to find housing 

near their work. Nationally, 45 percent of all renters and two-thirds of low-income 

renters live in central cities. Low-income families, many of them minorities, live in 

neighborhoods that limit access to quality jobs, good schools and opportunities to 

create wealth. Indeed, some studies have found that zip code predicts poor educational, employment, and even health outcomes. The unbalanced nature of metropolitan housing development has strained urban, suburban and rural household 

budgets, as commutes lengthen: the combination of housing and transportation costs 

now average a combined 60 percent of income for working families in metropolitan 

areas. 

With few exceptions, the Federal Government has historically not been up to the 

task of addressing these critical trends. Federal programs dealing with housing, 

transportation and energy issues remain largely separate from each other, precluding smart, integrated problem solving. Federal policies and rules are narrowly 
195 

defined, poorly coordinated and often work at cross purposes. The silo driven nature 

of Federal policies and programs extends to planning, data collection, performance 

measurement and research and evaluation. To address these and other issues, the 

administration has launched the first comprehensive review of ‘‘place based’’ Federal 

policies since the Carter administration, with sustainability as a central focus—asking each agency to determine whether Federal policies enable and encourage locallydriven, integrated, and place-conscious solutions, or obstruct them. 

Place of course is already at the center of every decision HUD makes. Today, 

HUD’s programs reach nearly every neighborhood in America; 58,000 out of the approximately 66,000 census tracts in the United States have one or more unit of 

HUD assisted housing. Now we have seized this opportunity to renew our focus on 

place, to better nurture sustainable, inclusive communities across America’s urban, 

suburban, and rural landscape. 

A major component of HUD’s place-based approach involves making communities 

sustainable for the long-term. For HUD, ‘‘sustainability’’ includes improving building level energy efficiency, cutting greenhouse gas emissions through transit-oriented development, and taking advantage of other locational efficiencies. Critically, 

we believe sustainability also means creating ‘‘geographies of opportunity,’’ places 

that effectively connect people to jobs, quality public schools, and other amenities. 

But it’s not just about what we think at HUD or in the Federal Government. Sustainability means different things to different kinds of communities. If you asked 

John Hickenlooper, the Mayor of Denver, where they are building more than 100 

miles of new light rail, commuter rail, and bus rapid transit lanes, linking the 32 

communities surrounding Denver proper, he’d tell you sustainability is about building inclusive neighborhoods of opportunity—binding communities to work together 

as a region so that they not only share problems, but solutions as well. If you asked 

Dan Kildee, who was Genesee County Treasurer for many years, he’d tell you sustainability is about the very economic survival of a city like Flint, Michigan—where 

years of population loss and economic decline have left a surplus of housing and 

more vacant land than can be absorbed by redevelopment. For Flint, sustainability 

is about being smaller but stronger and smarter. 

And so, the Federal role within each of these efforts is clear: not to dictate what 

localities can and can’t do or how to do it, but rather offering them the resources 

and tools to help them realize their own visions for achieving the outcomes we all 

want: less time commuting and more time with family, neighborhoods where kids 

can play outside and breath clean air, and communities with opportunities for people of all ages, incomes, races and ethnicities. 

Partnering with communities so they can make choices that work for them—for 

their needs, and their marketplaces—is an example of what I would call a ‘‘New 

Federalism’’ that President Obama is proposing—and it’s something we are committed to practicing at HUD. 

LAYING THE FOUNDATION—RECOVERY ACT INVESTMENTS IN SUSTAINABLE HOMES AND

COMMUNITIES

HUD has played a key role in implementing the Recovery Act, which, according 

to the Council of Economic Advisors, is already responsible for putting about 2.5 

million Americans back to work, putting the Nation on track to create or save 3.5 

million jobs by the end of the year. 

HUD has now obligated 98 percent of the $13.6 billion in Recovery Act funds 

stewarded by the Department—and disbursed over $3.9 billion. Nearly all of HUD’s 

Recovery Act funding is fully paid out, or expended, only once construction or other 

work is complete—just as when individual homeowners pay after they have work 

done on their homes. Therefore, HUD’s obligated but not yet expended funds are 

already generating jobs in the hard hit sectors of housing renovation and construction. 

While our top priority with Recovery Act funds is creating jobs and economic activity, we are also seizing the opportunity to lay a foundation for HUD’s new direction in our Recovery Act investments. When President Obama signed the Recovery 

Act into law last year, it was designed to do three things: create jobs, help those 

harmed by the economic crisis, and lay a new foundation to make America competitive in the 21st century. By putting people back to work greening homes in cities 

like Philadelphia and building high-speed rail in places like Milwaukee and Madison, this administration is using our response to the economic crisis as a catalyst 

to build good neighborhoods, more resilient communities, and the strong, interconnected regional backbones our economy needs to create and sustain these jobs. 

Nearly one-third of HUD’s Recovery Act funds can be used for ‘‘greening’’ America’s public and assisted housing stock, making homes healthier and more energy 
196 

efficient. At the same time, this investment will prepare a new generation of professionals, from mechanics and plumbers, to architects, energy auditors, and factory 

workers building solar panels and wind turbines, all of whom are needed to design, 

install, and maintain the first wave of green technologies. 

These investments include: 

—$600 million for energy retrofits of 226 public housing developments and 35 

more green newly constructed and substantially rehabilitated public housing developments. 

—$500 million for housing on Native American lands, which HUD is encouraging 

and supporting tribal housing groups to provide in an environmentally sustainable manner. 

—$250 million for green retrofits of 16,600 units of privately owned HUD-assisted 

housing. (HUD received applications for more than $700 million.) 

—$100 million to eradicate lead paint and create healthy homes. 

Importantly, energy efficiency and other environmental criteria—and results—are 

also present in larger HUD programs funded by the Recovery Act, such as $3 billion 

in formula funding for public housing and $2 billion through the Neighborhood Stabilization Program. 

The Recovery Act investments we are making to help families and communities 

save energy and live in healthier homes are teaching us what works and how we 

can be a more effective partner to builders, owners and residents who want the opportunity to live in greener communities. These lessons and feedback from our partners are informing and improving our continuing efforts to increase environmental 

benefits, lower costs, and measure the benefits in affordable housing. 

BUILDING THE FRAMEWORK—HUD’S SUSTAINABILITY PARTNERSHIPS WITH OTHER

AGENCIES

Creating more sustainable housing and communities at scale—making sustainability the ‘‘default option’’ for our partners and the people we serve—requires an 

interdisciplinary approach and intense collaboration across the traditional silos of 

Federal policy. That is why we are so pleased to be working closely with a number 

of Federal agencies to leverage the skills, resources and partnerships that each can 

bring to truly transforming our built environment. 

As you know, HUD, the Department of Transportation (DOT) and the Environmental Protection Agency (EPA) have formed the Interagency Partnership for Sustainable Communities to help improve access to affordable housing, expand transportation options and lower transportation costs while protecting the environment 

in communities nationwide. Through a set of guiding Livability Principles and a 

partnership agreement that frames our collective efforts, the partnership is coordinating Federal housing, transportation, and other infrastructure investments to an 

unprecedented extent to protect the environment, promote equitable development, 

and help to address the challenges of climate change. When it comes to housing, 

environmental, and transportation policy, it is time the Federal Government spoke 

with one voice. (The Livability Principles are attached as Appendix A.) 

Having served in, and worked with, various levels of government for many years, 

I can say that the extent of collaboration and cooperation among our agencies has 

been nothing short of remarkable—starting at the senior leadership level where Secretary LaHood, Administrator Jackson and I have developed an excellent working 

relationship, and extending to the staff in each agency. Every day, we are getting 

better at aligning where it makes most sense and assigning specific responsibilities 

to the appropriate agency based on resources and expertise. One example was 

DOT’s inclusion of HUD and EPA in the review of competitive applications for 

DOT’s $1.5 billion TIGER Grant program funded under the Recovery Act. We would 

by no means suggest that we have perfected the collaborative approach. Decades of 

statutes, regulations and habits, in some cases, create real challenges to the partnership results all three of our agencies aspire to achieve. But the good news is we 

are making consistent progress, moving forward despite the barriers, and we always 

welcome ideas and assistance from interested parties, including this subcommittee. 

Another exciting example is the partnership between HUD and the Department 

of Energy that is working to increase energy efficiency in affordable homes and 

apartments. One joint project is to develop a streamlined, low-cost, consumer friendly tool to provide homeowners with better information about their home’s energy 

use, options for saving energy, and the cost savings that would result. We are also 

exploring options for providing financing for consumers to pay for the cost of energy 

saving home improvements, described more below. 

HUD’s partnership with DOE is delivering results in multi-family low-income 

housing as well. Our agencies have worked together to eliminate duplicative and un-
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necessary rules that impeded the use of Federal Weatherization Assistance Program 

funds to retrofit multi-family properties. Thousands of low-income families are now 

in better position to benefit from the $5 billion in weatherization funds provided 

under the Recovery Act as a result. For instance, Rhode Island’s Office of Energy Resources, has allocated $7 million 

to weatherize multi-family housing—this set aside was in response to the HUD/DOE 

MOU published in May of last year. Rhode Island anticipates a large number of applications for this program. Colorado is allocating $80 million for its weatherization program. GAO and IG re- ports have identified Colorado as a high performing State. Currently, about $30 million of the ARRA funding has been expended to weatherize multi-family homes 

throughout the State. 

In addition, I have appointed Deputy Secretary Ron Sims to represent HUD on 

the Steering Committee for the White House Council on Environmental Quality, the 

Office of Science and Technology Policy, and the National Oceanic and Atmospheric 

Administration interagency process to produce a set of recommendations for Federal 

actions that will help society adapt to climate change. This group is developing recommendations on how Federal agencies can effectively create and implement climate change adaptation policies and strategies. 

Other similar partnerships are in formation or early development. We are especially optimistic about potential collaboration with the Department of Agriculture to 

ensure we are as effective in helping deliver sustainability solutions in rural areas 

and small towns as we are in larger and more urban communities. 

ENSURING HUD’S LONG TERM LEADERSHIP ON SUSTAINABLE HOMES AND COMMUNITIES

Thanks to this subcommittee’s support, we have created a new office that will ensure that the foundation laid by our Recovery Act investments, and the framework 

we are building in partnership with other agencies, is buttressed and built upon by 

institutionalized capacity within HUD. The Office of Sustainable Housing and Communities, under the direct supervision of Deputy Secretary Sims, will help provide 

and expand that capacity among HUD staff and stakeholders. 

Shelley Poticha, nationally recognized for her leadership to create more location 

efficient communities, is in place as Director of the office and we have begun to assemble a talented team that brings the technical skill sets and deep commitment 

our sustainability initiatives demand. Just as important, we are creating teams of 

staff in HUD’s regional and field offices to serve as partners and points of contact 

with stakeholders in our sustainability agenda, listening to local ideas and delivering HUD’s solutions in real time. Staff playing these roles will be current HUD 

employees who are trained in additional skills and work with their colleagues from 

DOT, EPA and other agencies in our communities. 

The office has already made significant progress advancing several new initiatives totaling $200 million. This subcommittee’s early support for these initiatives will be 

key to their ultimate success. First is the Sustainable Communities Regional Planning Grant Program, which will provide a total of $100 million to a wide variety 

of multi-jurisdictional and multi-sector partnerships and consortia at the regional 

level, from Metropolitan Planning Organizations and State governments, to nonprofit and philanthropic organizations and another $40 million to foster reform and 

reduce barriers, at the local level, to achieve affordable, economically vital and sustainable communities. These grants will be designed to encourage regions and local 

jurisdictions to build their capacity to plan for integration of economic development, 

land use, transportation, and water infrastructure investments, and to combine 

workforce development with transit-oriented development. Second is the $50 million 

Energy Innovation Initiative to enable the Federal Housing Administration (FHA) 

and the Office of Sustainable Housing and Communities to catalyze innovations in 

the residential energy sector that can be replicated and help create a standardized 

home energy efficient retrofit market. Finally, another $10 million is set aside for 

research on a transportation/housing affordability index. I will discuss these initiatives in greater detail below. 

Sustainable Communities Regional Planning Grants 

For the first time ever, we will provide Federal money to support planning grants 

that will be selected not only by HUD, but also by DOT and EPA—because when 

it comes to housing, environmental and transportation policy, it’s time the Federal 

Government spoke with one voice. 

As indicated above, the first $100 million in funding is for regional integrated 

planning initiatives through a Sustainable Communities Planning Grant Program. 

The goal of the program is to support multi-jurisdictional regional planning efforts 

that integrate housing, economic development, and transportation decisionmaking in 
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a manner that empowers communities to consider the interdependent challenges of 

economic growth, social equity and environmental impact simultaneously. We are 

committed to encouraging these regions to engage residents and other local stakeholders to build long-lasting alliances. 

HUD recognizes that while the core principles of the program are not new, the 

Federal Government has never attempted to directly support local leaders in articulating and realizing them. In recognizing that we can learn from our leaders on the 

ground, we issued an Advanced Notice and Request for Comment for the program. 

We invited feedback through a new online ‘‘Wiki’’ accessible via HUD’s Web site 

(www.hud.gov/sustainability) and through an extensive listening tour around the 

country. We want communities to tell us what works, what doesn’t work, and how 

we can build sustainably. Just as importantly, we hope to send a very important 

signal that we in the Obama administration are serious about being the kind of 

partner that listens and learns. 

We received over 900 written comments, met with over 1,000 stakeholders in 7 

listening sessions, and staged web casts that touched thousands more. The feedback 

we received was overwhelmingly positive—from the mayors and other elected officials of both small and large communities, to business leaders in growing regions, 

to Governors of States that have been hit hard economically. 

One example of how this feedback changed our thinking is with respect to small 

towns and rural areas. The White House convened a special focus group to discuss 

the needs of such communities. In those sessions, we heard concerns that larger 

communities and central cities would receive preference for these funds despite the 

great need in rural America. 

Indeed, Madam Chairwoman, while rural communities generally do not have access to public transportation, at HUD we recognize that these residents still face 

unique challenges when it comes to accessing healthcare, grocery stores, adult education opportunities, among other things. We are very much aware that there are 

high rates of poverty and inadequate housing in rural areas. 

That is why we are looking at creating a separate, special funding category for 

small towns and rural places as we prepare the Notice of Funding Availability 

(NOFA) for the fiscal year 2010 Sustainable Communities Regional Planning Grant 

funds—and, indeed, are incorporating many of the ideas submitted to us. 

HUD formed an interagency team to draft the NOFA. This team included deep 

engagement from staff within the Federal Transit Administration and Federal Highway Administration within DOT; EPA’s Brownfields, Water, and Smart Growth offices; all of HUD’s key program offices; the Office of Management and Budget; and 

the Domestic Policy Council within the White House. 

We also consulted with the Department of Agriculture, the Federal Emergency 

Management Agency, the Department of Education, and the National Endowment 

for the Arts. Our fiscal year 2010 NOFA is now in clearance. Applicants will be 

given at least 60 days to submit proposals. With DOT and EPA, we aim to announce 

approximately 40 winners—from small and rural areas, mid-sized regions, and large 

metropolitan areas. 

The $100 million investment from this fund could potentially be game-changing 

and will leverage additional public and private dollars. We will also be working hard 

and listening closely to ensure it is truly useful for rural and smaller communities, 

as well as larger ones. The program is designed to address the needs of places that 

are just starting to think about more sustainable growth and development, as well 

as those that are more advanced. Congress has directed us to share our plans for 

the entire Sustainable Communities Initiative and we will submit a formal report 

on our plans to the subcommittee. 

Finally, as briefly noted above, with $10 million of the Office of Sustainable Housing and Communities’ budget, we are working with the Department of Transportation and the Environmental Protection Agency to develop an Affordability Index 

to educate consumers who want to buy homes in more sustainable places by accounting for that housing’s proximity to jobs and schools. Congressman Blumenauer 

is preparing legislation on this subject and we look forward to continuing to discuss 

this proposal with him going forward. 

Community Planning Challenge Grant Program 

HUD’s fiscal year 2010 budget provided $40 million to support the detailed planning and code reform efforts that cities and counties must undertake to realize their 

sustainability goals. Consistent with the administration’s intent to be more transparent and ‘‘user-friendly,’’ HUD has chosen to issue a joint NOFA with DOT for 

its ‘‘TIGER II’’ planning grant program (up to $35 million.) This NOFA will be published at the same time that DOT publishes its TIGER II Capital Grants NOFA. 

The key difference between the DOT planning grant program and HUD’s Commu-
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nity Planning Challenge Grant program is in the types of activities that could be 

funded. DOT’s program funds planning activities that relate directly to a future 

transportation capital investment, while HUD’s program funds land-use related 

planning activities that would be linked to a future transportation investment. HUD 

and DOT will jointly develop selection criteria that will apply to all proposals submitted in response to the joint NOFA and will jointly review the proposals. 

DOT and HUD believe there is great value in aligning the two planning programs 

in order to create synergies between transportation and land use planning and to 

set the stage for future linkages between the three Partnership agencies’ various 

programs. Furthermore, we believe this proposal has the potential to encourage and 

reward more holistic planning efforts and result in better quality projects being 

built with Federal dollars. 

Energy Innovation Grants 

Another area where the Office of Sustainable Housing and Communities is focused is scaling up energy efficiency in affordable housing. Our fiscal year 2010 appropriation includes $50 million for an Energy Innovation Fund. Pursuant to Congress’ direction, we are developing new and innovative low-cost financing for singleand multi-family programs, including taking an Energy Efficient Mortgage product 

to scale that would allow homeowners to wrap energy improvements into property 

tax assessments where the up-front cost can be amortized. 

In both cases, our aim is to use these Federal funds to pilot approaches that FHA 

and the private sector financial institutions will take to greater scale in the market. 

Under the leadership of the Office of Sustainable Homes and Communities, HUD 

has also launched a transformative program to develop uniform investment policies, 

performance goals, and reporting and tracking systems to support national objectives for energy efficiency. HUD is working together with DOE to support the 

achievement of the President’s goal of weatherizing 1 million homes per year by enabling the cost effective energy retrofits of a total of 1. 2 million homes in fiscal year 

2010 and fiscal year 2011. As part of this initiative HUD intends to complete cost 

effective energy retrofits of an estimated 126,000 HUD-assisted and public housing 

units during this time. 

As we are developing new approaches to the Energy Efficient Mortgage, we are 

also exploring the potential for Location Efficient Mortgages (LEM’s). LEM’s take 

into account the lower costs of transportation in transit rich, walkable communities. 

This is part of a larger effort that HUD is considering housing affordability through 

the lens of the combined costs of housing (including utility costs) and transportation, 

rather than looking at them separately. This work, while early in the research and 

development stage, holds significant promise. These efforts are motivated by a belief 

that markets work best when there is reliable and useful information for consumers 

and communities alike—and that by making information on utility and transportation costs widely available, we can drive a much broader scale of change than 

Government ever could alone, ensuring that we never again foster a culture of 

‘‘Drive to Qualify.’’ 

As you know, we are requesting $150 million for the second year of the Sustainable Communities Initiative. Additionally, Senator Dodd and Rep. Perlmutter have 

introduced legislation that would make some of our initiatives permanent, and we 

will work in consultation with the two authorizing committees as the legislative 

process moves forward. Working closely with this subcommittee and the authorizing 

committee, we would use these funds for the following: 

—A second round of Sustainable Communities Planning Grants administered by 

HUD in collaboration with DOT and EPA. As described above, these grants will 

catalyze the next generation of integrated metropolitan transportation, housing, 

land use and energy planning using the most sophisticated data, analytics and 

geographic information systems. Better coordination of transportation, infrastructure and housing investments will result in more sustainable development 

patterns, more affordable communities, reduced greenhouse gas emissions, and 

more transit-accessible housing choices for residents and firms. 

—Additional investment in Sustainable Communities Challenge Grants, also as 

described above, to help localities implement Sustainable Communities Plans 

they will develop. These investments would provide a local complement to the 

regional planning initiative, enabling local and multi-jurisdictional partnerships 

to put in place the policies, codes, tools and critical capital investments needed 

to achieve sustainable development patterns. 

—The creation and implementation of a capacity-building program and tools clearinghouse, complementing DOT and EPA activities, designed to support both 

Sustainable Communities grantees and other communities interested in becoming more sustainable. HUD’s focus will be on buttressing the capacity of land 
200 

use and housing stakeholders, while DOT will focus on building capacity and 

providing tools for transportation professionals. EPA will bring their decadelong expertise in technical assistance and research to the Partnership. 

—A joint HUD–DOT–EPA research effort designed to advance transportation and 

housing linkages at every level where our agencies work together. 

—All three agencies will collaborate on providing guidance to fiscal year 2011 Sustainable Communities grantees to assist them to implement their projects and 

programs. 

I also would like to say a word about the various roles of the three agencies within the interagency partnership. Each agency has clear and defined roles: HUD will 

take the lead in funding, evaluating, and supporting integrated regional planning 

for sustainable development, and will invest in sustainable housing and community 

development efforts. DOT will focus on building the capacity of transportation agencies to integrate their planning and investments into broader plans and actions that 

promote sustainable development, and investing in transportation infrastructure 

that directly supports sustainable development and livable communities. EPA will 

provide technical assistance to communities and States to help them implement sustainable community strategies, and develop environmental sustainability metrics 

and practices. The three agencies have made a commitment to coordinate activities, 

integrate funding requirements, and adopt a common set of performance metrics for 

use by grantees. 

Allow me to explain to the subcommittee how our interagency collaboration—and 

your support—is already producing results. In the first round of DOT’s TIGER grant 

program under the Recovery Act, DOT awarded $25 million for the Woodward Avenue streetcar project in Detroit. Both HUD and EPA brought critical information 

and perspectives to the table when the three agencies reviewed Detroit’s application. 

HUD was able to bring to DOT’s attention community development activities already planned or underway in the Woodward Avenue corridor. EPA was able to 

highlight Brownfield remediation efforts in the vicinity of the project which will 

allow abandoned properties along the streetcar line to be ‘‘recycled’’ for economic development and affordable housing. In the past, DOT would not have had access to 

this information and a project with so much promise might not been selected. 

This is a prime example of how I believe, Secretary LaHood believes, and President Obama believes, Federal agencies must begin to partner with one another to 

make the biggest possible impact on the ground. 

Finally, I want to say that with our Choice Neighborhoods demonstration, which 

will be soon underway, HUD will be aiming to prove that neighborhoods can be a 

platform for a new kind of sustainability—bringing to bear private capital and 

mixed-use, mixed income tools to transform all housing in a neighborhood. 

But creating true neighborhoods of choice—where lower-income families can find 

opportunity and higher income families would choose to live, for their location, their 

uniqueness, and their amenities—requires we bring HUD’s fair housing policies, 

which have remained largely unchanged since the Fair Housing Act was passed in 

1968, into the 21st century. With consultation from Ron Sims, HUD’s Assistant Secretary of Fair Housing and Equal Opportunity, John Trasvina, is adopting a broader 

definition of fair housing that includes not only the racial makeup of housing, but 

also its orientation to opportunity—to public transportation and job centers. 

Armed with this broader set of criteria with which we can better understand segregated development patterns, HUD can not only help communities identify longstanding demographic and development challenges with new technologies such as 

geospatial data analysis—more importantly, we can help them with new development strategies and targeted technical assistance. This is not just enforcement—but 

what the law calls ‘‘Affirmatively Furthering Fair Housing.’’ 

Building on this direction, Deputy Secretary Sims and I have instructed Shelley 

to collaborate with Assistant Secretary of Community Planning and Development 

Marquez toward that end as we develop HUD’s new Consolidated Plan. 

With housing-specific resources like vouchers, counseling and Choice Neighborhoods, to new financing tools for transit-oriented development, to incentives that encourage the repurposing of polluted land for affordable housing development, we can 

help communities coordinate the use of all available resources to turn segregated 

neighborhoods of concentrated poverty into integrated, healthy, sustainable communities. 

That is why I believe this office reinforces President Obama’s commitment to ensuring all Americans have the opportunity to participate in real community change. 
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CONCLUSION

My testimony today has focused largely on the work and agenda of HUD’s Office 

of Sustainable Housing and Communities. We recognize that $150 million alone is 

not sufficient to meet the demand for sustainable communities. That is why I believe the real size of my sustainable budget is really $44 billion. That is the size 

of HUD’s fiscal year 2010 budget—and we intend to begin using every dollar of it 

to put more power in the hands of communities and more choices in the hands of 

consumers. 

These efforts are motivated by a belief that when you choose a home, you don’t 

just choose a home. You also choose transportation to work and to school. You 

choose public safety for your children. You choose a community—and the choices 

available in that community. And I believe that our children’s futures should never 

be determined—or their choices limited—by their zip code. 

We want to again express our deep appreciation for the subcommittee’s support 

for this bold, and necessary, new initiative. As I say frequently, our ultimate goal 

is to harness the entire HUD budget as a force for creating greener homes and communities everywhere in America. We look forward to working with the subcommittee to advance that goal and I look forward to our continued progress 

through the proposals outlined in the fiscal year 2011 budget. 

APPENDIX A

HUD–DOT–EPA Interagency Partnership for Sustainable Communities 

Livability Principles—June 16, 2009 

Provide More Transportation Choices.—Develop safe, reliable, and economical 

transportation choices to decrease household transportation costs, reduce our Nation’s dependence on foreign oil, improve air quality, reduce greenhouse gas emissions, and promote public health. 

Promote Equitable, Affordable Housing.—Expand location- and energy-efficient 

housing choices for people of all ages, incomes, races, and ethnicities to increase mobility and lower the combined cost of housing and transportation. 

Enhance Economic Competitiveness.—Improve economic competitiveness through 

reliable and timely access to employment centers, educational opportunities, services 

and other basic needs by workers, as well as expanded business access to markets. 

Support Existing Communities.—Target Federal funding toward existing communities—through strategies like transit oriented, mixed-use development, and land 

recycling—to increase community revitalization and the efficiency of public works 

investments and safeguard rural landscapes. 

Coordinate and Leverage Federal Policies and Investment.—Align Federal policies 

and funding to remove barriers to collaboration, leverage funding, and increase the 

accountability and effectiveness of all levels of government to plan for future 

growth, including making smart energy choices such as locally generated renewable 

energy. 

Value Communities and Neighborhoods.—Enhance the unique characteristics of 

all communities by investing in healthy, safe, and walkable neighborhoods—rural, 

urban, or suburban. 

REGIONAL PLANNING GRANTS

Senator MURRAY. Thank you very much to both of you for your 

testimony today. 

We will begin a round of questions, just so everybody knows, this 

is the Senate. We are going to have a vote here in a few minutes, 

apparently. So I will begin by asking my questions, and when the 

vote is called, I will turn it over to Senator Bond, and I will go and 

come back. So, hopefully, we can keep this moving. 

As we engage our stakeholders in discussions about the partnership for sustainable communities, it is really apparent that the 

terms ‘‘sustainability’’ and ‘‘livability’’ aren’t easily defined. And the 

reality is, there isn’t one type of sustainable or livable community. 

The administration has been clear that plans for sustainable 

communities will be locally driven, but at the same time as the 

subcommittee considers the administration’s funding request, it is 
202 

important to understand what types of projects will fit into these 

principles of livability developed as part of the interagency partnership. 

So, Secretary Donovan, let me start with you. What specific criteria is HUD going to be using to determine if regional and community plans meet the goals of sustainability? 

Secretary DONOVAN. I think there are a number of key things 

that we are looking for up front in the applications for these 

grants. And then I want to be clear, and I think you said this well 

in your opening statement, we need to make sure that this is about 

local efforts because one size doesn’t fit all, but we also have to set 

clear standards for accountability and showing results. 

Those results will be dependent on the specifics of the local plan, 

but will include a range of outcomes like lower cost of living for 

households, including the combined costs of housing and transportation, lower infrastructure costs for communities as well. And 

what we will see as a result of that is more disposable income and 

more resources available at the State and local level available, as 

Secretary LaHood said, because we will be able to lower costs for 

infrastructure investment and other forms of investment. 

In terms of the criteria, we are looking for very clear regional 

partnerships in our regional planning grants. There must be evidence of collaboration among the various local jurisdictions that 

will be competing. We are looking for capacity to use and leverage 

funds effectively, and we are looking for real evidence of the capacity to do planning efforts, whether it is through direct capacity at 

the local or regional government level or whether it is with nonprofit or other types of partners like regional planning organizations or councils of government that often play the lead function in 

these kind of planning efforts. 

Senator MURRAY. So I am hearing you say that you are more interested in the integrated planning process rather than the specific 

details? 

Secretary DONOVAN. I was talking about the regional planning 

grants. Those will be the key criteria. That is right. 

Senator MURRAY. Okay. And I am going to turn it over to Senator Bond because the vote has been called and let him do his 

questions, and I will come back and have a number of additional 

questions that I will ask. 

NON-MOTORIZED TRANSPORTATION

Senator BOND [presiding]. Thank you, Madam Chair, and thank 

you for your statements gentlemen. 

Secretary LaHood, I have a letter that I assume you have seen 

from the Transportation Construction Coalition dated—what was 

the date of this letter? We received it yesterday. Ah, Bella has 

kindly passed it up. 

These are the associations engaged in road building and the 

unions that engage in it. And I thought they raise some good questions. They state that any definition of ‘‘livability’’ must recognize 

that non-motorized transportation is a viable solution in certain 

areas, and in our major cities, we appreciate the support for mass 

transit. 
203 

And I told you Columbia, Missouri, is the one city in the State 

that has really gone wild with bicycles. They love to bike, and they 

have theirs. But there are a lot of communities, good-sized communities that don’t have public transportation, and it is too far to 

bike. And the conditions are not safe. 

And they are concerned that—another concern they have is that 

transportation goals and transportation policy is usually set in 

multiyear reauthorization bills. They are concerned that the proposal that takes $200 million out of the highway measure to put 

it in livability, as I think the chair mentioned, may reflect a view 

that we want to get rid of auto transportation. 

I don’t know if this quote is accurate, but I have an article stating that last year at a National Press Club event, a panel moderator said—and some of the highway supporter motorists groups 

have been concerned by your livability initiative. He said is this an 

effort to make driving more tortuous and to coerce people out of 

their cars? 

And according to the article, you answered, ‘‘It is a way to coerce 

people out of their cars.’’ Is that an accurate reflection of what you 

said? 

Secretary LAHOOD. Well, first of all, I haven’t seen the letter. I 

was in Houston yesterday. 

Senator BOND. Oh, okay. 

Secretary LAHOOD. And they didn’t provide the courtesy to 

present the letter to me. So I don’t have access to it. 

Senator BOND. It was addressed to us, and I thought—— 

Secretary LAHOOD. Senator Bond, I have been all over the country. I have been to 80 cities. I have been to 35 States. I was in 

Houston yesterday, which probably has more highways maybe than 

any other place in the country. We had a meeting there around the 

authorization bill. It is our fourth meeting that we had. 

We have had one in New Orleans. We had one in Minneapolis. 

We had one in Los Angeles, and we had one in Houston yesterday—and nobody has more highways than Texas does. 

What I told those folks is what I have told people all over the 

country not only at these meetings, but everywhere I have gone. 

We have a state-of-the-art interstate system in America. We have 

very good roads, and at DOT, we have an obligation to maintain 

our roads to make sure they are fixed up. In places in the country 

where they need more capacity, we are for that. So the idea that 

we are giving up on our road program, or we don’t care about it, 

or we don’t care about our highways is nonsense. 

But I can tell you this. Wherever I go, people are sick and tired 

of being stuck in cars and in congestion. People want other alternatives. When we hear that, we feel an obligation, as the U.S. Department of Transportation, to help create the kind of opportunities 

that people want. 

In some communities, people want more transit. Now that can be 

light rail. It can be a bus. It can be a streetcar. Streetcars are coming back to America. In some communities, it can be a walking 

path or a biking path, and in some communities, it may be more 

capacity on an interstate, like they have done in Miami, where they 

put another lane right down the middle of the—— 
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HIGHWAY TRUST FUND

Senator BOND. Mr. Secretary, I am beginning to run short of 

time, and I have worked on all those things, and I have made— 

I have asked for grants for things like that, and we talked about 

the place-based green city in Kansas City. That is something that 

came from the bottom up, from the leaders of the community with 

the leadership of my good friend Congressman—and we call him 

Reverend—Emanuel Cleaver has been very strong on that, and I 

have supported that. That comes from the bottom up. 

Now a lot of these things, they all want money that most of it 

comes out of the Highway Trust Fund. And the Highway Trust 

Fund is strangled, and they want to know why we have got all of 

these non-motorized uses for highway—for the Highway Trust 

Funds when we have a lot of roads, a lot of areas that need better 

roads in Missouri. 

But the basic question I asked was this is a quote from the 

American Spectator, I guess April 19 of this year, talking about 

last year. Did you say at the National Press Club it’s a way to coerce people out of their cars? 

Secretary LAHOOD. Yes sir. 

[The information follows:] 

I believe you are referring to a question that came up at a speech I gave at the 

Press Club in early 2009. The moderator asked if this was an effort to make driving 

more difficult and to ‘‘coerce people out of their cars’’. I said that it was, and that 

people already dread getting stuck in their cars in traffic for hours. My point was 

that people want to get out of their cars and it’s our role to create those opportunities for people who want to use streetcars, bicycles, or light rail. 

Senator BOND. That is inaccurate? Well, I think a lot of people 

may see that and be very much concerned because—— 

Secretary LAHOOD. Well, I have been quoted a lot of places 

around the country, Senator. There have been a lot of quotes that 

people have used. But I wish—and that is the reason that I—— 

Senator BOND. Well, that is all right. I gave you the opportunity 

to answer it and say it wasn’t—you didn’t say that. So that is good. 

Secretary LAHOOD. No, but look—— 

Senator BOND. You answered the question. 

Secretary LAHOOD. I have been to 80 cities in 35 States, so I 

have been quoted a lot. I have given a lot of speeches, and what 

I just told you is the accurate point of view from the Secretary of 

Transportation about our priorities. We have a state-of-the-art 

interstate system. We are not giving up on it. If people need more 

capacity, they will tell us that. 

Senator BOND. We are telling you that. We need it in Missouri—— 

Secretary LAHOOD. I know you are telling me that, but I am also 

telling you what other people are telling me about other kinds of 

things they want in their community. 

HIGHWAY TRUST FUND

Senator BOND. Okay. Well, I will tell you something. Your basic 

responsibility is the core transportation needs, and we put money 

into the Highway Trust Fund, and taking it out for livability, sustainability, that is greeted with a minimum amount of high enthusiasm by the people who need the roads. So I think we all have the 
205 

same goal. We all have the same goal to make sure that the communities in States around this country and areas that are too dispersed even to be considered a community, where people necessarily live and farm are part of and thriving parts of every State 

in the Union. 

And what I am concerned about is the focus that we—I know you 

like to bike, and I certainly want to respect bikers, but we need a 

lot of roads. And we are working on bridges, and we appreciate 

your coming to help get us another bridge across the Mississippi 

River. I had a battle on the floor with a good friend of mine who 

comes from a very dry State who didn’t know why we were spending any highway dollars on a bridge. 

I said in your State, you don’t need bridges. But if you live in 

Missouri and want to get to Illinois, you better have a bridge or 

a car with water wings. Now you were there to help us meet one 

of the top priorities. That was a priority identified by the leaders 

in the community, the people in the community. 

And that is what I’m saying. I’m saying these should come from 

the bottom up. And to the extent that we pay into the Highway 

Trust Fund, we need those dollars and we need more dollars in the 

Highway Trust Fund than we are able to put on the—lead on the 

target now. 

But let me go on to another question. Can you explain the difference between livability and the FTA’s definition of transit-oriented development? 

Secretary LAHOOD. Well, Senator, let me, first of all, just say 

that this bottom-up idea, that is the reason I have been to 35 

States and 80 cities. I agree with that. The reason we go out to 

these places is so we can listen to people and hear what they have 

to say. 

In some places in the country, people do want more roads, and 

they want more capacity, and we feel at DOT that has to be part 

of our priority. I would say just as counter to—I know the Highway 

Trust Fund is set up out of the receipts that come from the gasoline tax. But I will tell you, sir, that when you all extended the program, twice now, and extended it through December, the $35 billion, almost $40 billion to pay for that came from the general 

fund—— 

Senator BOND. Right. 

Secretary LAHOOD [continuing]. Which is taxes paid by all the 

taxpayers. So, the idea that we are trying to take Highway Trust 

Funds and use them for other things than highways—part of the 

money came from the general fund, which is paid for by all the taxpayers, who, in some instances, want something more than just 

roads. I just—I have to put that on the record. 

Senator BOND. We know that, and we need to have your recommendations for funding the Highway Trust Fund and also funding all the transportation needs. And when we get to electric cars, 

we are having more and more electric cars. That is good for the environment. It saves gasoline. It reduces imports. How are we going 

to make sure that the electric cars that are on the roads—and I 

happen to live in a small community which is assembling electric 

cars, and we believe in them. 
206 

But how do you get the trust fund—how do you get the money 

into the basic high programs because these little supersized golf 

carts need to drive on highways, too? I hope you will have a recommendation for that. 

TRANSIT-ORIENTED DEVELOPMENT

Secretary LAHOOD. Well, let me answer your question about FTA 

and the criteria. We changed the criteria because almost from the 

first day that I appeared before any of these committees on the 

Senate side, every Senator would ask how come it takes 10 or 12 

years to get a New Starts program? 

Because our criteria was very limited, and by expanding the criteria, we can shorten the period of time within which New Starts 

can begin and really give more communities more opportunities to 

really begin the kind of New Starts and transit that they want to 

do. That is the reason that we really wanted to change the criteria. 

Senator BOND. Well, one of the things that was most important, 

we worked very hard on the SAFE–T, and I happened to be the 

head of the subcommittee in EPW that worked on it. We put some 

streamlining in there to make sure that all of the relevant questions were asked and answered, but one time only because the cost 

of starting has been delayed so much and there is so much additional cost by all of the regulations, overlapping regulations that 

are added without considering reducing existing limitations. 

I hope that you will look at how you can streamline that to—they 

are telling me I have got one minute left on the vote. Oh, well. You 

win some. You lose some. 

But I hope that you will do that, and I am sorry I haven’t had 

a chance to discuss with you, Mr. Secretary, some of my concerns 

about this. We will submit those for the record. And I guess it 

would be appropriate to say that the subcommittee will stand in recess until the return of the chair. 

And I thank you very much, gentlemen. 

Secretary LAHOOD. Thank you. 

Senator BOND. It is always enlightening. I am sorry, Secretary 

Donovan, we will have more of a chance to talk later. 

Thanks. 

Senator MURRAY [presiding]. I bet you are glad to see me back. 

Secretary LAHOOD. We are very glad to see you, Madam Chair. 

METROPOLITAN PLANNING ORGANIZATIONS

Senator MURRAY. I am glad to see you as well. Sorry for the 

pause and I appreciate both of you waiting for us. We are back in 

session again. 

Let me go right back to my questioning, and I wanted to turn 

to you, Secretary LaHood. As part of the fiscal year 2011 budget, 

you have requested $200 million to increase the capability of metropolitan planning organizations, MPOs. Under this proposal, will 

you select those MPOs based on their need to improve their planning capabilities or their interest in livability projects? 

Secretary LAHOOD. Well, first of all, we think the MPOs play a 

very important role. In your absence, Senator Bond was talking 

about how these ideas need to bubble up from the communities. 

And we believe in that. And we believe that the MPOs are a very 
207 

good mechanism to do that. As I said to Senator Bond, I have been 

to 80 cities in 35 States. We have held four hearings around the 

country around the idea of transportation policy tied into with our 

friends at HUD and EPA. 

What we are hearing from people is that we are always going to 

need roads, but there are lots of other things that communities 

want in terms of transportation. Some communities want light rail. 

Some want more buses. Some want to get into the streetcar business. Some want more walking and biking paths. So our decisions 

will be based on what bubbles up from the MPO. 

I think people recognize that we have a pretty good system of 

highways and roads around the country, and I think what the 

MPOs are going to be hearing about is other opportunities for 

transportation that can be tied into affordable housing. So, I think 

some of it will be based on what the MPOs have to say, but I think 

everybody knows now that livability and sustainability include not 

only roads, but they include a lot of other things, too. 

Senator MURRAY. But when you look at those proposals and you 

are evaluating them, are you looking at whether they have put in 

place good planning and are capable of doing that? Or are you looking more at whether it actually is livability? 

Secretary LAHOOD. I think we are probably going to look at it in 

terms of what their capacity has been to do the planning and to 

do it on a regional basis and incorporate a lot of different forms of 

transportation. In some instances, I think we will try to enhance 

their ability to do that. 

For example, in Houston yesterday, I talked to the mayor, and 

she is very concerned about how far a reach her MPO goes and who 

should be included and those kind of things. In some instances, 

MPOs do need some enhancement, and some more staff capability 

to try to incorporate livability not only in an urban area, but also 

there are great concerns about rural transportation and rural 

areas, and how do you incorporate their priorities? 

So I think we are going to be looking at the capability of MPOs, 

what their thinking is, and how we can really enhance their ability 

to carry out the agenda that the community wants. 

SMALL AND RURAL COMMUNITIES

Senator MURRAY. Okay. The idea of a sustainable or livable community sometimes doesn’t resonate in some of our smaller or rural 

communities. The terms that are associated with concepts like ‘‘increased density’’ and ‘‘congestion pricing’’ and ‘‘transit-oriented development’’ just don’t resonate in small communities. But small 

and rural communities do need improved planning and need to address land-use issues, which is really actually why this subcommittee included a set-aside within the regional planning grants 

to support planning efforts in regions with populations of less than 

500,000. 

Secretary Donovan, can you explain how HUD will make sure 

that smaller regions benefit from these grants and maybe give us 

some examples? 

Secretary DONOVAN. Sure. First of all, I think the set-aside is 

very important. In fact, one of the things that we heard in the feedback that we got and the sessions we have done around the plan-
208 

ning grants is that, in fact, 500,000 may be too large in some cases. 

And so, one of the things that we are looking at is finding ways 

to ensure we get even to smaller regions and communities beyond 

the 500,000. 

So I think that was a clear piece of feedback that we heard and 

one of the ways that we are looking at right now. I guess another 

thing I would say is I think you make a very important point about 

not painting livability with too broad a brush because it does vary 

so much by community. Secretary LaHood was just talking about 

how we need to listen to those local communities. 

One of the things we consistently hear around smaller towns and 

rural areas is for seniors in those communities, the difficulty of 

linking up housing with transportation options. And obviously, you 

are not going to put in a streetcar line or you are not going to have 

the same kinds of solutions, but there are very important transportation solutions like vans or other kinds of transit options that can 

be flexible in rural areas that are available particularly for seniors, 

and we have been looking at ways to link up housing to those kinds 

of efforts as well. 

So there are very specific things like that, examples like that 

that we have heard out of these sessions and that we are incorporating into the criteria that we will have for those smaller places, 

as well as implementing the set-aside and looking at ways to even 

to get to smaller places. So those are a few examples. 

DATA COLLECTION FOR SMALL COMMUNITIES

Senator MURRAY. Okay. Secretary LaHood, your proposal seeks 

to increase the capacity of MPOs by improving data collection and 

computer modeling capabilities. Oftentimes, those things work better for large communities with really complex transportation challenges. How will those grants benefit smaller MPOs and communities, or communities that don’t have an MPO? 

Secretary LAHOOD. Well, we think there needs to be some reform 

to MPOs to make sure that in past instances where the rural communities have not been at the table, that they can be at the table, 

that their transportation, housing and other needs are really being 

addressed. There are a couple of programs that Secretary Donovan 

mentioned in which transit districts have established contracts 

with smaller communities where they do provide transportation 

services so people can make a doctor’s appointment or go to the 

grocery store or go to some other opportunity that they want in a 

larger city. 

We are going to work with MPOs on the idea that there has to 

be the kind of outreach that incorporates transportation and other 

needs that people have in rural communities. We know that many 

people want to retire in the communities where they have raised 

their children, where they farmed, or where they have lived all 

their lives, and still have access to the larger metropolitan areas. 

So, we have funded in the past some transportation opportunities 

for some communities, but we really need to make sure the MPOs 

are taking these kinds of considerations into account when they are 

putting together their plans. 
209 

FUNDING FOR INFRASTRUCTURE

Senator MURRAY. Okay. Well, most of the transportation planning is done by the MPOs. Elected officials sit on the boards of 

MPOs, but they are still different organizations than the State or 

local governments who actually fund transportation projects. 

Secretary LaHood, your planning grants mainly go to those 

MPOs, but State and local governments tell us they have huge 

backlogs of infrastructure needs, and the Federal Government 

needs to find a way to fund more of the transportation projects. 

And I think we all agree there is a tremendous need to invest in 

our Nation’s infrastructure. 

So how do you address the concerns that are given to us by State 

and local governments who are trying to find a way to fund their 

infrastructure needs? 

Secretary LAHOOD. We hope that you all in Congress will consider the kind of opportunities that were presented to communities 

for direct funding through the TIGER program. We had $1.5 billion. We had $60 billion worth of requests. That $1.5 billion went 

directly to communities, directly to transit districts, bypassed other 

bureaucracies. 

When you get $60 billion worth of requests, which we did, you 

get a lot of creative ideas and a lot of good ideas. The reason there 

is such a pent-up demand is for the reason that you just said—because they have been overlooked by either a State government or 

a larger metropolitan area. We think this program worked very 

well, the way it was intended, to go directly to very creative ideas 

in communities that have been bypassed. 

So the MPOs also should incorporate elected officials. If there is 

a small town mayor, they ought to have a seat at the table and be 

a part of the planning process. I think there will be some debate 

about whether they have an equal voice or not, but the point is 

they ought to be at the table. 

The TIGER program worked well because it went directly to very 

creative ideas that have been bypassed for years. 

CHALLENGE GRANTS

Senator MURRAY. All right. Well, as I mentioned in my opening 

statement, cities across the country like Bellevue in my home State 

have already developed projects like the Bel-Red Road that really 

exemplify both of your efforts to build livable communities. Bellevue has already done its planning and permitting. So I want to 

hear from both of you on what you would tell Bellevue or other cities like that where they would now look for Federal funding for the 

next phase of Bel-Red Road or similar projects that have finished 

their planning and permitting processes. 

And Secretary Donovan, let me start with you. 

Secretary DONOVAN. And let me just build on the prior question 

as well. It is one of the reason we felt that having the challenge 

grants that would go directly to local governments were an important complement. We realized that, I think as Ray said, the regional component of this, making sure that the regional organizations, whether it is an MPO. In rural areas, there are many places 
210 

where you have regional organizations that aren’t MPOs, but there 

are other types of organizations that cut across. 

Those are important, but also we have to go directly to local governments for the kind of planning and implementation that is important as well. So I think we have a balanced approach that recognizes you have to work with both kinds of organizations. 

In this case that you are talking about, I think it is the Bel-Red 

project that is there, there are a couple of things I would say on 

the HUD side, and Secretary LaHood could talk about the DOT 

side. Specifically, what we often see with these kinds of projects is 

that they create the opportunity for significant new housing development. 

They create demand around the stops on a line like that. And the 

challenge grants, as well as the DOT TIGER II planning grants 

that we are looking at putting together in one application or one 

NOFA process, those could be used, for example, to do zoning studies and really build out all of the specifics around the development 

that would take place around those transit stops. That is one example of how specifically it could be used there. 

A second would be our CDBG funding, which could be used for 

street improvements or a range of supporting investments to the 

actual transit line. This is exactly the kind of synergy I was talking 

about with the Detroit investment that the TIGER grant was made 

there. So those are a couple of examples of the way what we can 

do through this sustainability partnership would support the kind 

of investment and planning that they have already done. 

Senator MURRAY. Okay. Secretary LaHood? 

Secretary LAHOOD. We think that the collaboration that we are 

doing will enable people to have affordable housing and affordable 

transportation, in some communities, it could be a streetcar line, 

in other communities, it could be light rail, in other communities, 

it will be transit through bus services. 

The collaboration enables not only other forms of transportation 

besides an automobile, but affordable housing along the way. We 

have been around the country and seen where this has worked 

very, very well. Where there is good planning, you can make it 

happen, and you can actually talk about livable neighborhoods. 

Then, really building on the whole livable community’s idea, you 

create not only affordable housing and the amenities that go in 

neighborhoods, but also good transportation that goes along with it. 

TRANSPORTATION INVESTMENTS

Senator MURRAY. Okay. As both of you know, each State and 

local government has a different relationship with their MPO. In 

some cases, the plans are a valued part of the process. But in others, they are largely ignored. How can you be sure that investments in better planning will actually lead to better investments 

in transportation projects? 

Secretary LAHOOD. These MPOs have to be very inclusive. They 

have to include the rural areas. 

SMALL TOWNS AND MPOS

Senator MURRAY. So you will be looking at that? 
211 

Secretary LAHOOD. Absolutely, small towns and the connectivity 

that can be created around the metropolitan areas. In the city of 

Denver, the mayor brought all of the suburban Denver area in, and 

collaborated with them on plans. Now they have one of the really 

unique transit plans in the country, which runs six transit lines 

into their Union Station, where there will be an Amtrak capability. 

So, you create the kind of capacity for people from the suburban 

areas, and you take their ideas about the mobility that they want 

around the urban area. It has to be very inclusive, and it has to 

include rural and suburban in the case of a city like Denver or 

even Chicago, which Mayor Daley has done the same thing and 

been very inclusive with the suburban area. 

So, you have a couple different systems: you have the metro system that delivers people from the suburban area into the city of 

Chicago, you have the Chicago Transit Authority, where people can 

get around there, and you have trains that go to the airport, and 

it is connected. This is the kind of thing that really needs to be 

done if you are really going to provide the kind of alternatives that 

people want. 

Senator MURRAY. Okay. 

MEASUREMENT CRITERIA

Secretary DONOVAN. I would just add to that I think in addition 

to the important work we will obviously do in evaluating these applications, are the plans credible? Is there real evidence of collaboration, as Secretary LaHood is talking about, across jurisdictional 

lines? 

I also think it is critical that we set up specific measurement criteria as a result of the process. Again, we are not going to impose 

a single set of criteria up front. That has to come from the ground 

up. But it is clear that having impacts like reducing costs of combined housing and transportation, reduction in—— 

Senator MURRAY. So you will set that out up front, this is what 

we expect to see? 

Secretary DONOVAN. Exactly. To say, out of these applications, 

we are going to agree to a set of criteria. We want to see the criteria that you are proposing. We will work with you on those, and 

then we will agree to a set of metrics that will have to be met from 

the plan. 

And that way, everybody knows what success looks like up front. 

We are not going to dictate that, but we have to at least know that 

there is something to be accountable to. 

LIVABILITY

Senator MURRAY. Well, following on that, what changes would 

you expect to see from a community after it has developed this integrated plan? Do you see the community using Federal housing 

programs like CDBG or section 8 in a different way? 

Secretary DONOVAN. I certainly think that we will see lower 

costs, and that is in a range of different areas. I would hope that 

we would see lower commuting costs, which would also be able to 

bring down emissions as well. We would see families with more income available. And certainly, I would expect to see lower costs on 

the HUD side for the taxpayer as well. 
212 

What we see with the investments we have made from the Recovery Act in greening our housing stock, typically we see those investments pay for themselves in 3 to 5 years. So any savings that 

go beyond that, and these are annual savings, is net savings to the 

taxpayer. So we certainly expect to see lower utility costs in the 

long term that will help on the budget side with, as you know, 

what we have seen under the recession, increasing costs in section 

8 and other programs. So I think this is a significant advantage as 

well. 

Senator MURRAY. So I am assuming that one of the things you 

are looking at in proposals is, at the end of the day, does that community envision having lower costs as a result of their planning? 

Secretary DONOVAN. Absolutely. How we measure those costs 

may be different in different communities, but in just about every 

example that I have seen—urban, rural, different types of metro 

areas—we see that. 

We see more efficiency in infrastructure investment, and this is 

one of the things that I think is so important about these principles 

is where we have a community, whether it is because of 

brownfields or red tape from HUD is standing in the way of making investments in places that already have infrastructure, we 

should be able to achieve lower infrastructure costs because we can 

recycle, if you will, existing infrastructure that is there, improve it 

rather than having to have to continue to sprawl in ways that have 

negative impacts on families, but also on infrastructure cost. 

Secretary LAHOOD. Can I just say that as a result of the work 

that you have done, Madam Chair, this idea of these kinds of 

transportation opportunities coming from the grassroots up, the 

whole ferry service, which is very unique to your part of the world, 

and there probably aren’t any—there are very few other places 

around the country like this. But that is an integral part of the 

transportation for people to get back and forth to work, to housing, 

or to schools or whatever. 

Those opportunities to create multimodal forms of transportation 

have to come from the ground up, have to come from the MPOs, 

and have to come from the idea that not one size fits all. 

CAPACITY-BUILDING FUNDING

Senator MURRAY. Okay. Let me turn to some questioning about 

the roles and responsibilities of the agencies. 

In last year’s funding we provided to HUD for the Sustainable 

Communities Initiative, the administration has worked to clarify 

the roles that each agency is going to play in this partnership. And 

under those new defined roles, HUD is going to focus on integrated 

planning efforts and updating zoning codes. DOT is going to focus 

on capacity building. EPA will focus on administering technical assistance. 

Now I understand that those roles were established in part to 

avoid duplication of effort among the different agencies, and that 

is important. But I am concerned that when we make those distinctions up front, we just are reinforcing the old stovepipes. 

So, Secretary LaHood, can you provide some more detail on what 

you see as DOT’s role in providing capacity-building funding? 
213 

Secretary LAHOOD. Well, I don’t know if there has been another 

time when three agencies, three big agencies of the Government 

have ever sat down at a table together and began discussions about 

how we were going to share resources, how we were going to collaborate. This is an extraordinary opportunity, I think, for the 

country as we get into an authorization bill, as we get into a transportation policy, as we try to provide affordable housing. 

We each have our expertise, and we have our resources. The 

point here is, we are willing to share our expertise and some of our 

resources if it can be brought to bear on affordable housing and 

where people want to live. We know what our role is, but obviously, 

we have expertise in transit, and we have expertise in highways, 

and we have expertise in other forms of transportation. 

But collaborating with where people want to live and have affordable housing, has not really ever been done before. So, we are 

going to bring our own expertise, and look at a holistic point of 

view, not from a sort of a tunnel vision that you build a road here 

and then you hope that maybe somebody will build some houses. 

Or you see some houses, and how people are really going to gravitate around these communities. 

I think the key point here is that we are really looking at it from 

a holistic point of view and coordinating and collaborating and getting good ideas from people who are in these communities. 

HUD’S ROLE

Senator MURRAY. Secretary Donovan, you are supposed to focus 

on planning, but it seems to me that planning is about capacity 

building. So maybe define for me better what you see your role as. 

Secretary DONOVAN. I think you raise a very important question, 

I think, about how we make sure that we are not duplicating roles 

because I think that a lot of the work that we have done to try to 

define clear roles is to make sure that we are not replicating expertise that Ray has in his agency, at HUD that we are not hiring 

more folks than we need or spending more than we need to spend 

in terms of making these happen. 

But also recognizing, as you said correctly, that the lines are not 

perfectly clear and if we try to make them too hard that we can 

end up replicating the silos, and I think it is the right balance to 

strike. 

Let me maybe use an example in what we are looking at with 

the planning grants that we have, our challenge grants. We looked 

at this, and we said, look, DOT has $35 million in funds that could 

be used for similar purposes, but not exactly the same. We are 

going to come together to evaluate, but we will be awarding these 

funds depending on the specifics of what that community needs. 

If it really is more of a transportation planning effort that is specifically around, say, a streetcar line or something like that or a 

ferry line or whatever it might be, Secretary LaHood’s team would 

provide the funding there. We might provide the funding if it is 

more specifically, say, an inclusionary zoning effort or a transit-oriented development around there. And there may be examples, too, 

where we would both combine funding and provide them. 

In those cases, we are going to be providing some capacity building as well because we are going to be working so extensively with 
214 

the regional planning organizations, the MPOs, and others. There 

is real expertise at Department of Transportation in doing that. 

That is why we felt it was appropriate for them to be the lead. 

They being the lead doesn’t mean we wouldn’t also provide technical assistance—— 

Senator MURRAY. So you don’t see that as the sole responsibility 

is going to be them? 

Secretary DONOVAN. It is not a sole, but it is making sure we understand who is leading and who is following. If there is a more 

specific issue, for example, around zoning codes, land use, those 

issues, we would step in. If there is a brownfields issue, obviously, 

EPA would step in and be able to provide the technical assistance. 

But really, the leadership and the greatest experience on this 

was in DOT. That is why we felt like on that technical assistance 

side, they ought to be leading that effort. I hope that clarifies it. 

BARRIERS TO NEW STARTS PROGRAM

Senator MURRAY. Yes, it does. And what I hear you saying is you 

are using your own expertise, you are sharing it, which is new, and 

you are not exclusively limiting yourself to your one area? 

Secretary DONOVAN. Right. And the biggest risk here, we don’t 

want to reinvent the wheel—— 

Senator MURRAY. Yes. 

Secretary DONOVAN [continuing]. Where we have that capacity. 

It is more cost effective, and that means we have to be in the same 

room and understand who is leading and who is following. 

COST EFFECTIVENESS

Senator MURRAY. Okay. All right, very good. 

Secretary LaHood, I wanted to talk with you, I was really happy 

to see your announcement in January that the Department is now 

going to consider other important factors in addition to cost effectiveness when it is evaluating new transit projects. Cost effectiveness is obviously important, but I am really happy to see a more 

holistic approach that also considers the potential impacts of congestion and the environment and the economy because we know all 

of that is important to the places where we live and want to make 

them more vibrant and sustainable. 

That announcement also highlighted the proactive steps that 

DOT and HUD can take to remove barriers that stand in the way 

of smart development, and I wanted to ask both of you today if you 

can tell me what your Departments are doing now to identify and 

eliminate obstacles that are within your power to change? 

Secretary LAHOOD. Well, by proposing changes rather than just 

using economic development, which is an important, obviously, criteria. But taking into consideration several other factors, we think 

we can speed up opportunities for funding of New Starts. Really, 

I think the main obstacle to really expediting New Start opportunities and providing funding for it was that we were encumbered by 

our own guidelines. Expanding the guidelines and taking other criteria in will shorten the time within which we can really make 

these allocations and approve these projects. 

In your absence, I told Senator Bond that the most common complaint that I heard at the beginning of my tenure was, why does 
215 

it take 10 or 12 years to get a New Starts program going? Well, 

because of all the bureaucracy, I guess, and all the hoops that we 

were making people jump through. 

It is not that we are not going to be taking a careful look. We 

are going to be doing that, but we are going to be looking at other 

criteria, such as livability and sustainability and the environmental 

benefits of each. The economics are important, and they always will 

be. But there will be other things that we will look at, and I think 

it will speed up the process. 

Senator MURRAY. I am told there is a list available somewhere 

in the administration of the barriers that exist. Is that available? 

We have been asking for it for over a year now. 

Secretary LAHOOD. Well, it is available as far as I am concerned. 

We will see if we can get you a copy of it. 

[The information follows:] 

The Federal Transit Administration (FTA) has, in the past year, rigorously examined each stage of the project development of New and Small Starts and implemented measures in an effort to make the process move more smoothly and quickly. 

FTA has revised its internal business practices and policies as well as the regulatory framework of the New and Small Starts program to expedite project delivery. 

A number of significant improvements have been made. A major change occurred 

in January 2010, when Secretary LaHood rescinded the test established in 2005 requiring New and Small Starts projects to have a Medium or better Cost-Effectiveness rating to be considered for a funding recommendation in the President’s annual 

budget. Consideration for project funding recommendations are now available to 

projects that achieve a Medium or better Overall rating, as required by statute. 

Cost-Effectiveness no longer trumps all the other statutory evaluation criteria. 

Project funding recommendations are now based on the full set of statutory criteria, 

including ‘‘livability’’ criteria like environmental benefits and economic development 

effects. This change is expected to expedite the project development process because 

it removes the need for project sponsors to repeatedly rescope projects to lower their 

costs in an effort to meet a Medium cost effectiveness threshold. 

To provide better technical support to applicant project sponsors as they advance 

toward construction funding, FTA issued new and clarified guidance. FTA also 

works with sponsors to develop ‘‘roadmaps,’’ mutually developed action time lines 

for advancing projects. 

FTA revised its organizational structure by creating an office solely devoted to 

New and Small Start project development and by revitalizing its New Starts project 

development teams that work one-on-one with applicant sponsors. FTA reduced the 

number of submittals required from sponsors. FTA introduced streamlining policies 

such as allowing project sponsors to automatically move forward with certain procurement and early construction activities, using local funds eligible for later Federal reimbursement upon compliance with environmental requirements. 

Of particular note, FTA has just issued an Advanced Notice of Proposed Rulemaking (ANPRM) effort to improve and simplify the methodology used to measure 

three important criteria used to evaluate New Starts projects. During this ANPRM 

effort and subsequent development of a new regulation, FTA will work with a broad 

range of stakeholders in public transportation and livable communities to make the 

New and Small Starts regulatory framework not only reflect a wider range of the 

benefits of transit, but to be more compatible with expedited project development 

timeframes. 

With those accomplishments behind us, the FTA also expects to announce a significant revamping of its project approval processes in the coming months to further 

streamline the project decision process and shorten the period it takes to advance 

projects to a Federal funding decision. 

Senator MURRAY. Okay. We would like that, all right. Secretary 

Donovan. 

Secretary DONOVAN. I think this is such an important question, 

and it goes back a little bit to the issue that was raised before. Is 

the Federal Government dictating, absolutely not. We want to work 

with local communities. 
216 

One of the things we consistently hear from local communities, 

and I think in some ways is our first responsibility, is the Hippocratic Oath, which says ‘‘first, do no harm,’’ and I think that is a 

principle we need to follow on this side as well. 

One of the great benefits of us coming together in the way that 

we have and reaching out to local communities is that we have 

heard a lot about where our rules—Ray talked about some of them, 

where our rules stand in the way of sustainability at the local 

level. In fact, I am not sure which list exactly you might be referring to. We have a list of 300 comments we have gotten from our 

input around the country that is barriers we ought to try and work 

on. 

Senator MURRAY. Okay. 

Secretary DONOVAN. We have begun to work on those. Let me 

give you just two quick examples. Let me just give you two quick 

examples of the things that we have started to work on already 

and the things that we have done. 

One of the things we have consistently heard is that our standards, both for ensuring multifamily buildings or subsidizing them 

require outdated environmental reviews that are not state-of-theart and often limit how much commercial income a property could 

have. Well, what are the effects of that? 

We make it way too hard to reinvest in existing communities 

that might be close to transit or other things, and we stand in the 

way of doing mixed-use development, which is key for livable communities. So that is one example. 

A second, by working with—and we have changed that, by the 

way. We have now begun to incorporate state-of-the-art environmental standards into the work that we do. 

A second example is with the Department of Energy. As we 

started to look at their weatherization funding and whether it 

could be used on multifamily, what we found was the Department 

of Energy partners had to go literally family by family and check 

their incomes to make sure that they were low income, even though 

HUD is already doing that work each and every year to check their 

incomes. 

It was a big barrier to doing it. So what did we do? We changed 

it. We put out an MOU with Secretary Chu that says here is a list 

of 1.5 million apartments in HUD programs that are automatically 

eligible for weatherization assistance because of the income level. 

Those are just two examples of the kind of barriers that we have 

identified already and moved on. And obviously, there is a significant list of others that we have heard feedback from that we are 

beginning to work on as well. 

Senator MURRAY. Okay. If you could share that with the subcommittee, it would be great. My understanding is there is a joint 

list developed by DOT and HUD, and if you could share that with 

us and some of the ones that have been removed or what the challenges are, I would really appreciate it. 

Secretary DONOVAN. Yes. 

Secretary LAHOOD. Can I just list for the record the six criteria— 

you know I mentioned cost effectiveness in the past, but we have 

mobility improvements, environmental benefits, cost effectiveness, 

operating efficiencies, economic development effects, and public 
217 

transportation supportive land use. That is the expansion that I 

was talking about, in addition to cost effectiveness. 

Senator MURRAY. Okay, very good. 

Well, I appreciate both of your responses to this and look forward 

to working with you on that. 

Secretary LaHood, I have one other question for you that is not 

about sustainable communities, but that is very important to me. 

And we will have a number of Senators who will be submitting 

questions to both of you. 

MEXICAN TRUCKS

And Secretary LaHood, I do need to ask you an important question. It is one I brought up with you when you were before our subcommittee before, and that is about the cross-border trucking issue 

with Mexico and the devastating effect of Mexican tariffs on my 

Washington State farmers now. 

Back in March, I urged you and the administration to move 

quickly to craft a plan to resume this cross-border trucking in a 

way that would address the safety concerns that were raised during the pilot and the tariffs that are imposed right now. You told 

me at that time that a resolution was going to be forthcoming soon. 

You should know and I want you to know that the effects of that 

Mexican tariff have been absolutely devastating to the farmers and 

families in my home State now. The tariffs are really undermining 

our farmers’ competitiveness. They are killing jobs, devastating 

communities. 

In fact, in the 2 months since we last talked and you came before 

the subcommittee, the ConAgra potato processing plant that is located in Prosser, Washington, shut down and eliminated hundreds 

of really good-paying jobs. If we don’t address this soon, that is just 

going to be the first of what we see. We literally have thousands 

of jobs at stake and are in serious jeopardy over this. 

I sat down last week with the Mexican ambassador to the United 

States in my office because I wanted him to know how harmful this 

was, and I told him that I feel very strongly that our Washington 

State farmers and our families should not be punished for a diplomatic dispute they had nothing to do with. 

Well, he told me that Mexico’s president, as you know, is planning to be here in a few weeks and is bringing this issue up with 

President Obama. So my question to you this morning is I want to 

know what you can tell me about the administration’s progress toward fixing this problem, are you prepared to resolve this issue 

with Mexico during the state visit later this month? 

CROSS BORDER TRUCKING

Secretary LAHOOD. Well, since the program was suspended, we 

have worked very hard with the White House and other members 

of the Cabinet, President Obama’s team has worked very hard to 

put a proposal together. We will be announcing it very soon, and 

we will come to Capitol Hill and brief every Senator that has an 

interest in what it says and get feedback. 

President Obama’s administration’s intention is to restart this 

program. It is a part of NAFTA. It needs to be restarted. We believe if it is restarted that these tariffs will be lifted, which we 
218 

know have had a devastating effect not only on the State of Washington, but on many other States across the country. 

We are very close to briefing you and other Senators on the proposal—— 

Senator MURRAY. Is ‘‘very close’’ sooner than ‘‘soon?’’ 

Secretary LAHOOD. It is closer than ‘‘soon.’’ 

Senator MURRAY. Okay. Well, this is extremely important to us. 

So I will stay in touch with you on this. 

Secretary LAHOOD. Yes. 

Senator MURRAY. And we are hoping with the President coming 

later this month that we can have a resolution of this and move 

on. 

Secretary LAHOOD. Yes. Thank you. 

Senator MURRAY. Okay. Thank you. 

ADDITIONAL COMMITTEE QUESTIONS

I would ask at this time that if the subcommittee members have 

any additional questions that they submit them for the record. 

[The following questions were not asked at the hearing, but were 

submitted to the Department for response subsequent to the hearing:] 

QUESTIONS SUBMITTED TO HON. SHAUN DONOVAN

QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

TRANSPARENCY

Question. Secretary Donovan, as discussed during this and previous hearings, I 

am still waiting for real transparency in the current administration grant making 

process: in other words, at a minimum, Congress and the American people need to 

know the substance of the implementation of the program and the decisionmaking 

through the Internet or the Federal register, including such information as the basic 

requirements for receiving a grant, a list of all grants awarded, to whom and for 

how much, and what were the requirements that the grantee met in order to qualify 

for a grant, how the grant was awarded (who made the decision, under what basis), 

what are the minimum expectations, and a bi-annual review of the status of each 

grant including what has been accomplished in contrast to the benchmarks established for a successful grant, and what benchmarks apply for the length of the 

grant, including in all cases the rate of obligation and the rate of expenditure and 

whether the expenditures are consistent with the requirements of the grant. It 

seems to me that cost shares and the leveraging of funds also should be readily 

available on the Internet so we have access to information about other sources of 

Federal, State or private funds that may be used to augment these grant awards. 

In brief, what does HUD believe should be the minimum requirements for transparency? What issues should not be subject to transparency? What steps is HUD 

currently taking to ensure that HUD grant decisionmaking is open and objective 

with benchmarks on the award of grants as well as a process to determine whether 

grants are meeting program goals and requirements? Is there a political review 

process at HUD which allows political decisionmaking once the underlying objective 

criteria process is complete? 

Answer. For our programs, both NOFAs clearly stated the process that would be 

used to evaluate and rate projects. 

HUD issued an Advance Notice of Funding Availability and the Office of Sustainable Housing and Communities organized a public listening tour with DOT and EPA 

in advance of the NOFA publication that directly influenced the structure of the 

funding notices. Each and every application for HUD programs is reviewed, evaluated and rated as stated in the Notice of Funds Availability (NOFA). There is no 

political process that is done once the objective process is complete. 

Additionally, both grant programs will involve a Logic Model that has specific performance indicators and there is also $8.5 million specifically for research and evaluation out of the fiscal year 2010 funding. The $8.5 million is derived by an appropriation of $10 million less $1.5 million for the Transformation Initiative. The eval-
219 

uation funds will be used to see how the grantees are performing. Specific information can be found on the Sustainable Housing Web site (HUD.gov/sustainability). 

There is a list of applicants for both grants and a summary of those that were funded. The NOFAs contains what criteria were used and how the grantees applications 

were weighted. 

RELATIONSHIP BETWEEN HUD, EPA AND DOT IN THE SUSTAINABLE HOUSING AND

COMMUNITIES INITIATIVES PROGRAM

Question. HUD has established a new Office of Sustainable Housing and Communities with an appropriation of $150 million which will be available for regional 

planning efforts that integrate housing and transportation decisions as well as to 

increase State, regional and local capacity to incorporate livability, sustainability 

and social equity principles into land use and zoning. One hundred million dollars 

will be for regional integrated planning initiatives. HUD, EPA and DOT are directed 

to work together to bring coherence to the planning process. HUD is also asking for 

another $100 million for fiscal year 2011. 

This program remains very ambiguous. A dialogue on livability and sustainability 

represents a good and healthy debate; however, we must be careful about not becoming too prescriptive or start to rely too much on Federal mandates to force certain conclusions. One size does not fit all—instead we must encourage flexibility and 

not try to purchase conclusions through grants. What is the current relationship between DOT, EPA and HUD as to sustainability/livability? How do the agencies work 

together and what are the problems? 

Answer. When we formed the Partnership for Sustainable Communities, the Department of Housing and Urban Development (HUD), the Department of Transportation (DOT), and the Environmental Protection Agency (EPA) agreed to collaborate 

to help communities become economically strong and environmentally sustainable. 

Through the Partnership and guided by six Livability Principles, the three agencies 

are coordinating investments and aligning policies to support communities that 

want to give Americans more housing choices, make transportation systems more 

efficient and reliable, reinforce existing investments, and support vibrant and 

healthy neighborhoods that attract businesses. Each agency is working to incorporate the principles into its funding programs, policies, and future legislative proposals. The Partnership breaks down the traditional silos of housing, transportation, 

and environmental policy to consider these issues as they exist in the real world— 

inextricably connected. This results in better results for communities and uses taxpayer money more efficiently, because coordinating Federal investments in infrastructure, facilities, and services meets multiple economic, environmental, and community objectives with each dollar spent. As part of this effort, the three agencies 

have been working to identify barriers that exist. 

Additionally, in June 2010 HUD and DOT joined together to issue a joint Notice 

of Funding Availability to support integrated housing and transportation planning 

to eligible States, tribal governments, regions, and local units of government, making up to $75 million available for these activities. 

HUD, EPA AND DOT CONTRIBUTIONS TO SUSTAINABLE HOUSING AND COMMUNITY

INITIATIVE PROGRAM

Question. How much is each agency contributing to this initiative and what is the 

relationship of the different funding streams? 

Answer. HUD, DOT, and EPA have identified a set of priorities and roles that 

guide our individual and joint efforts. Within the Partnership for Sustainable Communities, each agency will incorporate the six Livability Principles into their policies and funding programs to the degree possible and adopt a common set of performance metrics for use by grantees that helps align and leverage Federal funds. 

As laid out in the agencies’ joint fiscal year 2011 budget proposal, the agencies each 

propose to take the lead in different areas as further described below. 

—HUD will take the lead in funding, evaluating, and building the capacity for integrated regional and local planning for sustainable development, and will invest in sustainable housing and community development efforts. 

—DOT will focus on building the capacity of transportation agencies to integrate 

their planning and investments into broader plans and actions that promote 

sustainable development, and investing in transportation infrastructure that directly supports sustainable development and livable communities. 

—EPA will provide technical assistance to communities and States to help them 

implement sustainable community strategies, and develop environmental sustainability metrics and practices. 
220 

REQUIREMENTS FOR RECEIVING A GRANT

Question. What are the underlying requirements for receiving a grant under sustainability? 

Answer. We respectfully refer you to the Notices of Funding Availability that were 

issued on June 24, 2010 for the two Sustainable Communities grant programs, 

which describe the program requirements for each program. 

Sustainable Communities Regional Planning Grant Program.—http:// 

www.hud.gov/offices/adm/grants/nofa10/scrpgsec.pdf. 

Community Challenge Planning Grant Program.—http://www.hud.gov/offices/adm/ 

grants/nofa10/huddotnofa.pdf. 

SUSTAINABILITY VS. LIVABILITY

Question. Why does HUD call this initiative sustainability and DOT calls it livability? 

Answer. DOT uses the term ‘‘livable,’’ and by extension ‘‘livability,’’ to describe a 

community where an individual or family does not need to get in a car in order to 

do such things as go out to dinner, go to a movie, or a park. DOT defines livability 

to mean building communities that help Americans live the lives they want to live— 

whether those communities are urban centers, small towns or rural areas. Whereas 

DOT’s definition of livability reflects its transportation mission, HUD uses the terms 

‘‘sustainable communities’’ and ‘‘sustainability’’ in its programs because of HUD’s 

broader mission. 

Although HUD has not defined the term ‘‘sustainability,’’ it defines ‘‘sustainable 

communities’’ to mean ‘‘urban, suburban, and rural places that successfully integrate housing, land use, economic and workforce development, transportation, and 

infrastructure investments in a manner that empowers jurisdictions to consider the 

interdependent challenges of: (1) economic competitiveness and revitalization; (2) social equity, inclusion, and access to opportunity; (3) energy use and climate change; 

and (4) public health and environmental impact.’’ 

Given its broader mission, which includes promoting such things as economic competitiveness, social equity, and public health, HUD has chosen to use what it considers to be a term that has a broader meaning. We do not see these terms as being 

in conflict, but rather represent a coordinated approach between our agencies. 

PRIORITIZING FUNDING

Question. Secretary Donovan, as you know, there are significant deficit issues facing the entire Federal Government. As I discussed, we are facing a $1.6 trillion deficit this year; a record $1.6 trillion deficit this year—10.6 of the Nation’s GDP—the 

highest since World War II, and the future only looks worse, especially for future 

generations. The HUD budget is filled with new agenda items, such as Choice 

Neighborhood, Sustainable Communities, Transforming Rental Assistance with its 

future multi-billion out-year costs and Catalytic Investment Competition. How will 

these stack up with HUD’s core programs like HOME, CDBG, public housing and 

section 8 with the two previous programs requiring increased additional costs for 

each fiscal year just to preserve the housing safety net for low-income families? 

There are many other housing and Transportation programs that will also need 

funding and are widely supported both in the Congress and throughout the Nation. 

How do you plan to prioritize funding? 

Answer. HUD’s fiscal year 2011 budget request takes into consideration our core 

programs such as CDBG, public housing and section 8 rental assistance. In an effort 

to not only preserve the safety net that many of HUD’s programs provide to lowincome families and tenants, HUD sought to fundamentally change the way that 

our programs work to make them more efficient, serve more families and communities and preserve affordable rental housing options. 

HUD’s request compliments our core programs with new initiatives like Choice 

Neighborhoods and Sustainable Communities. The Choice Neighborhoods Initiative 

modernizes the HOPE VI program so that neighborhoods and communities can access funding that will improve existing HUD-assisted housing as well as support 

other community development needs. The Sustainable Communities Initiative will 

help regions, communities and neighborhoods create comprehensive development 

plans that link housing, transportation and job opportunities together. These programs in addition to HUD’s core programs will enable States, cities and regions to 

continue to serve low-income families, create more affordable housing options and 

spur economic development in a way that makes sense to that area. 
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LEVERAGING

Question. Secretary Donovan, HUD is looking at requiring or perhaps providing 

points in the grant process for matching or leveraging of funds or ‘‘in-kind’’ matches. 

The in-kind matching sounds like little more that crediting an additional staff to 

a Sustainability program? How do you plan to measure or identify this match which 

seems hard to quantify? 

Answer. Matching funds are not required. However, applicants must provide 20 

percent of the requested funding amount in leveraged resources in the form of cash 

and/or verified in-kind contributions or a combination of these sources. Successful 

applicants must have the required amount of leverages resources (20 percent) at the 

time of signing the cooperative agreement. In-kind contributions may be in the form 

of staff time, donated materials, or services. Please see section VIII.C. for a list of 

possible in-kind contributions. All assistance provided to meet this requirement 

must be identified by their dollar equivalent based upon accepted salary or regional 

dollar values. Cash contributions may come from any combination of local, State, 

and/or Federal funds, and/or private and philanthropic combinations dedicated to 

the express purposes of the proposal. Applicants will receive credit for leveraging 

resources greater than 20 percent of the requested amount, as described in section 

V., Rating Factor 4. If an applicant does not include the minimum 20 percent leveraged resources with its appropriate supporting documentation, that application will 

be considered ineligible. Please see section III.F., Threshold Requirements. 

We respectfully refer you to the Notices of Funding Availability that were issued 

on June 24, 2010 for the two Sustainable Communities grant programs, which describe how leveraging is defined and evaluated in each program. 

Sustainable Communities Regional Planning Grant Program.—http:// 

www.hud.gov/offices/adm/grants/nofa10/scrpgsec.pdf. 

Community Challenge Planning Grant Program.—http://www.hud.gov/offices/adm/ 

grants/nofa10/huddotnofa.pdf. 

STAFFING

Question. Secretary Donovan, how many staff do you have in the Office of Sustainable Communities and Housing? How many staff do you expect to hire and by 

when? Where will they be located and what will be there primary functions? How 

do you plan to perform grant review and selection? Will you or other political staff 

be part of the review and selection process? If yes, in what way? 

Answer. As of June 15, 2010, 14 of the allocated 19.5 full-time employees (FTEs) 

have joined the Sustainable Housing and Communities (OSHC). Another FTE will 

begin work on June 21. The remaining FTEs will join the Office over the next 2 

months. They will be located in HUD Headquarters in Washington, DC. The primary functions of staff will be to establish the Office, administer and oversee the 

two grant programs, and coordinate with DOT, EPA and other Federal agencies involved in the Partnership for Sustainable Communities and related energy efficiency 

programs. 

We respectfully refer you to the Notices of Funding Availability that were issued 

on June 24, 2010 for the two Sustainable Communities grant programs, which describe the grant review process, selection criteria and rating factors for each program. 

Sustainable Communities Regional Planning Grant Program.—http:// 

www.hud.gov/offices/adm/grants/nofa10/scrpgsec.pdf. 

Community Challenge Planning Grant Program.—http://www.hud.gov/offices/adm/ 

grants/nofa10/huddotnofa.pdf. 

As noted in the NOFAs for both grant programs, a senior review team will be created for each grant program to review qualifying grant applications that receive 

qualifying scores from review teams comprised of career staff from HUD, DOT, EPA 

and other Federal agencies. For the Sustainable Communities Regional Planning 

grants, we also anticipate using representatives from philanthropy as review team 

members to supplement teams with outside expertise on sustainability and regional 

planning. The Senior Review teams will review qualifying applications using the 

same criteria and rating factors, but will not change project scores. The Director of 

the Office of Sustainable Housing and Communities will recommend selected 

projects to the Secretary for recommended funding based on the overall review process as described in the NOFAs for both grant programs. 

SUSTAINABILITY VS LIVABILITY

Question. What is HUD’s relationship with DOT and these Sustainability and Livability programs? One of the primary goals is for DOT and HUD, and to some extent 
222 

EPA, to work together on related issues under each department’s jurisdiction to assist jurisdictions and joint jurisdictions to find common themes and activities that 

will facilitate the development of projects and help grow better communities through 

the interaction of these agencies. 

Neither HUD nor DOT appear to be making any real progress in growing their 

relationship and finding ways to join hands on grants and projects in order to improve the overall quality of life in that jurisdiction or jurisdictions. 

I am especially concerned that HUD calls its programs and activities ‘‘sustainability’’ and DOT calls its programs ‘‘Livability’’. Why not a common name and definition? As you know, from a legal viewpoint, the use of different concepts infers that 

the concepts and activities are different. If the departments cannot come to a common concept for this program, how will you plan to reach a common working relationship? 

Answer. Given its broader mission, which includes promoting such things as economic competitiveness, social equity, and public health, HUD has chosen to use 

what it considers to be a term that has a broader meaning but is still consistent 

with the objectives incorporated within the term of Livability. We do not see these 

terms as being in conflict, but rather represent a coordinated approach between our 

agencies. Within the joint-NOFA issues by HUD and DOT for Community Challenge/TIGER 2 Planning grants, both terms are used and described in terms of eligible activities and a focus on integrated housing and transportation planning. 

OVERSIGHT

Question. Secretary Donovan, it appears that Sustainability funding could go to 

a variety of different activities with the planning grants especially focused on staff 

and planning costs. These are often difficult funds to verify as to use. What are your 

plans to provide adequate oversight? This is a particularly sensitive issue now 

where jurisdictions are often surviving under very tight budgets—how will you ensure these funds are being used well for the intended purpose and not merely to 

maintain existing staffing? 

Answer. Grants made under both grant programs will be in the form of cooperative agreements, providing HUD greater opportunity to provide oversight in working 

with grantees. Grantees are required to develop detailed work plans within 60 days 

of grant execution and there are additional bi-monthly reporting requirements, all 

of which provide HUD the opportunity to verify use of funds and the on-going 

progress and eligibility of grantee activities. In addition, Congress included $10 million in the fiscal year 2010 appropriation for a joint HUD–DOT research effort that 

includes a rigorous evaluation of the Sustainable Communities Regional Planning 

Grant and Community Challenge Planning Grant programs. 

STAFF TURNOVER

Question. Secretary Donovan, planning grants at the local level are intended to 

last 3 years and then hopefully we will reach a project decision in conjunction with 

a DOT project. How will jurisdictions demonstrate they will be able to transition the 

cost of staff from Sustainability to other resources? 

Answer. You are correct that these are 3-year planning funds. The work plans and 

budgets developed by grantees cover work to be performed only during that timeframe. Applicants will be rated on their capacity to see these plans through to implementation, which includes plans to address turnover and a limited time horizon 

for funding toward staff costs. 

PROJECT COSTS

Question. After the planning stage, how much does HUD estimate the project 

stage will cost annually? Rough estimate—how can we be expected to even fund 

planning if we have no hard cost estimates for project costs especially with expected 

very tight budgets? 

Answer. Given the significant variation that we anticipate to see from each region 

as it develops its own regional and community plans, HUD is not able to forecast 

or estimate a number to answer this question. We do not advocate a one-size fits 

all, cookie cutter approach and these are decisions that will be made at the regional 

and local level, not by the Federal Government. Furthermore, the plans that will 

be developed will include consideration of Federal, State, local and private sector finance. As noted in the Livability Principles included as factors within the grant programs, however, the Partnership for Sustainable Communities places a strong focus 

on leveraging investments and coordinating policies and plans to achieve economic 

efficiency. We have seen in some regions such as Salt Lake City, UT substantial cost 
223 

savings from avoided infrastructure costs as a result of integrated regional planning. 

CHOICE NEIGHBORHOODS

Question. Secretary Donovan, HUD is proposing to fund Choice Neighborhoods at 

$250 million in fiscal year 2011 and Sustainability at another $150 million in fiscal 

year 2011. Both programs require the consultation and integration of program requirements under other agencies, including primarily DOT and HUD. What is the 

difference between these programs and why fund both when the goals are nearly 

the same. At a time of tight projects, shouldn’t we fund one or the other, not both? 

Answer. HUD’s Choice Neighborhoods Initiative focuses on the redevelopment, replacement and community integration of distressed public and HUD-assisted housing that cannot be funded through current annual funding formulas. The goal of the 

Choice Neighborhoods initiative is to provide investment targeted to distressed, 

high-poverty neighborhoods, to create opportunity in those neighborhoods and improve quality of life for residents. Choice Neighborhoods builds off of the HOPE VI 

program, which focuses on the rehabilitation and replacement of severely distressed 

public housing units, but takes it one step further to include HUD-assisted housing 

and encourage other types of community development. Where possible, HUD will coordinate with the Department of Education’s Promise Neighborhoods program, 

which aims to improve schools and education-related activities in high poverty 

areas, the Department of Justice’s Byrne Innovation program, which has been proposed to replace Weed and Seed, and other Federal programs to help grantees maximize the impact of Federal investments. Improvements in housing, access to educational opportunities and other community amenities will promote economic growth 

in low-income neighborhoods and resident self-sufficiency. 

The Sustainable Communities Initiative focuses more on holistic community planning at the metropolitan, regional, or county level, so that areas can then implement 

their own community development plans that take into account access to public 

transportation, community amenities and affordable housing. The Sustainable Communities Initiative is a collaboration with the Department of Transportation and the 

Environmental Protection Agency to address land-use, housing and transportation 

planning in order to promote more accessible and livable communities. These integrated plans may serve as a road map for transportation, infrastructure and housing investments in the future. 

Each of these initiatives does focus on better community and neighborhood planning and development, however, they have two different goals. The Sustainable 

Communities Initiative works at a larger geographic scale to assist local governments in coordinating housing, transportation and other amenities to reduce transportation costs and developed mixed-income and mixed-use housing in order to create a more viable community. The Choice Neighborhoods Initiative focuses more 

specifically, in distressed neighborhoods, on redeveloping and rehabilitating distressed public and/or HUD-assisted housing and improving economic and other opportunities in those neighborhoods. 

Senator MURRAY. I want to thank both of you for your work on 

this issue and for being here today and look forward to working 

with you in the coming months and years. 

Thank you very much. 

SUBCOMMITTEE RECESS

With that, this hearing is recessed. We will reconvene on May 13 

at 9:30 a.m. with testimony from Commissioner Stevens on fiscal 

year 2011 budget request for FHA. 

[Whereupon, at 10:57 a.m., Thursday, May 6, the subcommittee 

was recessed, to reconvene at 9:30 a.m. Thursday, May 13.] 

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TRANSPORTATION AND HOUSING AND URBAN 

DEVELOPMENT, AND RELATED AGENCIES 

APPROPRIATIONS FOR FISCAL YEAR 2011 

THURSDAY, MAY 13, 2010 

U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, DC. 

The subcommittee met at 9:32 a.m., in room SD–138, Dirksen 

Senate Office Building, Hon. Patty Murray (chairman) presiding. 

Present: Senators Murray and Bond. 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

FEDERAL HOUSING ADMINISTRATION

STATEMENT OF HON. DAVID H. STEVENS, COMMISSIONER 

ACCOMPANIED BY KENNETH M. DONOHUE, INSPECTOR GENERAL 

OPENING STATEMENT OF SENATOR PATTY MURRAY

Senator MURRAY. Good morning. This subcommittee will come to 

order. 

This morning we welcome Commissioner Stevens to his first appearance before our subcommittee as we examine the Federal 

Housing Administration and its role in the housing market. 

As we sit here today, millions of Americans are out of work and 

many more are struggling with unaffordable mortgage payments, 

negative home equity, or foreclosure. During the housing boom, 

millions of Americans achieved the dream of home ownership, but 

for far too many Americans, these dreams were based on false 

premises and fueled by investors and lenders that were chasing 

profit while ignoring risk. The consequences of these risky behaviors have rippled through the national and global economies with 

mounting foreclosures, a crippled housing market, and a financial 

sector in turmoil. We continue to clean up the mess created by 

predatory lenders and Wall Street greed. 

Fulfilling the same role as it did when it was created during the 

Great Depression, the FHA has stepped forward to help provide liquidity and restore stability to the housing market. FHA’s increased role in the housing market is as critical as it is daunting. 

As recently as 2007, when this subcommittee held the first in a series of annual hearings on FHA, its share of the market was only 

3 percent. Today FHA represents nearly 30 percent of all new 

home sales. FHA has played a critical role supporting the housing 

market while private financing has been nearly frozen. 
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However, FHA has been plagued by longstanding management 

challenges, challenges that continue to raise concern about its ability to manage its outsized role in stabilizing the market. Commissioner Stevens, you have acknowledged the challenges you inherited when you took over the agency and have moved quickly to assess and seek solutions to the problems facing FHA. The most glaring of these are antiquated information technology systems and an 

inadequate workforce, both of which are critical to equipping the 

agency to meet the challenges that face us. A well functioning FHA 

is vital to maintaining the solvency of the Mutual Mortgage Insurance Fund and protecting the American taxpayers from having to 

pay for risky or fraudulent mortgages. This subcommittee provided 

additional resources to help FHA address its shortcomings both in 

2009 and 2010. We provided funding to help FHA modernize its IT 

systems and hire additional staff to better manage and oversee a 

growing portfolio. 

Equally important to these new tools is fostering a culture at 

FHA focused on risk. Commissioner Stevens, one of your first actions after taking office was to appoint FHA’s first chief risk officer. 

This position was long overdue and sends an important signal to 

lenders, borrowers, and taxpayers that FHA understands the risks 

it faces and is working to mitigate them. I am pleased that the 

FHA is increasingly using its authority to investigate lenders that 

are not playing by the rules. It must be absolutely clear to lenders 

engaging in fraudulent and risky practices that they are not welcome in FHA programs and will not be supported by taxpayer dollars. 

Despite some important progress, FHA still faces significant 

challenges. Foreclosures have taken their toll on FHA’s finances, 

leaving the capital reserve fund below the 2 percent required by 

Congress. This is a cause for concern since any significant setbacks 

in the housing market could result in additional and possibly 

unaffordable losses to the fund. 

In an effort to strengthen the agency’s finances and protect itself 

from future risk, HUD has proposed a series of reforms, including 

increasing premiums, setting minimum FICO scores, increasing 

downpayment requirements for riskier borrowers, and expanding 

enforcement authorities. Some of these changes are already underway but others will require legislation. 

Today I will have questions about these reforms, what they mean 

for fulfilling FHA’s mission to provide access to affordable mortgages, as well as how they impact the solvency of the MMI Fund 

as we look to the future. It is clear that the solvency of the MMI 

Fund and the strength of FHA depend on the recovery of the housing market. This is evident by CBO’s re-estimate of receipts that 

FHA is expected to generate in 2011. Continued uncertainty about 

the housing market, as well as lingering doubts about FHA’s ability 

to realistically assess its risks, resulted in CBO’s much more conservative estimate of $1.9 billion in receipts instead of the $5.8 billion projected by the administration. 

The concerns expressed by CBO are real. Relatively stable home 

prices and increasing home sales suggests the market is stabilizing. 

Yet, large segments of the housing market remain fragile and there 

are looming problems that could undermine the progress we have 
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made. Over 2 million homes are currently in foreclosure and that 

number is expected to grow through 2010. 

To date, the administration’s Home Affordable Modification Program has had limited success in stemming the tide of foreclosures. 

There have only been 230,000 permanent modifications made 

under this program far short of the 3 million to 4 million homeowners expected. And as banks and servicers determine whether a 

modification is in their best interest, many families are left waiting 

as they face the agonizing prospect of losing their home. I continue 

to hear that servicers are unresponsive to borrowers and in some 

cases unwilling to explain why modifications are denied. Americans 

trying to get assistance are frustrated and rightfully so. They have 

watched as banks have received billions of dollars in taxpayer assistance and yet many of these same banks are unwilling to assist 

homeowners facing foreclosure. This cannot be tolerated. Servicers 

must be held accountable. At the very least, servicers must communicate with those trying to receive assistance and provide an explanation if borrowers are not approved. 

The success of HAMP was also limited because it failed to address two of the major problems facing troubled borrowers today: 

unemployment and negative equity. I have seen this tragic combination devastate families firsthand in communities across my 

State. In Clark, Snohomish, and Pierce Counties, communities are 

struggling with both unemployment and foreclosure, and unfortunately, home prices have yet to stabilize in Washington State, so 

families are continuing to see the equity of their homes decline. 

Nearly 16 percent of all Washington homeowners are under water 

and they are not alone. Over 11 million families in the country 

today are under water on their mortgages as a result of falling 

home prices and growing debt. That represents nearly one out of 

every four mortgages. 

Just a few months ago, the administration announced plans to 

change HAMP in order to address these problems. The plans include offering increased relief for unemployed borrowers as they 

look for work and get back on their feet, as well as incentives for 

lenders to permanently write down the principal of these mortgages instead of addressing interest rates. These changes were necessary to more effectively address the foreclosure crisis, but I remain concerned that since this program is voluntary, it will fail to 

meet its goal. 

So I expect the administration to compel lenders to provide real 

aid to families that want to and, with a fair deal, could stay in 

their homes. As part of these announcements, FHA’s refinance program is also set to be expanded. This is an important tool that will 

assist homeowners to get into a truly affordable mortgage through 

incentives and write-downs of both first and second liens. While 

these loans will be subject to FHA underwriting standards, there 

is still an increased risk associated with those loans. In order to 

mitigate the effects of these riskier loans on the health of FHA’s 

insurance fund, the administration has set aside $14 billion in 

TARP funds. 

However, many of the details surrounding this proposal are still 

being worked out, and I am concerned this could result in additional losses to the MMI Fund, losses the fund simply cannot ab-
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sorb. So I will have questions today about the design of this program and how we can be assured this program will not cost American taxpayers anything more than what was already set aside 

from the TARP funds. 

Amidst all these efforts to modify mortgages so families can stay 

in their homes, there are a growing number of homeowners deciding to strategically default. Many of these homeowners can afford 

their mortgage payments, but because of the severe negative equity, they feel it is in their financial interests to simply walk away. 

The potential impact of this on home values and market stability 

would be devastating. 

There is also the very real concern about what is called the 

‘‘shadow inventory.’’ These are houses that are facing foreclosure or 

have already been repossessed by the bank but are not yet on the 

market. Hopefully the impact of these will be lessened by an increase in permanent modifications, but if a large number of homes 

were to suddenly flood the market, all of our gains in home values 

could be erased. 

These issues demonstrate how fragile the housing market remains, but we are beginning to test its stability. The Federal Reserve ended its purchase of mortgage-backed securities at the end 

of March and the homebuyer tax credit ended last month. Even as 

we watch with some anxiety as these supports are withdrawn, it 

is clear the Government cannot continue to play the outsized role 

in the housing market it has taken on over the past 2 years. The 

long-term health of the housing market and the economy depend 

on the return of the private market. 

It is also clear we must address the future role of Fannie Mae 

and Freddie Mac in the housing market. There is no doubt that the 

GSEs had a hand in exasperating the housing crisis, and just as 

there needs to be consequences for Wall Street, there must also be 

consequences for the GSEs. The spigot of taxpayer dollars flowing 

into the GSEs cannot stay on indefinitely. As the administration 

debates the future of the GSEs, I like most Americans are growing 

impatient and my impatience only increases as the cost to the 

American taxpayers grows with no end in site. 

The administration must put forward a real plan on how to reform the GSEs. GSEs currently provide important support to the 

housing market, and so this plan has to be thoughtfully done with 

care not to reverse the hard-won progress made to date. The plan 

must include a clear understanding of how any changes will impact 

the housing market and Americans’ ability to buy a home for their 

families, but it is simply not enough to say it is complicated and 

we have a plan soon. It is not easy. It deserves an honest and open 

dialogue about its future, but there needs to be a sense of urgency 

that has been lacking so far. 

As we try and tackle the complex set of challenges facing the 

housing market today, the Federal Government must play a role in 

supporting the market but it must also protect the taxpayers. 

Commissioner Stevens, this has been your task since taking on 

the FHA, and I want to commend your commitment to addressing 

the challenges at FHA while working to ease the recovery of the 

housing market. I look forward to hearing your testimony today. 
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And with that, I turn it over to my partner and ranking member, 

Senator Bond, for his opening statement. 

OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Good morning, Madam Chair. 

And thank you very much, Commissioner Stevens, for being with 

us today. 

The chair has outlined the very significant problems that we 

have in the whole area of housing, not just in FHA, but I found 

her comments on the GSEs very similar to my concerns. We are in 

a real problem, and your efforts with FHA and your guidance on 

other things may be of help to us in trying to find a way out. 

We are pleased to have on the front row Ken Donohue, the HUD 

inspector general. Over the years, he in particular has been a true 

partner working with me and others to eradicate fraud and abuse 

in the mortgage market. And that is not to diminish all the hard 

work both he and his staff perform in their oversight capacity in 

the Office of the HUD inspector general. This may be our last time 

to have a little gathering like this, Mr. Donohue, but you have my 

sincere thanks for being the uninvited guest at the garden party 

at so many of these hearings where you have had to tell the truth, 

and I am just lucky that you—we are both lucky that you did not 

get tarred and feathered for having warned us in advance of the 

problems we are facing. Now that we are seeing those problems, we 

can call you a guru, I guess, for having warned of many of the 

problems. 

Well, with that beginning, Mr. Commissioner, as you know, 

FHA’s history is marked by longstanding challenges in balancing 

the financial risk to FHA which we are seeing is significant and 

also very important is the goal of expanding home ownership, especially for low-income and first-time home buyers. This is the promise of FHA. 

Unfortunately, much of the financial risk in the housing market, 

which is a risk to all of us as taxpayers, is uncertain. It is especially problematic since FHA still faces many challenges and is still 

evolving to limit FHA’s financial exposure. Additional reforms we 

need to discuss, and I am still concerned the FHA is a powder keg 

that could explode, leaving the taxpayers on the hook for another 

bailout. To borrow the term from the gulf and the recovery efforts 

there, I think you are trying to put a cap on the well. We just hope 

it is more successful than the ones they have tried in the Gulf of 

Mexico. 

As recently as 2007—okay, I stretched it a little bit. Okay, all 

right. I know when I get that look from the chair she is saying 

where is he going with this one. That is off the record. You can 

scratch that. 

As recently as 2007, FHA accounted for less than 4 percent of the 

single family housing market, whereas FHA, as we all know, now 

dominates market with a share of about 30 percent of new mortgages and another 20 percent of refinances. While this market 

share may help the Federal oversight of home purchases, there is 

nothing predictable in FHA’s enhanced role in the market for assessing the potential for financial risk to the FHA, the Mutual 
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Mortgage Insurance Fund, the MMIF that has already been referred to, and those of us as taxpayers. 

There is no guarantee the housing market is on the rebound or 

that it will not collapse again, even though prospects are certainly 

more encouraging than they were a year ago. But with continuing 

high unemployment as well as the explosive and escalating Federal 

debt, I think the problems have not gotten much less severe. One 

of the essential questions we must ask is are we digging a grave 

with spending or filling one in. 

As recently as late last year, FHA was unable to meet its statutory requirement of holding capital reserves equal to 2 percent of 

FHA’s insurance in force. I am a born optimist and I could be optimistic that FHA will be able to meet this requirement in the future, but there remains wide disagreement as to the health of 

FHA’s MMIF, with OMB’s budget estimate for FHA receipts in 

2011 at some $5.8 billion, as the chair indicated, which is about $4 

billion more generous than the CBO’s re-estimate. This disparity 

both underlines the unpredictability in the future of the overall 

housing market, as well as uncertainty as the financial risk to 

FHA’s single family mortgage insurance programs. 

The CBO re-estimate also means we will likely have to tighten 

our belts with regard to other programs within the jurisdiction of 

the THUD appropriations subcommittee. Let me assure you that 

others coming in here before us have grand schemes of how much 

money they want to spend, but there is a lot of money in this area 

we have to spend. So we need to get an idea of how much we will 

be called upon to produce. 

Nevertheless, Mr. Commissioner, I believe you are moving FHA 

in the right direction, as I told you earlier, and particularly HUD 

and FHA currently are proposing some significant changes to shore 

up the FHA single family mortgage insurance program by including an increase to annual premiums, as well as implementing a 

credit-related risk assessment. That assessment, as I understand 

it, would allow borrowers with a FICO score of 580 and above to 

make a 3.5 percent downpayment while home buyers with a FICO 

score of between 500 and 580 would be required to make a minimum downpayment of 10 percent. Borrowers with FICO scores 

below 500 would be ineligible for FHA mortgage insurance. 

Some people are better off renting until they have the downpayment, and that is a point we have made before. We need to make 

sure rental housing is available so that people who cannot afford 

to buy a house do not get pushed into buying a house that they 

cannot afford. This has been a mistake that has been endemic in 

policymakers for the last 20 years in Washington. I will not cite the 

list of Members of Congress who pushed for it. I would say that it 

has been bipartisan at the administration level, and for 8 years, I 

fought the Bush administration pushing for the American dream 

no-downpayment home, which I characterized then, with some little guidance from the inspector general, as being a recipe for turning the American dream into the American nightmare. 

But I think that the changes you are implementing, while they 

continue to promote home ownership, should lower the risk of financial exposure to the Federal taxpayer and the Federal Government. I know you have proposed a number of other reforms de-
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signed to protect the integrity of FHA and MMIF, including reforms to the appraisal process and a proposal to increase net worth 

requirements for FHA lenders. 

These are controversial, but I am a firm believer that our financial system will be much stronger if people up and down the line; 

borrowers and securitizers and everybody else, has skin in the 

game. You look at Canada; they require a lot of skin in the game. 

They have a higher percentage of home ownership and much lower 

problems than we do because people there have to have skin in the 

game, which is the name of business. 

Reforms are important but FHA still faces many challenges. I am 

concerned about the programs for default mitigation. We do not 

want to leave homeowners behind unless the financial criteria demand such an approach. If there is no way they can get out, we 

need to resolve it as humanely as possible and move on. 

What role is HUD expecting to play over the next few years with 

regard to the administration’s foreclosure mitigation policies and 

how will HUD reforms impact these policy efforts? 

And while FHA seems to have been the administration’s initial 

choice for implementing the administration and Congress’ foreclosure mitigation strategies—congratulations on getting the ball 

on that one—much of the emphasis now seems to have shifted to 

Treasury and the GSEs, especially Fannie Mae with their GSE 

losses buried in TARP payments. It would be very helpful for us 

to understand Fannie and Freddie’s new role in the mortgage crisis, especially since the GSEs recently reported fourth quarter 

losses, I believe, totaling $18 billion with an overall request of some 

$76 billion from Treasury’s unlimited credit line. That is a number 

that should scare all of us. Last Monday, Fannie reported losses of 

another $8.4 billion. That is beginning to mount up to real money. 

We cannot fool ourselves that these are just losses from an old 

book of business. Instead, Freddie was directed by the administration to buy back troubled loans from investors and obviously is taking losses on these mortgages. In fact, this policy appears to bail 

out lenders on their risky investment but it does little to save a 

home with a risky loan for a homeowner. And I am asking myself 

and others why. Why are we bailing out investors? That to me is 

a major concern. 

As of last month, the opportunities to forestall housing foreclosures were virtually limited to wishful thinking where families 

could receive test funding for foreclosure mitigation but where the 

majority of these families would not qualify for mortgage reform 

and more permanent mortgage reform options. 

Despite the administration’s more optimistic view, without more 

options by the administration, families are destined to fall deeper 

in debt and be unable to meet the needed qualification for the 

mortgage reform permanent option. In other words, it is extremely 

unlikely that more than a scintilla of homeowners with looming 

mortgage foreclosures and high debts will qualify for the more permanent, long-term program. 

That is bad news. The worse news is the longer we wait, the 

worse it will get. I think there are a number of other issues that 

have to be investigated somewhere, and I guess that we are about 

the only ones interested in it. There have been a number of articles 
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that claim the affordable housing program under which Fannie and 

Freddie were required by law to invest in low-income housing 

helped to destabilize the GSEs. More troubling were Congressman 

Frank’s efforts to tax Fannie’s and Freddie’s profits at more than 

$1 billion annually to benefit favored nonprofits and I would mention the infamous ACORN. These legislative requirements I think 

reinforce losses and undermine the financial credibility of the GSEs 

in the financial markets. 

Most important, we need to know the administration’s overall 

plan for revitalizing the housing industry and what will be the 

overall menu of tools for addressing the mortgage default crisis 

under FHA, the GSEs, Treasury, as well as other entities. 

Finally, not everyone will be eligible for foreclosure mitigation relief, especially those without permanent employment or other income. Nevertheless, as we move forward, it is important that we 

all understand the contours of the various foreclosure mitigation 

programs and the potential exposure for additional financial losses 

in the housing marketplace both to the Federal Government as 

well as to other entities, families, and individuals. 

I am very interested in how many homeowners we are likely to 

help and how many are likely to lose their homes. The answer is 

likely to be very troubling, as evidenced by a very negative report 

in March by the National Association of Homebuilders in its index 

which tracks home purchases. 

FHA STAFFING SHORTFALLS

In addition, I am anxious to hear how FHA is addressing its 

staffing and expertise shortfalls as well as its plans to update fully 

the FHA IT systems. While there have been a number of comprehensive briefings with congressional staffs on these issues with 

FHA recently submitting a comprehensive staffing plan to Congress on its progress toward hiring an additional 118 FTEs for 

FHA-related activities, much remains to be done. The sooner we 

understand fully HUD’s capacity and funding needs in these areas, 

the better we will able to respond through appropriations to the 

needs of HUD and FHA. 

Finally, congratulations on your efforts on the mortgage and the 

mortgage insurance fraud. We cannot understate the fact that enforcement against mortgage fraud remains an area of overall weakness throughout the Nation, the mortgage market and likely FHA. 

I understand, however, FHA is making substantial progress with 

reforms in its mortgage programs, especially by eliminating the 

participation of bad lenders in the FHA program that should not 

be there. 

In the predecessor to this subcommittee, the VA, HUD subcommittee, Senator Mikulski and I learned that these reforms are 

likely to be the tip of the iceberg, and now I would urge HUD and 

the HUD inspector general to continue to work with the Department of Justice and Treasury, along with other agencies, to develop 

a set of coordinated plans to put predatory lenders who are criminally at fault in prison. Seeing some of these people in orange 

jumpsuits may be one of the best remedial actions we can take. 

Now not only does FHA require larger net worth requirements 

for all of its FHA lenders, it is also reviewing lender enforcement 
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activities. In particular, as your written testimony indicates, since 

July 2009, FHA has referred some 365 cases of mortgage fraud or 

negligence to the Mortgagee Review Board. These investigations 

have resulted in the withdrawal of approval to underwrite FHA 

loans for some 354 lenders and the suspension of underwriting authority for another 6 lenders. It would be helpful to know what additional legislative authorities may be needed by HUD and the 

HUD inspector general to stop mortgage fraud and abuse around 

the Nation, including the laws that require jail sentences when 

some form of mortgage fraud is the subject of criminal action. 

With that pessimistic statement, I look forward with optimism 

and enthusiasm to hearing your testimony, Commissioner Stevens. 

Senator MURRAY. Thank you very much, Senator Bond. 

Mr. Stevens, we will turn to you for your opening statement. 

STATEMENT OF HON. DAVID H. STEVENS

Mr. STEVENS. Thank you, Chairwoman Murray and Ranking 

Member Bond. And thanks for the opportunity to be here to testify 

about the Federal Housing Administration’s recent reforms, legislative proposals, contributions to the 2011 budget, and any other subjects that may be of interest. 

I also do want to recognize, as you did, Senator, the involvement 

of the inspector general. He has been a very valuable advisor to me 

coming into this role with all the challenges we face, and we have 

had some great opportunities to partner. I share the zeal for enforcement on fraud and other issues, not just in the single family 

area, but the inspector general has been helpful in advice on multifamily issues and health care issues as well. So it is a critical partnership that I value very highly. 

I appear before you at a moment when it is clear that the housing market has made significant progress toward stability. With 

the past year’s record-low mortgage rates, thanks in large part to 

the administration’s initiatives, more than 4 million homeowners 

have refinanced their mortgages to more affordable levels. This 

helped save homeowners more than $7 billion last year. More than 

1 million families are saving an average of $500 per month through 

the administration’s mortgage modification program, otherwise 

known as HAMP. Home equity has increased on average by more 

than $13,000 for homeowners in the last three quarters of 2009, 

and these efforts have begun to restore the confidence we need to 

get the economy moving, creating 290,000 jobs last month, the largest monthly increase in 4 years. 

FHA

There is also encouraging news relating to foreclosures. Just this 

morning, RealityTrac released its latest monthly U.S. foreclosure 

report which shows foreclosure activity actually decreased 9 percent in the month of April. And FHA’s second fiscal quarter numbers show our early delinquencies are better than expected. The 

number of loans in early default and claims has declined 15 percent since December, a strong indicator that the loan quality is improving. 

The FHA has been essential to the improved outlook in the housing market. In the past 18 months, FHA protected 650,000 families 
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from foreclosure, enabled more than 1.1 million homeowners to refinance into stable, affordable, fixed-rate mortgages, and insured 

1.4 million new purchase loans, more than 80 percent of which 

were first-time home buyers. Indeed, as access to private capital 

has contracted in these difficult times, borrowers and lenders 

flocked to FHA, and the increased presence of FHA has help support liquidity in the purchase market, helping us ride through 

these difficult times until private capital returns. 

During that time, Fannie and Freddie under conservatorship 

have also played an important role in stabilizing the market. The 

administration strongly supports the need for reform of the Government-sponsored enterprises and looks forward to working with 

Congress to enact meaningful reform in a manner that does not 

disrupt the Federal housing markets, nor increase the cost and reduce the availability of mortgages for American households. Toward this goal, we strongly support efforts to require thoughtful 

and thorough review, public commentary, and final study of reform 

options going forward. 

While progress is clearly being made on many fronts, we continue to see challenges. The administration’s strategies to address 

the housing crisis has evolved because our challenges have evolved. 

On March 26, we announced the FHA refinance option in conjunction with provisions to the HAMP modification program to tackle 

the challenge of underwater borrowers, one of the biggest threats 

to our continued recovery. The FHA refinance option will provide 

more opportunities for lenders to restructure loans for families who 

owe more than their home is worth due to price declines in their 

communities. These adjustments support principal reduction efforts 

already underway in the private market and offer incentives to expand their reach. The vast majority of the burden of writing down 

these loans will fall where it belongs, on lenders and investors, not 

the taxpayer. It is because FHA is in a stronger position today that 

we are able to facilitate these efforts to help more struggling homeowners. 

With FHA’s increased role, however, there is risk and responsibility. In addition to several policy changes that I have made since 

taking office on January—or we have made since January 20 of the 

year, we proposed several reforms to mitigate risk and replenish 

FHA’s capital reserves. Some of these steps require legislative authority. 

Thank you for the opportunity to explain these proposals in more 

detail in conjunction with the contributions to HUD’s budget for 

the fiscal year 2011. 

These policy changes have three guiding principles that we are 

balancing in all of them. First is how does it improve the capital 

reserves of FHA. Second, how does it impact the broader housing 

market and the recovery? And third, how does it impact FHA’s role 

to provide opportunities for the underserved? 

So first, we are asking Congress for authority to restructure 

FHA’s mortgage insurance premiums. We would like to reduce the 

up-front premium to 100 basis points and increase the annual premium to 85 or 90 basis points, depending on the LTV. To more substantially increase FHA’s reserves and facilitate the return of private capital to the mortgage market, these changes are needed. 
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We greatly appreciate the cooperation of Congress in support of 

these reforms, and on April 27, the House Financial Services Committee passed H.R. 5072, the FHA Reform Act, on a voice vote. The 

bipartisan authorizing bill would enable FHA to enact these proposed changes, which will further strengthen FHA’s reserves and 

overall stability. And we look forward to working with this subcommittee and the Senate Banking Committee to enact similar legislation in the Senate as quickly as possible. If these changes are 

adopted during this current fiscal year, they would increase the 

value of the MMI Fund by approximately $300 million per month, 

which would replenish FHA’s capital reserve even faster than if the 

authority was provided through the annual appropriations process. 

Second, FHA is producing a two-step FICO floor for FHA purchases. Purchase borrowers with FICO scores of 580 and above 

would be required to make the minimum 3.5 percent downpayment. Those with FICO scores between 500 and 579 would be required to make a 10 percent downpayment. Anything below 500 

would not be allowed. 

Some have suggested that FHA raise the minimum requirement 

to 5 percent across-the-board as a way to improve loan performance. As you can see, we have gone further to 10 percent for low 

FICO scores to ensure that we are only insuring responsible loans. 

We determined, after extensive evaluation, that an across-theboard 5 percent proposal would be inadequate to control risk for 

some borrowers and excessive to control risk for responsible borrowers, which would adversely impact the housing market recovery. Increasing minimum downpayments to 5 percent across-theboard would translate to 300,000 fewer responsible first-time home 

buyers having access to home ownership and would have significant negative impacts to the broad housing market recovery. It 

would forestall the recovery of the housing market and potentially 

lead to a double dip in home prices by significantly curtailing demand. The policy changes that FHA has instead proposed in the 

2011 budget would contribute an additional $4.1 billion in additional receipts to FHA and continue to support the broader housing 

market recovery. 

The third policy change we are proposing is to reduce maximum 

seller concessions from its current 6 percent to 3 percent, which is 

in line with industry norms. 

Our fourth proposal is to increase lender enforcement. In our 

2009 fiscal year actuarial review, the independent actuary projected more than 71 percent of FHA’s losses over the next 5 years 

will come from loans already on our existing books. That is why we 

have renewed our focus on enforcement and accountability, and 

since 2009, we have taken more action on more than six times the 

number of lenders than FHA had done in the past decade. 

This year, we are requesting an appropriation of $250 million for 

FHA’s reverse mortgage product. The HECM program provides 

seniors with a means to access their home equity to make ends 

meet and provide funds to pay for long-term health care and afford 

necessary home repairs and housing expense. We have conducted 

extensive analysis to identify the maximum policy changes we 

could perform to reduce risk to the taxpayer and maintain viability 

of the program. Without the budget request, we would be forced to 
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reduce the amount of funds that would be available to seniors by 

more than 30 percent, which is an average of $23,000 to $27,000 

in impact. Given the value of the program in assisting this critical 

population, HUD has requested an appropriation to maintain viability of the program for seniors while we are evaluating a broader 

range of program changes that may be necessary to ensure the success of HECM for the long term. 

Finally, as you know, the CBO released its re-estimate of the 

2011 budget, including the review of the FHA changes. Although 

the CBO estimate includes a significantly more conservative assessment of how these new changes made through the FHA’s MMI 

Fund will perform in the coming years, both CBO and the administration forecast that with our proposed FHA changes, such credit 

activity will result in net receipts to the Government. We differ, 

however, on the amount. While the President’s budget forecasts 

$5.8 billion in receipts, CBO re-estimated those net savings at $1.9 

billion. In addition, CBO agreed with our forecast that Ginnie Mae 

and our GI SRI fund will result in roughly $1 billion more in net 

receipts. 

While recognizing such a difference with CBO complicates budget resolution development, it is important to note that the $5.8 billion 

in receipts forecast in the President’s budget will determine any receipts transferred to FHA’s capital reserves. This will help the fund 

get back on track to be capitalized with the statutorily mandated 

2 percent of insurance in force. I would also note that we remain 

confident in our forecast. 

PREPARED STATEMENTS

I have submitted a more detailed testimony for the record, but 

Madam Chairwoman, as you can see, we have proposed a comprehensive set of reforms to improve loan performance, hold lenders accountable, and increase revenues to the FHA fund, while also 

ensuring that FHA continues to support the overall recovery of the 

housing market, continues to serve its mission of providing home 

ownership and financial opportunities for responsible borrowers 

and seniors. We look forward to working with Congress closely on 

all the issues and hope to gain your support for our budget proposal and legislative requests to further reduce the risk to the 

American taxpayer. 

And with that, I am happy to answer questions. 

[The statements follow:] 

PREPARED STATEMENT OF HON. DAVID H. STEVENS

Chairwoman Murray, Ranking Member Bond, and members of the subcommittee, 

thank you for the opportunity to testify today regarding the Federal Housing Administration’s (FHA’s) recent reforms, legislative proposals, and contributions to the 

HUD fiscal year 2011 budget request. FHA remains focused on providing access to 

home ownership, while minimizing the risk to the American taxpayer is of the utmost importance. 

HELPING PREVENT AN ECONOMIC CATASTROPHE

As you know, when this administration took office just over 15 months ago, the 

economy was hemorrhaging over 700,000 jobs each month, housing prices were in 

free fall, residential investment had dropped over 40 percent in just 18 months, and 

credit was frozen nearly solid. Many respected economic observers warned that a 

second Great Depression was a real possibility, sparked of course by a crisis in the 
237 

1Federal Financial Institutions Examination Council (FFIEC) 2008 Home Mortgage Disclosure Act (HMDA) data. Published on December 23, 2009, this is the most recent data available. 

housing market. Meanwhile, communities across the country—from central cities to 

newly built suburbs to small town rural America—struggled to cope with neighborhoods devastated by foreclosure, even as their soaring jobless rates and eroding tax 

base crippled their ability to respond. 

As we move beyond the peak of the recent global financial crisis, though there 

is still a long way to go, it is clear that the Nation’s housing market has made significant progress toward stability. Through the combination of coordinated efforts by 

Treasury, HUD, and the Federal Reserve to stabilize the housing market, we are 

seeing real signs of optimism. 

As measured by the widely referenced FHFA index, home prices have significantly 

stabilized since last April. As recently as January 2009 house prices had been projected to decline by as much as 5 percent in 2009 by leading major macro-economic 

forecasters. This housing stabilization is all the more surprising since most forecasters had underestimated the rise in unemployment that has occurred over the 

past year. 

Homeowner equity started to grow again—increasing by over $1 trillion by the 

end of December, or $13,000 on average for the Nation’s nearly 75 million homeowners, and helping our economy grow at the fastest rate in 6 years in the fourth 

quarter of last year. 

And mortgage rates which have been at or near historic lows for more than a year 

have spurred a refinancing boom that has helped nearly 4 million borrowers in 

2009—freeing up an additional $7 billion annually, some of which will be spent in 

local economies and businesses, generating additional revenues for our Nation’s cities, suburbs, and rural communities. 

FHA—FACILITATING RECOVERY

While there remains uncertainty about whether this progress will continue at this 

pace going forward, what is not in doubt is that the FHA has been central to much 

of this improvement. 

Created by President Franklin Roosevelt at a time when two million construction 

workers were out of work and housing prices had collapsed, the FHA was designed 

to provide affordable home ownership options to underserved American families and 

keep our mortgage markets afloat during tough times. 

And by insuring almost 30 percent of purchases and 20 percent of refinances in 

the housing market, FHA is certainly doing so today. 

We know the critical role first-time home buyers are playing in the market, including purchasing REO and vacant properties, helping stabilize home prices and 

communities alike. More than three-quarters of FHA’s purchase-loan borrowers in 

2009 were first-time home buyers, and nearly one-half of all first-time buyers in the 

housing market in the second half of last year used FHA loans. 

FHA provides mortgage insurance to help lenders reduce their exposure to risk 

of default. This assistance allows lenders to make capital available to many borrowers who would otherwise have no access to the safe, affordable financing needed 

to purchase a home. 

As access to private capital has contracted in these difficult economic times, borrowers and lenders have flocked to FHA and the ready access it provides to the secondary market through securitization by Ginnie Mae. The increased presence of 

FHA and others in the housing market, including Fannie Mae and Freddie Mac, has 

helped support liquidity in the purchase market, helping us ride through these difficult times until private capital returns to its natural levels. 

And with 51 percent of African Americans home buyers and 45 percent of Hispanic families who purchased homes in 2008 1 using FHA financing, FHA is far and 

away the leader in helping minorities purchase homes. 

FHA has stepped up to fulfill its countercyclical role—to temporarily provide necessary liquidity while also working to bring private capital back to credit markets. 

Indeed, the FHA has in the past year alone helped more than 800,000 homeowners 

refinance into stable, affordable fixed-rate mortgages. 

At the same time FHA has taken steps to reverse falling home prices, it has also 

worked to help families keep their homes, deploying its loss mitigation tools to assist a half million families at risk of foreclosure. 

Not only is FHA ensuring the availability of financing for responsible first time 

home purchasers, it is also helping elderly homeowners borrow money against the 

equity of their homes through the Home Equity Conversion Mortgage (HECM). This 
238 

program has grown steadily in recent years, to a volume of $30.2 billion in fiscal 

year 2009. 

And finally, FHA is playing an important role in protecting homeowners and helping prospective homeowners make informed decisions. It is providing counseling to 

homeowners to help them avoid falling into unsustainable loans. And it is fighting 

mortgage fraud vigorously on all fronts, having taken enforcement actions on more 

than six times as many lenders since fiscal year 2009 than those over the fiscal year 

2000–2008 period combined. 

The central role of housing in the U.S. economy demands that Federal agencies 

involved in housing policymaking rethink and restructure programs and policies to 

support housing as a stable component of the economy, and not as a vehicle for overexuberant and risky investing. 

With that in mind, the President’s budget for 2011 represents a careful, calibrated 

balancing of FHA’s three key responsibilities: (1) providing home ownership opportunities to responsible borrowers, (2) supporting the housing market during difficult 

economic times and (3) ensuring the health of the FHA Mutual Mortgage Insurance 

(MMI) fund. 

With this budget, HUD is projecting that FHA will continue to play a prominent 

role in the mortgage market in fiscal year 2011. Accordingly, it requests a combined 

mortgage insurance commitment limitation of $420 billion in fiscal year 2011 for 

new FHA loan commitments for the Mutual Mortgage Insurance (MMI) and General 

and Special Risk Insurance (GI/SRI) funds. The proposed total includes $400 billion 

under the MMI Fund, which supports insurance of single family forward home 

mortgages and reverse mortgages under HECM; and $20 billion under the GI/SRI 

Fund, which supports multifamily rental and an assortment of special purpose insurance programs for hospitals, nursing homes, and title I lending. The budget requests a direct loan limitation of $50 million for the MMI fund and $20 million for 

the GI/SRI fund to facilitate the sale of HUD-owned properties acquired through insurance claims to or for use by low- and moderate-income families. 

The budget also includes $88 million for the Housing Counseling Assistance program, which is the only dedicated source of Federal funding for the full spectrum 

of housing counseling services. With these funds we also plan to continue our work 

to expand the number of languages in which counseling is available. In addition, 

the budget continues FHA’s Mortgage Fraud initiative ($20 million) launched in fiscal year 2010 as well as implementation of sweeping reforms to the Real Estate Settlement and Procedures Act (RESPA) which began in January 2010 and the Secure 

and Fair Enforcement (SAFE) for Mortgage Licensing Act beginning in June 2010. 

REBUILDING FHA’S CAPITAL RESERVES

As important as FHA is at this moment to our Nation’s economy, FHA has not 

been immune to the hard times for the housing sector. Late last year, we reported 

to Congress that FHA’s secondary reserves had fallen below the required 2 percent 

level—to 0.53 percent of the total insurance-in-force. However, when combined with 

reserves held in the Financing Account, FHA reported with its fiscal year 2009 actuarial review that it holds more than 4.5 percent of total insurance-in-force in reserves—$31 billion set aside specifically to cover losses over the next 30 years. 

As such, the independent actuary concluded that FHA’s reserves will remain positive under all but the most catastrophic economic scenarios. 

Further, while its Capital Reserve Account has decreased too quickly, FHA is not 

‘‘the next subprime’’ as some have suggested. 

Subprime delinquencies are 240 percent higher than FHA’s for a reason— 

subprime loans had much weaker underwriting standards than FHA. While others 

participated in investor-owned markets or were exposed to exotic mortgages such as 

option-ARMs and interest-only loans, and while some tolerated lax underwriting 

standards, FHA stuck to the basics during the housing boom: 30-year, fixed rate traditional loan products with standard underwriting requirements. Unlike subprime 

lenders, FHA requires that borrowers demonstrate they can pay their mortgage by 

verifying their income and employment. 

All of that said, Madam Chairwoman, we’ve learned from recent history that the 

market is fragile, and we have to plan for the unexpected. That uncertainty is complicated by an organization we inherited that, to be honest, was simply not properly 

managing or monitoring its risk. 

Credit and risk controls were antiquated. Enforcement was weak. And our personnel resources and IT systems were inadequate. 

Little of this may have been obvious when FHA’s market share was 3 percent as 

recently as 2006. But when our mortgage markets collapsed, and home buyers in-
239 

2See Appendix for Historical Data on Mortgagee Review Board Actions. 

creasingly turned to the FHA for help, the potential consequences of these lapses 

in risk management became very clear. 

REFORMS TO DATE

From my first day as FHA Commissioner, I began a thorough review of our loan 

practices and organizational capacity and gaps. We have already taken several steps 

within our existing authority to shore up the FHA and continue to improve our operations to ensure that taxpayers are not put at risk. 

In addition to steeply increasing lender enforcement, we’ve strengthened credit 

and risk controls—toughening requirements on our Streamlined Refinance program, 

made several improvements to the appraisal process, and published a final rule in 

the Federal Register on April 20 to increase net worth requirements for all FHA 

lenders. 

Long overdue, FHA hired its first Chief Risk Officer, Robert Ryan, to provide the 

most comprehensive and thorough risk assessment in the organization’s history— 

and ensure that the assumptions going into our modeling reflect the most current 

economic conditions. 

In addition, with Congress’ help, we are working to increase staffing and technical 

capacity and upgrade our technology systems—and though we still have a long way 

to go, we delivered FHA’s first comprehensive technology transformation plan to 

Congress in September. We have continued to make progress on both fronts. We recently issued and received several responses to a Request for Information to begin 

upgrading our risk and fraud tools and we delivered a FHA Staffing Report to Congress, which outlines our significant progress toward hiring the 118 FTEs that we 

thank Congress for appropriating to FHA in fiscal year 2010, along with details on 

an aggressive training and human capital development plan that includes managerial and technical skill building training as well as on-the-job mentoring. 

Lender Enforcement 

Under the Obama administration, FHA has significantly increased its lender enforcement activities to protect the MMI Fund, consumers, and address a number of 

bad actors that were previously not held accountable. 

Since July 1, 2009, the Mortgagee Review Board (MRB) has investigated 365 

cases, resulting in withdrawal of approval for 354 lenders and suspension of an additional 6 lenders. The number of cases that have been investigated by the MRB 

since July 2009 are greater than those investigated in the years 2002–2008 combined.2 We take our responsibility to oversee lenders with the utmost seriousness. 

I would also like to emphasize that FHA’s intent is to protect the Fund through a 

commitment to lender enforcement, but FHA in no way intends to punish responsible lenders. We are working closely with lenders to identify best practices and 

share them among the lending community, proactively identify problem situations 

and identify means to improve performance, to the benefit of lenders, consumers, 

and the FHA. 

JANUARY POLICY ANNOUNCEMENTS AND LEGISLATIVE REQUESTS

On January 20 of this year, I proposed taking the following steps to mitigate risk 

and augment the MMI Fund’s capital reserves: increase the mortgage insurance premium (MIP); impose a firm floor on allowable credit scores, and further tighten the 

minimum credit score required for borrowers with low down payments; reduce the 

maximum permissible seller concession to match the industry norm; and implement 

a series of significant measures aimed at increasing lender responsibility and enforcement. Thank you for the opportunity to explain these policies in more detail. 

I would like to be clear that many of these reforms were long overdue as FHA 

did not respond effectively to changes in the marketplace that happened during the 

housing boom and the subsequent decline—inaction was and is not an option. In addition to the Congressional mandate to take action to bring FHA’s capital reserves 

back up above 2 percent, FHA also has a responsibility to protect consumers from 

irresponsible lending practices, protect the taxpayer from excessive claims on the 

MMI fund, and facilitate the return of private capital to the mortgage market. We 

take these responsibilities seriously, as evidenced by the series of policies that we 

have already enacted and those that we request Congressional authority to enact. 

FHA conducted an exhaustive review of loan performance in its portfolio and a 

thorough policy development process to ensure that these policy changes balance 

three guiding principles: (1) improve FHA loan performance and capital reserves, (2) 

continue to support the broader housing market and recovery, and (3) preserve 
240 

3See Appendix for detailed information about the effect of proposed premium rate changes on 

home buyers. 4 ‘‘MGIC Lowers Rates to Compete With U.S.-Backed Mortgage Insurers,’’ Bloomberg, February 23, 2010. 

FHA’s role in providing home ownership opportunities to responsible underserved 

borrowers. Each one of our policy changes fulfills these three priorities. Additionally, 

FHA evaluated several dozen other policy options which ultimately were not chosen 

as they did not strike the appropriate balance. With these factors, in mind, FHA 

has proposed a series of balanced policy proposals that fulfill our responsibility to 

the American taxpayer and recognizes the important role that FHA is currently 

playing in the recovery of the housing market. 

Restructuring FHA Mortgage Insurance Premiums 

First, insurance revenues from single family loan guarantees will grow by increasing the upfront premium to 225 basis points across all FHA forward product types 

(purchase, conventional to FHA refinances, and FHA to FHA refinances). The upfront premium increase was implemented by mortgagee letter issued on January 21, 

2010 and became fully effective in the market for all applications received on or 

after April 5, 2010. I would like to thank Congress for providing FHA with the flexibility to increase the upfront premium to a maximum of 300 basis points through 

passage of the Housing and Economic Recovery Act (HERA) in 2008. While we have 

not chosen to increase the upfront premium to the maximum, this flexibility has enabled FHA to take immediate action to begin rebuilding our capital reserves. Similarly, we request flexibility in our legislative proposal to increase the annual premium to 150 basis points although we have not proposed to increase the annual premium to that level in our fiscal year 2011 budget proposal. 

As noted in the proposed budget, while HUD is moving to increase the upfront 

premium to 225 basis points we are ultimately planning to reduce that premium 

to 100 basis points, offset by a proposed increase in the annual premium to 85 basis 

points for loans with loan-to-value ratios (LTV) up to and including 95 percent and 

to 90 basis points for LTVs above 95 percent. 

This change to the annual premium will require legislative authority. We are extremely grateful that the House Financial Services Committee recently passed H.R. 

5072—the FHA Reform Act of 2010—which provides this authority as well as several other provisions to further strengthen FHA. This legislation is now awaiting 

passage by the full House of Representatives. Given the importance of these issues 

to FHA’s ability to facilitate our housing recovery while protecting the taxpayer, we 

hope that the Senate will similarly move to pass this legislation as expeditiously as 

possible. 

We believe this new premium structure is sound policy—more in line with GSE 

and private mortgage insurers’ pricing, and is intended to facilitate the return of 

private capital to the mortgage market.3 Indeed, if these changes are adopted during the current fiscal year, the estimated value to the MMI fund would be approximately $300 million per month, which would replenish FHA’s capital reserves even 

faster than if this authority was provided through the annual appropriations process. This restructuring of FHA’s mortgage insurance premiums will accomplish two 

very important goals: (1) increase the homeowner’s equity in each mortgage transaction and reduce the risk to the FHA fund; and (2) facilitate the return of private 

capital to the mortgage market. 

Increasing Equity in FHA Loans 

As stated earlier, if granted legislative authority to increase the annual mortgage 

insurance premium, FHA proposes to reduce the upfront mortgage insurance premium from 225 basis points to 100 basis points. Borrowers typically finance the upfront mortgage insurance premium in their loan balance, increasing the effective 

loan-to-value and reducing the amount of equity in their home. The reduction of the 

upfront premium will lower the loan balance as well as add an additional 125 basis 

points of equity to each loan purchase. 

Facilitating the Return of Private Capital to the Mortgage Market 

As noted, the elevated role FHA is currently playing in the market is temporary. 

In addition to being more equitable for borrowers and generating more receipts for 

FHA, this change to the FHA premium structure brings FHA’s pricing more in-line 

with the private mortgage insurance industry and enables more robust private competition. In fact, in response to FHA’s announced policy changes, MGIC, the largest 

U.S. private mortgage insurer, announced on February 23 that it would be adopting 

a new pricing scale.4
241 

Updating Credit Score/Downpayment Guidelines 

FHA is also proposing a ‘‘two-step’’ FICO floor for FHA purchase borrowers, which 

would reduce both the claim rate on new insurance as well as the loss rate experienced on those claims. Purchase borrowers with FICO scores of 580 and above 

would be required to make a minimum 3.5 percent down payment; and those with 

FICO scores between 500–579 would be required to make a minimum down payment of 10 percent. Applicants below 500 would be ineligible for insurance. FHA 

plans to publish the two-step FICO proposal in the Federal Register soon, with implementation planned later this fiscal year. 

Careful analysis of the existing FHA loan portfolio shows a clear performance difference between loans that were made below the proposed FICO/LTV guidelines. 

Loans below the guidelines are currently more than four times as likely to be seriously delinquent than loans above the guidelines. Loans below the guidelines demonstrate a seriously delinquent rate of 31.1 percent, while loans above the guidelines 

currently demonstrate a seriously delinquent rate of 7.6 percent. Of the total FHA 

loan portfolio, approximately 6 percent of loans fall under the proposed guidelines; 

however, due to improved quality of recent FHA loans, only 1.5 percent of loans endorsed in fiscal year 2009 would be excluded under the proposed guidelines. 
242 

LOAN PERFORMANCE BASED ON PROPOSED UPDATED CREDIT SCORE/DOWNPAYMENT GUIDELINES 

[In percent] 

Proposed Two Step Rule Outstanding Loans 30-Day 60-Day 90-Day In Foreclosure In Bankruptcy Seriously Delinquent (90-Day∂) 

Excluded ............................................................................................................................... 6.2 12.1 6.7 19.9 8.1 3.0 31.1 Still Qualify .......................................................................................................................... 93.8 5.0 2.1 4.9 2.0 0.7 7.6 

Total ........................................................................................................................ 100.0 5.5 2.4 5.9 2.4 0.8 9.1 

Source: U.S. Department of HUD/FHA; February 2010. 
243 

If implemented, in combination with the proposed mortgage insurance premium 

structure, the updated FICO/LTV guidelines are projected to result in the $4.1 billion in additional offsetting FHA receipts as reflected in the President’s budget. 

Minimum Downpayment for FHA Loans 

Some have suggested that FHA raise the minimum required downpayment to 5 

percent across the board and also remove the option of financing the upfront insurance premium into the loan balance for all transactions as a means to increase 

homeowner equity. We share the goal of increasing equity in home purchase transactions, but determined after extensive evaluation that such a proposal would adversely impact the housing market recovery. 

To determine the impact of requiring a minimum 5 percent downpayment for all 

transactions, FHA evaluated the loan files of a large sample of past endorsements 

to identify the number of borrowers who had sufficient assets at time of loan application to contribute the additional 1.5 percent of equity at closing. As illustrated in 

the table below, such a policy change would reduce the volume of loans endorsed 

by FHA by more than 40 percent, while only contributing $500 million in additional 

budget receipts. This translates to more than 300,000 fewer first-time home buyers 

and would have significant negative impacts on the broader housing market—potentially forestalling the recovery of the housing market and potentially leading to a 

double-dip in housing prices by significantly curtailing demand. In contrast, the 

combination of policy changes proposed by FHA in the fiscal year 2011 budget would 

contribute an additional $4.1 billion in additional receipts to FHA while having a 

much more moderate impact on the broader housing market. 

IMPACT OF FISCAL YEAR 2011 POLICY OPTIONS ON FHA RECEIPTS AND LOAN VOLUME 

[In billions of dollars] 

Policy Option FHA Receipts FHA Loan 

Endorsements 

Baseline without policy changes ............................................................................................ 1.7 246 

Minimum 5 percent downpayment for all transactions ......................................................... 2.2 139 

Fiscal Year 2011 Budget Proposal with all proposed policy changes .................................. 5.8 223 

Source: U.S. Department of HUD/FHA; February 2010. 

Furthermore, downpayment alone is not the only factor that influences loan performance. The combination of downpayment and FICO score is a much better predictor of loan performance than just one of those components alone. For instance, 

loans with a loan-to-value (LTV) above 95 percent and a FICO score above 580 perform better than loans with LTV below 95 percent and a FICO score below 580, 

while loans with a LTV above 95 percent and a FICO score below 580 perform significantly worse than all other groups, as illustrated below. 

FHA SINGLE FAMILY INSURED LOAN CLAIM RATES RELATIVE EXPERIENCE BY LOAN-TO-VALUE AND 

CREDIT SCORE VALUES 1

[Ratios of each Combination’s Claim Rate to that of the Lowest Risk Cell 2] 

Loan-to-Value Ratio Ranges 

Credit Score Ranges 3

500–579 580–619 620–679 680–850 

Up to 90 percent .......................................................... 2.6 2.5 1.9 1.0 

90.1–95 percent ........................................................... 5.9 4.7 3.8 1.7 

Above 95 percent .......................................................... 8.2 5.6 3.5 1.5 

1 Based on experience of the fiscal year 2005–fiscal year 2008 insurance cohorts, as of February 28, 2010. These ratios represent averages of the cell-level ratios in each cohort. 2 Claim rates in the first row and last column are the low-risk cell and are represented by a ratio value of 1.00. Values in all other cells of this table are ratios of the cell-level claim rate to the claim rate of the low-risk group. 3 Loan-level scores represent the decision FICO scores used for loan underwriting. This analysis includes all fully-underwritten loans, purchase and refinance, but excludes streamline refinance loans. 

Source: U.S. Department of HUD/FHA; March 2010. 

It is for these reasons, rooted in a thorough review of actual FHA loan performance data, that FHA has decided to reduce the upfront mortgage insurance premium, which is financed into the loan balance in the vast majority of transactions, 

and increase the annual mortgage insurance premium, which is paid over time and 

not financed into the loan balance, which is more aligned with the premium structure of private mortgage insurance companies. 
244 

In particular, we have proposed to permit loans to borrowers with FICO scores 

above 580 with a minimum 3.5 percent downpayment and loans to borrowers with 

FICO scores between 500 to 579 with a minimum 10 percent downpayment. It is 

also worth noting that these downpayment guidelines are minimums and many borrowers do in fact have significantly lower LTVs—in the fourth quarter of fiscal year 

2009, more than 21 percent of endorsed loans had a LTV lower than 90 percent. 

Reducing Seller Concessions 

We are also proposing a third policy measure to reduce the maximum permissible 

seller concession from its current 6 percent level to 3 percent, which is in line with 

industry norms. The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. As seen in the table below, FHA’s experience shows 

that loans with high levels of seller concessions are significantly more likely to go 

to claim. Experience to-date on loans insured from fiscal year 2003 to fiscal year 

2008 suggests that claim rates on high-concession loans are 50 percent higher or 

more than those on low-concession loans. 

FHA SINGLE-FAMILY INSURANCE TO-DATE CLAIM RATE COMPARISON LOW (0–3 PERCENT) VS. 

HIGH (3.1–6 PERCENT) SELLER CONCESSIONS 1

[As of December 31, 2009] 

Endorsement Fiscal Year Low Concessions 

(percent) 

High Concessions 

(percent) Ratio High/low 

2003 ........................................................................................................... 6.5 10.7 1.65 

2004 ........................................................................................................... 6.6 11.6 1.76 

2005 ........................................................................................................... 7.2 11.2 1.54 

2006 ........................................................................................................... 6.5 9.5 1.46 

2007 ........................................................................................................... 4.6 6.3 1.36 

2008 ........................................................................................................... 1.0 1.5 1.60 

1 As a percentage of the home price. This analysis is only for home purchase loans. 

Source: US Department of Housing and Urban Development, Federal Housing Administration; January 2010. 

Increasing Lender Enforcement 

In its fiscal year 2009 Actuarial Review, the independent actuary projected that 

more than 71 percent of FHA’s losses over the next 5 years will come from loans 

already on our existing books, rather than from newly insured loans. That’s why an 

important step we can take to minimize losses to capital reserves in the near term 

is to step up enforcement and make lenders more accountable. As mentioned earlier, 

we have renewed our focus on enforcement and lender accountability. 

Additionally, HUD is seeking Congressional authority to extend FHA’s ability to 

hold all lenders to the same standard and permit FHA to recoup losses through required indemnification for loans that were improperly originated and the error may 

have impacted the original loan decision, or in which fraud or misrepresentation 

were involved. FHA currently has this authority for loans originated through the 

Lender Insured (LI) process, which accounts for 70 percent of FHA loan volume, but 

only 29 percent of FHA-approved lenders. FHA is asking that Congress grant explicit authority to require indemnification for loans that were improperly originated 

for the remaining 71 percent of FHA-approved lenders. FHA is simply requesting 

that Congress permit FHA to hold all lenders to the same standard; FHA is not asking for expansion of authorities beyond those already granted to FHA to oversee 

lenders participating in the LI program. 

As you can see, we have proposed a comprehensive set of reforms to improve loan 

performance, hold lenders accountable, and increase revenues to the FHA fund, 

while also ensuring that FHA continues to support the overall recovery of the housing market and continue to serve its mission of providing home ownership opportunities for responsible borrowers. We look forward to working with Congress closely 

on all these issues and hope to gain your support for our legislative requests to further reduce risks to the American taxpayer. 

CBO SCORING

On March 5, the Congressional Budget Office released its re-estimate of the President’s 2011 budget. Although the CBO re-estimate includes a significantly more conservative assessment of how new loans made through FHA’s MMI Fund will perform in coming years, both CBO and the administration forecast that such credit 

activity will result in net receipts to the Government. We differ, however, on the 

amount. While the President’s budget forecast $5.8 billion in net receipts resulting 
245 

5 ‘‘Reverse Mortgages: Niche Product or Mainstream Solution? Report on the 2006 AARP National Survey of Reverse Mortgage Shoppers,’’ AARP Public Policy Institute Paper #2007–22. 

and ‘‘Use Your Home to Stay at Home,’’ National Coalition on the Aging, 2005. http:// 

www.ncoa.org/news-ncoa-publications/publications/reversemortgagereportpublications.pdf. 

primarily from insurance premia and other fees assessed on FHA loans, CBO reestimated those receipts at $1.9 billion. Accordingly, CBO’s scoring suggests our 

policies will cost $3.9 billion more than we estimated in our submission to you. 

While recognizing that such a difference with CBO complicates budget resolution development, we remain confident that the $5.8 billion in receipts forecast in the 

President’s budget will be realized and transferred to FHA’s Capital Reserve Account. This will help that fund get back on track to be capitalized with the statutorily mandated 2 percent of insurance in force. 

HOME EQUITY CONVERSION MORTGAGE (HECM)

This year, we are requesting an appropriation of $250 million to support FHA’s 

reverse mortgage product—the Home Equity Conversion Mortgage, or HECM, program. The HECM program provides seniors with a means to access their home equity to make ends meet. A survey conducted by AARP in 2006 showed that the product provided seniors with much-needed financial relief and was primarily used to 

pay for long term healthcare, enable home repairs, and provide piece of mind that 

housing expenses could be met.5 Another study, conducted by the National Council 

on Aging in 2005 showed how the program can help seniors access in-home 

healthcare services, an arrangement that allows households to ‘‘age in place’’ rather 

than undergoing disruptive transitions into nursing homes or other types of public 

facilities to receive health-related assistance. Keeping seniors in their homes and 

communities, close to familiar support networks, puts less pressure on our Nation’s 

overextended nursing home infrastructure and the public resources that support it. 

We have performed considerable analysis to perform the maximum policy changes 

that we could perform to reduce risk to the taxpayer and maintain the viability of 

the program, which is why we have proposed for fiscal year 2011 an increase in the 

annual mortgage insurance premium from 0.50 percent to 1.25 percent and a further reduction in the principal limit factors (PLFs) of approximately 1 to 5 percent 

depending on the age of the borrower, on top of the 10 percent reduction in PLFs 

that was implemented at the beginning of fiscal year 2010. 

Without the budget request, we would be forced to reduce the PLFs by an additional 21 percent in fiscal year 2011. This would significantly reduce the amount 

of funds that would be available to seniors (more than 30 percent), which is on average a $23,000 to $27,000 impact. 

Any additional steep cut to the PLFs will result in serious decline in program 

level as HECMs would no longer be viable to many seniors who need to access their 

home equity while staying in their homes. It is important to note that the need for 

this type of program is greater now than it’s ever been, due to increasing medical 

costs, declining employment/incomes, and less ‘‘savings’’ in various types of pension 

funds/retirement accounts. 

Forecasts suggest that future house prices will grow more slowly than in the past, 

and the HECM program costs are very sensitive to future house prices. As such, 

we have also assembled a working group with the Department to see what other 

kinds of broader program changes could be made going forward to make the program more viable even under stressful economic times. 

Given the value of this program in assisting this critical population, HUD has requested an appropriation to maintain the viability of this option for seniors while 

we evaluate the range of broader program changes that may be necessary to ensure 

the success of the HECM program into the future. 

HUD’S CENTRAL ROLE IN PREVENTING FORECLOSURES AND STABILIZING

NEIGHBORHOODS

On March 26, as part of the administration’s continued efforts to assist homeowners to avoid foreclosure, HUD announced adjustments to the FHA program, referred to as the FHA refinance option, that will allow lenders to provide additional 

refinancing options to those borrowers who owe more on their home than it is worth 

if combined with a principal write down by their lender or mortgage investor. These 

adjustments will provide more opportunities for qualifying mortgage loans to be responsibly restructured and refinanced into FHA loans as long as the borrower is 

current on the mortgage and the lender reduces the amount owed on the original 

loan by at least 10 percent. We have also expanded the FHA loan modification program, known as FHA HAMP, to provide incentives for servicers to modify loans in-
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6See appendix for description of FHA’s loss mitigation programs. 

sured by the FHA. With the issuance of new rules on March 26 (Supplemental Directive 10–03), TARP-funded incentives will be available to borrowers and servicers 

whose loans are modified under the FHA–HAMP guidelines, corresponding to the 

pay-for-success HAMP incentive structure. In addition to efforts to improve the execution of the administration’s Making Home Affordable program, HUD is utilizing 

long-existing mechanisms as well as additional authority provided in recently enacted legislation to aid distressed homeowners and to address community blight resulting from foreclosed and abandoned properties. 

FHA Refinance Option.—To address the challenge of underwater homeowners, we 

have made adjustments to Federal Housing Administration (FHA) programs that 

will permit lenders to provide additional refinancing options to homeowners who 

owe more than their home is worth because of large falls in home prices in their 

local markets. These adjustments will provide more opportunities for qualifying 

mortgage loans to be responsibly restructured and refinanced into FHA loans as 

long as the borrower is current on the mortgage and the lender reduces the amount 

owed on the original loan by at least 10 percent. This option will be made available 

in the market in early fall. 

The new FHA loan must have a balance less than the current value of the home, 

and total mortgage debt for the borrower after the refinancing, including both first 

and any other mortgages, cannot be greater than 115 percent of the current value 

of the home—giving homeowners a path to regain equity in their homes and an affordable monthly payment. By requiring a meaningful principal write-down in conjunction with the newly refinanced loan, borrowers will have a more sustainable 

loan that will be more affordable. Additionally, borrowers will have an opportunity 

to refinance into current interest rates, which remain low. 

The new loan must conform to FHA’s underwriting requirements, so performance 

would likely fall within acceptable risk thresholds for FHA. That being said, there 

is reasonable concern that there may be a performance differential—these loans 

may perform worse than refinanced loans that were not previously underwater. As 

such, loans that conform to all guidelines of the FHA refinance option will be counted separately toward lender performance monitoring through Credit Watch—the 

system by which FHA suspends or terminates lenders for high default rates. Originating these loans will not hinder a servicer’s ability to pursue other lines of business, mitigating a potential barrier to servicers’ and investors’ willingness to offer 

principal writedowns to borrowers. Of the $14 billion of TARP funds allocated to support the FHA refinance option, 

a portion will be made available to provide coverage for a share of potential losses 

on these loans, mitigating detrimental impacts to FHA’s capital reserve from facilitating the private sector to provide principal writedowns to underwater borrowers 

in conjunction with these refinancings. No TARP funds will go to the FHA itself for 

any loans. 

This refinancing will help homeowners by setting monthly payments at affordable 

levels and decreasing the mortgage burden for families owing significantly more 

than their homes are worth. Keeping more responsible families in their homes 

should support the continued recovery of the housing market. 

Established FHA Loss Mitigation Efforts.6—Homeowners of FHA-insured loans 

have long been eligible for a variety of loss mitigation programs to help protect them 

from foreclosure. In 2009, more than 450,000 families were assisted through a variety of methods, including forbearance, partial claim, loan modification, pre-foreclosure sale, and deed-in-lieu of foreclosure. In the first quarter of fiscal year 2010, 

FHA assisted more than 122,000 through these programs. Servicers of FHA-insured 

loans are required to notify delinquent homeowners about the option(s) that are 

available to help them make their monthly payments and to implement loss mitigation efforts before they take the final step of initiating foreclosure proceedings. 

FHA-Home Affordable Modification Program (FHA–HAMP).—When initially introduced to the public, the Making Home Affordable program excluded FHA-insured 

mortgages and stated that FHA would develop its own stand alone program. On 

July 30, HUD announced final rules implementing the FHA’s program—the FHA 

Home-Affordable Modification Program (FHA–HAMP)—which is an important complement to MHA and provides homeowners in default (or at-risk of imminent default) with greater opportunity to reduce their mortgage payments to a sustainable 

level. All servicers were expected to begin offering FHA–HAMP by August 15. This 

new loss mitigation program was authorized under the ‘‘Helping Families Save 

Their Homes Act of 2009,’’ signed into law on May 20, and allows FHA to give qualified FHA-insured borrowers the opportunity to obtain assistance under terms roughly comparable to borrowers in other segments of the market, without increasing 
247 

costs to the taxpayer. This program allows HUD to permanently reduce a family’s 

monthly mortgage payment to an affordable level by offering a partial claim of up 

to 30 percent of the unpaid principal balance. This defers the repayment of the 

mortgage principal reduction through an interest-free subordinate mortgage that is 

not due until the first mortgage is paid off. 

At the initiation of FHA HAMP in August 2009, it was projected to provide assistance to over 45,000 households over the next 3 years. As of January 31, 2010, lenders have sent over 15,000 trial plans and over 10,000 borrowers have made at least 

1 payment on their trial plan. FHA–HAMP loan volume is currently above projections for the 3 year milestone and all but one major lender has borrowers under 

a trial program. 

Pay for success payments were included for borrowers and servicers that utilized 

the conventional HAMP. However, at the time of its announcement, FHA–HAMP 

did not include Pay for Success payments for servicers or mortgagors that made on 

time payments as it required regulatory action to be eligible for FHA-insured mortgages. We have worked diligently to complete this process and FHA issued a mortgagee letter that enables FHA–HAMP borrowers and servicers to be eligible for Pay 

for Success payments. Consequently, it is expected that demand for FHA–HAMP 

will increase. 

Assistance for Borrowers Facing Imminent Default.—On January 22, 2010, FHA 

announced that it was exercising authority granted to it by Congress through the 

Helping Families Save Their Home Act of 2009 to use its loss mitigation tools to 

assist FHA borrowers avoid foreclosure to include those facing ‘‘imminent default’’ 

as defined by the Secretary. Homeowners with FHA-insured mortgage loans who are 

experiencing financial hardship are now eligible for loss mitigation assistance before 

they fall behind on their mortgage payments. Previously, these homeowners were 

not eligible for such assistance until after they had missed payments. Now servicers 

will have additional options for those borrowers who seek help before they go delinquent, which increases the likelihood that the borrower will be able to retain their 

home. 

The borrower must be able to document the cause of the imminent default which 

may include, but is not limited to, one or more of the following types of hardship: 

—A reduction in or loss of income that was supporting the mortgage loan, e.g., 

unemployment, reduced job hours, reduced pay, or a decline in self-employed 

business earnings. A scheduled temporary shutdown of the employer, (such as 

for a scheduled vacation), would not in and by itself be adequate to support an 

imminent default. 

—A change in household financial circumstances, e.g., death in family, serious or 

chronic illness, permanent or short-term disability 

Improving Servicer Outreach and Performance in Preventing Foreclosures.—FHA 

is working closely with lenders and servicers to improve their outreach and performance in assisting borrowers to avoid foreclosure. In February 2010, FHA’s Office of 

Single Family Asset Management and the FHA National Servicing Center began 

conducting lender visits to identify best practices that could be shared with the 

broader servicing community to improve foreclosure mitigation across the industry. 

The visits were conducted with five overall objectives: (1) better understand in specific detail the process variations that exist at each lender for providing a delinquent 

FHA borrower with options to avoid foreclosure; (2) discuss specific borrower trends 

the lenders are experiencing; (3) identify borrower circumstances that prevent them 

from being qualified for various foreclosure prevention options; (4) receive suggestions from the lender that might improve the process for FHA loss mitigation; and, 

(5) understand the differences in default/foreclosure statistics as compared to national averages. Several findings have already been identified and FHA has begun 

to share them with servicers, while continuing to meet with additional lenders to 

identify additional best practices that will enable underperforming servicers to improve their success with preventing foreclosures. It is worth noting that these best 

practices are not limited to the FHA population, and HUD’s efforts in this area will 

benefit all homeowners, not only those with a FHA-insured mortgage, by collaborating with the servicer community to improve their foreclosure prevention activities 

across the entire industry. 

Counseling.—HUD is utilizing its vast network of counselors and other nonprofits 

to provide critical assistance to the record number of homeowners at-risk of foreclosure. It is estimated that more than one-half of all foreclosures occur without 

servicers and borrowers ever engaging in a discussion about potential options to prevent foreclosure. That is why we have directed HUD-approved counselors to educate 

homeowners about their various options, promote the MHA program in local communities, and assist distressed homeowners with navigating the system so they can 

reach servicers and obtain assistance to avoid foreclosure. 
248 

HUD-approved counselors are located across the Nation and provide distressed 

homeowners with a wealth of information. The counselors provide assistance over 

the phone and in person to individuals seeking help with understanding the Making 

Home Affordable program, explain options available to FHA-insured homeowners, 

and often work with borrowers eligible for the administration’s refinance or modification program to compile an intake package for servicers. These services are provided free of charge by nonprofit housing counseling agencies working in partnership with the Federal Government and funded in part by HUD and 

NeighborWorks® America. In addition, HUD, working with Treasury and the Homeownership Preservation Foundation, encourages distressed borrowers to contact the 

Homeowner’s HOPE Hotline at 866–995–HOPE to receive counseling and advice on 

avoiding foreclosures. The 24 hours a day, 7 days a week hotline utilizes many 

HUD-approved counselors who can also help the homeowner reach and resolve 

issues with servicers. 

Neighborhood Stabilization Program (NSP).—HUD recognizes that concentrated 

foreclosures can wreak havoc on once-stable communities and is working to insure 

that the nearly $6 billion appropriated by Congress for NSP plays the intended role 

of helping to stabilize housing markets and combat blight through the purchase and 

redevelopment of foreclosed and abandoned homes and residential properties. NSP 

is starting to generate real results and is emerging as a vital resource in facilitating 

the transformation of foreclosed homes into affordable housing and other useful 

properties. HUD continues to monitor program activities, identify strategies that 

produce real results, and work to make program modifications that will help ensure 

that this funding is deployed quickly, wisely, and effectively. Additionally, FHA and 

HUD’s Office of Community Planning and Development have created a working 

group to assist NSP grantees to better coordinate the use of NSP funds for the purchase of FHA REO properties. 

FACILITATING OUR RECOVERY, BUT PROTECTING THE TAXPAYER

Madam Chairwoman and Ranking Member Bond, shoring up the FHA won’t solve 

all our housing challenges—one reason the administration is working to produce a 

more balanced, comprehensive national housing policy that supports home ownership and rental housing alike, providing people with the options they need to make 

good choices for their families. 

Further, as important as the FHA is at this moment, I want to emphasize that 

the elevated role it is playing is temporary—a bridge to economic recovery helping 

to ensure that mortgage financing remains available until private capital returns. 

That means that while we must remain mindful that qualified, responsible families need the continued ability to purchase a home, the changes and legislative requests that we have announced are crafted to ensure FHA steps back to facilitate 

the return of the private sector as soon as possible. Until the private sector can step 

back up, they need the FHA—and so does our housing market. 

So, Madam Chairwoman, while FHA must remain a key source of safe mortgage 

financing at a critical moment in our country’s history, we recognize the risks that 

we face and the challenges of this temporary role that we play in today’s market. 

And the bottom line is this: the loans FHA insures must be safe and self-sustaining 

for the taxpayer over the long-term. With these reforms the administration is committed to ensuring that they are today—and into the future. Thank you. 
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APPENDIX.—MORTGAGEE REVIEW BOARD HISTORICAL ACTIONS BY FISCAL YEAR 

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 

Total Number of Cases ........................................................................................................................ 61 92 14 63 47 38 21 18 95 593 360 Fact Based Cases ................................................................................................................................ 61 92 14 63 47 38 21 18 30 21 40 Recertification Cases ........................................................................................................................... ............ ............ ............ ............ ............ ............ ............ ............ 65 572 320 Actions Taken: 

Withdrawal of Approval .............................................................................................................. 15 29 2 4 8 10 3 3 27 268 314 Suspension .................................................................................................................................. 1 1 ............ ............ ............ ............ ............ ............ 1 6 1 
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Fact Based Cases.—Are those referrals to the board as a result of a review of the 

lenders origination, underwriting and/or operations; primarily the result of the Single Family Quality Assurance Division’s lender monitoring reviews, but the board 

also receives referrals from the OIG, Multi-Family, etc. 

Recertification Cases.—Are referrals to the MRB from the Office of Lender Activities Lender Recertification branch and are the result of a lender’s failure to follow 

our annual renewal process. The addition of this new category in fiscal year 2008 

was primarily due to the new requirements issued from the decision by HUD’s Administrative Law Judge in fiscal year 2008 that all lenders that do not comply with 

FHA’s annual renewal requirements must go before the Board for administrative action. 

Withdrawal of Approval.—Terminates the FHA-approval of a lender, e.g. lenders 

lose their FHA Approval Status and have no authority to originate and/or underwrite FHA loans. 

Suspension.—Temporarily suspends an FHA-approved lenders ability to originate 

and/or underwrite FHA loans. It does not terminate their FHA Approval, just the 

ability to use it. 

FHA SINGLE FAMILY INSURANCE EFFECT OF PROPOSED PREMIUM RATE CHANGES ON HOME 

BUYERS WHO MAKE THE MINIMUM CASH INVESTMENT 

Home Price and Mortgage Payment 

Components 

With Current MIP 

Values (175/55) 

With Interim 

225/55 MIP Plan 

Difference from 

Current Values 

With Proposed 

100/90 MIP Plan 

Difference from 

Current Values 

House price—Average Value ........... $176,000 $176,000 ........................ $176,000 ........................

Base Loan Amount (96.5 percent 

LTV) ............................................. $169,840 $169,840 ........................ $169,840 ........................

Loan Amount with UFMIP ................ $172,812 $173,661 $849 $171,538 ¥$1,274 

Interest Rate (percent) .................... 5.50 5.50 ........................ 5.50 ........................

FHA upfront MIP rate (percent) ....... 1.75 2.25 ........................ 1.00 ........................

FHA annual MIP rate (percent) ....... 0.55 0.55 ........................ 0.90 ........................

Principal and Interest payment ....... $981 $986 $5 $ 974 ¥$7 

PITI payment 1 .................................. $1,355 $1,360 $5 $1,348 ¥$7 

PITI ∂ FHA Mortgage insurance 

payment (full mortgage payment) ........................................... $1,434 $1,439 $5 $1,475 $42 

1 This assumes that property taxes and hazard insurance payments (TI) amount to 2.55 percent of the property value. This figure is backed 

into from the difference between the average mortgage payment ratio of FHA-insured borrowers and the payment without the TI portion. PITI 

refers to principal, interest, taxes, and insurance. 

Source: U.S. Department of HUD/FHA; February 2010. Average values are for FHA-insured home-purchase borrowers, October–December 2010. 

DESCRIPTION OF HUD’S LOSS MITIGATION PROGRAM TOOLS

Formal Forbearance 

A short term repayment plan to postpone, reduce, or suspend payment due on a 

loan for a limited and specific time period. A formal forbearance is normally entered 

into when a borrower is in imminent default or early delinquency and can be as 

simple as a promise-to-pay. 

Special Forbearance 

A long term repayment plan that may provide for periods of reduced or suspended 

payments when there is reasonable likelihood the borrower can resume normal or 

increased payments. 

Mortgage Modification 

Provides a permanent change in the monthly mortgage payment by capitalizing 

the accumulated arrears and establishing a new mortgage term of up to 30 years. 

Partial Claim 

A promissory note and subordinate mortgage to cover the advance for delinquent 

mortgage payments is issued in the name of the Secretary of HUD. Mortgagee advances funds on behalf of the Mortgagor in the amount of the Partial Claim advance 

to reinstate the delinquent loan. 

FHA–HAMP 

FHA–HAMP allows qualified FHA-insured borrowers to reduce their monthly 

mortgage payment to an affordable level by permanently reducing the payment 

through the use of a partial claim combined with a loan modification. The partial 

claim defers the repayment of a portion of the mortgage principal through an inter-
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est-free subordinate mortgage that is not due until the first mortgage is paid off. 

The remaining balance is then modified through re-amortization and in some cases, 

an interest rate reduction. 

Pre-foreclosure Sale 

Homeowner sells the property at a price less than the outstanding mortgage balance and HUD pays an insurance claim to the mortgagee for the resulting loss. 

Deed-in-lieu of Foreclosure 

Voluntary transfer of property title to the lender or directly to HUD. 

PREPARED STATEMENT OF KENNETH M. DONOHUE

Chairman Murray, Ranking Member Bond, and members of the subcommittee, 

thank you for inviting me to submit written testimony today. I very much appreciate the opportunity to speak on the importance of the role of the Federal Housing 

Administration (FHA) in addressing the housing crisis currently confronting our Nation. It was a year ago, when I last testified before you on this topic and much has 

transpired during the intervening time as well as some aspects, such as the stagnancy of the housing market, unfortunately remaining the same. We have not yet 

weathered the economic storm but hopefully in its aftermath we will see some clearer skies and renewed prosperity. This much is known 1 year later however—the current degree of FHA predominance in the market still is unparalleled. 

BACKGROUND

The mission of the Department of Housing and Urban Development (HUD) is to 

increase home ownership, support community development, and increase access to 

affordable housing free from discrimination. The FHA provides mortgage insurance 

to private lenders that finance single family homes, multifamily projects, healthcare 

facilities, loans for property improvements and manufactured homes. The FHA has 

provided mortgage insurance to over 37 million single family homes and over 51,000 

multifamily projects since its inception over 75 years ago. Most of the industry has 

adhered to the FHA and industry standards in assisting the American home buyer. 

Unfortunately, there are those that seize upon the opportunity for ‘‘greed’’ in exploiting the system. 

As I stated previously, the last number of years have seen enormous and damaging developments in the mortgage market: the dissolution of the subprime and 

Alt-A loan markets; dramatic drops in housing prices in most areas of the country; 

a concomitant rise in default and foreclosures arguably drawing comparisons to levels of distress experienced in the Great Depression; financial insecurity in the mortgage-backed securities markets represented by the Government takeover of Fannie 

Mae and Freddie Mac; the collapse of credit markets; and, as a primary vehicle to 

address these issues, an urgent reliance on the FHA to bolster the mortgage market. 

The FHA was established under the National Housing Act of 1934 to improve 

housing standards and conditions, to provide an adequate home financing system 

by insuring mortgages and rental projects, and to stabilize the mortgage market 

after the devastation of the Depression and massive losses of home ownership during that time. It was created to be the standard setter and the standard bearer for 

the mortgage and housing communities in areas such as underwriting standards 

and ethical behavior. It had, in my estimation, as history will attest, abdicated this 

important role—too often slow on the upside, as we saw during the recent expansion 

of FHA in the marketplace, and slow on the downside. It had a responsibility which 

frankly it sidestepped. 

HISTORICAL PERSPECTIVE

The FHA Commissioner in his testimony a number of weeks ago regarding policy 

and legislative reforms, stated that ‘‘. . . many of these reforms were long overdue 

as FHA did not respond effectively to changes in the marketplace that happened 

during the housing boom and the subsequent decline.’’ In his view ‘‘. . . inaction 

was and is not an option.’’ I applaud these remarks and state for the record that 

in my 8 years as HUD inspector general, this FHA Commissioner has tried to do 

more in the last year than I saw in all the previous years combined. As you know 

from my many years of testimony before this subcommittee and others, I agree with 

his statement that the ‘‘organization they inherited was simply not properly managing or monitoring its risk.’’ Many of his proposals and initiatives are long overdue 

and meritorious. That said, we still have much to do and have much uncertainty 

facing this Department—some within the control of departmental officials and some 
252 

outside their sphere of influence. While it is difficult to predict the future—as an 

old adage goes if you have five economists in the room you’ll have eight different 

forecasts—I am not as optimistic as some are with where we are today or even going 

in the near future but I do agree that the program is attempting to move ahead 

in a good direction. 

In late 2008, a BusinessWeek article generated a buzz with a picture of a wolf 

on the cover representing the pernicious side of the mortgage industry coming at 

the FHA. I was quoted at the time expressing my concern about the groundswell 

of loans that were going to come in to the program and the types of loans that might 

be coming with the onslaught of new lenders. The FHA disputed my statements. 

Also quoted in the article was Michael Ashley, a chief official of a New York mortgage lending firm who had switched its strategy from subprime to FHA-backed 

mortgages. The article reported that in 2008 alone the company, Lend America, 

made $1.5 billion in loans and Ashley is quoted as stating that the ‘‘FHA is a big 

part of the future.’’ I was perturbed reading his blatant bravado regarding how the 

FHA had become his meal ticket because of our open investigation of him and his 

company at the time and our previous prosecution against him years earlier for engaging in similar activity. 

When I highlighted this case to you in previous testimony, I was frustrated with 

the vulnerabilities in the FHA approval system that allowed Mr. Ashley to come 

back into the program and to publicly and brazenly brag about his participation. I 

am pleased to state, however, that we did receive an injunction against Mr. Ashley 

banning him permanently from ever engaging in Federal mortgage programs. A 

local newspaper reported when we took initial action against him that there was 

a Mercedes Benz car in the company parking lot with a license plate ‘‘RefiFHA.’’ 

Hopefully, with the actions that the FHA is trying to put into place today we will 

not see such bombastic industry behavior. I am also pleased that this Commissioner 

has recently taken action against over 300 lenders sending a very distinct message 

to the lending community. I had highlighted in reports that the Department’s Mortgagee Review Board was broken and I applaud his action to reinvigorate the process. I do think that this Commissioner is dealing with the consequences of departmental inactions that took place prior to his tenure and that our perceptions at the 

time have, despite the agency’s attempts then at refutation, come to pass in terms 

of volume, types of participants, and ramifications to the portfolio. 

For example, another recent OIG case underscores large fraud schemes and losses 

to the program. At Taylor Bean and Whitaker (TBW) Mortgage Corporation and Colonial Bank we uncovered various schemes. Federal search warrants were simultaneously executed at both TBW and Colonial Bank. The FHA then suspended TBW 

from participation and the company filed for bankruptcy. Colonial Bank was taken 

over by the FDIC and then sold to BB&T Bank. HUD’s suspension was based on 

TBW failing to submit an audited financial statement, misrepresenting that there 

were no unresolved issues with an independent auditor and its failure to disclose 

it was the subject of two examinations into its business practices. At the point of 

seizure, TBW was servicing Federally insured and guaranteed loans with a remaining principal balance of about $26 billion. 

Lastly, I had said that, through the multitude of our work in auditing and investigating many facets of the FHA programs over the course of many years, we have 

had, and continue to have, concerns regarding FHA’s systems and infrastructure to 

adequately perform its current requirements and services. This was expressed by 

the OIG to the FHA through audits and reports regarding a wide spectrum of areas 

prior to the current influx of loans coming into the program and prior to the consideration of the numerous proposals that expanded its reach. Some of these were longstanding concerns that went back to unresolved issues highlighted in our work products from as far back as the early 1990s. 

THE CURRENT LANDSCAPE

The past 2 years have certainly produced a lot of changes and initiatives. In response to increasing delinquencies and foreclosures brought about by the collapsing 

subprime mortgage market, the FHA Secure program to refinance existing subprime 

mortgages, the Housing and Economic Recovery Act’s (HERA) Hope for Homeowners 

program, the Helping Families Save Their Homes Act, and The Making Home Affordable Program were created to assist homeowners. 

As we turn to today’s environment, the size of the Single-Family FHA-insured 

loan portfolio has enlarged by nearly 50 percent from $466 billion in fiscal year 2008 

to over $697 billion in fiscal year 2009. During the month of March of this year, 

the FHA’s total mortgage in force was over $6.1 million with an aggregate outstanding balance of over $800 billion. Single-Family market comparisons from the 
253 

first quarter of fiscal year 2010 show that FHA’s total endorsements have increased 

to 74 percent of the insured mortgage market which includes both home sales and 

refinances. As recent FHA testimony states, the FHA program is insuring almost 

30 percent of purchases and in the past year alone helped more than 800,000 homeowners refinance. 

I still remain concerned that the FHA will be challenged to handle its expanded 

workload or new programs that require the agency to take on riskier loans than it 

historically has had in its portfolio. The surge in FHA loans is overtaxing the current infrastructure, making careful and comprehensive lender monitoring difficult. 

Through our cases we see the consequences of allowing in dubious lenders who then 

inflicted the program with problematic loans. In addition, our experience in prior 

high FHA volume periods (such as from 1989–1991 and 1997–2001) shows that the 

program was vulnerable to exploitation by fraud schemes, most notoriously flipping 

activities, that undercut the integrity of the program. I support many of the recent 

initiatives proposed by the Secretary and the FHA Commissioner, of which I will 

elaborate on later, and a new departmental attitude to address these issues head 

on. 

We testified last year that the FHA had to contend with a significant and complex 

situation in balancing the risks to, and fiscal vitality of, the Mutual Mortgage Insurance (MMI) Fund against the need to assure financial mortgage markets continue 

to function properly during the downturn of the economy. Among the issues we 

spoke to were the adequacy of resources available to FHA for staffing, training, 

oversight, and system enhancements. We cited the increasing risks the FHA faced 

that needed to be addressed by both its front-end risk assessment processes as well 

as its back-end monitoring and corrective action processes. 

Since that time the FHA has undertaken a number of actions to mitigate some 

of those risks and protect reserve fund balances. The FHA has banked on the accuracy of its actuary’s projections in assessing the health of the Fund and has faith 

that it is experiencing improved performance with its 2009 and 2010 portfolio. 

Economists cannot agree the direction the economy is going and I equally am not 

a proficient prognosticator. We are in a fluid and dynamic situation that too often 

has not been predictable or readily knowable. The FHA, like the average American, 

is still searching for clearer horizons and a break in the tempest. 

The FHA’s latest report shows that for last quarter, the net losses on claims were 

averaging close to 60 percent which is 13 percent higher than was predicted. In layman’s terms, the FHA is recovering only 42 cents on the dollar (i.e., what it loses 

after it pays a claim and sells foreclosed property). In the State of Michigan, however, it is only recovering 16 cents on the dollar. It currently has approximately 

45,600 properties at a value of $5.7 billion in the real estate owned (REO) inventory. 

Moreover, its credit subsidy rate is one-half percent which after adjustment for 

present value means revenues are a one-half percent ahead of claims. That’s positive but by a very slim margin. The FHA is taking a number of steps to mitigate 

losses and keep the fund positive. 

While the FHA’s confidence in actuarial numbers brings it hope, we believe vigilance is needed until the marketplace has stabilized. Like any American family in 

today’s uncertain times, the FHA will have to continuously monitor its financial position and take proactive steps to keep ahead of the curve when reality dictates corrective action is required. The FHA has a number of tools at its disposal to increase 

revenue or to reduce losses accomplished through mechanisms such as loss mitigation or vigilant oversight of lenders and brokers. Most of the major actions proposed 

to mitigate risk will not go into effect right away so we need to understand that 

such actions may have little effect on loans already in the portfolio. With the current state of the economy, will there be enough new loans to bail out the old loans? 

This is where due diligence today is imperative as well as an overall proactive approach. 

FHA POLICY CHANGES TO ADDRESS RISK AND STRENGTHEN FINANCES

New Loan-to-value and Credit Score Requirements 

Loans to borrowers with a credit score of less than 580 will require a minimum 

10 percent down payment. Loans to borrowers with a credit score of 580 or above 

will require the traditional minimum of 3.5 percent down payment. This change, if 

approved, will go into effect this summer after going through the Federal Register 

notice and comment process. 

We are in general agreement with the move to strengthen down payment requirements. We, however, believe there are some caveats. While this requires borrowers 

with the riskiest loans (below 580) to put more, to quote an earlier comment by Senator Bond, ‘‘skin in the game,’’ this will more than likely have minimal impact on 
254 

the Fund in terms of bringing in additional premiums. Loans for borrowers with 

credit scores below 580 are less than 1 percent of new activity. So these additional 

requirements may likely end most activity in this category. It might, however, reduce future claims but the volume of these loans will not bring in a significant 

amount of premium payments to cover current losses. The chart below from LPS 

Applied Analytics shows the proportion of FICO credit scores over the last 23 

months. 

As seen in the lowest color segment of the bar chart for FICO scores below 620, 

the percentage of loans that would be potentially subject to the new 10 percent 

down payment requirement has steadily decreased to less than 1 percent. This is 

both good news and bad news because it shows that from a financial perspective 

the FHA’s riskiest business is falling off but from a social perspective the potential 

homeowners that it traditionally has served may be priced out of the market. Importantly, we are also seeing defaults and claims affecting higher credit score loan holders and there are some vocal advocates who think a higher down payment may be 

required for a wider spectrum of credit score categories. Further, the 580 credit 

score threshold is well into what is traditionally considered subprime territory in 

the conventional marketplace with 620 being the usual demarcation for subprime. 

We believe that to have a higher down payment requirement at the 620 level may 

have a more meaningful impact due to the larger volume of loans at this level. 

In assessing the most recent year’s book of business, it needs to be understood 

that underwriting is like a three-legged stool. FICO scores are only one leg—the 

other two legs are the value of the property and the future employment of the borrower. While it is true that FICO scores have risen from an average of 626 in fiscal 

year 2008 to 695 in the first quarter of fiscal year 2010, we should also note that 

the loan-to-value ratios have also gone up during this timeframe. In FHA’s recent 

Quarterly Report, the loan-to-value ratio for the 96–98 percent category had risen 

from 48.8 percent of the loans written in the first quarter of fiscal year 2009 to 69.1 

percent in the first quarter of fiscal year 2010. This may mean that any gains realized from reduced risk for having higher FICO scores may be offset by the increased 

risk of higher loan-to-value ratios. In other words, borrowers are putting less of a 

down payment into purchased homes. As we said in previous testimony opposing 

seller-funded down payment assistance plans, less ‘‘skin in the game’’ often means 

that there are increased chances for the owner to walk away if delinquencies occur. 

Further, any benefit from the increase in the average FICO scores may be tempered 

by a commensurate rise in claims generated from those loans. 

So while the FHA believes that they may have an improved book of business in 

terms of increased volume and FICO scores, the jury is still out if the additional 

cash generated by the new book of business will be sufficient to cover the unknown 
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amount of losses in the short term or if the premise that high FICO scores are 

equivalent to soundly underwritten loans still holds. Economic instability is creating 

counter-intuitive trends in consumer behavior. 

Up-front Mortgage Insurance Premium Increased to 2.25 Percent 

The FHA is pursuing legislative authority to increase the statutory cap on the annual Mortgage Insurance premium. OIG supports this change in the premium structure. Any business needs to be able to adjust its pricing in order to continue to operate efficiently. The FHA needs the ability to adjust premium prices without requiring legislative action each time that may impede its ability to react quickly. The 

FHA will need, however, to ensure that a process is developed to link future insurance premium changes to actuarial forecasts. 

Reduce Allowable Seller Concessions From 6 Percent to 3 Percent 

The FHA is seeking an action to conform to industry standards and to reduce potential value inflation. It is anticipated to go into effect this summer after appropriate notice and comment time. The OIG supports this measure. We believe that 

the FHA needs to be consistent with industry practices so as to avoid pressure to 

raise prices to cover seller concessions. 

Increase Enforcement Efforts to Ensure Compliance With FHA Guidelines and 

Standards 

The FHA: (a) Will use a scorecard system to evaluate and report lender performance to compliment current information available from Neighborhood Watch data 

(this was implemented in Mortgagee Letter 2010–03); (b) will enforce indemnification provisions through section 256 of the National Housing Act and cover those 

loans found to contain material errors in underwriting (this is anticipated to go into 

effect this summer after posting and comment periods); (c) asked for legislation to 

apply section 256 to require indemnification provisions for all direct endorsement 

lenders in order that all approved mortgagees assume liability for the loans originated and underwritten by them; and (d) will move to increase capital requirements 

from $250 thousand to $1 million in 1 year, and then to $2.5 million after the final 

rule is published, and hold the lender responsible for the final underwriting. 

We support the FHA’s decision to enhance risk management by, among other 

things, hiring a senior level risk management officer. Its decision to use a scorecard 

system will certainly assist it in uncovering problem companies. We note that the 

FHA has returned to conducting a 5 percent sample of lender endorsement reviews 

by its contractors. The number had slipped to 2 percent last year because it could 

not keep up with the volume. We also support FHA’s request for legislative authority to create separate areas for the purpose of review and termination under the 

Credit Watch Initiative. 

The FHA’s intent to strengthen enforcement of its indemnification provisions in 

section 256 is important to an overall enhanced enforcement strategy. OIG reviews 

of indemnifications found recovery was hampered by firms going out of business, 

thereby rendering some indemnifications worthless. In a recent OIG Inspection and 

Evaluation report, we found that the FHA serviced $187.5 million of indemnification 

and civil money penalty debt due from lenders for the period fiscal year 2005 

through fiscal year 2008. The FHA collected $124.4 million or a 66 percent recovery 

rate (a collection rate that compares favorably with that of the Veterans Administration’s Housing-Guaranteed and Insured Loans program and private collection 

agencies), however $8.7 million was uncollectable primarily the result of the debtor 

lender going out of business. —OIG Concerns Regarding Anti-flipping Waiver.—One change the FHA recently 

instituted this year was the decision to waive its anti-flipping provisions for 1 

year. This action was not vetted with us through normal departmental clearances and we, unfortunately, had no opportunity to opine on the matter. While 

we understand the underlying reasoning to turnaround foreclosed properties in 

a quicker manner, we believe its imposition may open a new round of fraudrelated flipping abuse and we would have liked to express our concerns or to 

press for more compensating controls. 

Current housing market conditions have created a bulge in HUD’s real estate 

owned inventories that provide a ready source of properties for potential flipping schemes. To eliminate inventories, lenders and the FHA’s own contractors 

often significantly discount the sales price from acquisition costs and appraisal 

values in a more normal housing market. The discounts provide the necessary 

margin for flipping opportunities, legitimate as well as illegitimate. Historically, 

the illegitimate flip involved a conspiracy between investors, loan officers and 

appraisers, allowing for the financing of the re-sale to be done at an inflated 

value, justified by market conditions of increasing housing values. 
256 

When the anti-flipping rule had been originally promulgated, the FHA, primarily at the request of the OIG, sought to protect the MMI Fund from this 

vulnerability by prohibiting financing of property re-sales until 90 days had 

elapsed after the purchaser acquired the property. This waiting period effectively protected the FHA from flip abuses such as ‘‘double escrows’’ and same 

day closings. The FHA states the waiver is designed to help reduce REO inventories. There is, however, a real risk that the waiver could serve as an invitation to investors willing to engage in abusive schemes or to try to skirt the 

rules. Indeed, we almost immediately saw discussions on the Internet among investors. Moreover, with the increase in the FHA’s loan limits to greater levels, 

high-end, as well as traditionally low-end, properties could be targeted by the 

unscrupulous. 

While an attempt was made by the FHA to mitigate improper activity by requiring an explanation of any price increase over 20 percent, as a law enforcement agency we know that it can be just as easy to fabricate documents for this 

as it can be to inflate the appraisal itself. We see little to deter the wide-scale 

flipping that occurred before the practice was stopped by a 90 day waiting period. While we recognize that keeping the status quo may delay closing, we believe that it is preferable to the alternative risk that such an action may unleash. A safer approach may be to limit the wavier to GSE-held properties or 

to those sold through State and local rehabilitation programs such as the Neighborhood Stabilization Program where closer scrutiny of rehabilitation costs can 

be made. —Enhanced Up-front Reviews.—We believe it is important that the FHA become 

more aggressive in the areas of monitoring and detection and analysis of red 

flags. We endorse FHA’s Mortgage Fraud Initiative which seeks to use fraud detection technology to identify loans likely to contain fraudulent information. We 

have stated previously our belief that FHA needs to take advantage of commercial off-the-shelf pre-screening loan software. We have also long voiced our concerns that the process to become an FHA approved lender and correspondent 

was not rigorous enough to keep out the known bad actors. When the conventional markets started to decline, we expressed our concern that the same individuals and companies that precipitated the conventional market collapse would 

seek shelter in the FHA markets and use similar tactics that led to poor underwriting. We believe that this did in fact occur. 

In the case which I referred to earlier in this testimony regarding the New 

York company Lend America, Michael Ashley, who carefully did not place himself as a principal in the firm but as a business strategist, had had a long history of legal troubles (including with the HUD OIG) and was working as a top 

manager for one of the most rapidly growing lenders in the FHA’s portfolio. 

Court filings show that Ashley fostered an environment that encouraged sales 

staff to originate FHA loans even when the borrowers were not eligible. Sales 

staff could make 10 times the commission on FHA loans than on standard mortgages and almost 4 times the commission than on a subprime loan. 

Mr. Ashley pled guilty in 1996 in Federal court to two counts of wire fraud 

relating to a mortgage scam at another company his family once owned. He was 

sentenced to 5 years probation and ordered to pay a fine and his father was 

sentenced to nearly 4 years in prison. He appealed his suspension and debarment with HUD which later was reduced to a ban that expired in 1998. Once 

served, the FHA allowed him to resume operations. He then went to another 

firm that again HUD issued a notice of violation. After leaving that firm, he 

became affiliated with the most recent company. Although this case is still 

open, it is clear to say that the Federal court would not have permanently 

banned Mr. Ashley if it were not concerned about the current operations of his 

affiliated company. The President of the company was also debarred at the 

same time but for a specific period of time—in this case 18 months. 

This again calls for the establishment of a new mindset at the FHA to know 

your participants and not just the entity. It can be a very arduous process for 

the OIG acting as the investigators for the Department of Justice to work to 

get a court-ordered injunction. Mr. Ashley was quoted in the press as grumbling 

that the inspector general’s office tried its best to constantly go after him and 

put him out of business. Although he was complaining to the judge at the time, 

his quote is revealing in that we had to keep following him from one dubious 

enterprise to another. It can be frustrating. If current regulations and statutes 

are impeding the FHA’s ability to create a watch list or to know its providers 

complete backgrounds or to keep out permanently those from entering whom it 

does not want to participate in its program—it has a duty to let Congress know 

it needs legislative relief to enhance its administrative remedies (i.e., more per-
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manent debarment authority, enhanced civil monetary penalty fines) in order 

to accomplish this goal. I do not believe in years past, when it was striving to 

increase its market share, that this was a goal. But I do believe that with the 

large influx of loans and lenders coming at the program recently it may now 

see how imprudent such inaction can be. 

A systemic weakness revealed in this case and others showed that FHA-related monitoring and oversight reports typically cited the lending firm without 

naming the individuals associated. The FHA had argued that without specific 

citations against individuals it could not link principals of a defunct company 

to those same individuals who would go on to form new entities. We see this 

type of maneuver too often and it makes the FHA program too easy a target 

for those intent on abusing the program. We recommend that FHA ensure in 

a more significant way that those individuals affiliated with lender entities (either as principals or as staff) are clear of indictment, conviction, debarment and 

suspension, limited denials of participation and unpaid Federal debt before applications are approved. 

The FHA should also consult with other HUD offices to determine whether 

applicants are subject to unresolved findings and ensure that application fees 

received are reconciled with the related applications. More importantly, if the 

Mortgagee Review Board concludes that a company has participated in improper activities and recommends removing the company’s ability to participate 

in the FHA loan program, the Board also needs to recommend permanent removal of the principals and other individuals involved from any future FHA and 

HUD programs. I know in my conversations with the Commissioner this is an 

area on his radar screen. 

The Commissioner testified at his recent hearing, and I lauded earlier in my 

testimony, that over the last year the FHA has withdrawn 300 licenses from 

poor performing lenders. We believe that many of these could have been 

screened more vigorously at the time of their application before the consequences of their admission came to bear in terms of losses or resources applied to investigate and to prosecute. Only time will tell how many more significant failures are yet to be uncovered but we do see more on the horizon. We 

believe that more stringent requirements, in addition to enhanced net worth requirements, are needed to keep predatory firms and individuals from conducting 

FHA business. 

I would like to take the opportunity to also draw a parallel issue with the 

Government National Mortgage Administration (Ginnie Mae) approval process. 

We believe Ginnie Mae equally needs to strengthen its approval process. While 

the funding level for its reserves are in a better financial position than that of 

the FHA, it too has experienced increasing default rates and has suffered unusual substantial losses due to the failure of Taylor, Bean and Whitaker and 

Lend America. More due diligence needs to be done by Ginnie Mae in approving 

and recertifying its issuers and I look forward to seeing meaningful recommendations for statutory and regulatory improvements akin to what the 

FHA has recently proposed. It also has to shift its mindset away from a business-oriented mentality to let problem issuers remain in the program while they 

work out the details. This attitude toward the industry is no longer feasible unless it wants to absorb large losses. I will speak more to my concerns with 

Ginnie Mae later in the testimony. 

We commend the FHA for endeavoring to expand its enforcement and note 

that it has very much needed to implement a more robust early warning system 

that would alert FHA to precipitous sales price increases. We also see the need 

for FHA to enhance its Neighborhood Watch system (i.e., allow for tracking of 

information relating to loan officers, loan processors, and real estate agents) 

and the Credit Watch Termination Initiative. 

—Lack of Affirmative Certification Statement.—In this same vein, we would like 

to update the subcommittee on a matter we brought before you a year ago. At 

the time, I shared with the members an exhibit showing the current application 

form to become an approved FHA lender or Ginnie Mae issuer. I pointed out 

to the subcommittee that unlike the Ginnie Mae section which contained an affirmative statement that required the applicant to attest that they had not 

knowingly made a false statement and could be subject to applicable civil or 

criminal penalties, and despite the large volume of new applicants coming into 

the FHA program, the FHA certification and recertification inexplicably contained no such requirement. Even more puzzling is the FHA’s response from the 

Director of the Office of Lender Activities to my recommendation in an audit 

of the lender approval process. The FHA stated it did not agree with the finding 

and stated that ‘‘the OIG has not sufficiently demonstrated that because of its 
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certification language FHA is unable to successfully take legal action against 

lenders violating its program requirements’’ and requested its removal from the 

audit. 

The Department of Justice as chair of the National Procurement Fraud Task 

Force has recommended that all agencies put in language for grantees of Federal funds the requirement that the participant certify that the statements 

made in the application are true and correct and that it understands that any 

false statements made as a part of these certifications can be prosecuted. 

Requirements to Better Manage Brokers Such as New Rules for Audited Financial 

Statements and Adequate Capitalization 

OIG supports this initiative. We also believe that the annual financial statements 

for lenders lag too far behind to be useful. We believe there should be quarterly 

unaudited financial statements similar to the SEC’s publicly-traded company requirement and suggest that there also be an effective review process of these statements. Billions of dollars flowing through the FHA are riding on the financial health 

of these firms. Timeliness of information is essential in making decisions and we 

would encourage such a change. 

OPERATION WATCHDOG

On January 12, 2010, FHA Commissioner Stevens and I jointly announced a new 

OIG initiative focusing on mortgage companies with significant claim rates against 

the FHA mortgage insurance program. This initiative was prompted in part by the 

Commissioner who was alarmed by the incidence of excessive default rates by a 

number of poor performing FHA lenders and reached out to the HUD OIG for assistance. Our office served subpoenas to the corporate offices of 15 mortgage companies 

in 11 States across the country demanding documents and data related to failed 

loans which resulted in claims paid out by the FHA fund. We identified these direct 

endorsement companies from an analysis of loan data focusing on companies with 

a significant number of claims, a certain loan underwriting volume, a high ratio of 

defaults and claims compared to the national average, and claims that occurred earlier in the life of the mortgage. These may be key indicators of problems at the origination or underwriting stages. The firms were not selected for indications of wrongdoing on their part but we will aggressively pursue indicators of fraud if they should 

be uncovered during the analysis. We are a principal member of the President’s Financial Fraud Enforcement Task Force and this initiative reflects our commitment 

to seek information on red flags that may arise from data analysis. 

While we are still in the data recovery and analysis phase, and cannot discuss 

at this time the initial results of our review, we do believe that this initiative will 

continue. We will carry out our line of inquiry until we have conclusive results to 

provide to the FHA, to the Congress and to the American taxpayer. It is important 

to know for the long-term viability of the FHA program whether these skewed high 

claims and default rates are a result of a weak economy or if companies are ignoring, or even purposefully violating, FHA regulations. We want to send a very distinct message to the industry that as the mortgage landscape has shifted, we are 

watching very carefully, and that we are poised to take action against bad performers. The American taxpayer demands, especially after the lessons of the 

subprime collapse, that oversight and monitoring must be rigorously implemented. 

While we may disagree from time to time with some of the actions the FHA has 

taken, we both share a common resolve to preserve home ownership at the same 

time as protecting the American taxpayer from further economic instability. 

In an audit on Single Family insurance claims, we found that the Department received and paid claims on loans for which the lender did not show the borrower was 

able to make the required monthly payments, made the minimum investment in the 

property, and was creditworthy. It paid the claims and did not review the loan files 

for compliance with requirements, fraud, and/or misrepresentations. Our initial review under Operation Watchdog reinforces the concerns we found in this claims 

audit. The Department should review claims for eligibility and, if feasible, independently determine that loans comply with program requirements and seek, from lenders, recovery or adequate support for final costs associated with those claims. 

Loan Binder Retention.—One issue that has arisen in our reviews of these poor 

performing lenders is the ramifications of the prior administration’s policy to allow 

lenders to maintain original records. Through the issuance of a Mortgage Letter in 

2005, the FHA enabled certain direct endorsement lenders to endorse FHA loans 

without a pre-endorsement review and generally relieved those lenders from the responsibility of submitting loan origination case binders to the FHA. The Federal Bureau of Investigation (FBI) and the HUD OIG, vigorously opposed the FHA’s directive (as did HUD’s own General Counsel at the time) to allow lenders the ability 
259 

to retain documents. As a law enforcement and auditing agency, we were concerned 

that such a relaxation of control would hinder our ability to gather information for 

evidence if documents were tampered with or destroyed. Further, the guidance allowed lenders to maintain the files for only 2 years after closure. Statutes of limitations run 5 years in criminal fraud and generally 6 to 10 years in civil fraud matters. 

Unfortunately, our fears expressed then in testimony and in a letter-writing campaign are indeed coming to fruition today. As we proceed with Operation Watchdog, 

we have had difficulty obtaining files from a number of these lenders including encountering instances of missing case files despite OIG subpoena demands. We 

strongly recommend that the FHA again revisit this directive to ensure information 

critical to the loan origination and underwriting process is available for detection 

of issues and/or potentially fraudulent activity. In a time when the American public 

demands our mortgage industry is free of waste, fraud and abuse, such a policy 

change is essential. 

FHA FINANCIAL CONDITION

The results of the latest actuarial study produced last fall show that HUD has 

sustained significant losses in its Single Family program making a once fairly robust program’s reserves smaller. The study shows that the FHA’s Fund to cover 

losses on the mortgages it insures is contracting. As of September 30, 2008, the 

fund’s economic value was an estimated $12.9 billion, an almost 40 percent drop 

from over $21 billion the year before. By September 30, 2009 the reserve level 

dropped below the statutorily mandated 2 percent requirement to 0.53 percent. The 

Fund’s economic value was $3.64 billion compared to the $685 billion of outstanding 

insurance in force. 

Since its inception in 1934, FHA has been self-sustaining and premiums paid to 

the fund have covered the losses due to fluctuating defaults and foreclosures. We 

testified last year that given the current economic conditions, it is critical that the 

assumptions used to derive the current estimate of the health of the fund be supportable and not overly optimistic. We stated to the FHA during our audit of its 

financial statement that the model embraced by the FHA should include the study 

of past and current delinquencies and the ultimate resolution as to cures or claims. 

The current model is designed for long term claim projections and is based on historical claims paid experience. Therefore, the model does not reflect recent delinquency development and lacks the corresponding adjustment to the claims paid. We 

recommended that the FHA expand its financial cash flow model validation to include seriously delinquent aged loans data, case level historical recovery data, and 

other leading indicators; and to track reasons for default and determine whether 

other economic indicators, such as unemployment claims, may be useful to support 

near term estimates for claim payments. 

An assessment of the first quarter of fiscal year 2010 shows some trends that 

merit examination. With FHA’s greatly increased Single-Family insured volume (a 

24 percent change from the prior year and currently at more than three-fourths of 

a trillion dollars in insurance) comes an increasing default and claims paid rate. 

Add to this an increasing inventory of real estate owned properties that are managed by the FHA—with a falling recovery rate that has FHA now only recovering 

slightly more than 40 cents on the dollar and a ‘‘days in inventory’’ average of close 

to 200 days—and the picture becomes more disquieting. A significant problem facing 

the FHA, and the lenders it works with, is the fallout from decreasing home values. 

This increases the risk of default, abandonment and foreclosure, and makes it correspondingly difficult for the FHA to resell its REO properties. 

Approximately 8.8 percent of FHA loans are currently in default (i.e., more than 

90 days non-payment status, foreclosure or bankruptcy), an increase from the prior 

fiscal year to date. A major concern is that even as FHA endorsement levels meet 

or exceed previous peaks in its program history, FHA defaults have already exceeded previous years. Claim rates have also increased and though numerically still 

quite small, it must be noted that many of the new defaults are still in the pipeline. 

We may see increasing claim rates on the horizon. The Secretary and the Commissioner hope to stave off the consequences of this trend with new approaches to business, but the congressional and executive branch budget offices’ disagree with the 

impact of these approaches. 

In our estimation, this only reinforces the importance for FHA-approved lenders 

to maintain solid underwriting standards and quality control processes in order for 

the FHA to withstand severe adverse economic conditions. Another extensive problem confronting the FHA has been its inability to upgrade and replace legacy (developed in the 1970s and 1980s) application systems that had been previously sched-
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uled to be integrated. The FHA systems environment remains at risk and must 

evolve to keep up with its new demands though there has been increased funding 

and new plans formulated. I know in my conversations with congressional staff that 

they are frustrated with the amount of resources expended and the pace with which 

such replacement plans have proceeded over the years. 

INCREASED RISKS TO FHA

Mortgage Fraud.—Last year during testimony before this subcommittee, I highlighted a variety of traditional mortgage fraud schemes impacting both the FHA and 

the conventional loan market including schemes in areas such as appraisal fraud 

and loan origination fraud, and identity theft as well as new forms of fraud such 

as rescue or foreclosure fraud (to include equity skimming and lease/buy-back 

plans), bankruptcy fraud, and Home Equity Conversion Mortgage (reverse mortgage) fraud (to include schemes involving flipping, annuity sales, unauthorized recipients, and onerous fee payments/consumer fraud). As the Department of Justice 

recently testified, all types of mortgage fraud are on the rise and we are working 

closely with other agencies in the President’s Financial Fraud Enforcement Task 

Force and as part of the National Mortgage Fraud Team. We currently have over 

2,290 case subjects involving Single Family investigations. We have also recently 

created a more robust civil fraud enforcement initiative to assist the Department 

of Justice in enhancing civil mortgage anti-fraud prosecutions. For example, we recently assisted the Department of Justice in filing a complaint against Capmark Finance Inc, a large originator of HUD-insured loans, for making false statements in 

connection with applications used to acquire two nursing home facilities (a discussion of nursing home issues appears later in this testimony). The following represents a sample of a few of the criminal fraud cases we have recently pursued: 

—In Operation Mad House, we conducted an undercover investigation to deal 

with the problem of escalating mortgage fraud in the Chicago area that had 

consistently placed it as one of the top five geographic areas for fraud. We received allegations that a number of mortgage operatives were involved in loan 

origination fraud including the creation of fictitious bank statements, false employment and inflated appraisals and we targeted an organized group of real 

estate industry professionals at all levels. We tracked the inflated appraisal and 

phony origination as well as the closing proceeds and how it was distributed. 

This investigation resulted in 22 individuals in 9 separate indictments being 

charged with multiple counts of fraud and a spin off whereby 4 new subjects 

were indicted late last year. All told, 26 principals in the mortgage industry including attorneys, brokers, loan officers, loan processors, appraisers, recruiters, 

and accountants have been charged. 

—Earlier this month in Atlanta, three members of a reverse mortgage fraud ring 

were indicted by a Federal grand jury for altering real estate records, using fake 

documents, and posing as realtors in an abuse that took money away from 

qualified seniors. The defendants in this case faked required down payments by 

senior citizens to establish the equity needed in the home to qualify for the reverse mortgage. They did this by using bogus gift letters in amounts between 

$50,000 and $105,000 and using fake HUD–1 Settlement Statements reflecting 

the sale of non-existent assets closed by fictitious law firms to show the source 

of the required down payments. All the down payments were actually supplied 

by the defendants, not the senior citizens, to be returned to the defendants upon 

the reverse loan closings along with profits far in excess of the true sales prices 

of the properties. Such payments were disguised as seller proceeds or lien payoffs and all the mortgages contained fraudulently inflated appraisals. 

—In another reverse mortgage case, on April 13, 2010, in Kansas City, Missouri, 

the Jackson County Prosecutor charged an individual with financial exploitation 

of an elderly/disabled person and forgery related to a fraudulent HECM (home 

equity mortgage conversion) loan. Our investigation revealed that the defendant 

allegedly obtained a quit claim deed on a Kansas City property belonging to an 

elderly man suffering from Alzheimer’s disease and subsequently took out a 

fraudulent reverse mortgage in the victim’s name. As a result of the scheme, 

the defendant deposited, by means of a forged Power of Attorney, reverse mortgage proceeds into a personal bank account as well as obtained a loan against 

the victim’s life insurance policy. 

—In February of this year, the former president of a mortgage company was sentenced in Federal court in California to 156 months in jail, 5 years probation 

and ordered to pay almost $30 million in restitution to victims for a fraudulent 

loan origination scheme that knowingly caused loan applications containing 

fraudulent documents to be submitted to various lenders for FHA insurance so 
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that unqualified mortgagors would appear qualified. His actions caused over 

900 fraudulent loans to be FHA insured and subsequently default resulting in 

a substantial loss to the program. 

Nursing Homes/Section 232.—The FHA insures mortgage loans (section 232) to 

facilitate the construction and rehabilitation of nursing homes, intermediate care facilities, board and care homes, and assisted living facilities. It also allows for the 

purchase or refinancing of existing projects not requiring substantial rehabilitation. 

It insures lenders against the loss on mortgage defaults. As of the end of calendar 

year 2009, HUD had 2,327 projects with an outstanding principal balance of $14.6 

billion. This represents close to a 36 percent increase in projects receiving initial endorsements from the previous year. As we noted in last year’s testimony, the current 

section 232 regulatory agreement does not prevent transfer of the Transfer of Need 

associated with the property; does not include receivables in any security documents 

(which is a significant asset to the properties and can limit HUD’s loss when retained); and does not require a lessee operating the project to abide by the same 

requirements as the owner. This allows lessees to use project funds for non-project 

expenses to the point of default with no recourse. 

With such a vulnerable population involved, the OIG has been recommending for 

years in numerous audits and investigations that the regulatory agreement needs 

to be changed. This status has not changed since approximately the fall of 2006. It 

is our hope that this can be done expeditiously. 

Appraiser Oversight.—Our review of the FHA appraiser roster identified critical 

front-end weaknesses as evidenced in the quality control review and monitoring of 

the roster. The roster contained unreliable data including the listing of 3,480 appraisers with expired licenses and 199 appraisers that had been State sanctioned. 

In a further review, we found that HUD’s appraiser review process was not adequate to reliably and consistently identify and remedy deficiencies associated with 

appraisers. The FHA’s current Single Family insured exposure totals over $800 billion representing over 6 million in FHA insured mortgages. Inflated appraisals correlate to higher loan amounts. If the properties foreclose, the loss to the insurance 

fund is greater. 

With significant increases in volume and new responsibilities in the mortgage 

marketplace, and appraiser fraud a significant problem highlighted in national studies, we do believe it may be time for the Department to return to an FHA Appraiser 

Fee Panel similar to the one dismantled by statute in 1994. It is essential if the 

mortgage industry wants to overcome perceptions regarding its integrity and its role 

in the current economic crisis that it ensures true market values are correctly estimated. Such a move would relieve pressures on appraisers to return predetermined 

values and would change a system based on misplaced incentives. A study indicated 

that 90 percent of appraisers had felt pressure ‘‘to hit the number’’ provided (i.e., 

on the sales contract). The old FHA Fee Panel was rotational and guaranteed work 

as long as the appraiser met certain HUD requirements. As can be deduced from 

the many cases and problematic issues discussed in this testimony, inflated appraisals often are at the heart of the scheme or of the questionable arrangement. 

Late Payment Endorsement Requirements Changed.—Last year, we testified on results from a number of other key audits that have noted significant lender underwriting deficiencies, inadequate quality controls, and other operational irregularities. We spoke to an audit in which we analyzed the impact of FHA late endorsement policy changes affecting FHA insured loans. Unfortunately, this still remains 

an issue and bears repeating. On May 17, 2005, the Federal Housing Commissioner 

issued Mortgagee Letter 2005–23, which significantly changed the requirements for 

late endorsements for Single Family insurance. A request for endorsement is considered late whenever the loan binder is received by the FHA more than 60 days after 

mortgage loan settlement or funds disbursement, whichever is later. The Mortgagee 

Letter removed the prior 6-month good payment history requirement for these loans 

and provided an additional 15 days grace period before the current month’s payment 

was considered late. 

We conducted a review of this rule change and found that, although FHA asserted 

the change did not materially increase the insurance risk, FHA did not perform a 

risk analysis to support this determination. Our review of the performance of loans 

from seven prior OIG late endorsement audits (i.e., Wells Fargo, National City 

Mortgage, Cendant, etc.) found a three and one-half times higher risk of claims 

when loans had unacceptable payment histories within the prior 6 months. Since 

the issuance of the Mortgagee Letter, we found that the default rate for loans submitted late had increased and was significantly higher than the default rate for 

loans submitted in a timely manner. The HUD Handbook itself acknowledged the 

risk of unacceptable payment histories by stating that ‘‘Past credit performance 
262 

serves as the most useful guide in determining a borrower’s attitude toward credit 

obligations and predicting a borrower’s future actions.’’ 

In 2006, we recommended that HUD rescind the Mortgagee Letter until appropriate rule changes could be designed that were supported by an adequate risk assessment. The FHA disagreed with our audit report and declined to implement the 

recommendations. We referred this matter to HUD’s Deputy Secretary who concurred with our recommendations on February 27, 2007 and ordered the FHA to immediately rescind the Mortgagee Letter. 

Initially, the FHA agreed to implement the Deputy Secretary’s directive but failed 

to take action, instead taking efforts to again dispute our audit results. This continued until April 2008, when the Deputy Secretary’s office again intervened, at our 

request, and instructed the FHA to publish the proposed rule change in the Federal 

Register reinstating the 6 month payment history requirement for late endorsements. In June 2008, the proposed rule change was published in the Federal Register for comment. 

Although the final rule rescinding the Mortgagee Letter was never published, 

FHA nevertheless closed the audit recommendation. In a memorandum dated March 

18, 2009, we informed the FHA that, given the amount of time that had lapsed and 

the absence of a corrective action, the OIG would report this in our next Semi-Annual Report to Congress. Given the current mortgage crisis, concerns over losses to 

the insurance fund, and requirements for transparency, we believe that this is an 

important recommendation that should not be dismissed. 

Capturing Key Information in, and Upgrading, Data Systems.—Another major 

concern, touched on previously in testimony, is the integration and upgrading of 

FHA legacy systems which bears repeating since our original premise has not been 

acted on. While there has been much discussion of an overall plan, and what particular types of systems are needed to go forward, it would be useful at this juncture 

to reposition the discussion to ascertain which data should actually be collected, and 

maintained, in the system in order to control the new demands placed on the program. Our audit work and our investigative ‘‘Systemic Implication Reports’’ transmitted to the Department over the years, makes it clear that, at a minimum, we 

need the system to track identifying information on key individuals involved in the 

transaction such as the originating loan officer, loan processor, and real estate 

agent. 

The loan officer, for example, is central to the origination of the loan where due 

diligence should be exercised on the application material (i.e., credit scores, appraisal information, etc.). It would be useful to record the person’s name and corresponding identifying information (i.e., license) in the same system the FHA uses 

to track underwriter and appraiser details. This will allow the FHA and OIG to key 

in on a vital part of the loan process—origination—where fraud typically can occur. 

If the system could also capture information on other key players such as the real 

estate agent for the seller and buyer, and other parties to the transaction, that too 

would be helpful for purposes of increasing integrity in the processes in our investigative and audit functions. It would also be valuable to the FHA in strengthening 

its risk management and monitoring efforts. 

Further, it could be beneficial for the FHA to participate more significantly in a 

unified lender oversight consortium with Fannie Mae, Freddie Mac, the Federal Deposit Insurance Corporation (FDIC), and Ginnie Mae in order to, among other 

things, create standardized forms that could produce common machine-readable 

data fields with consistent information as well as to leverage existing data systems. 

Earlier in the testimony, we described the TBW case and the weaknesses that it 

exposed in the FHA and the Ginnie Mae programs. As we are discussing the need 

for Federal entities to come together in a more unified manner, we would also like 

to highlight an issue that came to forefront in this case. Ginnie Mae mortgagebacked securities (MBS) are the only MBS to carry the full faith and credit guaranty 

of the United States. If an issuer fails to make the required pass-through payment 

of principal and interest to MBS investors, Ginnie Mae is required to assume responsibility for it. Typically, Ginnie Mae defaults the issuers and assumes control 

of the issuer’s MBS pools. 

The FDIC temporarily froze the Ginnie Mae custodial bank accounts at Colonial 

Bank as well as the bank’s mortgage payment lock box account. As a result, Ginnie 

Mae was forced to make an approximately $1 billion pass-through payment (principal and interest) to investors. There needs to be better coordination between the 

FDIC and other Federal Government agencies so that losses absorbed because of its 

action can be mitigated by more cooperative and forward-thinking behavior. We are 

also very concerned with the extent that future bank failures and bankruptcies 

could have on the Ginnie Mae program. The FDIC stated in a recent report that 

over 200 banks are predicted to fail this coming year. 
263 

The other disconcerting aspect of the TBW case involves the fact that Fannie Mae 

became aware of some unsettling practices at TBW, made it replace some loans and 

then stopped doing business with it. TBW then sold their servicing rights to another 

company and started doing business with Freddie Mac. Then, down the line, Ginnie 

Mae accepted pools from TBW. It appears that Fannie Mae’s only interest was selfinterest. A number of years ago, I testified before the House of Representatives regarding a case called First Beneficial in which Fannie Mae did not tell other entities 

of its discoveries at First Beneficial and then, by its silence and inaction, caused 

losses to the Ginnie Mae program. There needs to be mandated requirement of notification and penalty for failure to notify or we will continue to see instances of fraud 

cases being perpetrated on unknowing securitizers. 

CONTINUING CONCERNS

Though there have been incremental increases in funding to the FHA for a variety 

of staffing and system needs, including a planned increase of over 100 FTEs from 

fiscal year 2010 to fiscal year 2011, we believe there remains a need for either more, 

or a proper placement of, resources to the FHA in light of the dramatic percentage 

of increased loan volume and of its increased relevance to the eventual stabilization 

of the conventional mortgage marketplace. We would like to see more personnel 

dedicated to the Home Ownership Centers, which are responsible for monitoring 

loan origination and servicing practices, setting underwriting standards, and overseeing the disposition of HUD-owned properties, as well as to headquarters systems 

and technology until the IT infrastructure can be put in place in order to manage 

the program changes, and away from such activities as marketing since FHA has 

already proclaimed it wants to retreat from such a prominent place in the marketplace. 

We still remain concerned that increases in demand to the FHA program are having collateral implications for the integrity of Ginnie Mae. Like FHA, Ginnie Mae 

has seen an augmentation in its market share. For example, in December 2009, its 

Single Family issuances totaled nearly $40 billion and it had a remaining principal 

balance of over $880 billion. By comparison, its balance in December 2007 was exactly one-half at slightly over $440 billion. It too has stretched and limited resources 

to adequately address this increase. 

CONCLUSION

Mortgage industry behavior was a precipitating factor in the present economic 

turmoil. As the Department has written about in its assessment of the foreclosure 

crisis, industry participants encouraged borrowers to take riskier loans with a high 

risk of default due to the high profits associated with originating the loans and 

packaging them for sale to investors. These lenders had little or no risk in the loan. 

There were many factors that made it possible for the mortgage market to make 

so many miscalculations and missteps. A primary factor was development during 

this period of the growth of the asset-backed securities market, which shifted the 

primary source of finance from Federally regulated institutions to mortgage banking 

institutions that acquired funds through the broader capital markets and were subject to much less regulatory oversight. 

Clearly the regulatory structure was not changing rapidly enough to keep with 

the pace of growth. Fraud may have had a significant contribution and analysis 

shows that there was a lack of adequate underwriting controls by lenders to oversee 

brokers’ activities. The general regulatory structure did not work to provide adequate oversight to oversee the origination and financing of mortgages. The consequences were high risk lending and a resulting surge in delinquency and default. 

The lessons of the conventional side of the industry should not be lost on that of 

the FHA and Ginnie Mae programs as they too are now experiencing increasing delinquencies, defaults and claims. And it should not be lost on those tasked with rectifying the vulnerabilities that clearly came to the foreground regarding the lapse 

in oversight of the Fannie Mae and Freddie Mac Government sponsored enterprises. 

The conventional mortgage market is going back to the basics. It is embracing full 

underwriting standards including accurate verifications of income, employment and 

appraisal; it is demanding adequate cash down payments from borrower’s own 

funds; and it is seeking rational debt-to-income ratios. Observations of current historic contagions of risk suggest that, in the marketplace today, yesterday’s lower 

600’s FICO score is now today’s higher 600’s FICO score and that FHA’s floor may 

be set too low. Nevertheless, this has to be weighed against the FHA’s traditional 

mandate to assist homeowners that are low to moderate income and who may have 

poorer FICO scores. It also suggests that even high FICO borrowers with significantly distressed properties still default because of the rational choice to prevent 
264 

years of principal payments just to break even. This makes it all the more important to have an active risk management department to monitor and rapidly develop 

policies as the traditional ‘‘black-boxes’’ adapt to the ‘‘new.’’ 

Finally, we remain concerned that, although not within the control of the FHA, 

the fact that our nationwide mortgage lending system is fragmented with separate 

players embracing differing requirements creates opportunities for waste, fraud and 

abuse that a more unified approach could potentially ameliorate. We have not seen 

enough progress or initiative to try to overcome the vulnerability that lapses in coordination among Federal entities creates. Of one thing, however, we are sure— 

those intent on unscrupulous behavior know full well how to exploit the weaknesses 

in the system and to profit from such disorder. We do very much look forward to 

the implementation of many of the Secretary’s efforts designed to mitigate many of 

the difficulties we have been highlighting in the last number of years and to working with him and the Department to try to improve programs so increasingly relied 

on by our citizenry during these trying economic times. 

As Chairman Murray has stated, stabilizing and improving the housing market 

is critical to the Nation’s economic recovery but FHA’s participation must be done 

in a way that it can effectively manage the loans that were made during the height 

of the housing boom so that it can provide a much-needed boost of liquidity to the 

market. We thank you for the opportunity to relay our thoughts on these important 

issues based on the body of our work and of our experience, and greatly appreciate 

the activities of the Congress to protect the Department’s funds from predatory and 

improper practices and to ensure an effective response on oversight at this critical 

time. 

MMI FUND

Senator MURRAY. Thank you very much, Mr. Stevens. 

Let me just start. This is your first appearance before our subcommittee, but FHA has been the subject of annual hearings since 

I have become chairman here. And together, Senator Bond and I 

have sounded the alarm on FHA and the solvency of the MMI 

Fund, and because of our concern, we did provide FHA with additional resources both for IT improvements and for increased staffing in order to give FHA the tools that they needed to protect the 

agency from fraud and risk and make sure that taxpayers never 

have to subsidize these mortgages. 

So I am, obviously, very concerned that FHA’s capital reserve account has now fallen below the mandatory 2 percent required by 

Congress. In your testimony, you outlined several reforms that are 

designed to recapitalize the reserve fund and protect the solvency 

of the MMI Fund, some of which you said are already in place. 

But I would like you to share with us what is the current state 

of the MMI Fund and how does it compare with the projections 

that were set forth in the audit that Congress got last fall. 

Mr. STEVENS. Thank you for the question. 

Let me just start with the—we released to you the first quarterly 

report of the fiscal year to Congress a month and a half or so ago. 

The second quarterly report will be released here in the next few 

weeks, so you will get some detailed information on the status of 

the MMI Fund. 

In particular, the current total reserves are actually higher than 

we reported when we announced that we had fallen below the 2 

percent statutory level for the capital reserve fund. So today we are 

sitting at about a little over $32 billion. When we reported in the 

fall, it was about $31 billion. So they have actually increased. 

I will tell you that there are a couple of key drivers that will impact the fund the most. The first are, obviously, the real foreclosure 

numbers that will impact the real actual reserves in the fund. We 

are actually behind what was forecasted for the year at this point 
265 

in time, but we did forecast that we would have 125,000 total defaults for the fiscal year, and given the trend line, I believe we still 

will be on track to hit the 125,000 number, based on the trend line 

that we are seeing now. But I do not expect us to exceed that number. 

The other impact to the fund will be the severity rate or the recovery rate, however you look at that. While we have some concerns in that area, the current recovery rates are generally remaining on track with what was forecasted. 

So in total right now, I would tell you that the overall dollars in 

the fund are growing, not shrinking, but we still remain on track 

with everything that was projected by the actuary when we released it in the fall. 

Senator MURRAY. Do you know when you are going to hit that 

2 percent level? 

Mr. STEVENS. The forecast for the 2 percent level was forecasted 

to be in 2013, I believe. As you know and as I would strongly caution, there are so many moving parts in the market that go into 

these forecasts, that we could hit that sooner or later, obviously depending on market conditions. 

One example I would give you. In our actuarial forecast, our 

home price index expected roughly a 9 percent drop in home prices 

in the first quarter of the 2010 fiscal year. That has not been realized. However, there is still enough instability in the market that 

we do not know when the new actuarial study is done for the next 

upcoming fiscal year, what the home price forecast will look like. 

And if stability is on the horizon, we could end up having a better 

view of when the capital reserve will be hit. If the forecast is worse, 

it could put in jeopardy our existing forecast, and those are critical 

components that we are watching closely. 

RECOVERY OF LOSSES

Senator MURRAY. You noted in your testimony that most of the 

expected losses are the results of mortgages from previous years, 

and while you are limited in your ability to effect the performance 

of older loans obviously, you can hold lenders accountable for losses 

on FHA mortgages that were improperly or fraudulently underwritten. How successful have you been in recovering losses from 

some of those mortgages? 

Mr. STEVENS. I think this is a real challenge, part of which is 

there are some limitations to what FHA is allowed to do. Fortunately, the inspector general has some additional authorities which 

have been implemented. I would tell you at this point that some 

of the measurements of that are the number of institutions that we 

have either withdrawn approval from or suspended completely. As 

was noted, there were 300 institutions in the fiscal year. There 

have actually been another 200 on top of that, in total well over 

500 institutions that are no longer allowed to originate loans in the 

FHA. 

Our ability to go after performance on previous book years, borrowing fraud or misrepresentation or violations of the law, continues to be somewhat limited, and that is why we are asking for 

additional approvals to go after institutions whether they are DE 

lenders or LI lenders to be able to require indemnification at the 
266 

institution level and that will help greatly. I do commend the inspector general. 

Senator MURRAY. That will take legislation. 

Mr. STEVENS. That will take legislation. 

But addressing fraud issues has been a significant concern of 

mine, and we have a lot more work to do going forward. Obviously, 

we made some great visibility with companies like Taylor, Bean & 

Whitaker, shutting them down in the first few weeks while I was 

on the job, and Lend America, which really required partnership 

with the inspector general to get done. And these were stand-out 

institutions, but what people do not see are the little institutions 

committing fraud like the reverse lender in Hawaii who was taking 

reverse mortgages out for seniors and investing them in their own 

annuity investment fund which they owned and operated. Well, we 

got them too. That’s just not a big headline-maker. 

And so it is a big job and it requires a lot of work. And that is 

why the first investment we are making on the technology front is 

in the fraud tools area. We released our RFP last week and it is 

a 30-day process. So we have bids coming in right now for that 

work, and that will be in the market hopefully as quickly as possible. 

GSES REFORM

Senator MURRAY. Well, as we now work to reform Wall Street 

and the financial sector and prevent any future housing crisis, it 

is really clear that we have to address the future of the GSEs. During the housing boom, Fannie Mae and Freddie Mac kind of lost 

sight of their primary mission of facilitating liquidity for safe and 

affordable mortgages. Instead we saw their zeal for profit drive 

them to take some unnecessary risks. 

So we know reform is necessary and there has to be a clear plan 

for ending this unlimited taxpayer assistance for Fannie and 

Freddie. I think we need a very thoughtful approach as we do this. 

We have to protect our American taxpayers, but thoughtful deliberation cannot turn into delay or inaction. And we need to see the 

administration recognize the urgency of reforming GSEs. 

So I wanted to ask you, when can we expect to see the administration’s plan for reforming the GSEs? 

Mr. STEVENS. Senator, what I would respond by saying is to reiterate what you said in your opening statement, that this needs to 

be thoughtfully done with care not to disrupt the housing market, 

and we completely agree with that. 

We strongly agree with the need for reform. We all recognize 

that the housing system and the role of the GSEs or whatever 

structure exists going forward will not be the same as it was coming into this crisis. That is clear. 

And we support Senator Dodd’s recommendation strongly to do 

a study with recommendations early next year. 

So to that extent, everything we do now has to be very carefully 

balanced with the need not to disrupt the markets because the 

GSEs are playing a critical role in the issuance of mortgages and 

mortgage-backed securities to keep the market stable under the 

current format. 
267 

Senator MURRAY. Well, any kind of radical change in the role of 

the GSEs could also mean a dramatic change for FHA and Ginnie 

Mae, and I am concerned about the prospect of FHA taking on significant increase in new business, given all the current challenges 

we have. 

How do you see FHA fitting into this debate? 

Mr. STEVENS. Without question, the needs in the future of the 

housing finance system under any normal view would have to consider all the participants that in some way, shape, or form have involvement by the U.S. Government, whether that is Federal Home 

Loan banks, FHA, Ginnie Mae, Freddie Mac, Fannie Mae, and 

whatever other solutions ultimately get considered. 

So the fundamental belief we have for FHA is in isolation. FHA 

plays a critical role, as it always has since the Depression, when 

it was first created. It is a countercyclical role. It has been consistent in the marketplace when other financing vehicles have not 

been available. Its role is too big today. It is unhealthy to run at 

30 percent market share as it currently does. The emergence of private capital to be sustainable in a recovery market is absolutely 

the most important step to help FHA’s role in the market begin to 

shrink back to more normalized levels. 

Senator MURRAY. Thirty percent is too much. We all agree with 

that. What do you think the market share for FHA should be? 

Mr. STEVENS. You know, I think targeting a market share for 

FHA is something that gets any institution in trouble, but I will 

say that 2 percent was also an unhealthy level. That was a sign 

of subprime mortgages and option ARMs and private label securities wrapped by rating agencies and sold into various debt obligations to unknowing investors. That was an unhealthy world as 

well. 

So if you look back through normal times, going back through 

the decades of FHA, during traditionally stabilized markets, it typically runs in the 10 percent range, maybe low teens, and that is 

sort of the range where I think FHA would be shown as a healthy 

participant in the mortgage context. 

Senator MURRAY. How long would it take us to get from 30 down 

to 10—low teens? 

Mr. STEVENS. Well, I think that is why the dialogue is so frustrating, as you said in your opening comments, and both of you 

have articulated this concern about even decisions around the 

GSEs. We are in a very unique period now. Freddie Mac, Fannie 

Mae, and FHA are consuming about 95 percent of the mortgage finance system for single family housing, and we need private capital to emerge. The first sign, as you said, Senator Bond, in your 

comments, was that—or Senator Murray. I cannot remember 

whose comments—who made the point. But as the Fed steps out 

of buying mortgage-backed securities out of the market which have 

kept interest rates low, that range of movement in mortgage 

spreads will be a clear indication of the private sector’s interest in 

getting back into the mortgage markets. And we will see. We have 

a variety of thought leaders that we have talked to. 

Senator MURRAY. So we do not know what the withdrawal of 

these supports is going to be. Yet, we are all kind of looking out 

there. Do you have a guess what it is going to do to—— 
268 

Mr. STEVENS. Guessing is a dangerous game. I have been in this 

industry for 3 decades. 

Senator MURRAY. How about a thoughtful—— 

Mr. STEVENS. Here is my thoughtful view, Senator. I actually do 

not expect mortgage rates to back up as significantly as some of the 

extreme negative views are when the Fed steps out. That will be 

the first sign of health. The first-time home buyer tax credit ends 

here. The last applications are at the end of the month. It expires 

at the end of June completely. That will be an interesting move because 2.2 million Americans filed for tax benefits under the FirstTime Homebuyer Tax Credit Act. And so that will be a next test. 

Redwood Trust has already issued one mortgage-backed 

securitization in the private sector in the last couple of weeks. They 

are getting ready to do another one. The trade levels of those trusts 

we are looking at very closely. 

Each of these are indicators to me as to what will happen. Having been through a lot of—I lived in the oil patch crisis in Colorado 

and had branches in Missouri at the time many, many years ago 

working for a bank, and I do recall the impacts of going through 

that kind of cycle. You know, it takes confidence for investors to 

return. Private capital will come back when they believe there is 

strong regulation, that the rules of the road are clear, and that 

they believe that home prices are past the point of severe instability. There will always be variations, but stability is what people 

will invest in. The markets do not like instability whether it is in 

the equities markets or in the housing market. 

Senator MURRAY. Thank you very much. 

Senator Bond. 

FHA LOSSES

Senator BOND. Thank you very much. Your questions and your 

responses raised a whole bunch of interesting areas. 

Let me start off. What are the current losses that FHA is realizing under the MMI Fund? How does it compare to last year, and 

what is your projection for the future? 

Mr. STEVENS. If you give me just a moment, I would like to be 

as accurate as possible. 

Senator BOND. Okay. 

Mr. STEVENS. So through the end of March, we have actually 

seen current delinquency rates have dropped for January—or excuse me—for February and March, we saw delinquency rates drop 

fairly significantly, 15 percent, over where they were in December. 

So while we are seeing delinquency rates drop, we are seeing foreclosures, actual, real foreclosures increase. And so what we expect 

to have occur for the year is 125,000 foreclosures with an expected 

severity rate on each of those losses of somewhere in the range of 

50 percent. And so, the specific losses to the fund at year end—and 

George, I do not know if you know the number that is in the MMI. 

SPEAKER. No, but like you said earlier, the capital resources have 

been increasing. 

Mr. STEVENS. Yes. I mean, the reality is our capital resources 

have been increasing. So let me step back. We reserve very differently than a bank does. A bank under a Basel standard will hold 

for loan loss reserves for anywhere from 2—sometimes 1 year to a 
269 

3-year period they will hold for loan loss reserves. So the FHA’s reserves function is we hold capital in reserves for a full 30 years’ 

worth of losses. Much of that loss expectancy will not hit until peak 

default periods, 2, 3, 4, or 5 years into the amortization of a mortgage. 

So when we reported that we were below our 2 percent capital 

reserve, it was not our total capital, Senator. It was our secondary 

loss reserve, which is an additional loss reserve above our primary 

reserve account. And the two combined reserve accounts are actually in excess of about 4.5 percent of total capital. The 2 percent 

reserve requirement is based on the secondary account, which contributes to that. That is what had fallen below 2 percent, but our 

primary reserve account actually continues to grow simply because 

we are not seeing the losses that were fully expected when the actuarial audit was done. 

So without trying to sound evasive, the reality is that we are not 

seeing the real losses as yet. Our actual reserves are growing. The 

forecast is that under the existing book of business, we will exhaust 

the entire amount down to that remaining capital reserve of .53 

percent. That forecast assumed that we do not originate any new 

loans. So as we continue to originate new loans of such high quality, the fund is actually rebuilding faster with better assets offsetting that loss reserve. 

Senator BOND. Have you got a number? How many billions will 

you experience in loss this year? 

Mr. STEVENS. In this year? 

Senator BOND. You must have some forecast. 

Mr. STEVENS. Do we have a forecast, George? 

SPEAKER. We are not forecasting. 

Mr. STEVENS. Yes. So we forecast the reserve number. We do not 

forecast this current year number. But, Senator, if it would be all 

right, I would like to give you a more thoughtful answer. 

Senator BOND. Yes, we would like to know because we need to 

get a handle on this somewhere. We have got reserve accounts and 

reserve accounts are growing, but losses are out there. There is no 

question that there are losses out there, and we need to have a 

handle on where all this is going. 

Mr. STEVENS. Senator, if I may, I would tell you that we would 

expect by year end that the fund would be either about where it 

is now or higher. The actual reserves will be about where they are 

now. What it will impact, unfortunately, from a budget standpoint 

will not be our actual losses. It will be what is forecasted in what 

we have to reserve against. So those will be very different numbers 

in terms of how we look at it. But I will submit to you a more 

thoughtful response to that question. 

Senator BOND. Okay. You mentioned that you are still confident 

in the official $5.8 billion estimate or whatever it was that OMB 

came up with. CBO came in with a $1.9 billion in receipts. What 

is the difference? How do we resolve this? We are kind of looking 

at hither and yon, but we need to have where we are rather than 

hither and yon. 

Mr. STEVENS. So the challenge is both analyses are based on 

views on various performance characteristics. The difference in the 

CBO score, in particular, can be mostly isolated into two variables. 
270 

One is they assumed much higher prepayment speeds on our portfolio than was in the OMB estimate. Interestingly, prepayment 

speeds are a derivative of interest rates. If interest rates drop dramatically, you get much higher refinancing and loans will pay off 

earlier. If interest rates remain stable or rise, you would actually 

expect prepayment speeds to be slower. And so depending on that 

forecast, you are going to have an impact to prepayment speeds, 

that combined with default rates. 

So that is one variable that is very different, and I would question the prepayment speed assumptions, but I am sure they are 

based on rational logic. 

The other one is the severity rate. So on your losses, you know, 

what is going to be percent of loss on each actual unit of real estate 

that goes into foreclosure. And the CBO score expects higher severity rates than the OMB score does. In that particular measure, I 

would say there is probably a little truth to both, and we will look 

at that very closely. 

But it is interesting that the prepayment speed issue—if you assume you are going to have losses and worse severities over the 

long term, you would assume that the market is worsening. My 

own internal logic would say that if interest rates are dropping, 

you are probably going to have increasing volumes of new home 

sales which may actually level or spur recovery. 

So while there may be some natural conflict there, I think both 

are based on rational input. Both expect positive receipts from FHA 

in either case. The amount differs because of those two variables. 

Senator BOND. You said in your first element was the prepayment, and that if interest rates go down, prepayment goes up. So 

you get better returns. But I do not see how, with the problems we 

have, which are too much like Greece’s problems with our debt 

with an unending series of spending and declining tax revenues, 

somewhere those interest rates are going to go up. And I do not 

see—even though the Federal Reserve has been accommodative, 

perhaps overly accommodative, I do not see any prospect that interest rates are going to get lower. Are you predicting lower interest 

rates rather than higher? 

Mr. STEVENS. I am not predicting lower interest rates. I think we 

would have to ask the CBO what variables they assumed for faster 

prepayment speeds on our portfolio than the OMB view was, or 

quite frankly, our own independent actuary had as well similar 

prepayment speeds to OMB. 

Senator BOND. I tell you what. We probably are not going to 

hash this out. 

Mr. STEVENS. Yes. 

Senator BOND. I have got a staff that loves to get into those 

things, and maybe they can work with your staff and we can see 

if we can find some way to resolve those. And we will ask the inspector general and your actuary and everybody to get together and 

have a whole lot of fun working those things out. 

Mr. STEVENS. That sounds great. 

Senator BOND. If you do not mind. 

Mr. STEVENS. That is wonderful. 
271 

FINANCIAL REFORM

Senator BOND. Now, while we are asking easy questions, as you 

have indicated and the chair has indicated, as you know, we are 

debating a financial regulation bill on the floor, and from what I 

have learned—and granted, some of it comes from the book, The 

Big Short—the problem of shaky subprime mortgages was exacerbated in Wall Street by creating mirror derivatives based on the 

subprime securitized mortgages. And these—I call them computer 

game shadow derivatives—magnified the impact. In other words, 

Wall Street was making a whole bunch of money on derivatives 

that mirrored the subprime but these were not actually based on 

the subprime loans themselves. But when the subprime loans went 

down, all of the value of those derivatives, which for some reason 

were successfully marketed to people who were willing to go out on 

a limb—is that an accurate assessment of what happened in the financial system? 

What kind of regulation would be necessary to rein in the risk 

that the excessive Wall Street manipulation of derivatives will not 

impose in the future the same kind of serious risks to the financial 

marketplace we have seen not just in America, but we managed to 

poison a lot of the world’s economic systems? 

Mr. STEVENS. Which question was easier, this one or the last 

one? 

Here is just a view that I would articulate, that the financial reform bill is critical. The risk retention component, just as one example, clearly under any of the amendments that are being offered, 

would require risk retention for those kinds of programs. Looking 

back at how these products were created and manufactured and 

being in the private sector and watching that occur, there was 

clearly a lack of alignment on incentives, short-term gain based on 

models that were not tested, and there was no recourse or skin in 

the game for that creation. 

I think to that end, whatever ultimately comes of the amendments on sort of vanilla programs or things offered by the Landrieu 

amendment or some of the other amendments that have been offered, I think one of the most critical values that will come of financial reform, if it gets passed, which I strongly encourage, is that 

without question, no one is carving out the products that you address. I think to that end, having to hold capital against loss is 

clearly—and you made that point about capital reserves that we 

are requiring at an institutional level. In my opinion, capital reserves on risk assets, putting a risk-based weighting against those, 

is the clearest way to require that skin in the game and interest 

in making sure that your evaluations of risk are appropriate to the 

real risks that you ultimately see. 

Senator BOND. I have run over my time. 

But the SEC has now come in full force in going after these. But 

it is my understanding that they or—I think they are the ones that 

should have been regulating these. And I heard a great Texas 

country band called Asleep at the Wheel recently and I was thinking about how that might be a good moniker for what went on in 

the regulatory agencies. Is the regulation of risk an SEC function? 

What agency should be doing this? 
272 

Mr. STEVENS. Without going back to the past and the multiple 

regulators—— 

Senator BOND. Okay. Going forward, who ought to—— 

Mr. STEVENS. Going forward, one of the things that I think is 

also important about the financial reform bill is the creation of a 

CFPA, having a single regulator to oversee mortgage products that 

are directed to consumers. You know, I think to some degree you 

have articulated a very important point. When you have multiple 

regulators, specific ownership of specific risk attributes may become murky. And I am not sure that is the case in the past. I have 

personal opinions, but I know that Secretary Donovan and Secretary Geithner would have clear statements to that effect. But I 

would say that that is another value proposition in the financial reform bill to get this through, is to identify a single regulator responsible for regulating mortgage products. 

Senator BOND. Thank you, Madam Chair. 

MAKING HOME AFFORDABLE PROGRAM

Senator MURRAY. Thank you. Thank you very much. 

About a year ago, the administration launched their Making 

Home Affordable to help homeowners with foreclosure. One of the 

programs is this HAMP, Home Affordable Modification Program, 

was designed to make mortgages more affordable, lower interest 

rates, spread mortgages out, now by writing down principal. We 

were told that that program was supposed to help 3 million to 4 

million families by 2012, but as of the end of March, only about 

230,000 homeowners had received any kind of permanent modification, which is far short, I think, of expectations. 

Can you tell us at what rate do we need to see permanent modifications occur in order to reach that 3 million to 4 million goal? 

Mr. STEVENS. So if I may, I would just like to back up to the initial program and kind of where we are today. When the program 

was first rolled out, we all know that adoption was slow in the program. Bank readiness to manage the HAMP program was not developed at a pace that was acceptable to the administration. 

In July of last year, both Secretaries Geithner and Donovan, 

asked in what became the infamous fly-in where all the CEOs of 

the banks involved in HAMP flew into Washington, and a lot of 

pressure was put on to get the program up and going and the announcement of the scorecard at that point. 

From July until the end of the year, there was a rapid ramp-up 

in trial modifications. Unfortunately, a lot of the initial modifications done by some of the institutions were modifications first without getting the appropriate documentation to ensure that they 

would be sustainable into permanent mods. 

And so what we may see is a relatively higher cancellation rate 

of that initial population. 

Since then, through a learned process, we have transitioned to 

where documentation and qualification is now going to be done upfront at the trial modification period, and we believe that there will 

be a high transition from trial to permanent mod on all mods going 

forward. 

So I just wanted to put that out there. We just this week had 

another fly-in with the executives of all the institutions in HAMP 
273 

and reiterated and went through the details of the new process. I 

left with the feeling of confidence that at least that portion is done. 

We will not have that high fallout. 

I would say that we still have well over a million homeowners saving $500 a month in trial modifications, of which, to your point, 

the 230,000 have converted to permanent mods. We have 108,000 

more that have accepted a permanent mod and are waiting to sign 

documents. You will see some rapid activity over the next 60 days 

because the institutions all involved in HAMP have pledged to 

clear out their pipelines of backlogs from that initial phase over the 

next couple of months. So we will see a big transition there. 

Senator MURRAY. So by the end of the summer, we will see better numbers? 

Mr. STEVENS. I think we will see some interesting numbers for 

the next couple of months, as we see the backlog of nonpermanent 

modifications either go permanent or go into portfolio modifications 

that are not part of HAMP or perhaps pure cancellation. So there 

will be some noise there as they clean out the pipelines. 

We will then see, I believe, a regaining of activity on trials and 

permanence. That, combined with our enhancements to HAMP, 

which we just recently announced and the FHA program we believe 

will remain on track to hit the 3 million to 4 million homeowners 

that the administration committed to by 2012. 

Senator MURRAY. All right. 

At home I am hearing from a lot of counselors and homeowners 

about the problems that they are facing in getting permanent mortgage modifications. It is very frustrating. In fact, it is actually 

anger, especially when we hear about the profits that a lot of these 

banks are making in large part due to Federal taxpayer assistance. 

Since a lot of these banks have received direct or indirect Government assistance, is there anything the administration is doing to 

make sure that they are working in good faith now to assist these 

troubled homeowners? 

Mr. STEVENS. There are several things that have occurred and I 

would be eager to follow up with either of your offices with additional information, but let me just say a couple of things. 

One is, I think you are all aware we have the Making Home Affordable Web site. We also have the Making Home Affordable hotline where consumers can call in, if they are not getting the response they think they need from their banks, and we have teams 

that will triage those and respond to them fairly quickly. So they 

do have a direct, non-institution channel if the point of frustration 

comes. So that is a backstop at the point where they are probably 

already frustrated. 

On the front end, that was one of the—— 

Senator MURRAY. My front desk in my Seattle office would tell 

you that that is not working very well. 

Mr. STEVENS. The hotline is not working? 

Senator MURRAY. Yes. 

Mr. STEVENS. Okay, that is good feedback. I would love to hear 

more about that. We actually talked about that in our meeting this 

week. 

You know, the other issue that has gone on with the HAMP program is the banks did not staff up. People would call initially. They 
274 

could not get someone on the phone. They would send in packages. 

We have heard stories of lost documents. We have done several 

things to try to address that environment. 

Senator MURRAY. Banks not returning phone calls forever. 

Mr. STEVENS. That is right. And I get a lot of personal e-mails 

and phone calls from just consumers that I have to get involved 

with, just as I am sure your offices do, and their frustration level 

is very high. 

There are several things we are working on in the banks. One, 

from a readiness standpoint, they are clearly better off today than 

they were even 60 days ago. So we are hopeful that will happen; 

that they are onboard. We have made them all designate a czar or 

a head of the HAMP program within their institutions that is solely accountable for HAMP and has the authority to make decisions 

around HAMP. That was a directive of the meeting this week. 

Senator MURRAY. Will we know who those people are so we can 

direct our constituents to them? 

Mr. STEVENS. I will work with that office, and we will try to 

make sure that list is made public for you. 

Senator MURRAY. If it is just one more phone number that they 

call that they cannot get to, it is not going to be very helpful. 

Mr. STEVENS. Right, I recognize that. 

This is a directive. So we have asked them to identify that individual, make it clear. We want to assemble who the head of that 

is, and we are going to have a much increased frequency of meetings between the Treasury Department and HUD to meet with 

these heads for all the institutions to make sure they are staying 

onboard with the HAMP process. 

We have changed documentation standards. We have done field 

checks. We have gone out and done individual field visits with each 

of the institutions to investigate their process. We are sharing best 

practices. 

But without question, the frustration is real. The lack of activity 

and readiness was absolutely there. They were not ready. They 

continue to get ramped up and onboard from an operational standpoint. And then there are a lot of issues in just getting access to 

the homeowners, having them understand the paperwork involved 

from the trial modification to transition to the permanent modification. 

So all of these are real challenges, Phyllis Caldwell, who is heading up the office for Treasury, is a great resource and is very focused on it on a full-time basis solely on HAMP to try to make sure 

that these problems are resolved, but without question, I mean, 

quite frankly this was a huge program that was implemented. It 

has never been done before. The banks did not get ready quick 

enough. We have all collectively learned about what was not working through the process. I think a lot of—— 

Senator MURRAY. Well, I guess from my point of view, I want to 

know that the banks are working to do this rather than doing everything they can to make it not work or stall it or not get involved. 

Mr. STEVENS. We agree, and we made that point. I can assure 

you that the meeting that was held this week, which was attended 

by mostly CEO levels of all the major lenders—Assistant Secretary 
275 

Herb Allison was very direct on that subject, as were all of us at 

the table about their needing to be ready to stop these customer 

responses, these consumer responses that are so frustrated. And I 

have personally spoken to them myself as well, and I feel without 

question their frustration and pain. They have committed to going 

there. They all acknowledge there are still going to be some 

missed—just because of the vast number of people, but we need to 

do as much as we can to eliminate that frustration. 

If it would be okay, I would actually like to have Phyllis Caldwell 

draft a response for you on this question—— 

Senator MURRAY. I would really like that. 

Mr. STEVENS [continuing]. To lay out with specificity what is 

going on so that if there are questions or concerns you have from 

there, we can respond further. 

Senator MURRAY. Okay, and to give her our feedback that this 

is a huge frustration for a lot of our constituents right now. 

Mr. STEVENS. Yes. And she knows it and we have had meetings 

with many Senators and Members of the House on this issue. We 

all get it. We all know the score now, and the pressure has to be 

on these banks to get ready to view this as the same priority as 

they would originating a new loan through their sales force. They 

have pledged their commitment. They re-pledged it at a meeting 

that we made them fly in for this week. It was a very stern discussion on the subject. So we share your concern. We share the frustration, and it is a full court press from both Secretary Donovan 

and Secretary Geithner. 

Senator MURRAY. It may take more than being stern. 

Mr. STEVENS. It might. 

Senator MURRAY. Also in my last few seconds of my time, there 

is an FHA HAMP program which applies only to FHA mortgages, 

and that is the one you have just been talking about. Okay. 

And if you want to, please comment on that, and I will turn it 

over to Senator Bond. 

Mr. STEVENS. Yes. The HAMP program I was referring to was 

not FHA. It was the broader HAMP program, but that does include 

the FHA numbers. The FHA HAMP numbers are actually very 

small. They are in the low thousands, and I think the reason for 

that is FHA has a loss mitigation program that has been so successful and has been in the market for many, many years. We have 

just a greater experience with dealing with loss mitigation, and to 

that extent, we have addressed over 600,000 in-distress homeowners in the last year on our own outside of HAMP. And I would 

be glad to report the resolution numbers on those, if you have interest. 

Senator MURRAY. That would be good. 

Mr. STEVENS. Okay. 

Senator MURRAY. Thank you. 

Senator Bond. 

Senator BOND. Thank you, Madam Chair. That was an area that 

I wanted to explore, and you have done that, and we thank you 

very much, Commissioner, for your comments on it. 

Let me ask in a related area. It is my understanding Freddie 

Mac was directed to buy back troubled loans from investors, taking 

the losses on the mortgage. It seemed to me that that policy was 
276 

designed to bail out lenders on their risky investments but did little to save a home with a risky loan for the homeowner. Am I missing something here? You want to keep the investors happy, but if 

they are losing their skin in the game, should we be bailing them 

out? 

Mr. STEVENS. I apologize. I do not have the specifics on that. I 

will tell you that in meetings with Freddie Mac and Fannie Mae, 

which we have had, this week, the vast majority of their efforts are 

not there. The vast majority of their efforts are in working on the 

HAMP initiatives and modification and HAFA, the refinance program, and very little on the buybacks. I could guess, but I would 

rather not guess for you and get specifics back on what assets they 

bought. I do not know the size of it. 

HUD INSPECTOR GENERAL EFFORTS ON FRAUD AND ABUSE

Senator BOND. We are interested in getting a handle on this because, as you have indicated, there are so many moving parts in 

this that we want to try to get a handle on as many as possible. 

We talked about the fraud and abuse efforts. Is there a joint 

oversight program with Justice, Treasury, HUD inspector general, 

and other agencies? You talked about 365 cases have been referred 

to the Mortgage Review board. Do you know how many of those 

cases have—question No. 1, is there a joint effort? Question No. 2, 

how many criminal indictments? Do you know offhand? 

Mr. STEVENS. Senator, I would probably defer to the inspector 

general who is playing a huge leadership role in the fraud joint 

task force. So I would encourage—— 

Senator BOND. Maybe we could invite Mr. Donohue to come to 

the table, if you do not mind, just briefly on this one. 

Mr. DONOHUE. First off, may I thank you very much. I would be 

remiss, Senator, if I did not respond back to your first comments. 

I am so grateful to you for your support. I would be remiss in not 

mentioning Senator Mikulski and Senator Sarbanes and Senator 

Murray as well and John Kamarck of your staff and Megan from 

yours, Senator Murray. 

This is not possible. You mentioned seller down payment assistance. I think if seller down payment continued, we would be having 

a different discussion here today. It is a result of your leadership 

that that is possible in support of that effort. 

We are very heavily engaged with the Department of Justice. We 

are involved in a major Federal fraud task force that I sit in with 

Attorney General Holder and his deputy staff. We had three summits recently: one in Miami, one in Detroit, and one in Phoenix, Arizona. And we had a chance to have people come in from the industry, people who are victims and talk about some of their concerns 

and also the law enforcement community as well. 

The reason I mention that, getting back to Senator Murray’s concern, you were talking about the counseling which is very important to you. One of the things I do want to mention to you when 

you spoke to that is what we are finding and the concern to us is 

that we are finding fraudulent counseling going on—— 

Senator BOND. Oh, really. 

Mr. DONOHUE [continuing]. Where people are going back out and 

being contacted and being approached to give certain fees of sorts. 
277 

And of course, that person disappears in the night or continues on 

the fraudulent activity. That came out in all those three summits 

very actively. So it is not just the challenge of—the statements that 

the Commissioner made, but also we are seeing a significant 

amount of fraudulent activity as well. 

As far as our cases are concerned, we have about 2,400 civil investigations on right now with regard to cases specific to the FHA 

fraud activity. We have created a civil fraud initiative. And you 

mentioned about the other agencies working together. I was on the 

National Bank Fraud Working Group back in the RTC days. And 

I think what we are seeing now is a collaboration of law enforcement working together. 

I think it is a great challenge, sir. I think that these regulatory 

agencies talking to each other, working with them collectively—I 

have spoken to the Commissioner about setting up a consortium 

with Fannie and Freddie and the other GSEs. The best practice. I 

would like to see standard forms applying with regard to this mortgage activity. I have spoken to that in my testimony. 

So we are very active. We are working well with regard to law 

enforcement agencies and, like yourself I share the same sentiment. I would like to see a lot more people in orange or red suits 

as much as I could on these cases. 

Senator BOND. I know by the fall of 2008, I was following very 

closely my home area. The Eastern District of Missouri U.S. Attorney had initiated three major actions with numerous parties involved. I have not had any follow-up or heard how many criminal 

prosecutions related to mortgage fraud. I do not know if they were 

all FHA—have been initiated, how many have been concluded with 

a successful conviction. Do you know that? 

Mr. DONOHUE. Well, sir, my semi-annual report I was just given, 

indictments and information from the period of April 1, 2009 to 

September 30, 2009, 1,182 indictments and information; convictions, pleas, pretrial diversions, 847. 

Senator BOND. Good. That number needs to be publicized because that is the greatest prophylactic to let people know if they 

are going to do it. 

I was concerned to hear your comments about fraudulent counseling. A few years ago, Senator Dodd and I created a $180 million 

foreclosure counseling effort. I talked with people all over my State 

who were involved in the counseling, and they were having some 

success, minimal success. But the one thing they emphasized to me 

was foreclosure counseling is not good enough. There has got to be 

pre-purchase counseling before somebody buys a home. We have to 

have an independent and maybe not a fee-based counseling program set up to sit down with the family, potential home buyer, explain to them what their obligations are, and look at their finances 

to see if they can buy a home. 

Commissioner, obviously you have got some thoughts on that. 

Mr. STEVENS. Yes. We share the concern. In fact, I have been 

hosting meetings with industry participants to talk about financial 

counseling particularly related to managing personal finances and 

mortgage finances before you make the decision to buy a home. We 

have had the help of members of the Housing Policy Council and 

others come in and show us and make recommendations of how we 
278 

might go down that path. It is very complicated to institute a whole 

new way of doing pre-purchase financial counseling as opposed to 

what most housing counselors are doing today, to your point. Given 

the huge volume of foreclosures in the market, most housing counselors are overwhelmed with homeowners in distress. So the ability 

to transition into being able to have the time and scope to do prepurchase sort of financial literacy becomes more challenging. 

The other thing is most of the agencies in Washington that deal 

anywhere in the financial area have some sort of financial literacy 

classes that are available on their Web site, and so there is some 

opportunity to consolidate those together. But we are working on 

that right now and hopefully will be able to report back on that 

sometime in the future. 

Senator BOND. Well, thank you. I think that is very important. 

Senator Murray and I are concerned a whole lot about what happens in Washington State and Missouri. And the people on the 

ground are the ones who really need to do it. In our State, 

NeighborWorks has been a very good partner. And we look forward 

to seeing those efforts expand and perhaps more assistance is needed in that pre-purchase counseling. 

Mr. Donohue, I am disturbed to hear that there are fraudulent 

counselors. But again, the best place for them is in Governmentrestricted housing. I wish you the best in assuring their placement 

in that kind of facility. 

Mr. STEVENS. It is interesting. The President even spoke about 

this when he first came into office. But if you watch TV and see 

someone helping someone walk away from their home, I think that 

was one of the things covered on the recent piece on strategic defaults. They called themselves counselors. They charge a couple 

$1,000 to counsel a family in distress, and they are not authorized. 

Free counseling is available, and getting that information to distressed homeowners is the big challenge. 

GSE LOSSES

Senator BOND. One quick question. I do not know if you have the 

answer to this. On the GSEs, do you know how much of the losses 

are coming from their old books of business as opposed to the new 

business like foreclosure mitigation efforts like HAMP? 

Mr. STEVENS. I recently just looked at some of their performance 

data, and Senator, like with the FHA portfolio the vast majority of 

these losses are on older books, 2006, 2007, and 2008 are just terrible portfolios. They are bad for FHA and they are bad for Freddie 

and Fannie. And it is those portfolios that we are going to be all 

experiencing losses on and paying the price for several years more 

to come. 

Senator BOND. Thank you very much. I hope that the new business does not catch up with the old business. Thank you very 

much. 

I have a commitment I have got to make, but I appreciate very 

much your testimony. We have got a lot of interesting follow-up 

that we are going to ask the staff to do. 

Thank you, Madam Chair. 

Senator MURRAY. Thank you very much, Senator Bond. And I 

would just say I have a financial literacy bill that we start teaching 
279 

basic financial skills back in our elementary schools. You and I 

probably are the few here who remember our banking Fridays at 

school where we learned how to balance our checkbooks and how 

to read basic financial statements and that is lacking in education 

today. 

Senator BOND. The only thing I would add, I took a very highlevel law school course on banking and bankruptcy. And I was having trouble with my checkbook, and the instructor said my checkbook never works out right. So I always take the bank’s view from 

it. 

HAMP

Senator MURRAY. A prevalent opinion today. 

Moving on, thank you very much, Senator Bond. 

I wanted to go back for a second to the HAMP program. Originally it was focused on reducing interest payments and spreading 

mortgages. The administration has changed that, focusing on principal write-downs and relief for unemployed borrowers and an expansion of the existing refinance program. 

In order to participate now, lenders are required to write down 

principal and make sure that a borrower’s mortgage is affordable, 

as measured by total mortgage debt, including both their first and 

second liens. As I talked about in my opening statement, these 

mortgages do come with additional risk, and $14 billion in TARP 

funding has been set aside for that initiative. 

Commissioner Stevens, how much additional risk do you expect 

to find these refinanced mortgages to carry? 

Mr. STEVENS. Senator, the way we are looking at the program is the allocation of the $14 billion in TARP funds will be to cover the 

incremental risk exposure on these loans. While we have modeled 

various paths of the loans that come in, the variability will be on 

seeing the actual loans as they are originated. So, for example, as 

you are aware, we allow a combined loan-to-value where a second 

lien holder can subordinate up to 115 percent. It is estimated that 

one-half of all negative equity loans in America have a second lien, 

but we do not know how many of those will come into the FHA 

portfolio. Those that have subordinated second liens are going to 

have a higher risk weighting on our portfolio, as we see them come 

in, than those that do not. 

Likewise, the FICO score distribution can have a wider range, 

and if the FICO distribution ends up being much lower on the 

scale, they will have a higher risk weighting than those that do 

not. 

So we have the $14 billion allocation from Treasury. We do not, 

but that will be assigned to offset the claims from the lenders. As 

the loan comes in, we will be evaluating that volume coming in. If 

it skews off the path, we have the ability in the program, as announced, to stop it with little notice. And our Chief Risk Officer, 

Bob Ryan, is tasked with managing that overview. We will have 

the data of all the loans coming in as they are being insured. So 

we will just watch the volume coming in, the distribution of all 

those attributes that can cause risk, what risk rating we assign to 

those, and we will stop the program at a point in time if the risk 

seems greater than what we originally foresaw. 
280 

DEFAULT RATE

Senator MURRAY. What is the default rate that you are assuming? 

Mr. STEVENS. Without giving specificity—and the reason why I 

am trying to avoid is there is a wide range of default expectations. 

There is a high default rate, which would be something similar to 

what we are seeing on some of our worst books of business from 

the past years. There are some estimates by some economists who 

think this is actually going to be a better performing book than 

even a standard refinance because the borrower incentives to come 

into the portfolio are that much higher. So to that extent, we know 

we have a bucket of risk mitigation dollars from TARP that will 

be available to the lenders to pay their claims, and that is why it 

is important to watch what comes in because the distribution could 

be from very low to very high. 

It is kind of like stochastic modeling where you are looking at a 

variety of outcomes. We just know that we are going to use those 

real loans coming in to identify what path they are coming in on, 

and that will help us forecast as to when the funds will be exhausted. 

Senator MURRAY. How much of the $14 billion will actually cover 

the costs that are expected to result from additional risk and how 

much will be used to provide incentives to lenders or help extinguish second liens? 

Mr. STEVENS. The only incentives that are being provided at all 

are incentives for second lien extinguishment. There are no servicer 

incentives provided in the FHA solution, and there are no first lien 

principal write-down incentives whatsoever. So the private sector 

will bear all the costs of writing down the principal balance and refinancing that mortgage into a new FHA mortgage. So the only 

variable on the $14 billion will be the second lien, and without 

again trying to be evasive, because of the various paths and what 

our expectancy is on how many of these will have second liens 

versus those that will not, we have a wide range. I would say for 

a simplistic view, we expect the second lien extinguishment portion 

to be a relatively small percentage of the $14 billion because it only 

pays pennies on the dollar anyway, and the vast majority of the 

$14 billion will be to offset risk to the FHA portfolio. 

We have pledged to report these numbers and share them with 

a high level of frequency with the Department of the Treasury. We 

are both going to be reviewing the actual assets coming in carefully 

together because our primary focus is not to add incremental risk 

to the FHA portfolio through this initiative. 

STRATEGIC DEFAULTS

Senator MURRAY. In my opening remarks, I mentioned the concern I have about strategic defaults, people who are defaulting because they are just making that decision to do it not because they 

are personally not able to make their mortgage payment. I am concerned that this could provide some serious instability in the market, and I wanted to ask you, is there any good data today on how 

serious this problem is or something that you are seeing with FHAinsured mortgages? 
281 

Mr. STEVENS. We have done a great deal of research into the 

strategic default area. There is no history on this. Strategic default 

is a new anomaly for this recession. And as I am sure you are concerned and I am concerned—I was interviewed on 60 Minutes on 

Sunday on this subject. There is a significant moral hazard that 

will pervade the mortgage finance system for decades to come 

should this become a real problem. 

Based on estimates we have gotten from independent third party 

analysts which include the GSEs’ view as well as economists like 

Mark Zandi, it is estimated that real strategic default risk is in the 

single digits as a percentage of overall foreclosures. So somewhere 

between 7 and 9 percent are sort of the current estimates of what 

are real strategic defaults. 

Now, the issue ends up being that negative equity is highly concentrated in five key States, the sand States plus Michigan. And 

in those States—in Nevada, which is the worst hit, for example, if 

you look at all negative equity loans, which is somewhere between 

11 million and 15 million loans that have negative equity, about 

one-half of those are either second homes or investor properties, 

and some small percentage of those are also super-jumbo, millionplus dollar homes. So when you isolate back down to the rest of the 

borrowers that have negative equity, you break that down into two 

categories. The greatest category will be those—our default risk 

will be those that are in distress that have lost their jobs, had income curtailment. 

Laurie Goodman of Amherst Securities suggests that negative 

equity could contribute 1 percent to the unemployment rate because people just cannot accept a job somewhere else because they 

cannot get out of their home without going into foreclosure. That 

is where the focus of our efforts is. 

But our solution with FHA does allow an investor, if they think 

a strategic defaulter is going to walk away, to write down their 

principal too and put them into a refinance, if they will stay. But 

we do need to track this carefully over time and see, to the extent 

this becomes a greater hazard because the ramifications, as I am 

sure you would agree, go far beyond just the foreclosure risk to 

those communities. It will affect how loans are priced in the future 

if that is considered a real risk. 

Senator MURRAY. And the other question I wanted to ask you 

about is the so-called shadow inventory. We obviously have an 

oversupply of housing right now, and there is a concern that with 

all the newer imminent foreclosures that are coming or banks that 

are holding repossessed homes if those start flooding back on the 

market, what kind of impact that would have. Could you talk a little bit about how big perhaps the shadow inventory—— 

Mr. STEVENS. Again, this is another where there is great research on it. In fact, I have a couple of good studies I would be glad 

to send to Megan or however you want me to get it back to you 

that have been done independently. 

The shadow inventory is real. And the in-foreclosure numbers 

are clearly higher than the actual foreclosure numbers. I know that 

in the FHA portfolio and I see it in the numbers at both of the 

GSEs. So there are a lot of reasons why that has been built up, 

part of which is just the overwhelming volume that hit many of 
282 

these counties that have to process foreclosures, moratoriums 

placed in various States or areas where the courts put a freeze or 

bans on foreclosures for a period of time. Clearly the loss mitigation efforts by FHA through HAMP, even portfolio modifications 

have also slowed the process down, and banks are obviously being 

much more aggressive to try to delay the foreclosure if they can 

find any way to work out a borrower’s situation in most cases. And 

so the inventory of in-default is clearly rising. 

Now, there are some estimates that based on some home price 

appreciation forecasts, even modest ones, that a good percentage of 

those foreclosure problem cases could be resolved just by some 

slight improvements to unemployment and some slight improvements to home values, in other words, that they are close enough 

to the line that they could back into an affordability with some involvement on either forbearance or modification efforts that are 

being done today. 

But it is still—without question, the numbers are large. At FHA, 

for example, our in-foreclosure numbers are about double what 

they were a year ago in foreclosure, but our actual foreclosures are 

not double of what they were a year ago. That is why, even though 

we are behind on actual foreclosures today based on our forecasts, 

I expect them to rise based on what I am seeing in this shadow 

inventory that is coming in. 

So we are looking at the data very carefully. And again, I would 

be glad to share at least some independent looks that I may have 

available with your office. 

Senator MURRAY. I would really appreciate that very much. 

With that, I want to thank both of you, especially Commissioner 

Stevens, for your input today. It has been very valuable. 

ADDITIONAL COMMITTEE QUESTIONS

There will be questions submitted by a number of our subcommittee members. We will leave the record open in order to have 

you respond to those. 

[The following questions were not asked at the hearing, but were 

submitted to the Department for response subsequent to the hearing:] 

QUESTIONS SUBMITTED BY SENATOR PATTY MURRAY

FHA RISKS

Question. As we have discussed, CBO recently came out with its re-estimate of 

the receipts that FHA will generate from mortgages insured in fiscal year 2011. The 

result is a loss of $4 billion in anticipated receipts. This is not the first time that 

CBO had disagreed with OMB’s assumptions for receipts. Do the current models appropriately account for risk? 

Answer. FHA spends a great deal of time and effort studying the credit risk of 

its insured portfolios. The valuation models used for the single family insured portfolio have been developed over a 20-year period and capture all of the essential factors needed to value a national portfolio. Those include borrower credit quality, 

downpayment rates, house price changes, and interest rate movements. 

For its scoring of the fiscal year 2011 budget, the CBO did not have a similar 

credit risk model for FHA. They are in the process of building such a model for scoring the fiscal year 2012 budget. CBO also, but not unlike OMB, prefers to err on 

the side of conservative judgments, especially when there is uncertainly involved. 

The nature of any disagreements on the value of FHA loan guarantees generally 

comes down to uncertainty with respect to future housing market conditions. There 
283 

is no right answer. There are only informed judgments, and persons of goodwill can 

differ markedly in their preference for some risk-adjustment factor in forecasting. 

The direct impact of larger economic risk adjustments in a budget forecast is to 

lessen the expected budget receipts generated from the FHA insurance programs, 

and thus lower the overall receipts the Congress has when formulating a budget. 

The indirect impact is to increase the probability that, in future years, there will 

be beneficial budget re-estimates for the affected cohorts of loan guarantees, and 

lessen the probability of adverse re-estimates. 

FHA PRIORITIES FOR INVESTMENTS

Question. As I mentioned in my statement, improving the information systems at 

FHA are critical. As you know from coming from the private sector, the systems at 

FHA are outdated and are in some instances opening FHA to unnecessary risk. Last 

year, we provided HUD with significant resources to invest in IT systems. This included funding for immediate fraud detection and mortgage fraud tools as well as 

longer-term investments. How are you prioritizing these IT investments? 

Answer. With respect to prioritization for Combating Mortgage Fraud, fiscal year 

2010 funds are being used to address a broad range of risk and fraud management 

efforts within the Department. FHA has worked diligently to put in place contract 

vehicles which provide access to industry leading tools and professional services that 

will greatly enhance the Department’s capabilities related to fraud detection/prevention and risk mitigation. Specifically, we are focused on the following three functional areas: 

—Counterparty Risk Management Functionality 

—Analytical Consulting Services for risk and fraud tool evaluation and selection 

—Consulting and Contracting Services for Loan-level File Review 

Through the acquisition process, HUD has focused on services that address the 

most critical and immediate areas of need within FHA to reduce the likelihood of 

insuring fraudulent and high risk loans, detect trouble spots among product types, 

improve targeting methodology for loans selected for review, significantly improve 

counterparty due diligence and review, and aggregate key information to make informed and reasoned decisions across the organization. To the extent feasible, these 

services are designed to have applicability across the FHA enterprise and may well 

reduce total organization contract expenditures on duplicative tools and services. 

However, the short-term application of this contract vehicle will be for the Single 

Family portfolio with downstream usage envisioned for multifamily and hospital financing. 

With respect to prioritization for longer-term FHA IT investments, the use of the 

Transformation Initiative funds for IT purposes requires detailed IT planning per 

Congressional requirements. Our modernization objectives align with the FHA IT 

Strategy and Improvement Plan (FHA IT Plan) submitted to Congressional committees in August 2009. As articulated in the FHA IT Plan, with many, if not all, of 

Housing’s IT systems being old and outdated, our priority is to transform and upgrade FHA’s infrastructure in line with modern financial services organizations. 

This initiative is being designed and planned to leverage the specific components of 

the Risk and Fraud initiative as they become a reality for FHA. This is how all of 

the Transformation work comes together. Tools selected through the Combating 

Mortgage Fraud Initiative will fit into the portions of the architecture that house 

aggregated capabilities for FHA. In addition, counterparty level information, required by the Risk and Fraud initiative, will flow into the front end of the FHA Infrastructure data area and provide valuable insight throughout the insurance 

lifecycle. 

Question. How quickly do you think you can make these IT upgrades? 

Answer. FHA has worked closely with internal (e.g., OCIO) and external (e.g., 

GAO, OMB) organizations to create measurable 6-, 12-, and 18-month deliverables 

for the FHA Transformation work. While our project planning materials indicate 

that this initiative will be a multiyear effort that spans longer than an 18-month 

timeframe, the initiative has been crafted to ensure that measurable value is delivered in as short a timeframe as possible. 

NEW SHORT SALE PROGRAM

Question. In the midst of all of the attempts being made to keep families in their 

homes, the administration recently announced its plans to implement a program to 

facilitate short sales. Through these sales, lenders and borrowers consent to take 

a loss by selling a home below the mortgage balance owed in order to avoid foreclosure. How much would this initiative cost? 
284 

Answer. As this is an initiative led by the Department of the Treasury, it would 

be more appropriate that these questions be directed to that agency for response. 

Question. As with all of the housing programs, this would be a voluntary program, 

and lenders already have the ability to do short sales. Why do you believe that the 

relatively modest amount of incentive payment that would be offered will be enough 

to increase the number short-sales so that it has a real impact on the housing market? 

Answer. As this is an initiative led by the Department of the Treasury, it would 

be more appropriate if this question was directed to them for response. 

Question. Under this new program, participating owners would be required to sell 

their home if an offer is made at a pre-determined price. Under the proposal, this 

price would be determined by Real Estate agents. Given the inherent subjectivity 

of home value determinations, there is a concern that this program could be open 

to fraud and conflicts of interest. What protections will be put in place to mitigate 

these risks? 

Answer. As this is an initiative led by the Department of the Treasury, it would 

be more appropriate if this question was directed to them for response. 

HOME AFFORDABLE MODIFICATION PROGRAM

Question. One of the problems with HAMP has been the capacity of servicers to 

process the claims. Do you think that servicers have the capacity to manage a significant increase in short sales? 

Answer. As this is an initiative led by the Department of the Treasury, it would 

be more appropriate if this question was directed to them for response. 

SUBCOMMITTEE RECESS

Senator MURRAY. Again, thank you so much, both of you, for 

your participation today. 

With that, this hearing is recessed, and this subcommittee will 

hold its next hearing on Wednesday, May 19 at 3:30 on the fiscal 

year 2011 budget request for the Washington Metropolitan Area 

Transit Authority. 

[Whereupon, at 11:09 a.m., Thursday, May 13, the subcommittee 

was recessed, to reconvene at 3:30 p.m., Wednesday, May 19.] 
(285) 

TRANSPORTATION AND HOUSING AND URBAN 

DEVELOPMENT, AND RELATED AGENCIES 

APPROPRIATIONS FOR FISCAL YEAR 2011 

WEDNESDAY, MAY 19, 2010 

U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, DC. 

The subcommittee met at 4:09 p.m., in room SD–138, Dirksen 

Senate Office Building, Hon. Patty Murray (chairman) presiding. 

Present: Senators Murray and Mikulski. 

Also present: Senator Cardin. 

WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY 

STATEMENT OF HON. PETER BENJAMIN, CHAIRMAN, BOARD OF DIRECTORS 

OPENING STATEMENT OF SENATOR PATTY MURRAY

Senator MURRAY. Good afternoon. This subcommittee will come 

to order. 

Our apologies for being late this afternoon, we are having votes 

on the floor and could not get here in time. So I apologize to all 

of our witnesses and all those who are here, but we are here and 

ready to go. 

And this afternoon, we are holding a hearing on the President’s 

budget request for the Washington Metropolitan Area Transit Authority [WMATA]. We are going to be hearing testimony from Senator Cardin. He is going to be joining us here in just a few minutes. 

We will have two panels. The first panel following Senator 

Cardin will include the Chairman of WMATA Board of Directors, 

Mr. Peter Benjamin, and Mr. Richard Sarles, the Interim General 

Manager. 

The second panel will consist of three witnesses: Ms. Jackie 

Jeter, who is the president of Local 689 of the ATU; Mr. Jack 

Corbett, director of MetroRiders.org; and Mr. Francis DeBernardo, 

chairman of the Riders’ Advisory Council. 

I want to welcome all of our witnesses at this time and really appreciate your being here today. 

Metro has often been called the jewel of the Washington, DC 

area’s transportation system. It is a web of rail and bus lines that 

reaches into almost every neighborhood across the region. On a 

typical work day, it carries passengers on more than 1.2 million 

trips, making it the second-largest heavy rail and sixth-largest bus 

transit system in the Nation. 
286 

Its trains and buses cross two States and the District, offering 

mobility, reducing congestion, and reducing air pollution. For those 

neighborhoods clustered around its stations, it is a proven engine 

for economic development. Its difficulties—management, financial, 

and especially safety—have been deeply troubling to this subcommittee, which have long been a champion of public transit and 

strong supporter of Metro. 

In the past year, 13 people have died in 4 separate accidents at 

Metrorail, including 8 passengers and 5 employees. All of these accidents were preventable, which is a tragic indictment of management and the agency’s safety culture. 

Like many other transit systems around the country, Metro faces 

a severe operating budget shortfall, and its Board of Directors is 

considering significant fare increases that are required to restore 

the system’s financial footing. Given the need to also replace much 

of Metro’s aging rail fleet, parts of which date to the 1970s, and 

upgrade its track signaling systems, fare increases and other steps 

to increase revenues and control costs are unavoidable. They are 

also essential to any future growth of the system since financial 

stability is a key requirement for support from the highly competitive New Starts program administered by the Federal Department 

of Transportation. 

Tackling these challenges is the responsibility of Metro’s board 

and its new interim general manager, Mr. Sarles, and they clearly 

have their work cut out for them. Just 2 weeks ago, we saw communications delays and confusion over what could have potentially 

been a serious incident at Wheaton station. 

That said, I am encouraged by the efforts to restore a culture 

centered on safety, where safety is considered and factored into 

every decision concerning operations. In recent weeks, Metro has 

hired a new Chief Safety Officer committed to filling key vacancies 

in its Safety Division, taken steps to increase track worker safety, 

and committed to address the findings of the FTA’s highly critical 

review by the end of the summer. 

It is still early, and changing any complex organization, even one 

with large numbers of dedicated workers such as Metro, does not 

happen quickly. Metro’s problems did not develop overnight, and 

some solutions will require time and commitment. For that reason, 

Metro must be relentless on this point. Its passengers, employees, 

and the taxpayers will expect nothing less. 

The real test for Metro’s new leadership will be its ability to 

demonstrate continued progress, the most visible sign of which will 

be the absence of further accidents, as well as upgrading the system to better serve its riders. The Federal Government is supporting Metro’s efforts to right itself, both through the technical assistance provided by the Department of Transportation, as well as 

through direct appropriations. 

Last year, Congress provided almost $200 million in stimulus 

funding on top of the $239 million in formula and bus grant funding awarded to Metro. For fiscal year 2010, Congress added a further $150 million to support Metro capital and preventive maintenance expenses, focusing on those investments that most improve 

safety. This was in addition to the $85 million appropriated for the 

Dulles airport extension. 
287 

I was pleased to see the administration continue both invest- ments in Metro in its fiscal year 2011 budget, with another $150 

million requested for capital expenses and $96 million for the Dulles extension. I trust this strong demonstration of support will encourage Metro’s three funding partners to continue to meet their 

responsibilities toward the system as well. 

During this hearing, we will have the opportunity to look into 

these important issues. It is impossible to imagine the Washington 

region without Metro. It has transformed the city and the region, 

and we owe it to present and future generations to not just maintain it, but to make it better. 

So I look forward to the testimony today, and I want to thank 

Senator Mikulski, who has been absolutely wonderful in helping us 

put this hearing together. Her adamant support of the system and 

making sure it works right is a real tribute to her work as a Senator from Maryland. And I am delighted she is here today. 

Senator Mikulski. 

STATEMENT OF SENATOR BARBARA A. MIKULSKI

Senator MIKULSKI. Thank you very much, Chairwoman Murray. 

I want to thank you for holding this very important hearing on 

the WMATA budget. 

I know that we will be very shortly joined by Senator Cardin, 

and I want to thank those in the audience for their patience while 

we were working through some parliamentary quagmire on the financial service bill. 

We want to thank you for your courtesy to allow us all to participate. As a member of the subcommittee, we appreciate that you 

have expanded it. Senator Warner is on the Banking Committee 

and is on the floor with Senator Webb. We hope they will join us. 

But Senator Murray, I also would ask unanimous consent, before 

I begin my remarks, to put into the record a letter from Governor 

O’Malley. Governor O’Malley wishes to inform you through me that 

he is committed to providing Maryland’s full share for the regional 

funding to match the statutory Federal investment in WMATA. 

There was some confusion about that. He wanted to assure you 

in the strongest possible way that Maryland will meet its commitment. However, he does call for budget reform with WMATA and 

encourages that they go to a 6-year capital program, updates on 

their budget process, and so on. I would like to discuss that with 

you at a later time, but I ask unanimous consent that the Governor 

O’Malley letter be in the record. 

Senator MURRAY. The letter will be put into the record. 

[The information follows:] 

OFFICE OF THE GOVERNOR, 

State of Maryland, May 18, 2010. 

The Honorable BARBARA A. MIKULSKI, 

United States Senate, 

503 Hart Senate Office Building, Washington DC 20510. 

DEAR SENATOR MIKULSKI: The State of Maryland is committed to providing its full 

share of the regional funding to match statutory Federal investment in the Washington Metropolitan Area Transit Authority (WMATA). In order to qualify for $1.5 

billion in Federal funding dedicated for WMATA system preservation over 10 years, 

the Maryland Department of Transportation (MDOT) Consolidated Transportation 

Program (CTP) reflects annual on-going contributions of $50 million—100 percent 

of our share of the region’s matching funds. 
288 

To ensure these funds are programmed and managed responsibly, we and our 

partner jurisdictions are calling for WMATA to develop and implement a capital 

programming process much like the one the MDOT has used for over 30 years. The 

key elements of the process include: 

—A 6-year capital program period; 

—Formal annual updates as part of the budget process; and 

—Quarterly reviews focusing on project cost, schedule and scope changes, updated 

project cash-flow projections, and revised estimates of overall capital program 

components. 

I thank you for your efforts to secure dedicated Federal funding for WMATA as 

we all work to ensure the safety, security and reliability of transit in the national 

capital region. We were the first of the three jurisdictions to program our matching 

funds, have always fulfilled our funding commitments to WMATA, and assure you 

that WMATA funding will continue to be a top priority for Maryland in the years 

ahead. For further information, you may contact me at any time or direct your questions to MDOT Secretary Beverley K. Swaim-Staley at 410–865–1001. 

Sincerely, 

MARTIN O’MALLEY, 

Governor. 

Senator MIKULSKI. And to assure you of that. 

Also, Senator Murray, there was concern, and I would want to 

work with you on this, that as we go forward with our statutory 

requirement of $150 million, that States and localities do not reduce their money. That this money was in addition to the contributions that were pledged by State and local governments. So we are 

in addition to. We are not in lieu of what either Maryland, Virginia, or the District of Columbia, the Virginia localities would contribute. 

As we work on this bill, I would like to talk with you about a 

requirement that there be maintenance of effort by all of those who 

are signatories to their original agreements. 

Senator MURRAY. I would be happy to discuss that with you. 

Senator MIKULSKI. But, you know, we need the will, a wallet, 

and a way. While often this hearing focuses on the wallet, we have 

to talk about what is the way forward, and do we have the will and 

the methods to accomplishment? 

You rightly have identified that Metro’s safety and operational 

reliability is absolutely critical. It affects daily riders for those who 

come to the Capital, for those who commute from within the region, 

or others who come from around the world. It is important to those 

who work at the Metro, operating the trains, fixing the tracks, 

managing the stations. 

Madam Chair, you have to know, and others, that we have been 

very impatient with Metro; we don’t want any more promises, 

memos, or laundry lists. We need action on safety. I hope at today’s 

hearing we can get into the specifics of what Metro has done already to improve safety? What do they plan to do? And how have 

we made progress? 

I would hope that we could get into their measurements in 

metrics to really identify, have they made progress in both improving their safety systems, the personnel involved in the safety systems, and in the leadership and the changing of the culture. You 

might be interested to know that Metro has no line item in its 

budget for safety, or maybe it has been recently added as a result 

of some of the new initiatives that we have encouraged them to 

take. 
289 

Like you, I am very impatient over the fact that it has been almost 1 year since the deadly crash at Metro. Thirteen more people 

have died: eight Metro riders; and five Metro employees. These 

aren’t numbers. These aren’t statistics. These are human beings. 

We have had audits. We have reports. We have recommendations. We need action. Audits, reports, and recommendations are a 

pathway, but now we need action. 

I remain just as worried about the safety of Metro as I was last 

June. We are now 11 months from that tragic crash, and we need 

to have a sense of urgency. What results does Metro have to show? 

The Federal Transit Administration [FTA] audit found persistent, 

ongoing, and systemic problems, and a Metro Safety Department, 

actually, initially barely functional. 

At various points, Metro leadership was ignorant of safety when 

they made budget decisions, and also they were not getting regular 

safety reports. So, today, I hope we can see what is the change, 

how has it changed, and for the Federal Government’s contribution 

of $150 million, what kind of change are we going to get for their 

money? 

Madam Chair, I want to acknowledge, both to you and to all 

here, all of us need to be safety officers. It is not only the people 

who operate who are charged at the Metro, but also all of us— 

those of us who fund it, and those of us who have political responsibility for it. We all need to commit ourselves to being safety officers. 

We need to know, as I said, what has Metro done to improve the 

safety, implement the FTA audit recommendations, and what are 

the mechanisms they have in place to measure their performance? 

Metro is America’s subway. This is an annual dedicated funding that is authorized. We ask you to continue the $150 million Federal 

contribution, but for our money, we want safety, operational reliability, and a way that will also be sustained. We really do want 

to insist on those outcomes. 

Senator MURRAY. Senator Mikulski, thank you so much for your 

opening statement. 

I know we are waiting for Senator Cardin. He will be here in just 

a minute. I would like both of our first witnesses, Mr. Sarles and 

Mr. Benjamin, to come up to the table, and we will take their testimony while we are waiting for Senator Cardin to do that. 

I am going to have to apologize. I have been called back over to 

the floor, Senator Mikulski. And I will ask Senator Mikulski to 

chair this hearing and to take the testimony. And if I am not able 

to return in time, Mr. Sarles and Mr. Benjamin, I do have questions from the subcommittee that I will submit to you for writing. 

But Senator Mikulski, if you would not mind, if I could turn the 

chair over to you for a short while here? 

Senator MIKULSKI. Be happy to do it. If you can come back, we 

will look forward it. If not, we will move expeditiously. 

Senator MURRAY. Okay. With that—— 

Senator MIKULSKI. Mr. Benjamin and Mr. Sarles. Mr. Sarles is 

the Interim General Manager, and Mr. Benjamin is the Chairman 

of the Board. 

Senator MURRAY. Thank you. 

Senator MIKULSKI [presiding]. Okay. Thank you. 
290 

You may proceed. 

STATEMENT OF HON. PETER BENJAMIN

Mr. BENJAMIN. Senator Mikulski, the comments that you have 

made and those by Chairman Murray are exactly right, and I am 

not sure that I can say them much better. I will try anyway to give 

my testimony. 

I am honored to appear before you today as the Chairman of the 

Board of Directors of the Washington Metropolitan Area Transit 

Authority. Metro’s General Manager, Richard Sarles, will cover this 

agency’s specific initiatives with regard to improved safety and 

service. I would like to provide the context for Metro’s fiscal year 

2011 appropriations request by giving the subcommittee some 

background about the Metro system and our capital needs. 

First, let me quote from a letter which President Lyndon Johnson wrote to Congress in 1965. ‘‘The problem of mass transportation in the Washington area is critical. It is also a problem in 

which the Federal Government has a unique interest and responsibility. Improved transportation in this area is essential for the continued and effective performance of the functions of the Government of the United States, for the welfare of the District of Columbia, and for the orderly growth and development of the national 

capital region.’’ 

In 1966, Congress responded by authorizing the creation of the 

Washington Metropolitan Area Transit Authority as an interstate 

compact. Today, the Federal Government is uniquely dependent on 

Metro, something that distinguishes Metro from other U.S. transit 

systems. One-half of all Metro stations are located at Federal facilities, and over 40 percent of peak ridership consists of Federal employees. 

A quick listing of some of our rail stations demonstrates Metro’s 

close connection to the Federal Government—Federal Triangle, 

Smithsonian, Capitol South, Navy Yard, Pentagon, and Arlington 

Cemetery, to name a few. The Federal Government is particularly 

reliant on Metro for special national events, such as inaugurals and 

state funerals, transportation of visitors to the Nation’s capital, and 

persons doing business with the Federal Government. 

Without Metro, it is hard to imagine how this region would have 

handled the massive influx of visitors who came to attend the inauguration of President Obama in January 2009. Federal disaster recovery plans in this region rely heavily on Metro, and Metro played 

a key role on September 11 in moving people out of the downtown 

core. 

Congress recognized the Federal Government’s unique relationship with Metro when it passed the Passenger Rail Investment and 

Improvement Act of 2008, PRIIA, which authorized $1.5 billion for 

Metro’s capital and preventive maintenance needs to be equally 

matched by Metro’s State and local funding partners. 

I want to thank this subcommittee and your colleagues in Congress for appropriating the first installment of that authorization 

last year. We are requesting that another $150 million be appropriated in Federal fiscal year 2011, as provided for in the President’s fiscal year 2011 budget. 
291 

PREPARED STATEMENT

On behalf of Metro’s Board of Directors, I thank you for your 

long history of support for Metro and your leadership in providing 

funding for the rehabilitation of Metro facilities and the replacement of Metro equipment. It is no understatement to say that just 

as the Federal Government depends on Metro, the future of Metro 

depends upon the Federal Government and the funding authorized 

under PRIIA. 

Thank you for allowing me to testify today. I look forward to answering your questions. 

[The statement follows:] 

PREPARED STATEMENT OF HON. PETER BENJAMIN

Madam Chairman, Ranking Member Bond, and members of the subcommittee, I 

am honored to appear before you today as the Chairman of the Board of Directors 

of the Washington Metropolitan Area Transit Authority (Metro). Metro’s General 

Manager, Richard Sarles, will cover the agency’s specific initiatives with regard to 

improved safety and service. I would like to provide the context for Metro’s fiscal 

year 2011 appropriations request by giving the subcommittee some background 

about the Metro system and our capital needs. 

METRO SERVES THE FEDERAL GOVERNMENT

The problem of mass transportation in the Washington area is critical. It is also 

a problem in which the Federal Government has a unique interest and 

responsibility... improved transportation in this area is essential for the continued and effective performance of the functions of the Government of the United 

States, for the welfare of the District of Columbia, [and] for the orderly growth and 

development of the National Capital region.——President Lyndon Johnson, 1965 letter to Congress. 

It may surprise you to learn that Metro’s relationship with the Congress began 

over 100 years ago, just a few yards away from where we are sitting today. In 1906, 

when the subway was built connecting the U.S. Capitol to the Senate Office Building (now the Russell Building), people started thinking about building a subway for 

the city. The Washington Post published an article in 1909 titled, ‘‘Why Not a Real 

Subway System for Washington?’’ A 1931 Post article included a map of downtown 

Washington showing possible subway routes. 

In 1955, Congress became directly involved in the discussion, and approved $500,000 to have the National Capital Planning Commission conduct a ‘‘Mass 

Transportation Survey’’ for the Washington region. The results of that survey led 

to passage of the National Capital Transportation Act of 1960, which created an 

independent Federal agency to plan a regional system of highways and mass transit 

to serve the Nation’s Capital. In 1966, Congress authorized the creation of the 

Washington Metropolitan Area Transit Authority as an interstate compact agency 

of the State of Maryland, the Commonwealth of Virginia, and the District of Columbia to plan, finance and construct a rail transit system for the region, and early the 

following year Metro was ‘‘born.’’ 

Today, the Federal Government is uniquely dependent upon Metro, something 

that distinguishes Metro from other U.S. transit systems. One-half of all Metrorail 

stations are located at Federal facilities, and about 40 percent of peak ridership consists of Federal employees. A quick listing of some of our rail stations demonstrates 

Metro’s close connection to the Federal Government: Federal Triangle, Smithsonian, 

Capitol South, Navy Yard, Pentagon, and Arlington Cemetery, to name a few. It is 

not surprising that in 2005, a ‘‘Blue Ribbon’’ report found that the Federal Government, the region’s largest employer, is the ‘‘largest single beneficiary’’ of Metro. 

The Federal Government is particularly reliant on Metro for special national 

events such as inaugurals and State funerals, transportation of visitors to the Nation’s Capital and persons doing business with the Federal Government. Without 

Metro, it is hard to imagine how this region would have handled the massive influx 

of visitors who came to attend the inauguration of President Obama in January 

2009. Metro carried 1.5 million riders on Inauguration Day, providing attendees 

with a convenient—albeit crowded—transportation alternative. 

Federal disaster recovery plans in this region rely heavily on Metro, and Metro 

played a key role on September 11, 2001, in moving people out of the downtown 
292 

core. People were able to rush home to their families because Metro employees 

stayed on the job, operating trains and buses, staffing stations, and coordinating 

service from a command center. Other Federal plans, such as the BRAC-related consolidation of Walter Reed Army Medical Center and Bethesda Naval Hospital, also 

depend upon Metro; the consolidated facility, which will serve tens of thousands of 

patients and visitors annually, will be located at the Medical Center Metrorail station. 

In fact, it is fair to say that Metro is the backbone of daily Federal Government 

operations. During the recent snowstorms, when it was impossible to operate 

Metrobuses safely on surface streets and to run Metrorail trains on above-ground 

tracks, the Federal Government decided to close. With well over 100,000 Federal 

employees regularly commuting by Metro, and thousands of others using Metro to 

access Federal facilities every day, the Federal Government depends heavily upon 

the system. 

METRO’S CAPITAL NEEDS

Congress recognized the Federal Government’s unique relationship with Metro 

when it passed the Passenger Rail Investment and Improvement Act of 2008 

(‘‘PRIIA’’, Public Law 110–432), which authorized $1.5 billion for Metro’s capital and 

preventive maintenance needs, to be equally matched by Metro’s State and local 

funding partners. I want to thank this subcommittee and your colleagues in Congress for appropriating the first installment of that authorization last year. We are 

requesting that another $150 million be appropriated in Federal fiscal year 2011, 

as provided for in the President’s fiscal year 2011 budget request. 

Why is this funding so important to Metro? Because we have a 34-year old rail 

system, which is not like it used to be when it was new. It has old rail cars, track 

bed, power equipment, and communications systems. More than one-half of our bus 

garages are over 50 years old and some buses are 15 years old. As the equipment 

and facilities age they become less reliable, break down more often, and need more 

maintenance. We have to replace our tracks, trains, and buses, and must rehabilitate our stations, bridges, and maintenance facilities. We have 30-year-old ventilation, lighting, and communications systems which must be maintained or replaced. 

Some of our station platforms are crumbling, our escalators and elevators need 

major repairs, and water is leaking into our tunnels. We must do all of the work 

required while providing service to hundreds of thousands of customers daily. 

We have been fortunate in that our funding partners—the Federal Government 

as well as the State and local jurisdictions that we serve—have demonstrated strong 

support for Metro’s capital program. As a result, Metro has been able to build out 

and operate a full 106-mile rail system, run a fleet of 1,500 buses, and provide paratransit service to thousands of customers with disabilities. We have also been able 

to make a number of critical investments in the system, including, for the first time, 

running 8-car trains. (When the Metro system first opened in 1976, we ran 4-car 

trains—hard to imagine today!) 

Going forward, however, Metro needs increased investment to keep the system in 

a state of good repair. We are currently developing our capital program for the next 

6 years. I expect that our State and local funding partners will not only continue, 

but will increase, their current level of funding to Metro, and in addition will match 

the new Federal funding stream authorized in PRIIA. The PRIIA funding itself is 

essential not just to leverage these additional contributions, but to help us at Metro 

address our most critical needs, such as replacing our oldest rail cars and rehabilitating our oldest segments of track. 

I hope that I have made clear why this funding is important to Metro. I hope that 

it is also clear why this funding should be important to the Congress. The PRIIA 

funds will allow us to make urgently needed investments in the aging infrastructure 

of our system so that we can continue to provide Federal employees, residents of 

the metropolitan area, and visitors to the Nation’s capital from across the Nation 

and around the world, with safe and reliable service. Annual appropriations under 

PRIIA are essential if we are to keep our system in a state of good repair. 

On behalf of Metro’s Board of Directors, I thank you for your long history of support for Metro and your leadership in providing funding for the rehabilitation of 

Metro facilities and replacement of Metro equipment. It is no understatement to say 

that just as the Federal Government depends upon Metro, the future of Metro now 

depends upon the Federal Government and the funding authorized under PRIIA. 

Thank you for allowing me to testify today, and I look forward to answering the subcommittee’s questions. 
293 

Senator MIKULSKI. Mr. Sarles, before I call upon you, may I recognize Senator Cardin. 

Senator Cardin. 

STATEMENT OF SENATOR BENJAMIN L. CARDIN

Senator CARDIN. Thank you, Madam Chair. Senator Mikulski, 

thank you very much. You don’t have to leave the table. I don’t 

mind being associated with Metro, I’m a big supporter of the Transit Authority. 

As Senator Mikulski knows, we were interrupted because of 

some votes, and I apologize for being a few minutes late. But I 

would ask consent that my full statement and letter that I authored to President Obama in December be made part of the 

record. 

[The statement follows:] 

PREPARED STATEMENT OF SENATOR BENJAMIN L. CARDIN

Thank you Chairman Murray and Ranking Member Bond for holding this hearing, and thank you Sen. Mikulski for inviting me to address the subcommittee about 

the Federal Government’s increased commitment to invest in the Washington Metropolitan Area Transit Authority. 

Last year, the Greater Washington Congressional Delegation fought hard for the 

much needed transportation appropriation we secured for WMATA. In working with 

the members of this subcommittee and the full committee we were able to get it 

done and for that I am grateful. I appreciate that the appropriators recognize the 

important role Metro plays in the function of the Federal Government, including 

Congress. 

In December, I read a letter to President Obama urging him to include Metro in 

his budget. I ask for unanimous consent that a copy of this letter signed by Senators 

Mikulski, Webb, Warner and me be submitted for the record. I applaud and support 

the administration’s request of $150 million in fiscal year 2011 for Metro. 

This demonstrates the President’s commitment to smart growth, his recognition 

that it is in the Federal Government’s interest to alleviate and not contribute to terrible traffic congestion in the Greater Washington Area—ranked the 2nd worst in 

the United States only behind Los Angeles, how integral a part of the region’s transportation network Metro is and more broadly how transit fits into the Nation’s 

transportation goals for the future. His budget request for Metro is in keeping with 

the October 9, 2009 Executive Order (No. 13514) on Federal Sustainability and the 

administration’s efforts to reduce the Federal Government’s carbon footprint, including its workforce. 

It also shows the administration’s recognition of how important Metro and ‘‘America’s Subway’’ system is to the function of the Government. We learned from this 

February’s snowstorms that the Federal Government in fact cannot function without 

Metro. The Office of Personnel Management based its decision to shutdown the Federal Government on WMATA’s inability to operate above-ground rail lines during 

the storms. This not only points out the Federal Government’s reliance on Metro, 

but also highlights Metro’s lack of resources to operate in weather conditions that 

other city transit systems like Chicago, New York or Boston could work through. 

Every work day, Metro provides tens of thousands of Federal employees rides to 

work. During peak ridership, more than 40 percent of riders on Metro are Federal 

employees and 10 percent of the overall ridership serves Congress and the Pentagon 

alone. Metrorail’s alignment was designed to serve the Federal Government, with 

more than one-half of the system’s stations located at or near Federal buildings. 

GSA has also established guidance that requires all new Federal facilities in the 

Greater Washington Area be Metro Proximate. 

I believe that the Federal Government has a clear financial interest in the operation of Metro. Likewise, I believe the Federal Government must play a greater role 

in ensuring the safety of Metro for its riders and employees. 

Safe and reliable operation of the Metro System is a top priority for me and the 

Greater Washington Area delegation. 

Revelations from the March NTSB hearing into the ongoing investigation of the 

June 22, 2009, fatal accident on the Red Line near Fort Totten, as well as discoveries made by the FTA through its Safety Audit of WMATA provided overwhelming 
294 

evidence that Metro needs to look inward and make serious efforts to revise its approach to operating the system safely. 

Metro needs to work hard to establish a culture of safety that starts from the 

General Manager office and the Board of Directors on down through the various 

leaders of departments within WMATA and throughout the system’s operators. 

We have heard directly from interim General Manager, Richard Sarles, and Board 

Chairman Peter Benjamin about the changes being made at Metro to improve safety. However, during our meeting last week in Senator Mikulski’s office, on the afternoon of May 5, there was an emergency braking situation on the Red Line in Wheaton. The incident was not reported to the Tri-State Oversight Commission within 

2 hours of the incident, as per WMATA’s protocol, nor was the Board or General 

Manager immediately informed of the incident. 

I appreciate how forthcoming WMATA is with information surrounding this incident after the fact. I am pleased to know that even though the train operator may 

not have needed to take the actions he did, that he is not being punished for being 

cautious and causing the disruption. That said, this incident reveals that lapses in 

protocol are still an issue at WMATA. 

I am committed to working with my congressional colleagues, the Federal Transit 

Administration and the leadership at the Washington Metropolitan Transit Authority to make safety an operational priority at Metro and restore public confidence in 

the system. I want more than just verbal commitments to improve safety from 

WMATA and I want to see measurable results. 

If the Federal Government increases its investment in the system, it should also 

increase its oversight of operations and capital projects, so as to ensure that tax dollars are being well spent. I am confident that we will find a way forward through: 

—Increased Federal regulatory authority and oversight, as called for by the FTA; 

and 

—Increased openness and transparency at WMATA. 

The FTA is prohibited by law from establishing national safety standards, requiring Federal inspections, or dictating operating practices. However, Senators Dodd, 

Menendez, Mikulski, and I introduced The Public Transportation Safety Program 

Act that will require the Transportation Secretary to establish and implement a 

comprehensive Public Transportation Safety program. 

This legislation will give the FTA the ability to take decisive actions such as conducting inspections, investigations, audits, examinations of (Federally funded) public 

transportation systems. This legislation establishes the type of safety enforcement 

authority for the FTA that already exists within the Federal Railroad Administration’s authority over safety rules for commuter rail systems or the Federal Motor 

Carrier Safety Administration’s ability to establish enforceable safety guidance for 

commercial truck drivers. 

It makes sense for public transit systems that receive Federal funding to meet 

Federal safety requirements set by the FTA. It makes even more sense to grant FTA 

a degree of Federal authority to establish safety guidance, particularly when it 

comes to WMATA, given Metro’s unique relationship to the Federal Government. 

In July 2009, FTA Administrator Peter Rogoff, in testimony before the House 

Oversight and Government Reform Committee made special note of the fact that 

WMATA does not have a dedicated revenue stream, rather it relies heavily on Congressional Appropriations which may fluctuate from year to year. 

While the President’s request for $150 million for Metro is an example of such 

special appropriations, it sends an important signal that the Federal Government 

recognizes the need to invest in Metro. 

Fortunately, Congress has taken an important step forward to remedy this situation. The Senate recently passed a new Metro Compact further advancing the final 

step in authorizing a 10 year $1.5 billion authorization providing Metro with a dedicated funding stream to ensure the safe and efficient operation of the system. 

For years, while Metro was a relatively new transit system, Metro was the epitome of safe, reliable and modern public transit. After 34 years of operation, the results of placing disproportionate resources toward growing the system rather than 

attending to the growing backlog of repairs and maintenance needs of the existing 

infrastructure, Metro’s age is taking its toll on the safe operation and function of 

the system. 

Metro must reevaluate its operational priorities. It is one thing to develop detailed 

plans to improve safety, and yet another to do what FTA Administrator Rogoff noted 

in the FTA’s Safety audit, and that is to change the business culture at Metro to 

take safety seriously and execute these new safety measures. Metro provides a vital 

service to the Government and the region and I stand ready to help improve the 

system. 
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I thank the chair and Senator Mikulski for inviting me here today. I urge the subcommittee to include the President’s fiscal year 2011 budget request for Metro in 

the fiscal year 2011 THUD Appropriations bill. 

UNITED STATES SENATE, 

Washington, DC, December 10, 2009. 

The Honorable BARACK OBAMA, 

President of the United States, 

The White House, 

Washington, DC 20500. 

DEAR MR. PRESIDENT: As you make final preparation for the submission of your 

fiscal year 2011 budget, we request that you provide $150 million to the Washington 

Metropolitan Area Transportation Authority (WMATA), the full amount authorized 

in the National Capital Transportation Amendments Act, included as title VI of division B of Public Law 110–432. This is a vital issue to both the effective and efficient functioning of the Federal Government as well as to the entire Washington, 

DC metropolitan area. WMATA’s compact jurisdictions are committed to providing 

50 percent matching funding. 

For the first time, both the U.S. Senate and the U.S. House of Representatives 

have included $150 million in appropriations for WMATA. This is the first installment of funding to support a 10 year authorization for the Washington region’s 

transit system. We urge that your administration’s fiscal year 2011 budget build on 

Congress’s effort to provide WMATA with essential funding to maintain and improve systems operation. 

Sometimes known as ‘‘America’s Subway,’’ WMATA was created in 1966 primarily 

to serve the Federal Government. Many Metrorail stations were built at the request 

of the Federal Government, and nearly one-half of all stations are located at Federal 

facilities. Federal employees comprise 40 percent of WMATA’s peak ridership, and 

millions of others use the WMATA system (Metrorail, Metrobus, and WMATA’s 

paratransit program: MetroAccess) each year to visit the Nation’s Capital or conduct 

business with the Federal Government. 

WMATA is also a critical component for ensuring continuity of Federal Government operations during an emergency, and Federal recovery plans rely heavily on 

WMATA, which played a key role on September 11, 2001. Another key indicator of 

how important the system is to the functioning of the Nation’s capital, WMATA 

handled 1.5 million trips in a single day during this year’s inauguration and was 

the most viable transportation option during this event. For all of these reasons, 

Congress saw fit to provide a unique authorization for WMATA, recognizing the special responsibility the Federal Government has to the Metro system. 

Before the enactment of this legislation last year, WMATA operated the only 

major transit system in the country without a source of dedicated revenue. The result has been a system with burgeoning needs and shrinking resources. Recent fatal 

tragedies on Metrorail underscore the need for infrastructure repair and maintenance to ensure the safe operation of this aging system. 

The $150 million in capital funding is for projects included in WMATA’s Capital 

Improvement Program and approved by WMATA’s Board of Directors. The funds 

will be used to maintain the transit system in a state of good repair, including vehicles, facilities, and infrastructure. All of the funds are for capital improvements and 

none may be used for operating expenses. 

The enabling legislation provides, for the first time, two seats on the Board of Directors for the Federal Government, represented by the General Services Administration. For this reason, we recommend that the funding be provided through the 

GSA portion of your budget submittal. This is a unique Federal obligation related 

to the operations of the Federal Government, and this seems an appropriate place 

in the budget to demonstrate that relationship clearly. Regardless of its placement 

in the budget, however, we urge you in the strongest terms to include this essential 
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funding in your fiscal year 2011 submission. It is vital to the region and the Nation. 

We believe it warrants your strong support. 

Sincerely, 

BENJAMIN L. CARDIN, 

United States Senator. 

BARBARA A. MIKULSKI, 

United States Senator. 

JIM WEBB, 

United States Senator. 

MARK WARNER, 

United States Senator. 

Senator CARDIN. And Senator Mikulski, I want to thank you particularly for keeping our regional delegation focused on the importance of Metro, Metro funding, and the Federal Government’s partnership with our Nation’s subway system that is here and our transit system that is so important to the Federal Government. 

We fought hard, our regional delegation, last year to get $150 

million put into the budget. It wasn’t easy. And I want to thank 

the appropriators for making those funds available. It is critically 

important. And I strongly support President Obama’s budget that 

adds $150 million this year to the Metro funding for fiscal year 

2011. It is desperately needed. It is the right thing to do. 

This is the Nation’s subway system. The Washington, DC area 

ranks second-worst in the United States as far as traffic congestion 

is concerned. This system is critically important to the operation of 

the region’s Federal facilities. During peak ridership, more than 40 

percent of the riders on Metro are Federal employees. Ten percent 

of the overall ridership serves Congress and the Pentagon. So this 

is how our employees get to work. 

And the Federal Government has a clear financial interest in the 

operation of Metro. Likewise, I believe the Federal Government 

must play a greater role in assuring the safety of the Metro system 

for its riders and employees, and there has been no stronger voice 

in the United States Congress on this issue than Senator Mikulski. 

I thank you very much for speaking out for the fact that, yes, we 

support the Federal Government’s financial partnership with 

Metro, but we also believe that the Federal Government has a responsibility to make sure the system operates safely for the ridership, its patrons, and its employees. 

And the problems with safety continue. I know that the witnesses from Metro that you have before you have instituted 

changes, and there have been improvements made. But we need to 

change the culture of Metro so that safety is a priority, and that 

is a continuing process that will require greater oversight, and I 

urge us to set up a way that we can continue the oversight. 

May 5, there was an emergency braking situation on the Red 

Line in Wheaton, and fortunately the incident was handled by the 

operators and system controllers so as to avoid an accident, but 

some of the protocols were still not followed in regards to that particular episode. These missteps reinforce the need for stronger oversight on safety. 

I strongly support the legislation that Senator Mikulski has been 

involved with that would give the FTA the authority to set up safety standards for our transit system, so they can do it now for our 

rail. They can do it for the trucks. It seems to me that we should 
297 

have the authority to set up Federal regulatory standards for our 

transit systems, and I would urge the Congress to take on that particular issue. 

The Senate recently passed the new Metro compact, further advancing the final steps of authorizing a 10-year $1.5 billion authorization for Metro with a dedicated funding system. That is critically 

important. 

But let me just point out one last point. This system is 34 years 

old. It is an aged system. I have seen the crumbling platforms, and 

I tell you, I worry about the safety of Metro today. It needs maintenance funds. It needs attention. It needs to make sure that its current service areas are done in a safe way for its patrons and employees. 

I think, in the past, Metro has been divided as to whether to pay 

attention to its current system or seek expansion of its system. And 

we all believe that we have to expand the service that Metro provides. But the first priority needs to be to take care of the existing 

infrastructure of the current system, with its stations and with its 

cars and with the way that it manages the system for safety. 

And I would just urge this subcommittee in making the funds 

available. It is critically important the Federal Government live up 

to its commitment as a partner, but also to establish a way that 

we can be more actively involved as a partner with Metro in regards to the safety. 

And with that, Madam Chair, I thank you very much for allowing me to be here today. 

Senator MIKULSKI. Thank you, Senator Cardin. 

First of all, you have been a real champion of Metro funding, as 

mass transit, as well as MARC trains. In other words, safe, efficient mass movement of people. We want to thank you for your advocacy both on the Environment and Public Works Committee and 

on the Budget Committee. Like you, I join in wanting to continue 

the Federal partnership of $150 million, but I really think we have 

to be careful. I think we also have to be insistent on certain kinds 

of conditions and not give a blank check. 

So, thank you. 

Mr. Sarles, you have been one of the most patient people in the 

room, and we apologize. We thank you and, please, now go ahead 

and take as much time as you want to give us your views. 

STATEMENT OF RICHARD SARLES, INTERIM GENERAL MANAGER 

Mr. SARLES. Thank you, Madam Chair, and thank you for the opportunity to testify today. 

As you know, Metro has submitted a request for $150 million in 

fiscal year 2011. And as the subcommittee considers that request, 

I feel that it is important for you to know what we are doing to 

improve the safety and reliability of our system. 

My written statement includes a detailed description of our action plan. So I will just briefly summarize a few key points. I will 

be at Metro until the board selects a new permanent general manager. I don’t know how long that will be, but while I am here, I 

am taking a back-to-basics approach. I want to strengthen the 

agency so that I leave it in better shape for my successor. 
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The audit that you asked the FTA to conduct was extremely 

helpful to us as we developed our safety action plan. And frankly, 

I welcome your watchdog role, especially in the area of safety. 

In response to that audit, I am working, first and foremost, on 

strengthening our safety program so that it is robust and proactive, 

not just reactive. We are hiring more good people and getting them 

the training that they need. We are developing an incident management system so that we can analyze trends and spot issues before they become major problems. 

We are also improving protections for our track workers by updating our procedures and our training program for those who 

work in and around the track area. 

I am also refocusing the agency on addressing our state of good 

repair needs. We have an aging system, and things are starting to 

break down more often. We need to do more today to keep our system in a state of good repair than we did when it was 5, 10, or 

even 20 years old. 

We are developing a new capital program, which will allow us to 

meet the state of good repair needs. Our State and local partners 

are committed to increasing their contribution to Metro, but to 

meet these needs, we must also continue to receive the funds authorized by Congress in the Passenger Rail Investment and Improvement Act. I thank this subcommittee for providing the first 

installment of that funding last year. 

These are the building blocks that will lead to a stronger organization for our employees and better service for our customers. It 

will take time to address all these issues fully, and we are constantly working on improving. For example, while the emergency 

braking at the Wheaton station 2 weeks ago did not involve an actual hazardous condition, we have learned from that experience 

and taken action to improve notification procedures to our operations control center and our oversight agencies. 

I believe that we are making progress, but you don’t have to take 

my word for it. Next month, Metro will begin posting an online performance scorecard so that members of the public can track how 

well we are doing. 

PREPARED STATEMENT

Thank you for the opportunity to testify today and for your consideration of our request. I would be happy to answer any questions. 

[The statement follows:] 

PREPARED STATEMENT OF RICHARD SARLES

Madam Chairman, Ranking Member Bond, and members of the subcommittee, 

thank you for the opportunity to testify before you today. I am Richard Sarles, General Manager of the Washington Metropolitan Area Transit Authority, known as 

WMATA or Metro. 

I began my service as Metro’s General Manager over 1 month ago. My career in 

rail and public transportation has spanned 40 years, during which time I worked 

with the Port Authority of New York and New Jersey, Amtrak, and most recently, 

New Jersey Transit. I have used the Metro system many times, and have always 

been impressed by Metro’s services and how well they are delivered. But Metro is 

no longer new. We have requested an appropriation of $150 million in Federal fiscal 

year 2011 to help us address some of the challenges associated with our aging sys-
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tem. As you consider that request, I want to let you know what Metro is doing to 

move forward on improving our system’s safety, reliability, and financial stability. 

SAFETY

As the subcommittee is aware, this region experienced an unprecedented tragedy 

on June 22 of last year, when two Metrorail trains collided on the Red Line north 

of the Fort Totten station. Nine people lost their lives and dozens of others were 

injured in an accident that has had ripple effects throughout the transit industry. 

The National Transportation Safety Board’s (NTSB) investigation of the accident 

has focused on technological issues, not human error, as the key factor leading to 

the collision, and as a result, transit and rail providers across the country have been 

reexamining their track signaling systems for signs of the same potential failure 

that caused the June 22 accident. 

The NTSB’s final report on the accident has not yet been issued, but Metro has 

already taken steps to improve safety on the rail system. We have been operating 

trains in manual mode since the accident, and we will continue to do so until the 

NTSB report is issued and any necessary modifications are completed. We have increased the frequency of computerized testing of track circuits, and we are holding 

the performance of those circuits to a higher standard than previously required. In 

addition, as recommended by the NTSB, we are working with a contractor to develop a real-time monitoring system which will provide an alert should a track circuit fail. 

In addition to the June 22 accident, Metro has experienced a number of other incidents over the past year that require us to re-assess the way that we go about ensuring the safety of our customers and employees. Our internal assessments and 

findings regarding safety have been supplemented by external agencies’ reports, 

such as the March 2010 audit of Metro’s safety program by the Federal Transit Administration, requested by Senator Mikulski. These external reports have been and 

will be critically important in helping Metro identify where we need to improve with 

regard to safety. We have learned even from those incidents which were not hazardous in nature, such as the May 5 emergency braking near the Wheaton station. 

Although there were no hazardous conditions present, we have taken action to improve reporting of such incidents to our operations control center and our oversight 

agencies. 

The following section describes a number of other actions that we have taken in 

recent months to address both internal and external findings in the areas of staffing, communications, track worker protection, and rail operations. 

Staffing 

The FTA audit and other assessments have identified lack of sufficient safety staff 

and expertise as an issue at Metro. To address that issue, Metro has hired a new 

Chief Safety Officer, James Dougherty, who began his duties on April 19. Mr. 

Dougherty brings 25 years of experience in transit safety, occupational safety and 

health, industrial hygiene and environmental protection, and he will report directly 

to me. In addition, we have filled 6 of 12 new positions in the safety department, 

and we expect to fill the remaining vacancies within 60 days. These new positions 

will help us to effectively investigate incidents/accidents, review and document safety policies and procedures, ensure safety protocols are in place and implemented, 

and analyze safety trends. We have also arranged for needed training for our safety 

personnel with the Transportation Safety Institute, an arm of the U.S. Department 

of Transportation, with seven courses scheduled through September. 

Communications 

Lack of communications across and within departments has also been cited in various reports as a problem at Metro. We have recently begun several new communications initiatives. For example, to improve communication between the Safety 

Department and operational personnel, we now have safety officers assigned to each 

bus and rail division. These safety officers participate in regular meetings of the 

front-line staff in their division, as well as interacting on a daily basis with operations employees on safety-related matters. 

In addition, my predecessor held 6 ‘‘Safety Action Report Out’’ meetings with 60 

front-line superintendents to increase their awareness and accountability regarding 

safety. I intend to continue those meetings on a regular basis. We have also established a cross-departmental Safety Action Team tasked with finding ways to create 

a safer organization. The Team’s first initiative is designed to further improve communications with front-line employees to ensure that safety-related information, as 

well as other messages, reaches all employees regardless of their work location. 
300 

Track Worker Protection 

Employees who work on and around our track areas are exposed to dangerous situations each day they come to work. Protection of these workers must be robust and 

effective. Metro is committed to improving our current practices and has established 

a cross-departmental Roadway Worker Protection Work Group which includes representatives from several Metro departments, union representatives, and representatives from FTA and TOC. This group has drafted a new roadway worker protection 

manual which has been submitted to the TOC for review. The group is also in the 

process of developing a new roadway worker training plan, and will also test and 

evaluate new technologies and processes for use in the Metro system; these activities are expected to be complete by the Fall of 2010. 

Metro’s track environment shares certain characteristics with other transit and 

rail systems, and we have reached out to our peers to learn from them and share 

best practices. Metro conducted a workshop in January with peer transit agencies, 

FTA, TOC, and union representatives, and convened a roundtable discussion in 

April with the Federal Railroad Administration and inter-city rail operators. The results of these discussions are reflected in the new draft manual and will be included 

in the training regimen being developed by the Roadway Worker Protection Work 

Group. 

Rail Operations 

In addition to the operational changes implemented in response to the June 22 

accident, discussed above, Metro is continuing to respond to earlier NTSB recommendations. We expect to award a contract in the near future to begin building 

the cars to replace our oldest vehicles, the 1000 series cars, as the NTSB has recommended. In addition, we are continuing to add rollback protection for rail cars 

operating in manual mode, another NTSB recommendation. About one-half of our 

fleet currently has such protection, and we are working to install it on the remaining cars with completion anticipated by the end of calendar year 2012. 

Six-month Action Plan—Safety 

While we have made progress with regard to safety, we still have work to do. We 

have established the following safety-related priorities: 

—Fill Remaining Safety Department Vacancies and Increase Training.—Specifically, we must continue to have front-line safety briefings while we develop 

more effective right-of-way training and identify other needed training for frontline staff. In addition, we have begun labor relations training for supervisors 

of represented employees, re-emphasizing the supervisors’ role in safety; we intend to complete that training by the end of 2010. 

—Continue Accelerated Close-out of Open Safety-related Audit Findings.—With 

the approval of the TOC, Metro develops corrective action plans (CAPs) in response to findings from both external and internal audits and investigations. 

Metro has closed 190 CAPs since 2007, with the rate of closure increasing significantly in recent months. Currently 85 CAPs remain open (including CAPs 

that were recently added in response to the TOC’s Roadway Worker Protection 

study and internal safety audits). I have communicated to Metro staff that continuing to close CAPs promptly is a top priority. I am particularly focused on 

responding to the recommendations in the FTA audit; we submitted a CAP for 

that audit to FTA on April 29. (Please see attachment No. 1 for details.) 

—Develop Incident Tracking and Safety Management Reporting System.—We are 

taking advantage of improvements in technology to develop a web-based tool to 

allow for communication of safety-related information and tracking across departments. Development is expected to be complete by the end of August 2010. 

—Encourage Near-miss Reporting, Including Anonymous Hotline and Strengthened Whistleblower Protection.—David Gunn’s report cited Metro for having a 

‘‘shoot-the-messenger’’ culture. I am taking steps to end that perception. I have 

informed all employees of the existence of a safety hotline and safety e-mail address through which they can report safety concerns, anonymously if desired. 

In addition, we are updating Metro’s whistleblower protection policy to encourage employees to raise safety-related concerns. 

—Complete New Right-of-way Worker Protection Manual and Revisions to Metrorail Safety Rules and Procedures Handbook (MSRPH).—When rules are outdated or unclear, they tend to be ignored. By Fall 2010 we intend to complete 

work on a new set of rules for right-of-way workers as well as an updated 

MSRPH, with rules and procedures that are clear, up-to-date, and effective. 

—Complete Self-assessment of Safety-related Internal Controls and Initiate Thorough Assessment of Safety Culture.—We intend to complete further self-assessments in safety-related areas, the first of which is focused on internal controls. 
301 

In addition, we have contacted the U.S. Department of Transportation, the 

AFL–CIO, and the American Public Transportation Association to seek their assistance in assembling a team of experts not only to review Metro’s safety culture, but also to recommend specific measures to improve that culture and to 

provide assistance in implementing those recommendations. We intend to initiate this review by Fall 2010, while recognizing that organizational culture 

change is a long-term process. 

SERVICE RELIABILITY

According to the Washington Post, ‘‘most riders give the (Metro) system high 

marks for comfort, reliability and generally the ability to take them where they 

want to go.’’ (‘‘In Survey, Metro Still Gets High Marks after a Year of Low Points,’’ 

April 5, 2010). Still, we know that we need to do better. The quality of our customers’ experience is the key to the continued success of our system. We are taking 

steps to improve the on-time performance of all of our modes—Metrorail, Metrobus, 

and MetroAccess—as well as the availability of our elevators and escalators which 

have a very direct impact on the quality of our customers’ trips. 

For Metrorail, we have evaluated ways of improving service reliability through 

schedule adjustments and are preparing to implement the first adjustment on the 

Red Line. We have also implemented revised 30-, 60-, and 90-day training performance reviews for newly certified train operators to ensure that they are meeting our 

standards for safe operations and customer service and to provide us with an ongoing source of review regarding the effectiveness of our training programs. 

For Metrobus, we are in the process of replacing 148 older buses, with deliveries 

between March and September 2010. With newer vehicles we expect fewer equipment failures, leading to improved service delivery. We have also reorganized our 

bus transportation division, retrained operators and supervisors, and increased supervision of street operations to better monitor and address service reliability issues. 

We have implemented NextBus, which provides customers with real-time bus arrival information by phone or online, and have created a new online service disruption notification for bus customers. For MetroAccess drivers, we have developed a 

new training program and installed Drive-Cam in MetroAccess vehicles to record incidents for investigation and training purposes. 

With regard to elevators and escalators, we are consolidating our command and 

maintenance centers to eliminate reporting layers and improve accountability, a 

process which we expect to have fully implemented by the end of June 2010. Also 

by June, we intend to have restructured our technicians’ shifts to create rapid response teams with responsibility for maintenance and repair in defined geographic 

areas. 

Six-month Action Plan—Service Reliability 

I have established the following priorities regarding service reliability: 

—Increase Training for Front-line Employees and Supervisors.—Specifically, we 

intend to provide additional training to all station managers with a renewed 

emphasis on customer service, as well as complete training that we have already begun related to the reorganization of our bus department, designed to 

improve management of operators, reduce accidents, and improve service. —Create Transparent Performance Tracking and Reporting Systems.—New performance measurement tools are currently under development, including webbased dashboards, a monthly vital signs report of key performance indicators, 

and an annual performance report to assess what is working well, what is not, 

and why. By the end of June 2010 we expect to release many of these new tools 

publicly to foster increased accountability and transparency. 

—Revise Inspection and Maintenance Procedures to Accommodate Changes in Operations.—As in the area of safety, our rules and procedures for inspections and 

maintenance need to be clear and relevant for our current operating environment. With changes in place related to manual operation and restricted speeds, 

our new vertical transportation command center, etc., we must start revising 

our related procedures accordingly. 

—Pilot Metrorail Schedule Adjustment on Red Line.—As I mentioned earlier, we 

intend to adjust schedules on the Red Line to improve service reliability and 

the quality of the customers’ experience. The new schedules will reflect reality 

and allow for more time for customers to board and alight the trains at our 

busiest stations, and will involve more 8-car trains running to the ends of the 

line, which will maintain our passenger throughput capacity for the Red Line 

as a whole. 

—Initiate External Assessment of Elevator/Escalator Maintenance and Repair Programs.—We intend to contract with outside experts to conduct a review of these 
302 

programs in order to assess their efficiency and effectiveness and make recommendations for additional improvements. —Continually Re-emphasize Safety and State of Good Repair as Top Priorities.— Maintenance of vehicles, track, structures, signals, and other infrastructure in 

a state of good repair has a direct impact on the safety and reliability of the 

Metro system, as it does for every transit agency in the country. If the condition 

of the Metro system is allowed to degenerate further, issues related to service 

reliability will continue to increase. The most effective action we can take to improve reliability is to improve the physical condition of our system. 

FINANCIAL STABILITY

Now let me turn to a topic which is integrally related to our ability to improve 

service reliability—Metro’s budget and current funding constraints. Metro’s proposed fiscal year 2011 budget totals $2.1 billion. That total is composed of Metro’s 

operating budget, which supports the daily delivery of transit service (including personnel costs, fuel and propulsion costs, etc.), and the capital budget, which funds 

investments in the vehicles, equipment, facilities, and infrastructure of the transit 

system. Sources of funding for those needs include State and local funds; Federal 

funds (primarily for capital costs); passenger fares and parking revenues, and other 

sources (such as advertising and fiber optic revenue). Passenger fares cover about 

one-half of the cost of Metro’s operations; broken out by mode, they cover more than 

70 percent of Metrorail operations, about 30 percent of Metrobus operations, and 5 

percent of MetroAccess operations. 

Operating Budget 

Fiscal year 2011 is likely the most difficult year, financially speaking, that Metro 

has ever had to face. The economic slowdown is having a continued impact on 

Metro, as it is across the country. For the transit industry as a whole, the economic 

slowdown has meant that ridership and revenue are down, while costs continue to 

go up. 

Despite the encouraging ridership numbers that Metro has experienced in the last 

few weeks, Metrorail ridership for fiscal year 2011 is projected to be just 2 percent 

above the fiscal year 2009 levels, and on Metrobus, ridership growth over 2009 levels is only projected to be 1.5 percent. These projections are primarily due to continued high unemployment in the region combined with reduced spending by consumers. Lower Metrorail ridership has resulted in less revenue coming in from 

Metro parking facilities as well. Major cost drivers in the fiscal year 2011 operating 

budget include the rise in healthcare cost (which is in line with national trends), 

market losses in pension values, the increasing demand for MetroAccess service, 

and liability insurance and claims associated with the June 22 accident. 

The imbalance between projected revenues and expenses created a $189 million 

gap in our fiscal year 2011 operating budget, if jurisdictional subsidies (which cover 

about one-half of our operating costs) were held constant at fiscal year 2010 levels. 

In order to close that gap, I have proposed a budget that includes further layoffs, 

fare increases, some service reductions, and an increase in jurisdictional subsidies. 

Metro’s Board is currently considering that proposed budget. Without knowing what 

they will decide, it is fair to say that balancing Metro’s fiscal year 2011 budget will 

require hard choices. When we raise fares or reduce service, we have a direct impact 

on the people we serve every day, on their ability to get to jobs, school, medical services, and recreational opportunities. The economic downturn has affected everyone 

in this Nation, and unfortunately Metro is not immune. 

Capital Program 

Over the last 6 years, Metro has funded its capital program through a multi-year 

agreement with our jurisdictional partners, known as Metro Matters, which expires 

June 30, 2010. The stable funding stream provided by Metro Matters allowed us to, 

among other things, purchase 667 new Metrobuses to reduce the age of our fleet 

from over 10 years to under 8 years; and purchase 122 Metrorail cars, expand rail 

yard maintenance and storage facilities, and upgrade power systems to run 8-car 

trains. 

Board Chairman Peter Benjamin’s testimony addresses our capital needs, and I 

simply want to reiterate his point that the funding Metro has requested from this 

subcommittee in Federal fiscal year 2011 is urgently needed to allow us to maintain 

the Metro system in a state of good repair. (Please see attached spending plan.) 

However, due in part to national economic conditions and in part to declining revenues in the Federal Highway Trust Fund, both Federal and State/local sources of 

funding for capital projects are severely constrained. Even with the new Federal 

funding authorization and the associated State/local match, these constraints have 
303 

required Metro to limit our capital investment for the next 6 years to only the most 

critical, ‘‘must-do’’ safety and system maintenance projects. ‘‘Must-do’’ projects include, for example, replacement of the 1000 series rail cars; replacement of our oldest buses; rehabilitation of the oldest segment of our rail line, and replacement and/ 

or rehabilitation of decades-old bus facilities. ‘‘Must do’’ projects do not include other 

investments that should be made, such as investments to address crowding (more 

frequent bus service; more 8-car trains); more elevators/escalators in core stations; 

and system and fleet expansion to accommodate projected growth in demand over 

the next several decades. 

Six-month Action Plan—Budget 

By Fall 2010, we intend to accomplish the following objectives related to Metro’s 

budget: 

—Implement Board-approved Fiscal Year 2011 Budget.—As I have discussed, the 

budget will include job cuts and likely some combination of fare increases and 

service reductions in order to fill the $189 million projected gap. Successful implementation of such changes will require timely and effective customer communication as well as operational changes such as reprogramming of farecard 

readers. 

—Manage Transition From Metro Matters Capital Funding Agreement to Next 

Capital Funding Agreement, Currently Being Negotiated.—I want to note that 

the National Transportation Safety Board is expected to issue its final report 

on the June 22, 2009, Red Line collision shortly before or during fiscal year 

2011, and that report may contain recommendations that will have a cost associated with their implementation. Metro is committed to responding to those 

recommendations and that response may affect our ability to undertake some 

of the projects that have been planned for the next 6 years, absent additional 

funding. 

—Initiate a Discussion With Regional and Federal Stakeholders on Metro’s Longterm Fiscal Outlook to Identify Both Challenges and Solutions.—The basic challenge is this: the Metro system must be brought into a state of good repair. Unless there is a renewed commitment to this goal, the system will continue to 

degrade. 

CONCLUSION

Madam Chairman, in the Fall of this year, I intend to deliver to Metro’s Board 

of Directors an interim performance assessment, along with recommendations for 

further improvement, in each of the areas I addressed above: safety, service reliability, and budget. But you do not have to wait until then to track our progress. 

Metro is developing products that will allow the public to see how we are doing on 

a more frequent basis. We expect to launch shortly a monthly ‘‘Vital Signs’’ report, 

which will initially track operational performance and identify trends, with the goal 

of expanding the range of performance metrics to other areas in the future. We also 

plan to issue an annual performance report, beginning this September. Metro is 

committed to improving transparency and communication with our customers and 

other stakeholders, including Congress. 

Thank you for the opportunity to testify today. I greatly appreciate your leadership on these issues, and I hope that you will favorably consider our fiscal year 2011 

appropriations request. I would be happy to respond to any questions. 
304 

ATTACHMENT NO. 1.—WMATA RESPONSE TO RECOMMENDATIONS IN THE MARCH 4, 2010 FEDERAL TRANSIT ADMINISTRATION SAFETY AUDIT 

Recommendation Actions Taken Next Steps Completion Date 

No. 1. Conduct assessment to identify resources and expertise necessary for Safety Dept. to carry out activities specified in System Safety Program Plan and 

Safety Rules and Procedures Manual.

Developed statement of work for contractor support. Initiate and award contract, with Board approval, received April 22, 2010. Final Report, including identified needs and recommendations by end of August 2010. 

No. 2. Use results of assessment to ensure adequate staffing levels and expertise 

within Safety Department.

Included in statement of work under No. 

1.

Initiate and award contract, with Board 

approval, received April 22, 2010.

Issuance of Safety Dept. staffing & recruitment plan by end of August 

2010. 

No. 3. Increase Safety Dept.’s access to operating & maintenance information and 

reports to ensure this information is being analyzed for potential impacts on safety.

Established Interdepartmental Safety 

Working Group, now receiving monthly reports on operations/maintenance.

Review process for information-sharing 

and quality of information shared.

Formalize process by end of August 

2010. 

No. 4. Develop internal process to require communication of safety-related info. 

across depts., including impacts of budget reductions & resource constraints on performance of safety-related maintenance activities/requirements.

Initiated development of web-based 

tool.

Develop process for identifying and 

evaluating maintenance-related safety issues.

Complete development by end of August 

2010. 

No. 5. Define and implement the process for the top Safety Department position 

to communicate safety priorities to the GM in a timely and consistent manner.

Chief Safety Officer (CSO) now reports 

directly to General Manager.

Continue weekly CSO meetings and reports to GM; revise System Safety 

Program Plan to reflect relationship.

Completed by end of April 2010. 

No. 6. Identify technical skills required to perform system-wide hazard analysis; if 

needed, provide training as soon as practicable.

Included in statement of work under No. 

1.

Initiate and award contract, with Board 

approval.

Contractor to issue needs assessment & 

training plan by end of August 2010. 

No. 7. Update the System Safety Program Plan to develop a hazard management 

process that ensures all departments participate in an on-going manner.

Interdepartmental Safety Working Group 

has met to design a new process.

Confirm design of new process with 

contractor support.

Completed by end of September 2010. 

No. 8. Institute process to ensure changes in operating rules are analyzed for 

safety impacts before system-wide implementation.

Outreach to peer transit agencies for 

model forms and processes has begun.

Continue outreach to peer agencies and 

consultation with union; revise rule book.

Metrorail Safety Rules and Procedures 

Handbook revisions completed by end of September 2010. 

No. 9. Finalize right-of-way protection rules; develop training to implement new 

rules. Ensure all ROW employees & contractors receive training before accessing ROW.

Roadway Worker Protection Working 

Group established; new manual has been drafted; workshop and roundtable held.

Finalize new manual; finalize new training program. Roll out of new training program in Oc- tober 2010. 

No. 10. Implement configuration management program described in System Safety 

Program Plan.

Included in statement of work under No. 

1.

Initiate and award contract, with Board 

approvalreceived April 22, 2010.

Create action plan & training program 

by end of September 2010. 
305 

WMATA RESPONSE TO FTA FINDINGS OF THE TOC THAT RELATE TO WMATA IN THE MARCH 4, 2010 FTA SAFETY AUDIT 

Recommendation Actions Taken Next Steps Completion Date 

Finding No. 1.—Require WMATA to complete a timely, thorough, and competent 

review and update of WMATA’s Safety Rules and Procedures Manual.

The update of both the SSPP and 

WMATA’s Safety Rules and Procedures Manual will be included as part of the contractor SOW for the Safety Assessment and Hazard Management Program.

Seek permission to Initiate and award 

contract with WMATA Board approval.

Board Approval received April 22, 2010. 

MSRPH revisions to be completed by the 

end of September 2010. 

Finding No. 2.—Require WMATA to develop (and TOC to review and approve) an 

internal WMATA safety audit recovery plan for calendar year 2010 and calendar year 2011.

The Safety Assessment and Action Plan 

will ensure that we have personnel skilled in auditing in the Safety Department.

We also will receive contractor support 

in reviewing and updating our existing checklists and procedures.

Seek permission to Initiate and award 

contract with WMATA Board approval.

Board Approval received April 22, 2010. 

Completed by the end of August 2010. 

Finding No. 3.—Require WMATA to develop a recovery plan to complete all open 

accident investigations following procedures established in TOC’s Program Standard, WMATA’s System Safety Program Plan and WMATA’s Accident Investigation Procedure.

We are working closely with TOC to address this finding and have made 

considerable progress.

In the May 4, 2010 submission, both 

TOC and WMATA will report that a recovery plan of closing at least ten open accidents investigations per month is accomplished.

The goal is to completed 90 percent by 

the end of September 2010. 

Finding No. 4.—Work with WMATA to ensure that there is a process in place for 

evaluating Corrective Action Plan (CAP) alternatives that may be necessary as a result of capital and operating program resource limitations.

The contractor SOW for the hazard management work will also address this 

issue.

Seek permission to Initiate and award 

contract with WMATA Board approval.

Board Approval received April 22, 2010. 

Completed by the end of August 2010. 

Finding No. 5.—Require WMATA to develop and implement a comprehensive and 

system-wide hazard management program (as specified in 49 CFR part 659.31).

Interdepartmental Safety Working Group 

to design new process has taken place and with contractor support and will: Integrate into web-based tool; Integrate into Internal Safety Audit process and Quality Assurance (QA) process; and Integrate into dayto-day activities.

Seek permission to Initiate and award 

contract with WMATA Board approval.

Board Approval received April 22, 2010. 

Create action plan & training program 

by end of September 2010. 
306 

WASHINGTON METROPOLITIAN TRANSIT AUTHORITY (WMATA) PROPOSED PRIIA (DEDICATED FUNDS) PLAN AS OF MAY 17, 2010 

[In millions of dollars] 

CIP Project Name Project Description 

Budget 

Federal Fiscal 

Year 2010 

Federal Fiscal 

Year 2011 

RAIL CAR FLEET REPLACEMENT AND REHABILITATION: 

CIP057 1000 Series Rail Car Replacement ................................... This project will design and purchase 300 7000 Series railcars, which will replace all 1000 Series railcars that were purchased between 1974 and 1978. This project is one component of a long-term 

fleet plan to avoid repetitive developmental cost associated with new car design and procurement. The replacement of the 1000 Series with the 7000 Series will improve reliability, reduce maintenance and operating costs and incorporate technology and enhancements of newly designed railcars.

79.3 20.5 

CIP063 Rail Rehabilitation Program .............................................. This project will procure major repairable railcar components tosupport the overhaul of essential systems in the fleet. To maintain astate of good performance, major railcar components must 

berefurbished or replaced on a regular basis. These components includebut are not limited to wheels, trucks, brake systems, HVAC, and traction motors. Approximately 225 railcars, or 20 percent of the fleet, will receive major overhauls funded through this project.

12.4 12.5 

CIP067 Rail Car Safety and Reliability Enhancements ................ This project will perform engineering analysis, diagnosis, testing and resolution of safety, maintenance 

and operational issues relating to the railcar fleet and its interaction with track work, automatic train control, communication, and power systems. The project work will resolve compatibility issues across the multiple series of railcars andinfrastructure related to changes in technology and components.Examples of specific issues to be resolved are emergency exterior doorreleases, wrong side door openings, and car roll back.

12.1 2.5 

CIP071 Test Track and Commission Facility ................................. This project will procure, design and construct a test track andcommissioning facility that will be utilized for ongoing engineeringanalysis and enhancements to the fleet, as well as acceptance testing 

of new railcar procurements and will be in constant use. A dedicatedfacility will allow testing to be done and not impact night-time maintenance activities.

5.2 17.5 

Total .............................................................................. ........................................................................................................................................................................... 108.9 53.0 

TRACK SAFETY IMPROVEMENTS: 

CIP018 Track Welding Program ..................................................... This project will provide for the welding of approximately 500 openrunning rail joints throughout the 

Metrorail system and to purchaseflash butt welding kits. The track welding program will improve theelectrical conductivity of the rail, eliminate joint defects, reduce noiseand wear, reduce maintenance and inspection costs, and eliminatecross tie fires.

1.5 2.7 

CIP019 Track Floating Slab Rehabilitation ................................... This project will prevent services delays and speed restrictions due to differential settlement of the 

track structure and reduces noise andvibration to the surrounding building and structures by replacing failedisolation pads and restoring the track structure to the proper elevation.

1.7 1.3 
307 

CIP020 Replacement of Rail Track Signage ................................. This project will procure and install 3,000 markers and 500 safety signs to replace old, illegible rail 

track graphic signs and various other signs indicating locations and warnings to employees, emergency responders, and the general public. Track graphics are essential for safe operations and emergency responses. Many signs throughout the Metrorail System are approximately 30 years old. Some of these signs require upgrading because they are damaged, deteriorated, or obsolete.

1.0 1.1 

CIP021 Track Pad/Shock Absorber Rehabilitation ......................... This project will maintain the integrity of the track structure by rehabilitating 7,000 linear feet of grout 

pads on Rhode Island and Minnesota Avenue Metrorail Station Aerials. Grout/plinth pads (concrete pads) located below the track provide elevation and support for the track and track fasteners. They are replaced as needed to restore the track structure to the proper elevation. Improper elevation can result in damage to the car’s third rail collector shoes and the vibrations can potentially lead to structural cracking in the surrounding buildings and structures.

4.3 2.1 

CIP022 Track Structural Rehabilitation ......................................... This project will be utilized for the rehabilitation of structural components and to restore the track 

structures, such as elevated platforms, bridges, and retaining walls to their designed load carrying capacity. These rehabilitations are critical, as the loss of one of these structures could result in the functional loss of an entire Metrorail line segment. The rehabilitation work includes the anchor bolts of 65 bridge piers on Minnesota Avenue Aerial and additional anchor bolts at Grosvenor and I–495. One down and under crane for underbridge inspections and rehabilitation will be procured.

2.3 1.5 

CIP023 Third Rail Rehabilitation ................................................... This project will replace the original third rail (5 miles annually) with the composite third rail. Original 

third rails have become worn throughout the Metrorail system. New aluminum and steel composite third rails will provide less resistance for eight car trains and allow trains to run more efficiently. This project will result in maintained tracks and fewer train delays.

.................... 5.5 

CIP024 Track Rehabilitation .......................................................... This project will be utilized for the procurement of material and specialized equipment to facilitate the 

removal and installation of the track and switch panels, which prevents service delays and speed restrictions. Track components (which include running rail, cross ties, direct fixation fasteners, third rail insulators, and turnouts) require replacement when, based on industry standards, they become worn or unserviceable due to deterioration, excessive wear, or defects. No. 8 turnouts will be upgraded from unguarded to guarded turnouts based on National Transportation Safety Board recommendations.

44.4 33.3 

CIP027 Switch Machine Rehabilitation Project ............................. This project will improve the safety and reliability of the interlocking track structure by replacing 20 

switch machines throughout the Metrorail Systems. Switch machines have a normal life expectancy of 10 years; all the switches to be replaced have been in service over 10 years.

0.9 1.0 

CIP133 Wayside Work Equipment .................................................. This project is for the installation of a safety signaling system at rail portals and other locations to 

alert personnel to approaching trains. This project will provide for enhanced safety for customers and WMATA personnel.

4.1 3.1 

Total .............................................................................. ........................................................................................................................................................................... 60.2 51.5 
308 

WASHINGTON METROPOLITIAN TRANSIT AUTHORITY (WMATA) PROPOSED PRIIA (DEDICATED FUNDS) PLAN AS OF MAY 17, 2010—Continued 

[In millions of dollars] 

CIP Project Name Project Description 

Budget 

Federal Fiscal 

Year 2010 

Federal Fiscal 

Year 2011 

TRACK EQUIPMENT: 

CIP025 Track Maintenance Equipment .......................................... This project is for the rehabilitation and replacement of heavy-duty track equipment. Track maintenance 

equipment is essential to deliver quality service and for the safe and efficient execution of the track rehabilitation work. Timely rehabilitation and replacement of four selfpropelled prime movers will ensure equipment reliability, reduce the probability of delays due to equipment breakdowns, and allow for efficient use of the right-of-way track time.

17.3 20.7 

CIP066 Rail Shop Repair Equipment ............................................. This project funds the replacement of rail shop equipment that has reached the end of its useful life. 

Purchases will include approximately 125 pieces maintenance equipment, 48 pieces shop test equipment, and 15 pieces shop machine equipment. Some examples of equipment to be purchased are overhead cranes, rail train lifts, hoists, industrial shop air compressors, service elevators, hoisting mechanisms, wheel truing machines, and electrical controls.

2.2 4.2 

CIP089 Track Fasteners ................................................................. This project is for the replacement of track fasteners. Deteriorated track fasteners cause stray current 

and have been found to cause fires in the system. Track fasteners are an integral structural component of the track system that needs to be replaced periodically. Approximately 15,000 track fasteners will be replaced on the Red Line with thesefunds.

2.1 2.1 

Total .............................................................................. ........................................................................................................................................................................... 21.5 27.0 

MAJOR RAIL LINE SEGMENT OVERHAUL: 

CIP110 Rail Rehabilitation Tier 1.—National Airport to Stadium 

Armory.

This project encompasses engineering and design to begin rail line segment rehabilitation of the Orange/Blue/Yellow Lines from National Airport to New Carrollton which includes 23 Stations with a 

route mileage of approximately 18.7 miles. Stations scheduled for rehabilitation were completed and put into service between 1977 and 1978. Work to be initiated includes but is not limited to traction power, automatic train control and communication upgrades, track fastener replacement, tunnel ventilation, air conditioners, replacing suspended ceiling tiles, canopy roof replacements, platform rehabilitation lighting, public address, and CCTV system upgrades.

34.5 60.6 

CIP116 Rail Yard Facility Repairs Tier 1.—Alexandria, Brentwood and New Carrollton. This project is a rail yard rehabilitation of Alexandria, Brentwood and New Carrollton Rail Yards that were put into service between 1976 and 1983. The contract will include items from the Inventory 

Database and other items identified by rail operations and maintenance, security and environmental to enhance operations and maintenance activities and provide a better work environment. Work will include all systems and infrastructure to increase overall efficiency.

.................... 24.8 
309 

Total .............................................................................. ........................................................................................................................................................................... 34.5 85.4 

RAIL PREVENTIVE MAINTENANCE: 

CIP125 Rail Preventive Maintenance ............................................. This project is for preventive maintenance and related purchases for rail cars. Activities will include 

regularly scheduled maintenance of railcar components and systems at scheduled duty-cycle intervals. Purchases will include brake parts, truck parts, propulsion parts and other parts necessary for maintaining functionality of rail car features.

40.9 20.8 

TRACK SIGNAL IMPROVEMENTS: 

CIP135 Train Control Signal .......................................................... This project funds the initial engineering support for analysis of the train control signaling system in an 

effort to improve the system.

1.0 10.3 

CIP136 FCC Radio Frequency Communication Changes ............... This project will meet the new FCC ‘‘narrow banding’’ requirement that affects the agency’s UHF radio 

system. Planned activities include specification development, engineering, prototype testing, and project management. The primary impact is to the infrastructure equipment (as opposed to the subscriber equipment—handheld and mobile radios).

0.2 1.0 

Total .............................................................................. ........................................................................................................................................................................... 1.2 11.3 

NTSB RECOMMENDATIONS: 

CIP139 NTSB Recommendations .................................................... This project will allow Metro to implement any forthcoming NTSB recommendations as a result of the 

ongoing accident investigation.

10.3 10.3 

BUS FLEET REPLACEMENT AND REHABILITATION: 

CIP006 Bus Replacement .............................................................. This project will purchase 100 buses a year to maintain an average fleet age of 7.5 years based on the 

2009 fleet size of approximately 1,500 buses that range in size from 26 to 62 feet, and are a mix of conventional and articulated buses.

.................... ....................

MAINTENANCE OF BUS GARAGES: 

CIP119 Bus Garage Facility Repairs Tier 1.—Western, Northern 

and Landover.

This project is a bus facility rehabilitation of Western, Northern and Landover bus garages and other 

auxiliary facilities, includes Metro Supply facility, Landover Open Storage and Blair Road Support Shop. The facilities in this project were originally put in service between 1906 and 1989. Work will include all systems and infrastructure to increase overall efficiency.

18.9 25.7 

BUS SAFETY IMPROVEMENTS: 

CIP007 Bus Camera Installation ................................................... This project is based on completing installation on remaining buses, which will ensure that all buses 

will be equipped with camera systems to reduce detrimental impact of fraudulent claims, reduce or eliminate vandalism, deter crime, assist in criminal prosecutions, and help employees assist customer concerns and complaints.

.................... 3.0 
310 

WASHINGTON METROPOLITIAN TRANSIT AUTHORITY (WMATA) PROPOSED PRIIA (DEDICATED FUNDS) PLAN AS OF MAY 17, 2010—Continued 

[In millions of dollars] 

CIP Project Name Project Description 

Budget 

Federal Fiscal 

Year 2010 

Federal Fiscal 

Year 2011 

CIP002 Automatic Vehicle Location Equipment Replacement ...... This project will begin the replacement of Advanced Vehicle Location (AVL) equipment on buses that 

was installed on buses prior to 2002. The equipment, which allows monitoring of bus locations, has a life span of 7–10 year. If Metro does not replace obsolete AVL equipment, Metro will not be able to monitor the location of buses with the old equipment.

3.7 12.1 

Total .............................................................................. ........................................................................................................................................................................... 3.7 15.1 PRIIA Funds ................................................................... ........................................................................................................................................................................... 300.0 300.0 
311 

MEASURING PROGRESS AND PERFORMANCE IN METRO SAFETY

Senator MIKULSKI. Well, let me get right to some of my questions. A year ago, right after the accident, I was very intensely critical of Metro, and everybody knows it. What I said, though, is that 

I didn’t want to be the manager of Metro. I don’t think that is an 

appropriate congressional role. But one of the questions that I said 

at that time, I am not saying it this time, is that often solving the 

problem was having a meeting about the problem, and that was 

viewed as solving the problem. 

I asked about how was Metro—and at that time I placed responsibility on the board, but I throw this question open to both of you. 

When we talk about safety and operational reliability—but let us 

go to the safety, you need to have the systems in place. You need 

to have the training, and you need to also find out if those systems 

and training are working. 

So my question to you is how are you measuring progress and 

performance? What we have here in your testimony, and you and 

I have had the opportunity to speak before, is a rather comprehensive list of actions taken. Develop an incident tracking and safety 

management reporting system. Encourage near-miss reporting, like 

an anonymous hotline. Strengthen whistleblower protection so you 

don’t shoot the messenger. 

In other words, these look promising. But we have been down the 

road of promises before, both the Federal Government, when we 

promised funding and broke that promise. So now it is our job not 

to break our promise. But the second is that with this list of things 

that you say will improve safety, you, sir, and you, Chairman Benjamin, how will you measure progress? How will you measure performance? What metrics are you going to use so that you would 

really know if this is going to work? 

Mr. SARLES. First of all, we have set deadlines for delivering certain items, when we are going to have the track worker protection 

manual done, for example. We have already completed the draft, 

but now we have a deadline for finalizing that and starting training. 

We set dates for starting training programs. Starting next week, 

there will be a series of training programs over the summer for 

people. We have these deadlines set. We are going to make these 

milestones, and we can be measured against that. 

Beyond that, in the longer run—— 

Senator MIKULSKI. But how are you going to measure them? 

Mr. SARLES. By meeting those deadlines. If we say we are going 

to deliver a manual, the track worker protection manual by a certain date, we have to make that date. If we say we are going to 

conduct training, which we are, this summer between such and 

such a date and what those courses are, we will show that we 

made those dates and, in fact, people attended those sessions. 

Those are the close-on measurements, if you will, that if you say 

you are going to do something, you deliver on it. 

Beyond that, ultimately, what the performance measure is, measures that you will see safety wise are number of injuries, both employees and passengers, number of incidents or accidents, that sort 

of thing. That tells you over the long term whether you are actually 
312 

seeing the right trends. And if you are not seeing the right trends, 

which all should be downward, then you have to take additional actions. And those are the types of things we will make public so people can see how we are doing as a scorecard. 

Senator MIKULSKI. Well, there was a woman, actually, a widow, 

after her husband’s death in January, stepped forward to say that 

this was her description of safety training for her husband—now I 

am going back to before your arrival, but nevertheless—she said 

Metro’s solution is having a safety meeting, putting on a video, and 

then handing out hard hats. 

They met a deadline. They had a meeting. They even had ‘‘training,’’ but it was a video. Her husband, according to her comments, 

had concerns about the vehicle that ultimately killed him. That it 

was too powerful, too dangerous, and that it had no backup camera. It had no backup sound and lights were disconnected. Metro 

didn’t have floodlights. In other words, this is beyond giving out 

manuals and meeting deadlines. 

Mr. SARLES. Yes. 

Senator MIKULSKI. I mean, start with the manual. But that is 

the whole darned problem, which is that we hear they are giving 

out manuals, and they meet deadlines. So what the hell does that 

mean? Pardon me. 

Mr. SARLES. Yes, sure. You have the manual. Then you have to 

train to that manual so the workers understand exactly what the 

procedures should be and how they should operate in a safe manner. And then you see, through gathering of the statistics that support the performance measures that, in fact, we are having fewer 

incidents, and the goal is to be zero in terms of accidents. 

So you have to take the first steps, put it into place, do the training, and then measure the results of that training. 

Senator MIKULSKI. Well, I understand, and I want to go to Mr. 

Benjamin, that at your board meeting, up until very recently, you 

got no reports on safety? 

Mr. BENJAMIN. Senator Mikulski, we did get reports on safety. 

We always, on a monthly basis, were told how many accidents 

there were, how many incidents of various types there were, how 

many fatalities, how many injuries, and what the trend over time 

had been. What we did not get reports on and what we should have 

heard about and we now are getting reports on is the degree to 

which our safety staff was fully staffed, the degree to which we 

were responding to our oversight agencies effectively and meaningfully, and the degree to which, when findings were made, we were, 

in fact, carrying out those activities. 

So, yes, we got the big picture, but we weren’t getting enough. 

And we have now changed that. We are getting more information, 

and we have asked our inspector general, as a separate path. Originally, the only path was going through the General Manager. The 

inspector general now reports directly to us as the Board to review 

all of those materials, make sure that activities were occurring at 

the schedules that were required, and that if we are not getting 

that activity occurring, to report directly to the Board. 

We have also asked the Tri-State Oversight Committee to brief 

the board directly so that if information is not flowing properly, we 

hear about it right away. 
313 

TOP SAFETY AND HAZARD CONCERNS

Senator MIKULSKI. The FTA audit found that Metro didn’t have 

a list of the top 10 safety and hazard concerns. Do you now have 

that list? 

Mr. SARLES. Yes. 

Senator MIKULSKI. Are you aware, Mr. Benjamin, of what those 

top 10 are? 

Mr. BENJAMIN. I am not aware of that particular list. 

Senator MIKULSKI. But those are the top 10 safety and hazard 

concerns. Look, please, and I am not trying to play a game of ‘‘I 

gotcha,’’ and I am not trying to embarrass you. I am trying to get 

to the point. We had the accidents. We have had the FTA audit. 

We are making corrections. 

One of the things that they said was Metro did not have a list 

of 10 safety and hazard concerns. Now, sir, you say you have the 

10? 

Mr. SARLES. Yes. And I will give you a couple off the top of my 

head. One is strengthening the Safety Department, which we have 

done. We are moving forward on that. We have hired a new Chief 

Safety Officer, who is here with us today. We had a dozen positions 

added. We filled six of them. We are interviewing this week and 

next week to fill the remainder. 

Another issue was to replace the 1000 Series cars. I am expecting 

to go to the board very shortly to seek approval to acquire new cars 

to replace those 1000 Series cars. And—— 

Senator MIKULSKI. I have a request. 

Mr. SARLES. Sure. 

Senator MIKULSKI. We will leave this open. I would like you to 

submit for the record the 10 top safety and hazard concerns. 

[The information follows:] 

TEN KEY SAFETY AND HAZARD CONCERNS

Replace the oldest railcars in the fleet (Rohr 1000 Series railcars). 

Develop a new real-time automatic train control redundancy system. 

Strengthen the expertise of the Safety Department. 

Complete the Roadway Worker Protection Program. 

Develop a training and certification program for bus and rail personnel. 

Strengthen employee knowledge of rules and rules compliance. 

Develop an accident and investigation database. 

Create a strong internal training tracking database. 

Fill vacancies in the Safety Department. 

Improve the agency’s safety culture. 

Mr. SARLES. Yes. 

Senator MIKULSKI. The actions taken on them, and then I would 

like you to give them to your own Board. 

Mr. SARLES. Will do and we have discussed most of them with 

the Board. We have presented some of those. 

Senator MIKULSKI. That is the point. 

Mr. SARLES. Yes. 

Senator MIKULSKI. Mr. Benjamin, you are a very dedicated public servant. I know your record. You are man of really civic engagement. Can you tell me why you didn’t have the top 10? 

Mr. BENJAMIN. Well, as Mr. Sarles was saying, I think I did not 

recognize it as ‘‘the top 10,’’ as listed like that. But I am fairly cer-
314 

tain from his statement that these are all issues that we have discussed, just not discussed as ‘‘the top 10 list.’’ 

Senator MIKULSKI. Sir, would you identify and would you agree 

that those are the top 10 things that need to be changed? 

Mr. SARLES. Yes. 

Senator MIKULSKI. In the order of priority? 

Mr. SARLES. Yes. 

Senator MIKULSKI. Well, I would like to really have a copy of 

those top 10 for us as well for the record. But I also would really 

recommend we call this the ‘‘checklist for change.’’ That this is one 

of the basic lists that we will follow. It won’t be the sole list, but 

it will be a primary list that we can all agree upon actions taken 

and progress measured. Would that be a good way to go? 

Mr. SARLES. That is fine. 

Senator MIKULSKI. Because we don’t want to be you, but we need 

to know how you are doing. 

Mr. SARLES. And I welcome that, and that is part of the scorecard—— 

Senator MIKULSKI. We need to know then how the board then focuses on that. Now we understand that the safety department has 

had 41 staff positions, but 10 were vacant. Now where are we on 

that? 

Mr. SARLES. Yes, and that is what I was referring to before—— 

Senator MIKULSKI. Maybe you don’t need all 41. Maybe that was 

from another era. But what we are concerned about is that since 

2006, it was reorganized six times. That is what I mean about having a meeting, a meeting, a meeting, and then the meeting met the 

meeting, and then it met the deadline. 

Mr. SARLES. I will agree with you that there has been too much 

reorganization. 

Senator MIKULSKI. Not enough organization. 

Mr. SARLES. And I am trying to stabilize that. And one of the 

things that was done just before I got there—and it is the right 

thing—is that the Chief Safety Officer now reports to me. Ten positions were created. Actually, I think it was a dozen last December. 

Six of them have been filled. We are interviewing for the remainder. We expect to fill those within the next 45 days. 

Senator MIKULSKI. You will have that in 45 days? 

Mr. SARLES. Yes. And then, on top of that, the board authorized 

at their last meeting the hiring of outside expertise because I want 

to take a look at further strengthening the Safety Department to 

see if the staffing is appropriate, to see if they are trained properly. 

The board has authorized that. We are out now seeking proposals. And I expect within the next 2 weeks to award that contract. 

Senator MIKULSKI. So, what do you think will happen when you 

do that? 

Mr. SARLES. The key thing is that we look at the Safety Department and, as I said, see where it needs to be strengthened further. 

Is it organized exactly the way it should be? Get that outside expertise and also aid us in looking at the other safety aspects as 

part of our safety plan. 

Mr. BENJAMIN. Senator Mikulski, if I may? 

Senator MIKULSKI. Yes, please. 
315 

Mr. BENJAMIN. I think one of the most important things that Mr. 

Sarles has focused on is the culture issue, which you mentioned 

earlier, and the fact that safety is not something that happens in 

a safety office and that safety officers who work in headquarters 

don’t cause safety to come about. 

And one of the things that he has been working on is making 

sure that safety is, in fact, the way that we live, the way that we 

react, the way that everybody focuses on the actions that they take, 

starting, as you pointed out, from the Congress, through the Board, 

the General Manager, the supervisors, and everybody working 

throughout the system. And one of the things he has done right 

away is to make sure that there are safety people out in the field 

working with the various organizations, not just in an office sitting 

and keeping track of things. 

Senator MIKULSKI. Well, I would concur. Safety officers are not 

meant to be the bean counters, counting how many accidents happen. It is the major prevention team. So in the area of safety, you 

not only need to have first responders, the ability to get out of the 

cars fast. You know, a lot of what the National Transportation 

Safety Board [NTSB] is going to tell us is what to do after a crash, 

which is how to get out fast and to have a black box to tell you 

what happened. We are in the prevention business. 

Mr. SARLES. Exactly. 

METRO MODERNIZATION

Senator MIKULSKI. That is what we are. I think the biggest role 

of Congress is we are in the prevention business. I know we must 

be. I want to move in short order to modernization questions and 

then this will go to the question related to modernization. To what 

degree, when we look at technological problems and the survivability of the cars, is due to the fact that the Metro system is a system that is aged in place? 

Mr. SARLES. Certainly, when you have a—— 

Senator MIKULSKI. Do you agree, first of all, that is aged in 

place? 

Mr. SARLES. Yes. 

Senator MIKULSKI. That it takes a lot to run it and maintain it? 

Mr. SARLES. And that is one of the things that has not occurred 

over the years, as I can see. The attention to maintenance, the attention to reinvesting in the system just to keep it in a state of 

good repair, sort of like-new condition, without having that continual reinvestment in the state of good repair, it does cause reliability issues. You are now repairing things. Things break down, 

even during the operation. That shouldn’t be the way it operates. 

And I believe with the proposed capital program, that especially 

with the infusion of the $150 million for 10 years and the matching 

funds from the jurisdiction—that, combined with maintaining the 

same level of other jurisdictional contributions, will go a long way 

over a period of time to restoring this system to a state of good repair. 

It is not there now, and it has got to be changed. And that is 

what we are focused on. 

Senator MIKULSKI. Mr. Benjamin, do you want to comment on 

that? 
316 

Mr. BENJAMIN. Yes. I agree entirely with the statement that you 

made. Our rail system is not brand-new anymore. It is 34 years 

old. Senator Cardin made that point as well. 

It is a system which has not been reinvested in. You cannot have 

an infrastructure that hasn’t been properly reinvested and parts of 

it maintained properly. Most of our escalators, one of the things 

that people complain about all the time, were designed to operate 

for 20 years. Many of them are 30 and 35 years old. 

When you have equipment that old, maintaining it, keeping it 

operating is extremely difficult, and the result is you are compromising safety. 

When you have moving equipment that people ride on, you have 

to maintain it. You have to replace it when the time comes. And 

we have not made those investments, and that is what is critically 

necessary. And I believe that with the new funding that we have 

from the Federal Government, with the continued funding by each 

of the jurisdictions by their match to the funding from the Federal 

Government, we will be making progress. 

And probably, we will get to the point where we will be able to 

bring our system to a state of good repair. What we will then have 

is the challenge that we won’t have enough money to really deal 

with the expansion of service that is necessary even within our 

given confines in order to allow us to serve more and more people 

that will need to use our existing system. 

Senator MIKULSKI. Well, I know you have just completed extensive public hearings over the fare box issues, and you have a pretty 

good sense that Metro, No. 1, is popular. 

Mr. BENJAMIN. Yes. 

Senator MIKULSKI. There is a lot of expectation of Metro. As I 

understand it a significant amount of your funds are now going 

into Metrobus and MetroAccess. Is that correct? 

Mr. BENJAMIN. In the increase that is in the proposed budget, 

the subsidy increase for bus goes up by about $20 million, the subsidy increase for MetroAccess goes up by about $20 million, and the 

subsidy increase for rail is actually a decrease of $40 million. So 

what we are looking at is substantial subsidy going to bus and to 

paratransit and rail not getting as much. What we are doing then 

is charging our rail passengers more and having them pay that difference. 

Senator MIKULSKI. Well, that is a pretty startling kind of breakdown there because it is the rail that carries the majority of the 

passengers. I am not into allocation or disputing because I think 

you would be the first to say you need rail, bus, and then people 

with special challenges need the MetroAccess. We are not disputing 

any of that. 

But for the $150 million Federal contribution, what are we going 

to get? Are we going to get modernization? Are we going to get 

maintenance? Are these safety improvements? What would be the 

breakdown of the $150 million? 

Mr. SARLES. You are getting, first and foremost, safety improvements. The second is state of good repair improvements. That is 

just bringing the system back to where it was, and when you do 

that, you also improve the safety of the system because there are 

less breakdowns, which causes other problems. That is what the 
317 

capital program is all about. It is safety and state of good repair 

and that is especially what the dedicated funds are going to, nothing else. 

As the chairman was mentioning before, we are not, in this program, at this time, investing in ways to expand the system either 

by adding more eight-car trains or expanding the number of buses. 

This is solely focused on the existing system’s state of good repair 

and safety. 

Senator MIKULSKI. What about modernization? 

Mr. SARLES. Only in the sense that, say, for instance, when we 

replace the 1000 Series rail cars, we will, of course, design them 

and build them to the latest standards, both safety and functional 

and all the other standards. So, in that sense, there is a modernization. When you take something old and rehabilitate it, you 

bring it up to the most modern standard. So you get that kind of 

modernization that goes on. 

Senator MIKULSKI. Well, this takes me to the Federal responsibility that while we might be self-congratulatory that we are finally 

providing a guaranteed revenue stream of $150 million, the fact is, 

is that helps maintain the status quo in good operating order. 

Mr. SARLES. Right. 

Senator MIKULSKI. I don’t mean to overstate it, but is that kind 

of a good summary of it? 

Mr. SARLES. Exactly. 

Senator MIKULSKI. So, if we wanted to modernize, it would take 

additional revenue from either your Federal partners or other partners. Is that correct? 

Mr. SARLES. That is correct. 

Senator MIKULSKI. If you wanted to because we know there is 

going to be some rather robust NTSB recommendations. Those will 

probably in many ways deal with more modernization. Am I correct? 

Mr. SARLES. Yes, I would assume so. 

Senator MIKULSKI. Well, what I would like from you, as we discuss it among ourselves because this goes to national priorities for 

not only the Washington system, but for Americans’ public transit, 

is how are we going to meet our responsibilities for capital improvement, modernization, and operational cost? These are national issues, and in some ways, you are right here. So we see you 

with the good, the bad, and the ugly. 

But I am going to go to the good, and a modern system needs 

to be continually modernized and from a management standpoint, 

modernization is not an event. It is a process. 

Mr. SARLES. You are right. It is a continuing process. As we rehabilitate, improve, we have to also bring it up to modern standards. And if you don’t, you fall behind. 

Senator MIKULSKI. Well, I like to have hard, concrete things, as 

you hear me say, to measure against, for example the checklist for 

change. But when NTSB comes out with their report, apart from 

overall words like ‘‘modernization,’’ we would like to hear from you 

what would it take to implement it? And I think that is a fair question. 

We don’t want to create unfunded mandates, but I think it is 

time that Congress has to take a realistic view of what it needs to 
318 

do to provide in partnership—again, we are in addition to the 

stakeholders and the locales. But at the same time, if there are 

Federal requirements, there should be a way for assistance to meet 

those Federal requirements. 

Mr. SARLES. I would welcome that—— 

Senator MIKULSKI. I am sure that is the way you see it. That, 

in some way, is out of the scope of the subcommittee. I mean, it 

goes to authorization. But I believe rail, whether it is heavy rail 

to move cargo in our corridors, whether it is—I will call it heavy 

rail, to move people in the Northeast Corridor, whether it is our 

MARC trains or the Virginia version of that, we need to have a real 

commitment to rail and mass transit in this country because, 

whether it is Purple Line, our Red Line in Baltimore, your Red 

Line here, but we are running into a lot of red ink. Isn’t that the 

problem? 

Mr. SARLES. Yes. 

BUDGET SHORTFALL

Senator MIKULSKI. Now you have a $189 million shortfall? 

Mr. SARLES. Currently, right. 

Senator MIKULSKI. So, first of all, what you hear from the subcommittee is not shouts and chest pounding about how we are 

going to withhold the money until you do such things. We do believe, though, there has to be modernization. There has to be safety 

reform, and there has to be accountability. By accountability, we 

mean real measurements. 

So we are going to be talking with you over the next year. We 

have said a lot about what we think about you. I am not going to 

ask you what you think about us. But as Congress looks at what 

it needs to do, I am asking you what your recommendations would 

be to us about what a Federal partnership would mean for modernization, safety improvements, and increased operational reliability. 

Whether it is the escalator working, which we hear a lot of, or 

the fact that significant funds do go in buses. Significant funds do 

go into meeting the Federal mandate of access for people who are 

challenged. Am I correct? 

Mr. BENJAMIN. You are absolutely correct. 

Senator MIKULSKI. So do you have thoughts or recommendations 

you would like to make to us? 

Mr. BENJAMIN. Well, one of the issues, as you point out, is that 

we do have a number of requirements that are already upon us, 

one of those being providing service for persons with disabilities. 

And that is an ever-increasing cost to every transit system in the 

United States. 

It is a critical service for us to provide because we are, in fact, 

the lifeline for many of those people. It is the only way that they 

can become productive members of society, and therefore, it is critically important for us to provide the service. 

However, what we are discovering is that it is overwhelming in 

terms of the cost increases, particularly in this area. It is overwhelming our ability to also provide service for everybody else because we just don’t have enough money to catch up with everything. So, to the degree that the Congress can help us in funding 
319 

that portion, and that is actually everybody in the United States, 

every transit system in the United States, funding the increasing 

operating costs of that portion, it allows much of the State and 

local funding, which otherwise is going into those increases, to be 

used for improvements in bus and improvements in our rail service, which, as you point out, is where the vast majority of our people are. 

So we have got to draw a balance between providing a critical 

service for people that have no other choice and providing the really major service for the vast majority of the people in the region. 

So it is an area that is very, very important. And I would encourage the Congress to look at that, both for Metro here, but for everybody around the country. 

Senator MIKULSKI. That is what I was saying. This is a national 

issue, and it is a mandate. Well, I can only speak from personal 

experience. You know, about 10 months ago, I had a fall and 

cracked my ankle in three places. So I got around with a wheelchair. Then I got around with a walker. I had a space boot that 

was 3 feet long. But my situation was temporary. 

But I learned a lot from the temporary situation because I often 

thought about for many people, whether it is a returning Iraq or 

Afghan vet, whether it is a senior citizen, a child injured in an accident, mine was temporary, but for many, it would be permanent. 

But I mean, even for me, getting to doctor’s appointments, returning to work, I had a car and somebody to help me. 

If I didn’t have that, and you will be interested to know, when 

I came in to vote for Sotomayor and I came in from Mercy Hospital 

to meet my constitutional responsibility, I came in a mobility van. 

Not yours, but something provided by the Senate to move handicapped Senators or staff around. I thought, you know, there are 

people that do this every day, and they need it. I am really committed to them having that service. 

But what you are saying is commitment, social policy, economic 

policy, this would be an area where the Federal Government is not 

taking over the role of the State and locals, but it is meeting a Federal mandate. This is an area that would enable State and locals 

to use other of their funds. So now you are subsidizing the Federal 

mandate when the Federal Government should be paying the share 

for its own mandate. 

Mr. BENJAMIN. Extremely well said, Senator Mikulski. 

Senator MIKULSKI. Is that the way it would go? 

Mr. BENJAMIN. Absolutely. 

Senator MIKULSKI. Well, I think that is a very good direction to 

go in because as we ponder how to think about more money, again, 

the national systems—New York, San Francisco, Chicago, any big 

city, my own, the one in the Baltimore area—we don’t want to get 

in the business of being the local government or the State government. But I think this is a very good guidance. 

CORRECTIVE ACTION PLANS

Before I go on to the other panel, I do have a question again 

about the FTA report. I understand that there were a number of 

open cases that were in the audit. I think there were 63 open cases 
320 

dating back to 2006. Could you tell me where you are on your open 

cases and the backlog, and were they resolved? 

Mr. SARLES. Sure. They are not all resolved yet. One of the 

things that we have been much more aggressive about is these corrective action plans, and there are old ones and new ones get 

added. We have actually become more aggressive in the last few 

months, upping the number of closeouts, if you will. 

I have given staff a goal of 10 a month so that when you look 

at where we are—we are about at 85 because others got added. But 

we are now cutting away at that backlog, if you will, and the goal 

is to get them down quickly. 

Senator MIKULSKI. How old is your oldest case? 

Mr. SARLES. It is several years old. I don’t remember the exact 

date, but it is several years old. 

Senator MIKULSKI. In other words, are you moving the backlog? 

Mr. SARLES. We are going after the backlog, too, as well as the 

current stuff. Yes. 

Mr. BENJAMIN. Senator Mikulski. 

Senator MIKULSKI. Yes. 

Mr. BENJAMIN. This was the area that I was referring to that the 

board was actually very shocked when we discovered how many of 

these cases there were. There are two parts to it. One is the creation of a corrective action plan. That is responding to an audit 

finding and saying this is what we are going to do. 

We did reasonably well on that, but not very well; we had a lot 

of corrective action plans that had never been filed, never been created. 

The second part is actually implementing that plan and making 

sure you have done something. Now some of those you can do very 

quickly and easily. Some of those are very difficult because one of 

them, for instance, is a recommendation by the National Transportation Safety Board that we replace 300 1000 Series railcars. Well, 

that takes a lot of money and takes a lot of engineering. So those 

take longer. 

So it is reasonable for some of them to be a little bit older and 

some of them to be newer. But one of the things we on the Board 

have said is we want to know what is out there and what progress 

we are making and we are now getting those reports. 

Mr. SARLES. To give you a more definitive answer, the oldest two 

are from 2004 and have to do with configuration management, 

which is how you make sure all the changes that take place on a 

particular event get integrated. Those are the two oldest. 

Senator MIKULSKI. Well, that is exactly what we are talking 

about, all the lessons learned. 

Mr. SARLES. Yes. 

METROACCESS

Senator MIKULSKI. One last question and this is a budget question. How much does it cost you to run MetroAccess, and how much 

is the Federal contribution? Do you know that? 

Mr. SARLES. Off the top of my head—— 

Mr. BENJAMIN. I can tell you what the Federal contribution is. 

It is zero. It is around $100 million—— 
321 

Mr. SARLES. Yes, that is the number. And there is no Federal 

contribution to our operating budget. So we absorb that totally. The 

jurisdictions do. 

Senator MIKULSKI. Well, I think that is an interesting insight. 

Well, we want to thank you, Mr. Benjamin. We want to thank 

you, Mr. Sarles. We know we are going to have a lot more conversations. You are excused from the testimony. If you want to 

stick around, we are happy to have you. 

(323) 

NONDEPARTMENT WITNESSES 

Senator MIKULSKI. We would now like to call up to the witness 

stand Ms. Jackie Jeter, the president of the Amalgamated Transit 

Union Local 689. We also wanted to hear from the riders. We wanted to hear from Mr. Francis DeBernardo, the chairman of the 

Metro Riders’ Advisory Council, and Mr. Jack Corbett, the head of 

MetroRiders.org. 

So, Ms. Jeter, you represent a good bit, if not the majority of 

workers at WMATA. We would love to get your views on safety. 

And again, there were people who were members of the union who 

passed away at these terrible and horrific accidents, our sympathy 

and condolences to their families. 

But we feel that the way we can express sympathy is to make 

sure it doesn’t happen again and again and again. So we welcome 

your testimony and your insights. 

And to the riders, we want to hear what you have got to say and 

uncensored, no holds barred. 

STATEMENT OF JACKIE JETER, PRESIDENT, AMALGAMATED TRANSIT 

UNION, LOCAL 689 

Ms. JETER. Thank you. 

I would like to start off by thanking Chairwoman Murray, as 

well as you, Senator Mikulski, on your insight concerning the Federal Transit Administration’s audit, also your introduction of Senate bill 1506 on WMATA safety. It shows the dedication that is 

needed on this particular issue. 

Every WMATA stakeholder has a vested interest in making sure 

that we discuss the issues, but more importantly, making sure that 

we find solutions that enable us to move forward. As a stakeholder, 

Local 689 is fully aware of each safety, funding, and operations 

issue is interdependent. It is incumbent upon all of us to rebuild 

the public’s confidence in our good, but aging transit system. 

I will address each part of the questions that you ask. I will start 

with the budget. In order to realistically develop a plan of action 

that will address the various safety issues facing the transit system, we must begin with the funds necessary to operate and improve it. The infrastructure at WMATA rail system is over 30 years 

old, and as such, an investment must be made to improve technology, repair the places where the structure has weakened, and 

provide for growth of the system. 

Proper fiscal planning must be the cornerstone of this system. 

We have debated wage and benefit issues for the last 3 years and 

have been victimized by WMATA’s failure to adequately plan for 

expected labor cost increases. Beyond the impact of wages and benefits, it is the impact on the public, as service cuts are becoming 

standard practice to help close budget gaps. 
324 

Further, insufficient capital funds have led WMATA into an environment where less than a state of good repair exists. For example, 

WMATA has identified $11.4 billion in capital needs over the next 

10 years. Even with maintenance of efforts, the budget gap will not 

be completely closed and only maintaining the present system 

without providing an expansion. 

And in my written testimony, I go on, but I would like to also 

add that I would also recommend that requirements for meaningful 

whistleblower protection be included in the appropriations language. Some of the things that I talk about are the flexibility in 

the capital budget allocation in order to allow the use of capital 

funds to cover operating cost, making sure that the Federal transit 

benefit remains at the $230 a month; the two appointments for the 

Metro board, in our opinion, should at least be someone of a transit 

advocacy background, environmental group, or a labor union; and 

when we go down to safety, we have addressed this holistically by 

defining safety as a three-pronged stool. Our internal process; 

interaction with WMATA, and the need to keep the public safety 

at the forefront of our decisions and consideration for all other components of the plan, including funding, that impact everything that 

we do; the concerns of the Metro workers; and needed improvements. 

In the last several weeks, there has been an effort to look more 

closely at the overall safety issues affecting the system. Although 

I have been pleased to see some recommendations given to the 

Metro board, I am not confident that those changes will be implemented immediately. WMATA has inculcated a culture of 

deferment, which postpones needed improvements and changes in 

the system. 

PREPARED STATEMENT

Finally, I note the tendency to blame individual employees instead of looking for underlying systemic causes of safety-related incidents. We believe that it should be urgency and rapidity that 

causes Metro to do what is needed to improve the safety of the 

Metro employees. 

Thank you for your time and attention. 

[The statement follows:] 

PREPARED STATEMENT OF JACKIE JETER

I would like to begin by thanking Chairwoman Murray for convening this hearing 

and allowing us to participate in this important discussion. Senator Mikulski, thank 

you for your insight concerning the Federal Transit Administration’s audit that has 

identified several serious underlying safety problems. Your introduction of Senate 

bill 1506 on WMATA safety shows the dedication that needs to be given to this 

issue. 

Every WMATA stakeholder has a vested interest in making sure we discuss the 

issues, but more importantly making sure that we find solutions that enable us to 

move forward. As a stakeholder, Local 689 is fully aware that each safety, funding, 

and operations issue is interdependent. It is incumbent on all of us to rebuild the 

public’s confidence in our good but aging transit system. 

I will address each part of this equation: (1) Fiscal year 2011 budget request for 

WMATA; (2) Local 689’s efforts to improve safety and operational reliability; and 

(3) concerns of metro workers and needed improvements. 
325 

FISCAL YEAR 2011 BUDGET REQUEST FOR WMATA

In order to realistically develop a plan of action that will address the various safety issues facing the transit system, we must begin with the funds necessary to operate and improve it. The infrastructure of the WMATA rail system is over 30 years 

old and as such, an investment must be made to improve technology, repair the 

place where the structure has weakened, and provide for the growth of the system. 

While the need for more transportation has increased, the amount given to fund 

that necessity has not. That is evident from the current much publicized events at 

WMATA. The impact of insufficient funding has had a devastating effect on workers, riders, businesses and overall development in the three jurisdictions hosting the 

system. Public transportation will never be profitable; it is a public service. The critical nature of funding and the lack thereof has a major impact on the riding public 

and WMATA employees. 

Proper fiscal planning must be a cornerstone of this system. We have debated 

wage and benefit issues for the last 3 years and have been victimized by WMATA’s 

failure to adequately plan for expected labor cost increases. Beyond the impact on 

wages and benefits is the impact on the public as service cuts are becoming standard practice to help close budget gaps. I will emphasize the need for flexibility in 

the capital budget allocation in order to allow the use of capital funds to cover operating costs. The ability to purchase a bus or rail car is only one part of the equation. 

If the Federal Government does not establish flexibility in the use of funds, it will 

be guilty of weakening the system. As users and providers, ATU Local has spent 

many hours developing and outlining these suggested measures: —Extend the Federal Transit Benefit at the $230 per month level (Currently set to expire and revert to $120 per month as of December 31, 2010. 

—Require the Federal General Services Administration to appoint the two remaining WMATA board members, (one voting, one non-voting) with at least one 

with a transit advocacy background, such as an environmental group or labor 

union. 

—Support the passage of the Carnahan/Brown Bill to permit large systems flexibility in use of Federal capital funds to cover operating costs. 

—Passage of an ‘‘Emergency Assistance’’ bill that would help transit agencies 

through this recession. 

—Move on 6-year Federal re-authorization bill that provides a permanent funding 

plan for transit agencies. (Extension of current authorization expires 12/31/ 

2010. WMATA had recently proposed a $4.6 billion, 6 year capital program. The 

previous ‘‘Metro Matters’’ agreement spent $2.8 billion ∂ $.2 billion in Stimulus 

Funds over a 6 year period. Adding the $1.8 billion in Federal and local ‘‘dedicated funds’’ would have been a $4.8 billion program. Adding an inflation factor 

would make that total even higher. The current draft agreement provides for 

a level of spending just over $5 billion over the next 6 years.) 

—WMATA has identified $11.4 billion in capital needs over the next 10 years. 

Even with ‘‘maintenance of effort’’ the budget gap will not be completely closed 

and only maintaining the present system without providing any expansion capacity. 

—The General Services Administration should be urged to locate new Federal facilities in the Washington area near Metro stations and restrict the number of 

parking spaces at such Federal facilities to a reasonable ratio of automobile vs. 

transit usage. 

—Support Obama’s ‘‘Public Transportation Safety Program Act’’ (SB 3015). 

—Review carefully the formula grant that is used as the basis for Federal funding 

to consider adjusting the percentage allocated to Metro. 

—Lobby to establish a dedicated funding source from the jurisdictions. 

—Consider recapturing tax incentives given to businesses that surround the 

Metro stations. They should bear a greater share of the costs because they gain 

a greater benefit as a result of their location. 

—The Federal transit benefit should be indexed to both increased use (riders) and 

inflation. It would get an annual increase automatically that reflects the real 

costs of providing increased services and any increase costs resulting from inflation. 

—Consider supporting the development of the outer spokes of the system to increase ridership and revenue from business development likely to occur around 

the stations. 

LOCAL 689’S EFFORTS TO IMPROVE SAFETY AND OPERATIONAL RELIABILITY

We have addressed this holistically by defining safety as a three pronged stool— 

our internal process, interactions with WMATA and the need to keep public safety 
326 

at the forefront of our decisions, and consideration of all other components of a plan, 

including funding, that impact everything we do. Our Internal process includes: 

—In cooperation with WMATA, relying on the Joint/Labor Management Safety 

Committee to address issues as they occur. 

—In our orientation process and during union meetings we openly discuss safety 

issues and solutions. 

—Forging a proactive media campaign and release of public statements to apprise 

the public of issues and possible solutions to safety problems with Metro. 

—Testifying before local and Federal agencies in regard to safety issues, incidents 

and accidents to publicize the changes and improvements needed to ensure 

greater safety throughout the system. 

CONCERNS OF METRO WORKERS AND NEEDED IMPROVEMENTS

In the last several weeks there has been an effort to look more closely at the overall safety issues affecting the system. Although I have been pleased to see recommendations given to the WMATA Board, I am not confident that those changes 

will be implemented immediately. WMATA has inculcated a culture of deferment 

which postpones needed improvements and changes to the system. Finally, I would 

note that there is a tendency to blame the individual employee, instead of looking 

for underlying systemic causes of safety related incidents. 

Local 689’s experience concerning the investigations, leads us to the belief that 

to date, WMATA has not implemented several key measures that would make the 

Metrorail system safer. 

Urgency and rapidity should be the hallmark of the suggested changes we are offering below. WMATA must consider instituting the following without delay: 

—Multiple layers and redundancy of safety protections. 

—Codification of standards for track worker safety similar to Federal Railroad Administration track worker safety standards. 

—Clear and concise communication between workers and controllers. 

—Clear notification and designation of work areas and zones on the right of way. 

—Development of a safety communications plan that alerts all WMATA employees immediately to incidents. 

—Immediate notification of the union when a safety incident occurs. 

—Firm commitment to respect the rights of workers to have a union representative present during investigatory interviews after an incident. 

—Effective worker safety training. 

—Supervisory enforcement of safety standards. 

—A process for WMATA employees, to appeal the standards they believe to be incorrect or unsafe, such as a Safety Appeal Board. 

—Meaningful whistleblower protection to insure that employees are not fearful of 

reporting perceived safety problems. 

—Effective labor-management safety committees. 

—WMATA’s commitment to the rapid development and implementation of procedures and standards that are calculated to improve safety immediately and in 

the long term. 

Thank you for your time and attention to my concerns. I would be pleased to address any questions you might have in regard to my testimony. Thank you on behalf 

of my members and the riding public. 

Senator MIKULSKI. Thank you. That was very powerful. 

Let us go down this way. Mr. Corbett. 

STATEMENT OF JACK CORBETT, DIRECTOR, METRORIDERS.ORG 

Mr. CORBETT. Thank you, Senator. 

I appreciate the opportunity to testify, and I wanted to thank you 

on behalf of our members for your having lit a fire under WMATA 

leadership some months ago when it was very much needed. We 

are very appreciative of that. 

As you have said so well, the riders are very upset and have lost 

confidence in the system over the last year. The tragedy on the 

Metrorail system last June, the loss of Ms. Jeter’s employees in 

other accidents, the scathing report from the Federal Transit Administration over the safety culture at WMATA, those things have 

all been very worrisome to riders. To ride the train and to see peo-
327 

ple choosing not to go into the first car of a six-car train because 

they know that was the one that had the tragedy is very worrisome 

to us. 

There is some good news. We are very pleased that two of the 

four Federal members of the Board of Directors have been appointed. Two, we are very pleased that WMATA has the leadership 

of Peter Benjamin this year, whose many years of service with 

WMATA makes him an admirable leader for WMATA’s board during this very tough period. 

We are really pleased that this subcommittee is having this hearing because there are not many Federal or regional agencies that 

have any leverage over WMATA. As you know from having cosponsored legislation, the FTA cannot mandate any safety for WMATA. 

The local Tri-State Operating Committee is powerless and cannot 

require Metro to do anything. So we think this subcommittee, 

through your power over the conditions of the $150 million annual 

appropriations, can be very, very helpful. 

And we have got some very specific suggestions. As you have already indicated, put on maintenance of effort requirement so the 

jurisdictions that have financial problems of their own don’t play 

games where they give $50 million in one side and they take 

money out of the other pocket. So that is very important. 

The other things the subcommittee could do to be very helpful: 

you could call the administrator of the General Services Administration [GSA] right now. They have been interviewing candidates 

for the other two Federal appointments since Thanksgiving, and we 

have urged that at least one of them be a safety official that would 

be added to the Board of Directors, and they still don’t have two 

final appointments to the Metro Board, when the Board has got to 

make very important decisions about safety, funding, and capital. 

Before you finalize your appropriation this year, check to see how 

well WMATA is doing in agreeing to implement whatever recommendations the NTSB comes out with between now and then 

having to do with the causes of the tragic accident. 

Also, it was your work last year that got the FTA to issue that 

report. We think the subcommittee report ought to indicate that 

FTA should do another report at the 1-year point just to see what 

you have heard from Mr. Sarles and Mr. Benjamin is really having 

an effect, rather than just being paper products. 

PREPARED STATEMENT

We have other suggestions attached to our testimony. One I have 

to mention is even with WMATA’s and the jurisdictions’ best efforts, there is a $3 billion shortfall in the capital needs, as Ms. 

Jeter has pointed out, over the next 10 years. In the current capital 

budget, there is no money for any additional railcars or buses for 

10 years. That means the riders who are standing today are going 

to have to stand for 10 more years unless somebody, maybe the 

Congress, maybe the jurisdictions, contribute some funds to 

WMATA and other pressed transit systems in the country to fill 

that gap. 

Thank you very much, Senator. 

[The statement follows:] 
328 

PREPARED STATEMENT OF JACK CORBETT

Chairman Murray and members of the subcommittee: Thank you for inviting 

MetroRiders.Org to testify today to discuss fiscal year 2011 appropriations for the 

Washington Metropolitan Area Transit Authority (WMATA) and the safety and 

operational reliability concerns of Metrorail and Metrobus riders. MetroRiders.Org 

has represented the views of transit users in the Washington, DC metropolitan area 

beginning in 2004. We are a riders’ voice outside WMATA. 

SAFETY CONCERNS ARE PARAMOUNT

WMATA’s recent and continuing safety and financial challenges are well known. 

The June 2009 Metrorail tragedy that took 9 lives and injured 80 others and the 

subsequent deaths of track workers document that Metrorail safety problems impact 

riders and employees alike. 

Senator Mikulski’s leadership in urging a Federal Transit Administration (FTA) 

safety audit of WMATA and the regional (powerless) Tri-State Oversight Committee 

generated a hard look at WMATA’s own safety program and resulted in a scathing 

FTA report questioning the safety culture at WMATA. More recently, David Gunn, 

a former WMATA General Manager, was asked by the current WMATA Board to 

conduct a review of the entire Metro operation. That 2-week review resulted in a 

report highly critical of WMATA’s management and organization and suggested that 

‘‘MetroRail has downhill momentum that will be difficult to stop.’’ Both the FTA 

audit and the Gunn presentation to the WMATA Board should be included in the 

record of today’s hearing. 

Finally, the National Transportation Safety Board (NTSB) held 3 days of investigative hearings in February about the June 2009 Metrorail tragedy; its findings 

on the probable cause or causes of that accident should be released soon. For all 

these reasons it’s understandable that there has been a loss of rider and public confidence in Metro’s safety, management and operation. 

WMATA BOARD HAS BEEN RESPONSIVE TO SAFETY CONCERNS

The current WMATA Board has played catch-up but is now attuned to fixing the 

system’s safety problems. We are grateful that current WMATA Board Chairman 

Peter Benjamin has had decades of experience as a WMATA staff official and is 

leading the Board—composed of public officials and political appointees—during this 

critical period. The recent appointments of an Interim General Manager and a new 

WMATA Chief Safety Officer are hopeful signs. 

FINANCIAL PROBLEMS UNDERLIE THE 34-YEAR OLD METRORAIL SYSTEM’S FRAILTY

Metrorail’s safety problems are not unconnected to its age. Like many aging transit systems across the Nation, Metrorail needs to replace its oldest cars and rail infrastructure to meet FTA’s ‘‘state of good repair’’ recommendations, as well as to increase rail and bus capacity to meet growing traffic demand. Unfortunately those 

capital requirements are occurring at a time when WMATA’s contributing jurisdictions are hard pressed to provide the needed resources because of their declining 

revenues during the national economic downturn. 

FISCAL YEAR 2011 OPERATING BUDGET GAP IS ALMOST RESOLVED

There’s somewhat better news, at least procedurally, about WMATA’s operating 

budget. Everyone has read that WMATA has an estimated $189 million gap in its 

fiscal year 2011 Operating Budget (July 2010–June 2011). While riders will have 

to pay substantially higher fares starting this summer to help eliminate the coming 

year’s operating budget gap and even then may suffer some service cuts, the 

WMATA Board has handled this situation very well. It opened up its decisional 

process to input from riders and the general public well before tough decisions were 

needed. 

WMATA received some 5,000 communications from the public about ways to solve 

the budget problem; some groups, including MetroRiders.Org, offered highly detailed 

proposals that were designed, for example, to move riders out of congested peak periods where possible, and to generate adequate revenue to eliminate or substantially 

reduce the need for Metrorail and Metrobus service cuts. We are grateful to the 

WMATA Board and staff for carefully considering these options. That the process 

was open, transparent and deliberative will make the resulting and inevitable fare 

increases somewhat more palatable. 
329 

1Title VI authorized the Administrator of General Services to appoint four new directors to 

the WMATA Board, two voting and two non-voting directors with one voting director ‘‘to be a 

regular passenger and customer of WMATA’s bus or rail service.’’ To date, GSA has only appointed two directors, one voting and one non-voting. Both appointees are highly regarded and 

have been important additions to the WMATA Board. Because the WMATA Board is considering 

many critical agenda items (6-year capital budget, fare increases for fiscal year 2011, etc.) we 

believe the GSA Administrator should announce her final two appointments as soon as possible, 

as well as to specify which of the two voting directors would be the designated ‘‘regular passenger’’ board member. 

Further, the statute required WMATA to appoint an Inspector General for the agency, with 

full IG-level powers for internal investigations of budgetary and agency management issues. We 

have been disappointed that the new Office of Inspector General has concentrated on auditing 

agency contracts (as had the predecessor internal auditor) and has not focused on important 

agency management issues, as Congress clearly intended by its mandate. The media has performed what are traditional IG functions at WMATA, such as identifying ineffective staff organization of safety functions, lack of proper treatment of the Tri-State Operating Committee, etc. 

METRORIDERS.ORG’S ‘‘TOP 10 RECOMMENDATIONS TO IMPROVE WMATA’’ 

MetroRiders.Org has developed a substantial list of recommendations for restoring the public confidence in WMATA’s governing body and management and in the 

safety of everyday Metrobus and Metrorail operations. That list is attached, and our 

recommendations would involve actions by this subcommittee, other Senate and congressional committees, Maryland, Virginia and the District of Columbia, the 

WMATA Board itself, and private organizations as well. 

SENATE THUD APPROPRIATIONS SUBCOMMITTEE HAS BROAD JURISDICTION OVER WMATA

This subcommittee’s jurisdiction over WMATA includes the authority to make appropriations for the U.S. Department of Transportation and its component agencies 

such as FTA and, specifically, from title VI of the Passenger Rail Investment and 

Improvement Act of 2008 (Public Law 110–432, October 16, 2008) (PRIIA). That recent law authorizes the appropriation of up to $150 million annually for a decade 

to WMATA to finance in part the capital and preventive maintenance programs included in the Capital Improvement Program approved by WMATA’s Board of Directors. Those Federal funds must be matched by contributions of ‘‘dedicated’’ State 

and local funding from Maryland, Virginia and the District of Columbia. 

That statute included a number of additional, specific conditions upon which congressional appropriations to WMATA would depend.1 MetroRiders.Org urges this 

subcommittee to actively supervise WMATA’s compliance with these conditions: 

—The subcommittee should appropriate the full authorized $150 million in Federal funds in fiscal year 2011 for WMATA capital projects but with conditions. 

MetroRiders.Org is appreciative of this subcommittee’s appropriating $150 million 

to WMATA for fiscal year 2010 but is disappointed that, 6 months after that fiscal 

year 2010 appropriations was enacted, WMATA has not yet finalized its application 

for FTA project approval for Federal and local matching funds. That said, the subcommittee should make full appropriations to WMATA for fiscal year 2011, as recommended in the President’s budget, because the funding is much needed for high 

priority capital projects. 

—Fiscal year 2011 appropriations should be conditioned upon the State and local 

jurisdictions’ maintaining their past ‘‘continuity of effort’’ with their own funds 

as the $300 million annual Federal/local match contribution was to be all ‘‘new 

money.’’ 

We and other groups (and the local media) were very disappointed that the State 

of Maryland recently tried to reduce its fiscal year 2011 capital contribution to 

WMATA below its past contribution level. Had this effort been successful, Maryland’s $50 million in matching funds for the PRIIA appropriations would have been 

provided but its past annual contribution to WMATA (from the same pot of State 

‘‘dedicated funds’’) would have been reduced—resulting in a displacement of State 

funds with Federal capital funding. Worse, because Maryland, local jurisdictions in 

Virginia, and the District of Columbia contribute to WMATA based on a pro-rata 

formula, Maryland’s reduced contribution would have also limited the contributions 

that the other two jurisdictions would make in fiscal year 2011. 

Only the glare of unfavorable publicity apparently caused Maryland recently to 

agree to increase its fiscal year 2011 capital contribution to WMATA to its fiscal 

year 2010 level plus the $50 million in new PRIIA-matching funds. 

Congress should condition fiscal year 2011 PRIIA appropriations to WMATA upon 

all three jurisdictions maintaining their past ‘‘continuity of effort’’ with their own 

funds. If severe fiscal problems in any jurisdiction preclude such continuous funding 
330 

levels, that jurisdiction must promise to make up any shortfall within a specific 

number of fiscal years. 

—Before the House-Senate Conference on fiscal year 2011 THUD Appropriations, 

the subcommittee should review the adequacy of WMATA’s response to the 

NTSB’s findings and safety recommendations resulting from the June 2009 

Metrorail crash. 

In fiscal year 2010, the Congress conditioned WMATA’s use of PRIIA appropriations to assure that safety projects would be funded. In fiscal year 2011, the Congress should review the adequacy of WMATA’s response to the NTSB recommendations, anticipated to be released shortly. Currently, WMATA has a $30 million plug 

in its proposed 6-year capital budget for this purpose. 

—The subcommittee report on fiscal year 2011 PRIIA appropriations for WMATA 

should request FTA to undertake a follow-up safety audit of WMATA 1 year 

after the first audit. 

Because FTA’s recent audit of WMATA found many serious safety concerns, and 

because FTA doesn’t currently have authority to regulate WMATA’s rail safety operations (see attached ‘‘Top Ten Recommendations to Improve WMATA’’ list), the subcommittee should urge FTA to conduct a follow-up audit of WMATA a year later 

to see if internal WMATA safety management has improved in the interim. 

—The subcommittee should appropriate funding to implement enactment of the 

‘‘Public Transportation Safety Program Act of 2010.’’ 

As you know, FTA currently is statutorily precluded from setting and enforcing 

safety standards for rail transit systems such as WMATA’s Metrorail system. We 

hope this legislation can be enacted soon, separately if necessary from congressional 

reauthorization of multi-year surface transportation funding. When enacted, FTA 

could set safety standards for Metrorail, or Maryland, Virginia, and the District of 

Columbia could empower the Tri-State Operating Committee to undertake safety 

regulation of Metrorail. MetroRiders.Org prefers direct Federal safety regulation of 

WMATA by FTA. The administration has requested $24.1 million in fiscal year 2011 for a new Rail Transit Safety Oversight Program and for an additional $5.5 million to fund 30 FTE 

in FTA’s new and expanded Office of Safety. We hope the authorizing committees 

of Congress act on this needed legislation soon and that this subcommittee can provide the necessary appropriations. 

Again, thank you for allowing MetroRiders.Org to testify. I’d be pleased to answer 

any questions. 

METRORIDERS.ORG’ S ‘‘TOP TEN RECOMMENDATIONS TO IMPROVE WMATA’’ 

Safety 

Enact S. 1506/H.R. 3338 to authorize the Secretary of Transportation to establish 

national safety standards for transit agencies operating heavy rail on fixed guideways. 

Request FTA to update its safety audit on WMATA 1 year later. 

Assure adequacy of WMATA’s response to expected findings and safety recommendations of the National Transportation Safety Board (NTSB) concerning the 

probable cause of Metrorail’s June 2009 crash with fatalities and injuries. 

Capital Financing 

Approve full authorized $150 million appropriation for WMATA in fiscal year 

2011 on matching basis with Maryland, Virginia, and the District of Columbia but 

with conditions. 

Condition fiscal year 2011 appropriations to WMATA upon State and local jurisdictions’ maintaining their past ‘‘continuity of effort’’ with their own funds as the 

$300 million annual Federal/local match was to be ‘‘new money.’’ 

WMATA, its Contributing Jurisdictions and Congress should develop a plan to 

provide $3 billion in additional capital funding to WMATA over the next 10-year period (fiscal year 2011–fiscal year 2020) to provide needed rail and bus capacity during the decade beyond the inadequate $5 billion 6-year capital plan now being negotiated by WMATA with its Contributing Jurisdictions. 

Management/Governance 

The Administrator of General Services should appoint the remaining two Federal 

directors to the WMATA Board of Directors to supplement the existing two appointees and to designate one of the two voting Federal directors as the ‘‘regular 

passenger’’ Board member. 

Support the project of the Metropolitan Washington Council of Governments and 

the Greater Washington Board of Trade for a fast-track, independent review of 

WMATA’s current governance structure. 
331 

Support amendments to the congressionally-approved ‘‘WMATA Compact’’ that 

would make transparent and available for public comment the various ‘‘behindclosed-doors’’ negotiations among the Contributing Jurisdictions as to their future 

capital contributions to WMATA and to require WMATA to follow the ‘‘open government meeting laws’’ of area jurisdictions. 

Other 

Congress should extend the current $230/month transit ‘‘commute benefit’’ beyond 

December 2010 for parity with the existing parking benefit. 

Senator MIKULSKI. Thank you. That was a very meaty presentation, Mr. Corbett. Thank you very much. 

Mr. DeBernardo. 

STATEMENT OF FRANCIS DeBERNARDO, CHAIRMAN, RIDERS’ ADVISORY COUNCIL 

Mr. DEBERNARDO. Yes, thank you. Thank you, Senator Mikulski. 

Thank you for inviting me to testify. My name is Francis 

DeBernardo, and I am chair of the Metro Riders’ Advisory Council. 

As a transit-dependent rider, I commute each day via Metrorail 

and Metrobus from my home in Greenbelt, Maryland, to my office 

in Mount Rainer, Maryland. On behalf of the council, I commend 

President Obama for including $150 million in his proposed fiscal 

year 2011 budget for capital and preventive maintenance projects. 

I also thank Congress for including funding in this year’s budget. 

These grants, matched by jurisdictional partners, will address critical safety needs. 

As riders, we appreciate the Federal Government’s recognition of 

the unique relationship between itself and Metro and urge you to 

ensure that these funds remain in the fiscal year 2011 budget. We 

ask, too, that you ensure that local jurisdictions will continue to 

fund Metro’s capital needs by making any Federal aid dependent 

on maintenance of efforts from local jurisdictions. 

Along with this $300 million, Metro and its partners must finalize a new capital funding agreement. Metro has estimated that it 

has $11 billion in capital needs over the next 10 years. However, 

as has been mentioned, if funding levels proposed remain constant 

over the next 10 years, funding will fall short by over $3 billion. 

Failing to keep the system in good repair seriously threatens 

safety. While certainly not as dramatic as the incidents that have 

occurred this past year, crowded platforms following service disruptions, crumbling platform tiles, and out-of-service elevators and escalators are significant recurring safety concerns. Ensuring stable 

and sufficient capital funding for Metro is necessary to improve 

safety. 

Commuters are not the only ones who benefit from good transit. 

The entire region benefits economically. Tourists visiting the Nation’s capital benefit from having a convenient way to see the city. 

The Federal Government benefits from greater productivity. And 

drivers benefit from reduced congestion on roadways. 

Riders have expressed their vision for improvements at Metro. 

They want more reliable service, greater focus on customers, and 

clearer frequent communication from Metro, especially when things 

go wrong. Metro will soon begin a more robust reporting of its operational performance, and riders look forward to working with 

Metro to use those reports to improve service. 
332 

Safety should top the list of Metro’s core values. Effective oversight is critical to maintaining safety and confidence in transit. 

Mandates and projects that improve safety while maintaining service quality can greatly enhance transit. Mandates that impair service in the long run in the name of safety will only drive commuters 

to other more dangerous modes of travel. 

PREPARED STATEMENT

We are pleased that Congress is taking a strong interest in the 

safety and success of the Washington area’s transit system. I thank 

you for this opportunity to provide testimony and would be happy 

to answer any questions you have. 

[The statement follows:] 

PREPARED STATEMENT OF FRANCIS DEBERNARDO

Chairman Murray, Ranking Member Bond and members of the subcommittee, 

thank you for inviting me to testify today. My name is Frank DeBernardo and I am 

chair of the Metro Riders’ Advisory Council. 

The Riders’ Advisory Council was established by Metro in September 2005 and 

serves as the riders’ voice within Metro. The Council provides feedback to the Board 

as well as customer input to Metro staff. Council members are appointed by the 

Board of Directors. The Council consists of 21 members, 2 from each of the District 

of Columbia, Maryland and Virginia, 2 appointed at-large and the Chair of the Accessibility Advisory Committee. Members use all of Metro’s transit services— 

Metrobus, Metrorail and MetroAccess—and represent a diverse mix of ages, backgrounds and ways in which they use Metro. 

Metro experienced several tragedies in 2009, and suffered a substantial loss of 

public confidence. The June 2009 crash on the Red Line and subsequent declines 

in service reliability not only shocked and saddened the region, they also accelerated 

awareness of the larger problem, the growing disrepair of the Metrorail infrastructure. 

Despite the challenges faced by WMATA, it remains a vital asset to the Washington region. A recent Washington Post poll found that 80 percent of riders rate 

the system positively. During April 2010, Metrorail recorded 3 of its top 5 highest 

ridership days (April 1, 2, and 7). This underscores the region’s dependence on 

Metro and also highlights the need to redouble efforts to maintain and expand the 

system. 

On behalf of the Council, I would like to first commend President Obama for including $150 million in his proposed fiscal year 2011 budget for capital and preventive maintenance projects at Metro. These grants, matched by dedicated funding 

from Metro’s jurisdictional partners, will help fund projects to address Metro’s most 

critical safety needs. As riders, we appreciate the Federal Government’s recognition 

of the unique relationship between the Federal Government and Metro and urge you 

to ensure that these funds remain in the fiscal year 2011 budget as it is considered 

by Congress. We ask, too, that you help to ensure that local jurisdictions will continue to adequately fund Metro’s capital needs by making any Federal aid dependent on maintenance of efforts by local jurisdictions. 

Along with the $300 million provided annually through the Passenger Rail Investment and Improvement Act of 2008, Metro and its partners must finalize a new capital funding agreement prior to the beginning of the new fiscal year on July 1, 2010. 

We are encouraged that jurisdictions have committed to fund a $5 billion 6-year 

capital plan. Recent decisions to restore funding for Metro’s capital plan represent 

good news for riders. However, Metro estimated that it has $11 billion in capital 

needs over the next 10 years; the 6-year plan, as proposed, will mean that Metro 

will still fall short of this estimate of needs by over $3 billion over the next 10 years. 

Failing to keep the system in a state of good repair seriously threatens safety. 

While certainly not as dramatic as the incidents that have occurred over the past 

year, crowded platforms following service disruptions, crumbling platform tiles and 

out-of-service elevators and escalators are significant, recurring safety concerns. 

Ensuring stable and sufficient capital funding for Metro is necessary to improve 

safety. 

As WMATA prepares to enter into its next capital plan on July 1 of this year, 

governments must also provide the resources necessary to adequately maintain Met-
333 

ro’s safety and service, from specific safety recommendations from the National 

Transportation Safety Board to the everyday yet critical maintenance challenges. 

In addition, WMATA must secure support for its operating budget. Closing the currently-projected $190 million operating budget gap for fiscal year 2011 will likely 

require both substantial fare increases and significant service cuts. Proposed service 

cuts, while greatly reduced from the original proposals, will still result in riders paying more for less service. During recent public hearings on WMATA’s proposed operating budget, fare increases and service reductions, riders expressed a clear preference for increased fares over reductions in service. However, fares cannot be 

raised too greatly lest riders, especially the most vulnerable, be priced off of Metro. 

In addition, members of the public stated clearly that Metro must work to improve 

its service reliability. 

The Council is encouraged that Metro will, next month, launch its’ ‘‘Vital Signs’’ 

report to provide the Board, the public and other stakeholders a detailed overview 

of Metro’s monthly performance. As rider representatives, the Council looks forward 

to working with Metro to ensure that these reports provide meaningful information 

and that issues they identify are subsequently addressed. It is an old adage that 

‘‘What gets measured gets done.’’ These reports represent an opportunity for an honest dialogue between Metro and its stakeholders about what needs improvement 

and how we can work together to make those improvements happen. 

Commuters are not the only ones who benefit from good transit. The entire region 

benefits economically. Tourists from around the country who visit the Nation’s capital benefit from having a safe and convenient way to see the city. The Federal Government benefits from greater productivity. And drivers benefit from reduced congestion on roadways. For that reason, the Riders’ Advisory Council and transit advocacy groups asked local jurisdictions to increase their contributions enough to forestall severe service cuts, and it appears that many of the most onerous cuts will 

be avoided. 

Over the long term, Federal, State and local governments must recognize the tremendous asset that Metro represents to the region and support it accordingly. A 

majority of residents in the aforementioned poll said that the region should find new 

ways to fund Metro, even if that meant raising some taxes. 

Metro’s budget difficulties are certainly not unique among the Nation’s transit 

systems. A recent study released by the American Public Transit Association noted 

that 84 percent of transit systems in the United States are planning to raise fares 

and/or decrease service, or have already done so. Metro does provide uniquely direct 

value to the Federal Government, and therefore we hope Congress and the States 

can work together to explore long-term funding sources. 

In the midst of all of these challenges, Metro must also find a new, permanent 

General Manager. The Council hopes that as the Board begins its search it will solicit input from all of Metro’s stakeholders, including its riders and its employees. 

Riders have expressed their vision for improvements at Metro. They want more 

reliable service, greater focus on customers, and clearer, more direct and more frequent communication from Metro, especially when things go wrong. While the General Manager must ensure a safe system, the region also needs a GM able to improve service quality and communicate effectively with the public to restore confidence. The Board should seek a candidate able to address Metro’s long-term as 

well as short-term challenges and listen to stakeholders’ views about those challenges. 

Safety should top the list of Metro’s core values. Effective oversight is also critical 

to maintaining safety and customer confidence in transit. Still, safety cannot exist 

in a vacuum. Statistics show that commuting by rail is approximately 34 times safer 

than driving, and many riders make a daily decision between the two. 

Mandates that improve safety while maintaining service quality can greatly enhance transit; mandates that impair service in the long run in the name of safety 

will only drive commuters to other, more dangerous modes of travel. Transit must 

be safe; it also must not be permanently hamstrung in ways that actually make 

travelers across all modes less safe. 

We are pleased that Congress is taking a strong interest in the safety and success 

of the Washington area’s transit system. At the same time, safety for commuters 

in our Nation’s capital does not start and end with Metrorail. A U.S. Department 

of Agriculture employee was killed by a driver after the recent snowstorm when the 

employee tried to walk to the Branch Avenue Metrorail station in Prince George’s 

County, Maryland, where the sidewalks had not been cleared. 

Metro safety issues have received considerable press recently, but the degree of 

press attention has been so great specifically because Metrorail fatalities are so 

rare, while fatalities on roadways are common to the point that we have become inured to these tragedies. This Congress should not ignore these larger safety con-
334 

cerns, and could draw needed attention to them by also conducting oversight into 

the ways in which elements of the entire transportation network, including our 

roadway designs, snow removal policies, and traffic law enforcement succeed or fail 

at maximizing the safety of commuters on all modes. 

A safe, reliable, well-maintained and adequately funded Metro system will enhance the entire region, including the Federal Government. I thank you for the opportunity to provide testimony and would be happy to answer any questions you 

may have. 

ATTACHMENT A.—LIST OF CURRENT RIDERS’ ADVISORY COUNCIL MEMBERS

RIDERS’ ADVISORY COUNCIL ROSTER (AS OF MAY 17, 2010)

2010 Officers: 

Chair: Frank DeBernardo 

District of Columbia Vice-Chair: David Alpert 

Maryland Vice-Chair: Victoria Wilder 

Virginia Vice-Chair: Dharm Guruswamy 

JURISDICTION

At-Large: 

Dharm Guruswamy 

Carl Seip 

Patrick Sheehan (Accessibility Advisory Committee Chair) 

District of Columbia: 

David Alpert 

Kelsi Bracmort 

Patricia Daniels 

Kenneth DeGraff 

Carol Carter Walker 

Diana Zinkl 

Maryland: 

Sharon Conn (Prince George’s County) 

Frank DeBernardo (Prince George’s County) 

Christopher Farrell (Montgomery County) 

Ronald Whiting (Montgomery County) 

Victoria Wilder (Montgomery County) 

Virginia: 

Penelope Everline (Arlington County) 

Robert Petrine (Fairfax County) 

Clayton Sinyai (Fairfax County) 

Lorraine Silva (Arlington County) 

Evelyn Tomaszewski (Fairfax County) 

Lillian White (City of Alexandria) 

ATTACHMENT B.—LETTER TO BOARD OF DIRECTORS CONCERNING METRO’S FISCAL

YEAR 2011 OPERATING BUDGET

RIDERS’ ADVISORY COUNCIL, 

Washington, DC, April 19, 2010. 

CHAIRMAN BENJAMIN AND MEMBERS OF THE BOARD: This letter serves as the formal position of the WMATA Riders’ Advisory Council on the fiscal year 2011 operating budget, currently estimated to contain a $189.2 million shortfall. 

First, we recognize and appreciate the efforts of the Board of Directors to solicit 

meaningful public comment on a wide variety of proposals to address the current 

budget situation. Providing the public with alternatives has spurred public debate 

and allowed riders to select from a menu of options to create a sound fiscal year 

2011 budget. We strongly encourage the Board and the Authority to review the fiscal year 2011 budget and reduce administrative spending as much as possible to 

close the projected budget gap. 

Over the past several months, our members have held lengthy meetings devoted 

purely to the budget, attended public hearings, solicited feedback on their commutes, and debated the merits of the many different proposals put forward by 

WMATA staff, the Board and other groups. 

This Council is faced with two distasteful options—service reductions which could 

drastically impact the quality of life in our region and/or fare increases that might 

price some residents out of using our transit system. 
335 

To limit the need for these drastic options, the R.A.C. continues to strongly support increased jurisdictional subsidies and dedicated local and Federal funding for 

the Metro system. While budgets are tight, we remain hopeful that local and Congressional leaders will fight to expand Metro funding at the jurisdictional and Federal level in recognition of the Authority’s role as a unique regional and national 

asset. 

We also recognize that Metro will make changes to MetroAccess service, continue 

negotiations with its operating unions to decrease costs, cut administrative positions, and continue to explore alternative revenue sources in an effort to reduce the 

budget shortfall in fiscal year 2011. 

We are deferring to the Accessibility Advisory Committee’s recommendations on 

the proposed changes to MetroAccess, which have already been submitted as part 

of the public hearing record. 

If the Board, after it exhausts all other options to close the fiscal year 2011 budget 

gap, finds that fare increases and service cuts on Metrorail and Metrobus are absolutely necessary, the WMATA Riders’ Advisory Council prefers the following proportions and priorities for the Board’s decisionmaking: 

If any fare increases should be necessary, we prefer the Board implement them 

in the following order from least to most undesirable: 

—Decreasing the transfer time among all modes from 3 to 2 hours; raising the 

fare differential for (rail) paper farecards; and instituting a peak-of-peak rail 

surcharge, which are preferable to 

—Increasing late-night weekend fares (after midnight); increasing the reserved 

parking fee; and increasing airport bus fares (with the consideration that steps 

be taken to protect airport workers), which are preferable to 

—Increasing bicycle locker rental fees; increasing general parking fees; and increasing express bus fares for non-airport buses, which are preferable to 

—Increasing the SmarTrip fare differential on bus, which is preferable to 

—Increasing base bus fare along with an increased transfer discount, which is 

preferable to 

—Increasing regular (rush hour) rail fare, which is preferable to 

—Increasing reduced (off-peak/weekend) rail fare, which is preferable to 

—Any special event fares on rail; peak fare surcharges on crowded bus routes; 

and increasing base bus fare without increasing the transfer discount, which 

are preferable to 

—Reducing the age at which children ride free, from under 5 years of age to 

under three years of age. 

If any service cuts to Metrorail should be necessary, we prefer the Board implement them in the following order from least to most undesirable: 

—Modifying headways and train lengths on four holidays: Columbus Day, Veterans’ Day, Martin Luther King’s Birthday and Presidents’ Day; Restructuring 

peak service on the Red Line to have 3 min headways from Grosvenor to Silver 

Spring and 6 min from Silver Spring to Glenmont and Grosvenor to Shady 

Grove; and early morning weekday headway widening, which are preferable to 

—Closing station entrances or mezzanine levels (after a full and transparent review of safety and security issues these closures may cause), which are preferable to 

—Weekend headway widening, which is preferable to 

—Late night headway widening, which is preferable to 

—A later weekday opening time at 5:30 a.m., which is preferable to 

—A later weekend opening time at 8 a.m., which is preferable to 

—Earlier weekend closing times; and weekend station closures, which are preferable to 

—Elimination of peak 8-car trains; elimination of Yellow Line service to Fort 

Totten off-peak/weekends; and elimination of Yellow Line service after 9:30 p.m. 

and on weekends except for a rail shuttle between King Street—Huntington. 

If any service cuts to Metrobus should be necessary, we prefer the Board implement them in the following order from least to most undesirable: 

—Reducing and eliminating bus stops after a full and transparent review of cost, 

safety and security measures that these changes may cause; and reductions in 

holiday service, which are preferable to 

—Eliminating of line segments/local overlap, which is preferable to 

—Peak-period headway widening, which is preferable to 

—Weekend headway widening; and off-peak weekday headway widening. 

We strongly recommend that any proposals to eliminate entire bus lines, weekend 

routes or service, or late-night (after midnight) trips be examined on a case-by-case 

basis and give consideration to distance and accessibility of alternative route service 

during peak and off-peak times and route efficiency metrics. 
336 

Additionally, we suggest the Board find a middle-ground on many of the aforementioned fare and service changes. Rather than focusing a disproportionate level 

of service cuts or fare increases on one sector of Metro riders, if any are necessary, 

we strongly prefer a moderate slate of cuts and increases that is spread more evenly 

across the entire ridership base. 

If the Board must make fare increases and service cuts, we prefer that service 

cuts represent a very small percentage compared to fare increases. As noted above, 

we hope that increased jurisdictional contributions and other savings measures can 

reduce as much as possible the need for fare increase or service cuts. 

As you well know, Metro is our communal responsibility. We all reap the benefits 

when we commute to work, attend cultural events, and visit friends throughout the 

region. It is this Council’s sincerest desire to work with the Board to find more stable funding solutions so that a budget situation such as this one never happens 

again. 

If you have questions about our proposal or would like to discuss this matter further, please contact myself or Carl Seip, Chairman of the Committee on the Budget, 

through John Pasek in the Office of the Board Secretary. 

Sincerely, 

FRANCIS DEBERARDO, 

Chair. 

Senator MIKULSKI. Well, thank you. 

WORKER SAFETY

Before I get to kind of the rider questions, I would like to go to 

Ms. Jeter, if I may? I have been disturbed about so many things. 

First of all, the accidents themselves, the scathing FTA report, the 

Gunn report, the things that you have all referenced. But the very 

poignant tale of Mrs. Jeffrey Garrard, who called to share her safety concerns, and when she said that their solution was have a video 

and hand out hard hats. That there was no backup camera on the 

maintenance truck, the backup sound and lights were disconnected, 

and Metro didn’t have floodlights. 

You know, a safe Metro has to ensure the safety of the workers 

to ensure the safety of the riders. Do you feel that safety has improved for your workers? Do these patterns continue to persist? Or 

do you feel that steps are being made, and what steps do you see 

being made? 

Ms. JETER. I can only say that I hear, just like you do, that steps 

are being taken. I am sure that Mr. Sarles has tackled those things 

that are right in front of his face. Unfortunately, I think that it is 

so entrenched that it is going to take—I have been disappointed for 

the last year almost. It has been almost a year now that nothing 

concrete other than testing, and I forget what it is called, but it is 

the test that they use to see whether or not they are going to have 

a circuit to fail, is the only safety measure that has taken place. 

We have known ever since this accident has occurred, and I have 

talked to not only Garrard’s wife, but I also talked to Jeanice McMillan’s mother, and I have to tell her that your daughter was an 

angel because although she died, she brought out a lot of issues 

that were here, entrenched at WMATA, and we have been able to 

look at them full faced. And hopefully, we will find a solution for 

them. 

But I am disappointed because I keep hearing talk, but I don’t 

really hear the ‘‘do.’’ 

Senator MIKULSKI. Well, what about the safety and the safety 

training and the safety officer? 
337 

Ms. JETER. I am looking forward to seeing that. I would like to 

see it right now. And I know for the last couple of weeks, I have 

been getting reports of safety committee meetings that have been 

taking place. 

And because the union, too, has said, okay, we have to step up 

our safety efforts, and we have to be the ones that are going after 

incidents or things that are being told to us by the members, there 

has been a butting of heads, so to speak, because it seems like in 

those safety meetings, there is a plan of action that the management comes in with, and the workers want to talk about things 

that are actually happening out on the line, and they seem to be 

butting heads. So I have to look into that and find out what is 

going on because, to me, that is not going to resolve. 

Senator MIKULSKI. Well, it seems to be that there needs to be a 

mechanism of communication between labor and management. In 

your testimony, you talked about relying on the Joint Labor-Management Safety Committee to address issues. Does that exist, and 

does it function? 

Ms. JETER. It exists. We haven’t met as that particular committee for a while. Actually, I got a letter from Mr. Sarles this 

morning, and one of the things that has happened, even though we 

weren’t meeting, when Chief Taborn was acting as the safety officer, he included that committee in with the WMATA Executive 

Leadership Team [ELT] committee. 

And after I attended a couple of the meetings, I am still trying 

to grapple how they function. But I am not so sure whether or not 

we should do that. But I am willing to see if it will work. 

Senator MIKULSKI. Again, I am not the manager of WMATA, but 

I believe it is in the best interest of the functionality of the system 

that labor and management have a regular systematic way of communicating. That it be a regular system. That the top union officials have a chance to talk to the top Metro management to bring 

issues of concern. That it is regular and that they are systematic 

and that it have a formalized agenda. 

This is not about contract negotiations. This is about problem 

solving. 

Ms. JETER. Right. 

Senator MIKULSKI. Does such a mechanism exist now? You are 

the head of the union. 

Ms. JETER. I know. I will say, yes, it does because—I will say, 

yes, it exists, but it is not functioning properly. I will have to say 

it that way. 

Senator MIKULSKI. Well, why doesn’t it function properly? Does 

it meet on a regular basis? 

Ms. JETER. The ELT committee does meet. I don’t—I have a 

problem with actually including the two. I think we are going in 

two different directions. The union’s position where safety is concerned is sometimes not at the same place that this ELT committee 

is. 

Senator MIKULSKI. I understand that, but I am going to get lost 

in this committee. I mean a subcommittee and this subcommittee’s 

name and so on. I am an outcome gal. So my outcome is this. What 

does it take to have labor and management meet on a regular 

basis, to have regular communication of things of mutual concern? 
338 

Ms. JETER. Mr. Sarles and I have spoken of that. We have both 

said that we are going to meet regularly with one another, and because of his answer to my letter this morning, concerning the Joint 

Labor-Management Committee, I will talk to him about that because—— 

Senator MIKULSKI. So, as of now, almost 11 months since the accident, there is no joint regular systematic, joint mechanism of 

communication? 

Ms. JETER. The Joint Labor-Management Committee that was 

there, we stopped meeting when Alexa Samuels was the head. We 

stopped meeting. And we have had maybe one meeting. I think we 

had one meeting in February. 

Senator MIKULSKI. Okay, let us stop. Mr. Sarles, what do you 

think? Do you think we can get something going here? 

Mr. SARLES. Absolutely. In fact, inside of that first 2 weeks, I 

met with Jackie, and we personally are going to meet about once 

a month to go over safety concerns, besides what is going on in the 

organization. 

Senator MIKULSKI. There has to be exactly this. You might have 

one view of what the safety issue is. They might be experiencing 

operational difficulty, and they are the ones on the line. They 

might know things you don’t know or technology doesn’t reveal or 

hasn’t come up the chain of command. Or in the same way, if you 

are looking to approve it, get greater cooperation, suggestions on a 

variety of things, you need to have the assistance of the union. It 

is in their interest that everything be safe. 

Ms. JETER. That is correct. 

Senator MIKULSKI. Because they are the first to experience any 

breakdowns for not only such a horrific thing as death, but also injury, even if it is temporary injury, you know? So I am going to 

hope that what comes out of this hearing and some of the correspondence recently is that there is a regular way of communicating. 

Ms. JETER. We will make that happen. 

Senator MIKULSKI. Okay? 

Ms. JETER. Yes. 

RIDER SAFETY

Senator MIKULSKI. I will come back to some of the other issues. 

I would like to get to the riders for a minute now. 

So, tell me, using an old Ronald Reagan phrase, my good friend 

Ronald Reagan, when he said, ‘‘Are you better off now than you 

were 4 years ago?’’ Do you remember that famous question? 

Do you think that Metro is more of a safe place now than it was 

on June 22, 2009? Do you think that there have been improvements that you experience? And I raise that to both of you. 

Mr. CORBETT. In my judgment, yes. We don’t have the day-to-day 

experience that Ms. Jeter has with her members, but if one listens 

to the WMATA board meetings, you hear more of a concern about 

safety now than you did a year ago. It was embarrassing to me to 

hear that a WMATA board member said I’ve been a board member 

for 12 years, and I have never heard of this Tri-State Operating 

Committee. That was about a year ago. 
339 

It is much different now. The board members are much more attuned to safety, and we think at least in terms of that verbal level, 

which is all we can respond to, it is much better than it was then. 

Senator MIKULSKI. Would you want to add or elaborate on that? 

Mr. CORBETT. I am sorry? 

Senator MIKULSKI. So you feel that there is progress and momentum, but more needs to be done as you recommend in your excellent testimony? 

Mr. CORBETT. There is—thank you. We really are awaiting the 

results of the National Transportation Safety Board to see what 

WMATA does to those. Those could be very costly recommendations, and how they respond to those is going to be a very good signal as to whether the jurisdictions can come up with the money to 

address the NTSB concerns. 

Senator MIKULSKI. Well, it will be my intention that when the 

NTSB makes their recommendations that we have a public discussion of that. In other words, what are they recommending? What 

was the rationale behind those recommendations? Then, to get a 

sense of what it would take to implement it other than budgetary 

and managerially. 

Mr. DeBernardo? 

Mr. DEBERNARDO. I would concur with Mr. Corbett. I think that 

there is definitely a renewed sense of urgency about the safety 

issue, and I am very optimistic that Mr. Sarles’s new program of 

reporting vital signs of Metro will be very helpful for riders. 

Senator MIKULSKI. Now to your Vital Signs, which we think is 

terrific, so the Vital Signs is the way that the riders can communicate, in addition to your official board capacity. Am I correct? 

Mr. DEBERNARDO. We are advisory to the board, yes. 

Senator MIKULSKI. So that is, and do you have regular systematic meetings where you can bring rider concerns to the board? 

Mr. DEBERNARDO. Yes, we do monthly meetings. 

Senator MIKULSKI. So you have a regular monthly meeting? 

Mr. DEBERNARDO. Right. And we are hoping that with the Vital 

Signs report, when that comes out, it will give us a basis for discussion with the board and with the management at Metro. 

Senator MIKULSKI. Now you said in your testimony extolling the 

virtues of Vital Signs, you talked about measurement, which is 

what I talked about in my opening remarks and some of the questions to the WMATA leadership. You said nothing gets acted on unless it is measured or that which is measured—— 

Mr. DEBERNARDO. That which is measured gets done. 

Senator MIKULSKI. Yes. So what did you mean by that? And 

what would you recommend, for our information, but also to the 

leadership, that really needs to be measured? 

Mr. DEBERNARDO. Well, in terms of reliability, things like ontime service and frequency of buses and breakdowns of buses and 

trains. At present, with our Riders’ Advisory Council, we are based 

a lot on anecdotal evidence, and I think that these Vital Signs, by 

measuring, by having a measurement, will give us better ways of 

discussing improvements. 

Senator MIKULSKI. So rather than somebody saying, oh, I feel hot 

or I feel dizzy. 

Mr. DEBERNARDO. Right. 
340 

Senator MIKULSKI. I have pains in my arm, you take the blood 

pressure and so on, and you actually get vital signs about, are you 

okay? Are you heading for a problem? 

Mr. DEBERNARDO. Right. And is it a real problem? How extensive is the problem? Is it a problem that by looking at the Vital 

Signs, we can often look at the causes of the problem as well. 

Senator MIKULSKI. Well, we get this anecdotal information too. 

I will speak for myself, and I know that Senator Cardin gets it too. 

We have talked about it. We hear about out-of-service escalators 

and elevators. That is a top favorite, as well as closed entrances 

and exits and train delays. Also, no communication about what is 

going on when trains break down. 

Lots of loud announcements that you really can’t hear. In other 

words, it is so loud that you can’t hear it. You can’t decipher it. I 

am not talking about aging people or someone, just regular folks. 

Then they also say, ‘‘I don’t know. I don’t have a number to call. 

So I called you.’’ Sometimes they call me a lot of things. 

Not only me, but we could talk about Congresswoman Norton, 

my colleagues Webb and Warner, and the House Members. Riders 

call us because we are visible, and we have publicly disclosed numbers. 

So do you feel that riders have a number to call if they have a 

problem or an e-mail address that they can send concerns? 

Mr. DEBERNARDO. Yes. I think there are many avenues at Metro 

for—I don’t think all the time that the riders themselves are aware 

of the many avenues, but I can tell you that since I joined the Riders’ Advisory Council about a year and a half ago, I was made 

aware of many more opportunities for addressing problems than I 

knew existed. 

Senator MIKULSKI. What about you, Mr. Corbett? 

Mr. CORBETT. Can I be a negative voice on that? 

Senator MIKULSKI. Sure. 

Mr. CORBETT. When people don’t call you, they call us. And quite 

often, we get very irritable people who have tried to send in a complaint to the WMATA complaint system, and it is very bureaucratic. They give you a number, and I am not sure that the service 

really improves. I think they need more manpower on that issue. 

Second, we divide between really important and nice to have. 

Whether there is too much noise in the system—that is nice to 

have. But if the escalator is broken and a heavyset person has got 

to walk up 123 steps, that is a safety item. So we try to divide 

those between nice to have and really important. 

And I think, frankly, in this coming year under Mr. Sarles’s leadership and that of Mr. Benjamin, if they can work on the got to 

have safety items, we would be happy with that, and we will give 

them extra time on the nice to have items. 

Senator MIKULSKI. Well, it is the way I work, even when we do 

appropriations. I have a must do, should do, and would like to do 

list. The must dos have to get done. Then we go to the should dos. 

So what you are saying is have the must dos and should dos and 

that would go a long way? 

Mr. CORBETT. Yes. 

Senator MIKULSKI. Is that correct? 

Mr. CORBETT. That is correct. 
341 

WMATA BOARD APPOINTMENTS

Senator MIKULSKI. But one of your points, though, is the GSA 

has got to get cracking on these two other Federal board appointments? 

Mr. CORBETT. Yes, speaking very frankly—and you invited us to 

speak frankly—the members of the board from the jurisdictions, 

they are somewhat protective of their jurisdictions. If they don’t 

have money, they don’t recommend things that they know are 

needed. Having the two Federal appointees already is opening up 

that process a little bit, but we think that the other two appointees 

should be appointed soon. One of them should be a designated rider 

representative. 

And we think they can help to open up the board so that some 

pressure can be put on the jurisdictions to come up with additional 

money for additional capacity. 

Senator MIKULSKI. Well, let me say what I am going to do in this 

testimony here, because Ms. Jeter also had recommendations for 

the board, we are going to take your recommendations and send 

them on to GSA. Because you have made recommendations, and 

you also have your underpinnings as to why you feel that the characteristics you are recommending would improve safety and operational reliability. 

We are going to say this is who we heard from. The people who 

use the system, the people who work on the system, and the people 

who are going to count on a board that—particularly when its Federal partners—brings some assets to the table themselves. So we 

would like to bring your recommendations to GSA and to tell GSA 

kind of get moving on it. Isn’t that what you are saying? Get moving on it? 

Mr. CORBETT. Yes. Yes. 

WHISTLEBLOWER PROTECTION

Senator MIKULSKI. Let us go to Ms. Jeter. The one thing that 

came out in both the Gunn report and also in your testimony is the 

whistleblower situation. 

Ms. JETER. Yes. 

Senator MIKULSKI. Also the ‘‘kill the messenger’’ problem, where 

it is difficult at times to speak freely because you are concerned 

about some form of retaliation. 

Ms. JETER. Right. 

Senator MIKULSKI. Do you feel that the climate toward whistleblowers has improved? 

Ms. JETER. It hasn’t improved because the employees who would 

utilize that type of system don’t know that it even exists. I don’t 

believe that there is a climate at WMATA to embrace that type of 

activity among the employees. 

I can tell you, even the incident that has been given so much 

public attention—the incident at Wheaton—when I spoke to the operator of the train, his first, initial response to me was ‘‘I didn’t 

want to put it on the air. So I used the ETS box because I didn’t 

want them to feel like I was trying to make a big deal.’’ And that, 

to me, is the climate that is surrounding the members of the local 

that I represent. 
342 

Some people might shrug it off and say it is normal paranoia 

that a lot of American citizens have these days. But for the most 

part, you probably will not find that many individuals reporting 

certain incidents because they don’t believe—either they don’t believe that WMATA is going to take care of them, or that in some 

type of way, they are going to be retaliated against for giving the 

information. 

And I give you another example, the IG had a setting where she 

went in to talk to employees, and one of the people that was there 

was one of the shop stewards that I have, and the shop steward 

informed me that during that meeting, people did not want to 

speak up freely, even though the IG said, ‘‘Nothing is going to happen to you. I want you to speak up freely to me.’’ She said most 

of them did not. 

A lot of conversation happened after the meeting, but not during 

the meeting. 

Senator MIKULSKI. Well, we will take a look at how to strengthen 

the whistleblower legal provisions. But I would strongly recommend in the interim, people who have those concerns bring it to 

those that they elected to represent them in the workplace. Since 

we are now going to have a labor-management organized and systematic way of communicating. You can then, if necessary, preserve 

their anonymity, or whatever. 

I am a big believer in people being able to come forward, and lots 

of times, the ability to come forward could save a life or help someone from being hurt or maimed. We need to be able to have that 

communication. 

The fact we have got so many things going for us, I mean, we 

have a system that really people like and use. I mean, that is one 

of the things, when I read the papers and follow the news on the 

public hearings, people really like WMATA, and they really want 

to use it, and they are willing to pay for it out of their own pocket. 

There are days that they function in heroic fashion that I believe 

it was Mr. Benjamin that spoke about and I have spoken about 9/ 

11. That the subway system helped Washington evacuate in a safe, 

orderly and non-panicked way. The performance during the Obama 

administration and then even during the rocking-rolling times of 

the recent snow situation, which bordered on almost a natural disaster. I mean, it was a slow version of a hurricane. 

So we have got a lot going for the system, and I think we can 

feel proud of the people who work there. Efforts have been made. 

I think there are certain things that have been falling. So we want 

to build on the asset. The most important asset that WMATA has 

that we can directly impact upon is the workers and getting them 

the ability to communicate and come forward and be able to do 

that. 

FEDERAL FUNDING AND OVERSIGHT

The other is, I will really say, that WMATA does need reliable 

revenue streams. You could have the will, but if you don’t have the 

wallet, it is very difficult to fix these things. 

I think we have identified a couple of things today. One, we continue to support the Federal share. In supporting the Federal 

share, we really do want to insist on maintenance of effort from the 
343 

States and locals. I think we also have identified an area where the 

Federal Government has created a mandate, and it is an appropriate mandate. It is a very important tool to ensure people’s physical and economic independence. If you can’t get to work, even if 

you have had the best rehab, or keep your doctor’s appointment, 

but there needs to be a way then to consider how at the national 

level to be able to do that. 

I also believe that we need to pass not only the President’s budget, but I think we need to pass what the President is recommending in rail reform, giving FTA more authority. I have got my 

own bill, along with Senator Cardin and others, to do that. 

So I think we have got our own reform efforts. I will say what 

I said. We all have to feel we are in this together. So this isn’t 

about finger pointing and so on, rather that we all have to take 

ownership for the safety offices. 

WITNESS RECOMMENDATIONS

So before I wrap up, I am going to ask each and every one of you, 

is there anything else you want to say: a recommendation; an observation; or an insight that you would like to share for the official 

record. This is an official congressional hearing. There is going to 

be an official congressional record of this. We can go down the row. 

Ms. JETER. Well, I know that I put everything, even the things 

that I did not read, in my testimony, and I can say on behalf of 

the members of Local 689, we support those acts or those bills that 

you are trying to pass. And so, we will do whatever we can to make 

sure that that happens. 

Senator MIKULSKI. Thank you. 

Mr. CORBETT. Senator, we very much appreciate this hearing and 

you listening to riders’ views. The one other item I would like to 

suggest for the Congress is to consider extending what is called the 

‘‘transit commute.’’ In the economic stimulus bill, the employer discount that is for $230 a month is going to automatically reduce to 

$115 at the end of this calendar year unless some vehicle of the 

Senate Finance Committee doesn’t fix that item up. 

And to keep people out of their cars and benefiting from the 

parking subsidy, we think having the transit have equal weight 

would be very helpful, and this Congress could do that this year. 

Senator MIKULSKI. Thank you. 

Mr. CORBETT. Thank you. 

Senator MIKULSKI. Very good idea. 

Mr. DEBERNARDO. And finally, I would just like to say that we 

know of your concern, and we appreciate it. And we are glad that 

we are working together to improve Metro. 

Senator MIKULSKI. Well, as citizen activists and civic engagement, I know that, for example, Ms. Jeter is the official union representative and does a very good job at it, but she does a lot like 

you, both of you on your own time and on your own dime. But you 

know, I think this is what is different from our country. I mean, 

we have got to be able to get together, put it out on the table, 

speak uncensored and unfettered, and let us solve some of these 

problems. 
344 

We really thank you for your insights. This concludes our hearing, and I wish to state for my colleagues and for the record, we 

will leave the record open for additional questions. 

I know Senator Murray has an extensive set of questions. Senator Bond, who is the ranking member, also tied up on the financial security, could have extensive questions as well, those will be 

really for the WMATA leadership. With that, the hearing is recessed. 

CONCLUSION OF HEARINGS

This subcommittee will hold its next hearing on May 20. It will 

turn its attention to its housing portfolio, when Senator Murray 

will hold a hearing on the progress being made to end the homelessness among veterans because this does have the homeless portfolio. To think that you have housing when you fight over there, 

but you don’t have it when you come back here is a national disgrace. So she will be holding a hearing on that. 

We thank you for your participation and the subcommittee is recessed. 

[Whereupon, at 5:49 p.m., Wednesday, May 19, the hearings 

were concluded, and the subcommittee was recessed, to reconvene 

subject to the call of the Chair.] 
(345) 

TRANSPORTATION AND HOUSING AND URBAN 

DEVELOPMENT, AND RELATED AGENCIES 

APPROPRIATIONS FOR FISCAL YEAR 2011 

U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, DC. 

NONDEPARTMENTAL WITNESSES 

[CLERK’S NOTE.—At the direction of the subcommittee chairman, 

the following statements received by the subcommittee are made 

part of the hearing record on the Fiscal Year 2011 Transportation 

and Housing and Urban Development, and Related Agencies Appropriations Act.] 

PREPARED STATEMENT OF THE COALITION OF NORTHEASTERN GOVERNORS

The Coalition of Northeastern Governors (CONEG) is pleased to share with the 

Subcommittee on Transportation, Housing and Urban Development, and Related 

Agencies this testimony on fiscal year 2011 appropriations for transportation and 

community development programs. The CONEG Governors deeply appreciate the 

subcommittee’s longstanding support of funding for the Nation’s highway, transit, 

and rail systems and critical community development programs, including the incorporation of transportation and community development funding in last year’s comprehensive American Recovery and Reinvestment Act (ARRA). The welcomed infusion of those flexible funds allowed States and local governments to advance many 

needed projects. The overwhelming response, particularly to the intercity passenger 

rail and multi-modal grant funds, also demonstrated the diverse and enormous 

needs for investment in an integrated national transportation system that supports 

a competitive economy, livable communities, and sound use of energy and environmental resources. Those needs continue to confront all of us—Federal, State and 

local governments and the private sector. 

We recognize that the subcommittee continues to face a very difficult set of fiscal 

challenges and interlocking issues in crafting the fiscal year 2011 appropriations 

measure. The slowly recovering economy exacerbates the shortfall in the Highway 

Trust Fund even as it generates greater demand for public transportation and intercity passenger rail services. The ongoing national debate on the surface transportation authorization and funding framework to guide highway and transit programs 

remains unresolved. Interest is growing in new approaches to funding, restructuring 

and financing highway and transit programs, and creating livable communities, yet 

many of these approaches are not authorized. In spite of these challenges, we urge 

the subcommittee to continue the strong Federal partnership so vital for a national, 

integrated, multi-modal transportation system. This network underpins the competitiveness of the Nation’s economy, broadens employment opportunities, and contributes to the efficient, safe, environmentally sound, and energy smart movement of 

people and goods. 

TRANSPORTATION

Surface Transportation 

The CONEG Governors urge the subcommittee to fund the combined highway, 

public transit, and safety programs at levels greater than the fiscal year 2010 appropriations. This higher level of Federal investment is necessary to sustain the 

progress made under the most recent authorization to improve the condition and 
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safety of the Nation’s highways, bridges, and transit systems. Attention is also needed to address the recurring shortfall in the Highway Account of the Highway Trust 

Fund. 

Continued and substantial Federal investment in these infrastructure improvements—in urban, suburban, exurban, and rural areas—is necessary to safely and 

efficiently move people and products and to support the substantial growth in 

freight movement projected in the coming decades. The Federal Government has invested significant resources in the Nation’s transportation system, and has a continuing responsibility to maintain and expand its transportation infrastructure to 

keep America competitive in a global economy. 

Specifically, the CONEG Governors urge the Subcommittee to: 

—Increase the Federal aid highway obligation over the fiscal year 2010 appropriated level; 

—Increase public transit funding over the fiscal year 2010 appropriated levels, including full funding for the current Formula and Bus Grants, the Capital Investment Grants, and the Small Starts programs; and 

—Ensure that these funds are provided to the States in a timely manner. 

Rail 

The Governors deeply appreciate the subcommittee’s strong support for intercity 

passenger rail, through the commitment of ARRA funds and the fiscal year 2010 appropriations levels. The overwhelming response to the initial AARA funds demonstrated the pent-up interest in investments to expand and improve intercity passenger rail service across the Nation. Now, new policy, program and funding frameworks for a vastly improved and expanded national intercity passenger rail system 

are taking shape under the guidance of the Passenger Rail Investment and Improvement Act (PRIIA), the High Speed Intercity Passenger Rail Vision and Strategic 

Guidance, the Preliminary National Rail Plan, and Amtrak’s Comprehensive Business Plan. 

The administration, States, Amtrak and freight railroads worked intensely over 

the past year to respond to the new intercity passenger rail program and funding 

requirements. Those efforts are now showing results as the Federal Railroad Administration (FRA) prepares to release the first awards under ARRA; the States begin 

submitting applications for the fiscal year 2010 corridor planning and capital funds; 

and the administration prepares the National Rail Plan. 

The ability of States, FRA and Amtrak to realize opportunities for service expansion and ridership growth in corridors across the country will depend upon a substantial and on-going Federal capital investment in infrastructure, equipment, and 

safety. These investments in ‘‘state of good repair,’’ capacity, and safety improvements are essential for the accessible, reliable, frequent and on-time service that attracts and retains ridership. In addition, the Federal Railroad Administration will 

need adequate funding and staffing resources to carry out its expanded responsibilities for intercity passenger rail grant programs and related studies in a timely 

manner. 

Amtrak.—The CONEG Governors request that the subcommittee provide at least 

the authorized level of $1.927 billion in fiscal year 2011 Federal funding for Amtrak, 

with specific funding levels provided for operations, capital, debt service, and the 

Amtrak Office of Inspector General. Additional capital resources are needed if Amtrak is to initiate its fleet program in a timely manner. A balanced program of adequate, sustained capital investment in infrastructure (including stations) and fleet 

modernization and expansion is vital for an efficient intercity passenger rail system 

that provides reliable, safe, quality services that attract and retain riders. 

A funding level of $1.025 billion in fiscal year 2011 for capital improvements is 

critically needed for the ‘‘state of good repair’’ improvements to aging infrastructure 

and safety improvements on Amtrak-owned infrastructure and equipment. Even at 

its requested level, Amtrak expects that the backlog of deferred investments (currently estimated at approximately $5.5 billion) will continue to increase. For example, Amtrak estimates that $700 million is needed annually just on the Northeast 

corridor (NEC) main line and branch lines for normalized replacement of assets and 

progress on reducing the backlog of deferred investment. This level of capital investment is vital to Amtrak’s ability to deliver efficient, reliable, quality service nationwide. We particularly encourage the subcommittee to ensure that Amtrak can continue bridge repair projects underway on the Northeast corridor, as well as the system-wide security upgrades and the life-safety work in the New York, Baltimore, 

and Washington, DC tunnels. 

Amtrak has also identified $446 million as the level of investment needed in fiscal 

year 2011 to begin executing its multiyear fleet plan. Timely action on a systematic 

plan to replace aging equipment used throughout the intercity passenger rail system 
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can help modernize the current Amtrak fleet; offer the prospect of more efficient 

procurement by Amtrak and by States supporting corridor services; and help stimulate the growth of the domestic rail manufacturing sector. 

Intercity Passenger Rail Corridors.—The CONEG Governors also thank the subcommittee for its support of the Intercity Passenger Rail Corridor Capital Assistance 

Program, particularly the provision of funds for the planning activities leading to 

the development of passenger rail corridors, including multistate corridors. We urge 

the subcommittee to continue funding this critical program at least at the $2.5 billion level in fiscal year 2011. This program is an important foundation for a vibrant 

Federal-State partnership that will bring expanded, enhanced intercity passenger 

rail service to corridors across the Nation. Infrastructure and service plans for these 

intercity passenger rail corridors take many forms and are at different stages across 

the country, reflecting the diverse range of city pairs, market opportunities, and 

travel time needs. Therefore, we urge that these grant funds be available to States 

to advance plans for reliable, frequent and travel-time competitive service and corridors, regardless of maximum speed requirements. In light of the stringent FRA 

requirements regarding funding criteria for intercity passenger rail grants, we also 

request that the subcommittee waive the current statutory requirement that 

projects be part of an approved State rail plan, since this requirement might curtail 

thoughtful and well advanced efforts already underway by the States. 

Northeast Corridor Infrastructure and Operations Advisory Commission.—The 

Governors thank the subcommittee for providing funding for the Northeast Corridor 

Infrastructure and Operations Advisory Commission (Commission) in fiscal year 

2010. The NEC Governors have named their representatives to the Commission, 

and are eager to see it organized and begin its important work. The Commission 

is uniquely designed to encourage mutual cooperation and planning among all three 

parties for intercity, commuter and freight use of the Corridor—and to also maximize the economic growth and the energy and environmental benefits of the larger 

regional NEC Network. 

The Commission has extensive responsibilities to set corridor-wide policy goals 

and recommendations that encompass passenger rail mobility, intermodal connections to highways and airports, energy consumption, air quality improvements, and 

local and regional economic development of the entire northeast region. The Commission is expected to play a central role in providing guidance to the Vision and 

service development plans that are a pre-requisite for the NEC to seek corridor-level 

funds under the newly emerging Federal framework for intercity passenger rail. To 

conduct the required assessments in a timely manner, the Commission will need resources, data and expert analysis that exceed that which is currently available 

through the staff of the States, Amtrak and FRA. Continued funding in fiscal year 

2011 will ensure the Commission’s ability to secure all essential resources for conducting these assessments. 

Other Programs.—A number of other national rail programs are important components of the evolving Federal-State-private sector partnerships to enhance passenger and freight rail across the country. In this time of uncertainty in financial 

markets, the Railroad Rehabilitation and Improvement Financing Program (RRIF) 

can be an important tool for railroads (particularly regional and small railroads) and 

public agencies to access the financing needed for critical infrastructure and intermodal projects. We encourage the subcommittee to provide funding in fiscal year 

2011 for the Rail Line Relocation and Improvement Program, the Next Generation 

Corridor Train Equipment Pool, and critical rail safety programs including deployment of positive train control and the related Nationwide Differential Global Positioning System which benefit both passenger rail and freight rail systems. In addition, funding for the Advanced Technology Locomotive Grant Pilot Program, created 

in section 1111 of the Energy Independence and Security Act of 2007, would be an 

important first step to assist the railroads and State and local governments in a 

transition to energy-efficient and environmentally friendly locomotives for freight 

and passenger railroad systems. 

The CONEG Governors also request funding for the Surface Transportation Board 

(STB) at least at the fiscal year 2010 level of $29 million, including specific funding 

for its responsibilities under PRIIA. Adequate funding is needed for the STB to carryout its expanded responsibilities for intercity passenger rail corridor service, and 

to provide critical oversight as the Nation’s rail system assumes increasing importance for the timely, efficient, and environmentally sound movement of people and 

goods across the Nation. 
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COMMUNITY DEVELOPMENT

The CONEG Governors urge the subcommittee to provide funding for the Community Development Block Grant (CDBG) program at least at the fiscal year 2010 level 

of $3.99 billion. The CDBG program enables States to provide funding for infrastructure improvement, housing programs, and projects that attract businesses to 

urban, suburban, exurban, and rural areas, creating new jobs and spurring economic development, growth and recovery in the Nation’s low income and rural communities. 

CONCLUSION

In conclusion, the CONEG Governors urge the subcommittee to: 

—Increase the Federal aid highway obligation over the fiscal year 2010 appropriated level; 

—Increase public transit funding over the fiscal year 2010 appropriated levels, including full funding for the current Formula and Bus Grants, the Capital Investment Grants, and the Small Starts programs; 

—Fund Amtrak at least at the fiscal year 2011 authorized level of $1.927 billion, 

including $1.025 billion in capital for infrastructure and safety-related investments; $592 million for operations; $288 million for debt service, and $22 million for the Amtrak Office of Inspector General; and also provide funding to initiate a sustained fleet modernization program; 

—Provide additional funding specifically for the Northeast Corridor Infrastructure 

and Operations Advisory Commission; 

—Fund the Intercity Passenger Rail Service Corridor Assistance Program for corridor planning and capital investment at least at the current level of $2.5 billion; 

—Provide funding for national rail programs that are important components of 

the evolving Federal-State-private sector partnerships to enhance passenger 

and freight rail across the country, such as the Rail Line Relocation and Improvement Program, the Next Generation Corridor Train Equipment Pool, and 

positive train control deployment and development of the related Nationwide 

Differential Global Positioning System; 

—Provide funding for the Surface Transportation Board at least at the fiscal year 

2010 appropriated level; and 

—Provide at least $3.99 billion for the Community Development Block Grant Program. 

The CONEG Governors thank the entire subcommittee for the opportunity to 

share these priorities and appreciate your consideration of these requests. 

PREPARED STATEMENT OF THE NEW YORK STATE DEPARTMENT OF TRANSPORTATION

The New York State Department of Transportation (NYSDOT) appreciates the opportunity to present testimony on the fiscal year 2011 transportation appropriations. 

Most people don’t realize how vast New York’s transportation system really is. Indeed, our State and local highway system supports more than 130 billion vehicle 

miles of travel annually. The total system in New York encompasses more than 

114,000 miles of highway and more than 17,400 bridges. New York also is home to 

a 3,565-mile intercity rail network over which more than 1.5 million passengers 

travel and more than 74 million tons of equipment, raw materials, manufactured 

goods and produce are shipped each year. New York also has 485 public and private 

aviation facilities through which more than 80 million people travel each year, and 

we have oversight of many of New York State’s ports. Finally, we support more than 

130 public transit operators, serving more than 8 million passengers each day. 

We must recognize that New York State and 47 other States in the Nation continue to face significant economic challenges. New York is currently facing a deficit 

of more than $9 billion in State fiscal year 2010–2011 and a long-term structural 

deficit of $60.8 billion over the next 5 years. 

Since taking office in 2008, Governor Paterson has continually warned that New 

York State is in the midst of an unprecedented economic crisis. The losses in the 

financial, insurance and real estate sectors, which have been hit the hardest, have 

had a devastating impact on our State revenues. Prior to the current recession, financial services alone provided more than 20 percent of our State revenues. The 

Governor’s actions have helped New York make substantial progress toward putting 

the State’s fiscal house in order. That does not change the fact that the process of 
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addressing a financial challenge of this magnitude has been, and remains, a long 

and difficult one. 

Just 1 year ago, Congress passed the American Reinvestment and Recovery Act 

(ARRA). The Recovery Act provided a one-time boost in funding to allow New York 

to create jobs to spur the economy and make progress on addressing transportation 

deficiencies. Here are some early results: —Eighty-two ARRA projects, valued at $80 million have been completed. 

—Another 328 ARRA projects, valued at almost $803 million, are under construction by the private sector throughout New York State. 

—Project selections were made collaboratively within the Metropolitan Planning 

Organizations (MPOs) for 80 percent of the projects. 

—Fifty-seven percent of the highway and bridge funds have gone to locally sponsored projects. In fact, every county in New York State has received Economic 

Recovery funding for transportation projects. 

—Fifty-five percent of the projects administered under the program are in economically distressed areas. —As of March 15, 2010, $146 million, or approximately 15 percent of New York’s 

Highway Recovery Act funding has been made available to Disadvantaged and 

Minority- and Women-Owned Small Businesses. 

The Federal Economic Recovery funding was certainly needed and we are very 

grateful to Congress for the opportunity it provided to invest in our transportation 

system. This infusion of Federal aid provided a one-time boost to our highway and 

transit funding. 

But if we are to maintain the benefits from this one-shot of investment and job 

creation provided by the Recovery Act, we need continued and increasing Federal 

and State investment in our transportation infrastructure to meet our growing system, mobility, infrastructure, safety, congestion and service needs. 

In developing the fiscal year 2011 transportation appropriations legislation, we 

ask that you consider and endorse the following: 

PROVIDE MODEST INCREASES TO TRANSPORTATION PROGRAMS AWAITING

REAUTHORIZATION

New York urges Congress to provide modest funding increases for those transportation programs that are awaiting reauthorization: highways, transit, highway safety and aviation. 

At a minimum, Congress should provide the level of funding proposed in the 

President’s budget: —$41.3 billion for highways, which would provide an increase over fiscal year 2010 levels ($41.1 billion). 

—$10.8 billion for Transit, a slight increase over fiscal year 2010 levels. 

—$3.5 billion for the Airport Improvement Program, sustaining the level of funding the program has received since authorizing legislation expired. 

New York is especially pleased that the President proposes a 32 percent increase in the Next Generation Air Traffic Control System, providing $1.14 billion to upgrade the Nation’s air traffic control system. Implementing state-of-the-art technology is crucial to the redesign of the severely congested New York City airspace. 

FULLY FUND RAIL PROGRAMS

New York urges Congress to provide rail no less than the amount authorized in 

Passenger Rail Investment and Improvement Act of 2008 (PRIIA). The President’s budget proposal calls for a $1 billion allocation for the High-Speed 

and Intercity Passenger Rail program. Although this amount is higher than the 

$350 million authorized in PRIIA, it is a reduction from last year’s $2.5 billion. Amtrak funding would include $1.052 billion for capital grants, up from $1.002 this 

year, and $563 million for operating grants, a continuation of the current level. 

The passage of PRIIA and ARRA provided the first significant level of Federal 

support for intercity passenger rail investment in 100 years. The nationwide response has been overwhelming. Applications valued at $57 billion were submitted 

for $8 billion in ARRA funds last year. The $2.5 billion provided in fiscal year 2010 

will help States continue to improve intercity passenger rail service. New York 

urges Congress to support the President’s budget request for rail in fiscal year 2011. 

MAINTAIN EXISTING TRANSIT PROGRAM STRUCTURE

New York urges Congress to maintain the existing Fixed Guideway Modernization 

program and Bus and Bus Discretionary program as separate transit programs until 

a full and productive discussion of the state-of-good-repair of our transit system occurs in connection with surface transportation reauthorization. 
350 

New York supports the Federal Transit Administration’s (FTA) reinvigorated emphasis on ensuring that the Nation’s transportation infrastructure reaches a stateof-good-repair. However, to achieve this goal, the administration, in its fiscal year 

2011 budget, proposes to merge the separate formula-based section 5309 Fixed 

Guideway Modernization Program and the section 5309 discretionary-based Bus and 

Bus Facilities into a single new ‘‘Bus and Rail State of Good Repair Program.’’ While 

New York welcomes a full and productive conversation on a needs-based approach 

to addressing state-of-good-repair, the administration’s proposal is too short on detail and FTA has not worked with transit stakeholders on a new process for apportioning program funds. As such, New York respectfully requests that Congress not 

address structural proposals through the appropriations process. We cannot afford 

any delay in our State’s efforts to maintain and modernize our existing facilities 

while the details of such a new program are developed. 

NYSDOT thanks you for this opportunity to present testimony. We appreciate 

your dedication to and support of the Nation’s transportation systems. 

PREPARED STATEMENT OF THE ILLINOIS DEPARTMENT OF TRANSPORTATION

Madam Chairman and members of the subcommittee, we appreciate the opportunity to submit testimony concerning the Federal fiscal year 2011 U.S. Department 

of Transportation (U.S. DOT) appropriations on behalf of the Illinois Department of 

Transportation (IDOT) to the Senate Appropriations Subcommittee on Transportation and Housing and Urban Development, and Related Agencies. We thank Senator Murray and the members of the subcommittee for their past support of a strong 

Federal transportation program and for taking into consideration Illinois’ unique 

needs. 

IDOT is responsible for the planning, construction, maintenance and coordination 

of highways, public transit, aviation, intercity passenger rail and freight rail systems in the State of Illinois. IDOT also administers traffic safety programs. Our recommendations for overall funding priorities and our requests for transportation 

funding for projects of special interest to Illinois are discussed below. 

SAFETEA–LU REAUTHORIZATION/EXTENSION

IDOT recognizes that Congress must vault over numerous hurdles before it can 

unite around a long-term surface transportation reauthorization bill that will enhance the quality of the Nation’s infrastructure. While the HIRE Act provided an 

extension of the SAFETEA–LU programs through December 31, 2010, allowing Congress the time it needs to thoroughly craft a bill that will address the pressing 

issues of funding, capacity, mobility, safety, preservation, modernization, environment and other critical issues, we urge Congress to complete its work on a surface 

transportation reauthorization bill before the end of the HIRE Act extension. Much 

work has been accomplished by Congress but substantial work remains. We urge 

Congress to maintain the momentum it has achieved in developing a multiyear bill 

thus far and to continue with alacrity so that a bill can be enacted before another 

extension of SAFETEA–LU is required. 

We recognize that the Congress has to view issues from many different angles, 

many of them competing, and that the end result may differ from a particular 

State’s perspective from time to time. All that being said, provided any extension 

is needed for any duration of time, IDOT supports ‘‘clean’’ extensions of SAFETEA– 

LU, i.e. without any re-structuring or re-programmatic distribution of existing formula or allocated programs. Extensions that modify only selected categories of 

SAFETEA–LU, ex post facto, not only unnecessarily set the stage for a zero-sum 

game scenario wherein States are thrust into disagreement, but it also disturbs the 

finely tuned State equity equilibrium that was reached upon SAFETEA–LU enactment. 

FULL RESTORATION OF END-OF-SAFETEA–LU RESCISSION

The recently enacted HIRE Act restored $8.7 billion in contract authority to the 

States that was rescinded at the conclusion of Federal fiscal year 2009 due to a 

mandated provision in SAFETEA–LU. While IDOT commends Congress for this 

prudent legislative remedy we also urge the subcommittee to pursue additional suitable monetary off-sets that will make it possible to completely nullify the impact of 

the rescission by restoring, to the States, the $334 million in useable ceiling that 

was lost to them in Equity Bonus (EB) funding. The special obligation limitation associated with the EB special contract authority was not rescinded but instead made 

unusable by the rescission of contract authority. Even after the restoration of the 
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rescinded contract authority, this special limitation will not become usable since 

current law requires that all contract authority made available as a result of the 

rescission restoration is subject to the overall obligation limitation provided by an 

appropriations act. Perhaps, additional obligation limitation could be made available, as it was in Federal fiscal year 2008, when $1 billion in ceiling was provided 

(to be used with a State’s existing apportionment) for projects under the Bridge Program. 

As you are aware, within the rescission EB funding was withdrawn from 34 

States (including Illinois). EB funds are more valuable to the States than contract 

authority (apportionments) because EB funds are either exempt from the obligation 

limitation or they come with attached obligation authority. Unfortunately, EB funds 

were rescinded at a time when the States were also being asked by Congress and 

the President to quickly spend funds provided to them from the American Recovery 

and Reinvestment Act of 2009 (ARRA) to invigorate the economy and preserve jobs. 

The need for transportation infrastructure projects to aid in the recovery of the national economy is no less critical now than it was February 17, 2009 when ARRA 

was enacted for that purpose. Full restoration of EB funds to the States will allow 

the States the opportunity to reinstate those funds with the programmed projects 

from which they were cut so that the economy can continue to rebound through 

transportation infrastructure improvements. 

HIGHWAY

Highway Obligation Limitation 

IDOT urges the subcommittee to set the obligation limitation for highway and 

highway safety programs at the highest level that can be sustained by the Highway 

Trust Fund/Highway Account (HTF/HA). If another SAFETEA–LU extension is 

needed for Federal fiscal year 2011, IDOT supports a reasonable, yet healthy, incremental increase above the obligation limitation level of $41.8 billion enacted in Federal fiscal year 2010. 

IDOT supports preserving the SAFETEA–LU budgetary firewalls and guaranteed 

funding provisions of SAFETEA–LU, as do other transportation advocates such as 

the American Association of State Highway and Transportation Officials (AASHTO) 

and the American Road and Transportation Builders Association (ARTBA). 

IDOT is aware of the implications of supporting increased transportation funding 

when the long-term viability of the trust fund is in question. However, it is the responsibility of IDOT to secure the Federal funding that is needed to address the immediate highway and bridge project backlogs in Illinois and to preserve Illinois’ 

transportation system for succeeding generations. Sufficient Federal dollars are 

needed to fund safer transportation systems, to address environmental concerns, to 

offset the erosion of the construction dollar, to address crippling levels of congestion/ 

delay and to meet the transportation demands of the future. To quote the most recent findings of the 2008 Status of the Nation’s Highways, Bridges, and Transit— 

Conditions and Performance Report to Congress, ‘‘Although investment in system 

rehabilitation has increased in constant dollar terms since 1997, despite recent 

sharp increases in construction costs, the analysis... suggest that current highway investment levels are not sufficient to sustain the physical conditions of all 

parts of the highway system.’’ 

Federal Fiscal Year 2011 Funding Requests for Meritorious Projects 

If the subcommittee finds the flexibility to fund meritorious projects in existing 

discretionary SAFETEA–LU categories or outside authorized categories, (Surface 

Transportation Priorities) IDOT requests funding for the following projects (noted 

throughout the testimony) for highway, Intelligent Transportation Systems (ITS), 

transit and rail funding: 

—Expansion of US 67.—IDOT requests $70 million for the pre-construction and 

construction activities for the expansion of US 67 to a 4-lane divided expressway between Macomb and Alton, Illinois. 

—Expansion of US 51.—IDOT requests $30 million for pre-construction and construction activities for the expansion of US 51 to a 4-lane divided expressway 

between Decatur and Centralia, Illinois. 

—Central to Central Avenue Connection.—IDOT requests $10 million for a Central 

Avenue Bypass connecting Central through Bedford Park in Southwest Chicago. 

Other IDOT highway priorities include: 

—$50.0 million for additional lanes on I–80 from US 30 to US 45 in Will County; 

—$58.5 million for I–57 at IL 50 Interchange and ICG Railroad in Bradley; 

—$46.8 million for additional lanes on US 30 (IL 31 to US 34) in Kane/Kendall 

County; 
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—$33.0 million for highway/railroad grade separation at IL 38 & Kautz Road; and 

—$16.3 million for reconstruction of US 45 (LaGrange Rd) from 131st Street to 

179th Street. 

Other IDOT Intelligent Transportation System Priorities: 

—$1.5 million for a prototype Automated License Plate Reader for commercial vehicle enforcement; and —$9.0 million for IntelliDrive in Illinois (fiber and wireless technology)—Readying 

the Rt. 66 Corridor. 

TRANSIT

Transit Authorization 

IDOT urges the subcommittee to fund transit programs at the highest level that 

can be sustained by the Highway Trust Fund/Transit Account or, at a minimum, 

a reasonable, yet healthy, incremental increase above the $10.7 billion obligation 

limitation level enacted in Federal fiscal year 2010. —Bus and Bus Facilities.—IDOT and the Illinois Public Transportation Associa- tion jointly request a Federal earmark of $48.9 million ($8.7 million for 

downstate bus, $25.1 million for downstate facilities and $15 million for Chicago 

Transit Authority (CTA)/Suburban Bus Division of RTA (Pace) buses in northeastern Illinois) in Federal fiscal year 2011 section 5309 bus capital funds. The request will provide $8.7 million for downstate Illinois transit systems to purchase up to 46 buses and paratransit vehicles to replace over-age vehicles and to 

comply with Federal mandates under the Americans with Disabilities Act (ADA). All 

of the vehicles scheduled for replacement are at or well beyond their design life. The 

request will also provide $25.1 million to undertake engineering, land acquisition or 

construction for three maintenance facilities and five transfer facilities that will enhance efficient operation of transit services. 

Illinois transit systems need discretionary bus capital funds. The funding provided 

under SAFETEA–LU has been inadequate to meet Illinois’ bus capital needs. IDOT 

believes that supplemental discretionary funding is needed, and justified, to support 

Illinois’ extensive transit system. Under SAFETEA–LU, Illinois has received less 

than 2 percent of the combined High Priority Project (HPP) category and discretionary appropriations made available for bus and bus facilities. 

Formula Grants 

IDOT urges the subcommittee to set appropriations for transit formula grant programs at levels that will allow full use of the anticipated Mass Transit Account revenues. IDOT also supports the continued use of general funds to supplement transit 

needs. In Illinois, Northeastern Illinois Urbanized Area formula funds (section 5307) 

are distributed to the Regional Transportation Authority and its three service 

boards which provide approximately 600 million passenger trips per year. 

Downstate urbanized formula funds are distributed to 14 urbanized areas which 

provide nearly 33 million passenger trips per year. 

The Rural and Small Urban formula funds (section 5311) play a vital role in 

meeting mobility needs in Illinois’ small cities and rural areas. IDOT urges the subcommittee to continue to fund section 5311 at a healthy increment above the Federal fiscal year 2010 funding level. From the section 5311 funding increases already 

authorized in SAFETEA–LU, Illinois was able to expand public transportation service into counties not currently served. Due to the decrease in Federal and local funding resources for public transportation, existing statewide public transportation 

service levels could be jeopardized unless there is an overall increase in funding 

above that enacted in SAFETEA–LU. 

State of Good Repair—CTA/Metra Commuter Rail (Metra)/Pace 

IDOT supports the increased focus on the state of good repair needs of the Nation’s transit systems. State of good repair is a high priority for all systems in the 

State of Illinois. In northeast Illinois there is a $2 billion annual need to keep their 

assets in a state of good repair and there is a $91 million annual need for downstate 

systems. A recent Federal Transit Administration study of the seven largest transit 

agencies in the country estimated that more than one-third of the study agency assets were in either marginal or poor condition. Additional resources should be directed toward preserving our existing assets. This will minimize future impacts on 

maintenance costs and improve safety and reliability to the entire system. 

Operating Assistance 

IDOT supports the continued flexible use of Federal transit capital funding for 

day-to-day operations. However, during these extraordinary economic times when 

local funding resources for public transportation have suffered, an increase or emer-
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gency Federal funding for public transportation is needed to supplement existing 

Federal transit funding. These emergency funds should be separate and distinct 

from continuing needs. This funding would ensure that vital services are continued 

at current service levels. 

New Systems and Extensions—CTA/Metra 

IDOT supports continued planning and engineering funding for existing CTA/ 

Metra projects. Public transportation in northeastern Illinois has benefited over the 

years from bipartisan, and regional consensus; and, therefore, there is no particular 

priority for the ongoing projects. However, since Metra’s Union Pacific Northwest 

Line and its Union Pacific West Line have completed their alternatives analysis 

studies and are ready for preliminary engineering, IDOT is supportive of Metra’s 

request of $20 million for upgrades for each line. 

RAIL

Amtrak Appropriation 

IDOT supports Amtrak’s request of $2.196 billion in funding from general funds for Federal fiscal year 2011 to cover capital costs ($1.018 billion), operating costs 

($592 million), debt service costs ($305 million) and ADA costs ($281 million). Amtrak needs the full amount of their request to maintain existing nationwide operations. In addition, IDOT supports Amtrak’s Federal fiscal year 2011 capital funding 

request for fleet planning which will require an investment of about $446 million. 

Amtrak needs to replace aging, obsolescent and increasingly costly rolling stock and 

has developed a procurement model to replace the whole of their existing fleet by 

2040 at a cost of $23 billion. 

In Illinois, Amtrak operates 58 trains serving approximately 4.4 million passengers annually within the Nation’s passenger rail system that served 27 million 

passengers in Federal fiscal year 2009. It is noteworthy that Chicago’s Union Station, a primary hub for Amtrak intercity service and the fourth busiest station in 

the Amtrak system, had boardings/alightings totaling over 3 million persons. Illinois 

subsidizes 28 State-sponsored trains which provide service in four corridors: Chicago-Milwaukee; Chicago-Springfield-St. Louis; Chicago-Galesburg-Quincy; and, Chicago-Champaign-Carbondale. Amtrak service in key travel corridors is an important 

component of Illinois’ multimodal transportation network and continued Federal 

capital and operating support is needed. 

—CREATE Railroad Grand Crossing Connection.—IDOT requests $25 million in 

Federal fiscal year 2011 for design and construction of a railroad connection between the Canadian National and Norfolk Southern Railroads at 75th Street in 

Chicago—also known as Grand Crossing. 

High-Speed Rail 

IDOT supports the administration’s $1 billion request for the High-Speed and 

Intercity Passenger Rail program for Federal fiscal year 2011. The $8 billion in 

ARRA high-speed and intercity passenger grant awards provided a great first step 

in the building of a national system; however, a continued Federal commitment and 

supplemental funding is crucial to accelerate the development of a true national 

intercity passenger high-speed intercity rail system. IDOT also urges the subcommittee to devote special attention to the development of the next generation of 

intercity passenger rail equipment. Providing funding for next generation intercity 

rail equipment creates and preserves solid employment for skilled American workers—employment that can be truly seen as ‘‘green jobs.’’ IDOT also urges the subcommittee to fully fund the Passenger Rail Investment and Improvement Act of 

2008 (PRIIA) at its authorized levels. Likewise, IDOT supports the President’s Vision For High-Speed Rail in America strategic plan released last April which promises to build a world-class network of high-speed passenger rail corridors. We believe 

that the funding provided under ARRA, PRIIA and in conjunction with the President’s strategic plan will serve the Nation in making reasonable investments in establishing a solid foundation for high-speed rail from which the system can thrive 

and expand. 

AVIATION

Airport Improvement Program Obligation Limitation 

IDOT supports a Federal fiscal year 2011 Airport Improvement Program (AIP) obligation limitation of $4.1 billion, the same funding level in the House-passed and 

Senate-passed reauthorization bill. These amounts are supported by the American 

Association of Airport Executives and the National Association of State Aviation Officials. 
354 

IDOT continues to support a multiyear reauthorization bill with AIP funding levels that will allow full use of the anticipated Airport and Airway Trust Fund (AATF) 

revenues. In addition, IDOT supports the continuation of the budgetary guarantees 

of AIR–21 and VISION–100 protecting the use of the AATF revenues. Both the 

House and Senate have passed long-term authorization bills. However, it is essential that Congress enact legislation to reauthorize the AIP program. Reauthorizing 

the AIP program secures Federal funds for Federal fiscal year 2010 and beyond so 

that the States can support the future development of their State aviation infrastructure programs. 

IDOT urges Congress to reauthorize the programs of the Federal Aviation Administration before, or soon thereafter the recent extension expires on April 30, 2010. 

Adequate AIP funding remains especially important for small, non-hub, non-primary, general aviation and reliever airports. While most large/medium hub airports 

have been able to raise substantial amounts of funding with Passenger Facility 

Charges, the smaller airports are very dependent on the Federal AIP. Airports must 

continue to make infrastructure improvements to safely and efficiently serve existing air traffic and the rapidly growing passenger demand. Lower AIP obligation levels translate into less Federal funds for airport projects, thereby exacerbating the 

existing capital project funding shortfall. 

Essential Air Service Program (EAS).—IDOT supports an EAS program funded at 

a level that will enable the continuation of service at all current Illinois EAS points. 

Several Illinois airports, Decatur, Marion/Herrin and Quincy, currently receive annual EAS subsidies. 

Small Community Air Service Program.—IDOT supports funding for the Small 

Community Air Service Development Program in Federal fiscal year 2011, at a level 

no less than $35 million. Illinois airports have received funding from this program 

in the past. 

Other Non-modal IDOT Priorities 

—Height Modernization.—IDOT requests $1.2 million to continue a newly established Height Modernization program in Illinois. This project solicitation will be 

requested through the Appropriations Subcommittee on Science, State, Justice, 

Commerce and Related Agencies. 

This concludes my testimony. I understand the difficulty you face trying to provide needed increases in transportation funding. However, an adequate and wellmaintained transportation system is critical to the Nation’s economic prosperity and 

future growth. Your ongoing recognition of that fact and your support for the Nation’s transportation needs are much appreciated. Again, thank you for the opportunity to discuss Illinois’ Federal transportation funding concerns. 

PREPARED STATEMENT OF THE AMERICAN INDIAN HIGHER EDUCATION CONSORTIUM

This statement focuses on the Department of Housing and Urban Development 

(HUD) and the Department of Transportation, Federal Highway Administration— 

Office of Civil Rights (FHWA–OCR). 

On behalf of this Nation’s 36 Tribal Colleges and Universities (TCUs), which compose the American Indian Higher Education Consortium (AIHEC), thank you for the 

opportunity to express our views and recommendations regarding the Department 

of Housing and Urban Development’s University Partnership Program for Tribal 

Colleges and Universities for fiscal year 2011. 

SUMMARY OF REQUESTS

Department of Housing and Urban Development (HUD).—Since fiscal year 2001, 

a TCU initiative has been funded and administered under the HUD-University 

Partnership Program. This competitive grants program enables Tribal Colleges and 

Universities to build, expand, renovate, and equip their facilities that are available 

to, and used by, their respective reservation communities. We strongly urge the subcommittee to reject the recommendation included in the President’s fiscal year 2011 

budget request to eliminate four separate HUD university and community assistance programs, each addressing very different community needs, and establish a homogenized University Community Fund. If all funds are competed from a single 

source, there is no assurance that TCUs will be served equitably, and the likelihood 

is that they will not be. We further request that the subcommittee support funding 

for the TCU Program, at a minimum of $5.435 million; the same level of funding 

appropriated for this separate program in fiscal year 2010. Additionally, we request 

that language be included to permit that a small portion of the funds appropriated 
355 

may be used to provide much needed technical assistance to institutions eligible to 

participate in this competitive grants program. 

Department of Transportation, Federal Highway Administration—Office of Civil 

Rights (FHWA–OCR).—Fort Peck Community College and Salish Kootenai College, 

both located in Montana, and members of the American Indian Higher Education 

Consortium, conduct Highway Construction Training Programs funded by On the 

Job Training/Support Services provided by FHWA–OCR. We urge the subcommittee 

to direct the FHWA–OCR to continue its current rate of investment in the vital programs offered by these TCUs that is designed to increase the number of American 

Indians, including women, that are part of the highway construction workforce in 

Indian Country. 

BACKGROUND

Tribal Colleges and Universities are accredited by independent, regional accreditation agencies and like all institutions of higher education, must undergo stringent 

performance reviews on a periodic basis to retain their accreditation status. In addition to college level programming, TCUs provide essential high school completion 

(GED), basic remediation, job training, college preparatory courses, and adult education programs. TCUs fulfill additional roles within their respective reservation 

communities functioning as community centers, libraries, tribal archives, career and 

business centers, economic development centers, public meeting places, and child 

and elder care centers. Each TCU is committed to improving the lives of its students 

through higher education and to moving American Indians toward self-sufficiency. 

Tribal Colleges and Universities provide access to higher education for American 

Indians and others living in some of the Nation’s most rural and economically depressed areas. According to 2000 decennial census data, the annual per capita income of the U.S. population was $21,587. In contrast, the annual per capita income 

of Native Americans was $12,893 or about 40 percent less. In addition to serving 

their student populations, TCUs offer a variety of much needed community outreach 

programs. 

These institutions, chartered by their respective tribal governments, were established in response to the recognition by tribal leaders that local, culturally based 

institutions are best suited to help American Indians succeed in higher education. 

TCUs effectively blend traditional teachings with conventional postsecondary curricula. They have developed innovative ways to address the needs of tribal populations and are overcoming long-standing barriers to success in higher education for 

American Indians. Since the first TCU was established on the Navajo Nation in 

1968, these vital institutions have come to represent the most significant development in the history of American Indian higher education, providing access to, and 

promoting achievement among, students who may otherwise never have known 

postsecondary education success. 

Despite their remarkable accomplishments, TCUs remain the most poorly funded 

institutions of higher education in the country. Chronic lack of adequate funds remains the most significant barrier to their expanded success. Funding for the dayto-day operating budgets of 26 reservation-based TCUs is provided under title I of 

the Tribally Controlled College or University Assistance Act (Public Law 95–471). 

Currently, the institutional operating budgets of these colleges are funded at $5,764 

per Indian student—only enrolled members of a Federal recognized tribe or the biological child of a tribal member may be counted as Indian students for the purpose 

of determining an institution’s operations funding level. Because TCUs are located 

on Federal trust land, States have no obligation to fund them—not even for the nonIndian State-resident students who account for approximately 20 percent of TCU enrollments. Yet, if these same students attended any other public institution in the 

State, the State would provide basic operating funds to the institution. While mainstream public institutions have had a foundation of stable State tax-based support, 

TCUs must rely on annual Federal appropriations for their day-to-day institutional 

operating budgets. In the almost 30 years since the Tribal College Act was initially 

funded, these reservation-based colleges have never received the authorized funding 

level for their institutional operations. In fact, they have lost ground. If you factor 

in inflation, the buying power of the current appropriation is $965 less per Indian 

student than it was when it was initially funded almost 30 years ago, when the appropriation was $2,831 per Indian student. This is not simply a matter of appropriations falling short of an authorization. It effectively impedes the TCUs from having 

the resources necessary to provide educational services afforded students at Statefunded institutions of higher education. 

Inadequate funding has left many TCUs with no choice but to continue to operate 

under severely distressed conditions. The need remains urgent for construction, ren-
356 

ovation, improvement, and maintenance of key TCU facilities, such as basic and advanced science laboratories, computer labs, and increasingly important student 

housing, day care centers, and community service facilities. Although the situation 

has improved dramatically at many TCUs in the past several years, some TCUs still 

operate—at least partially—in donated and temporary buildings. Few have dormitories, even fewer have student health centers and only one TCU has a science 

research laboratory. 

As a result of more than 200 years of Federal Indian policy—including policies 

of termination, assimilation and relocation—many reservation residents live in conditions of poverty comparable to that found in Third World nations. Through the 

efforts of TCUs, American Indian communities are availing themselves of resources 

needed to foster responsible, productive, and self-reliant citizens. 

JUSTIFICATIONS

Department of Housing and Urban Development 

The HUD–TCU program, funded and administered under the Department’s University Partnership Program, is a competitive grants program that enables TCUs 

to expand their roles and efficacy in addressing development and revitalization 

needs in their respective communities. No academic or student support projects are 

funded through this program; rather, funding is available only for community based 

outreach and service programs at TCUs. Through this program, some Tribal Colleges have been able to build or enhance child care centers and social service offices; 

help revitalize tribal housing; establish and expand small business development; 

and enhance vitally-needed library services. Unfortunately, not all of the TCUs have 

yet to benefit from this program. The program staff at the Department has no budget to provide technical assistance with regard to this program. If a small portion 

of the appropriated funds were to be available for program staff to conduct workshops and site visits, more of the TCUs and their respective communities could benefit from this vital opportunity. We strongly urge the subcommittee to support a 

TCU specific program funded at a minimum of $5.435 million, and to include language that will allow a portion of these funds to be used to provide technical assistance to TCUs, to help ensure that much needed community services and programs 

are expanded and continued in the communities served by the Nation’s Tribal Colleges and Universities. 

Department of Transportation, FWHA—Office of Civil Rights 

Since 1999, two of the Montana-based tribal colleges: Fort Peck Community College and Salish Kootenai College have conducted highway construction training programs with funds from FHWA–OCR’s On the Job Training/Support Services. In 

2006, FHWA–OCR recognized the strength of its investment and success of these 

programs by presenting Salish Kootenai College with the ‘‘Minority Institutions 

Higher Education Achievement Award’’. We urge the subcommittee to include report 

language directing the FHWA–OCR to continue its current rate of investment in the 

vital programs offered by these TCUs designed to increase the number of American 

Indians, including women, that are part of the highway construction workforce in 

Indian Country. 

PRESIDENT’S FISCAL YEAR 2011 BUDGET

The President’s fiscal year 2011 budget request proposes eliminating four existing 

separate university and community assistance programs that serve unique constituencies and melding the funds into a single $25 million University Community Fund, 

as part of the larger Community Development Block Grant (CDBG). We request 

that the subcommittee continue to recognize and appropriate separate funding for 

the Tribal Colleges and Universities Program, and the other affected programs, 

namely: Historically Black Colleges and Universities; Hispanic Serving Institutions 

Assisting Communities; and Alaska Native and Native Hawaiian Serving Institutions Assisting Communities, to be allocated competitively within the separate programs. 

CONCLUSION

We respectfully request that in fiscal year 2011, Congress maintain the current 

level of funding for a separate Tribal Colleges and Universities HUD program and 

provide for technical assistance, to help these vital institutions improve and expand 

their facilities to better serve their students and communities. Additionally, we ask 

Congress to direct the Department of Transportation to maintain the current level 

of funding for our two TCUs that conduct highway construction training programs 

to increase quality jobs for American Indians living in Indian Country. Thank you 
357 

for your continued support of Tribal Colleges and Universities and for your consideration of our fiscal year 2011 HUD appropriations requests. 

PREPARED STATEMENT OF THE CITY OF MARICOPA, ARIZONA

Chairwoman Murray, Ranking Member Bond, and distinguished members of the 

subcommittee, thank you for allowing me to testify on behalf of the city of Maricopa 

in support of $1.8 million for environmental studies through the Federal Highway 

Administration’s (FHWA) Public Lands Highway—Discretionary (PLHD) program 

for a grade separation along State Route 347 in Maricopa, Arizona. 

History.—Maricopa is a small but thriving community 35 miles south of Phoenix 

that is between the Gila River Indian Community and the Ak-Chin Indian Community. Incorporated in 2003 with a population of approximately 1,000 people, Maricopa is now a burgeoning community of more than 40,000 and growing at the rate 

of approximately 100 people per month. SR–347 is Maricopa’s ‘‘Main Street’’ and is 

the area’s primary north-south corridor and most direct route to the Phoenix area. 

Originally paved in the 1950’s as a two-lane highway, the roadway was upgraded 

to a five-lane facility in the early 1990s, when the population of Maricopa and surrounding communities was less than 1,000 people. The Union Pacific Rail Road’s 

(UPRR) Sunset Line crosses SR–347 in the center of the Maricopa community. The 

Sunset Line was a single track but has just recently been double tracked with plans 

for a third track. The Sunset Line is one of UPRR’s key transcontinental freight corridors, and currently over 50 trains per day pass through the UPRR/SR–347 intersection at speeds in excess of 50 mph. 

Traffic Levels.—Traffic counts taken in February 2009 show a daily traffic count 

of 33,547 vehicles, including 168 school buses carrying an estimated 2,856 children 

across this rail line during morning and afternoon peak hour periods. Also, on average 30 pedestrians cross the tracks at peak times, many of them students walking 

to and from Maricopa High School. Additionally, a majority of patrons of Harrah’s 

Ak-Chin Casino, located just a few miles south of Maricopa, cross the UPRR line 

on SR–347 in both personal vehicles and on charter buses. 

Accident History.—Crash statistics documented in our 2007 feasibility study show 

that SR–347 at the UPRR Line had 21 accidents including one fatality in the previous 3 years. Federal Railroad Administration’s (FRA) most recent 10-year accident 

statistics for all of Pinal County show an average of 3 fatalities a year out of 30 

incidents per year county-wide. In Maricopa, FRA statistics show five fatalities in 

the past 20 years at crossing 741343C (SR–347 and UPRR) including a toddler 

trapped in a truck stalled on the crossing in June 2000. Life long residents remember this tragedy and never want to see it repeated. 

Congestion.—Each passing train stops traffic on SR–347 for several minutes resulting in delays and congestion. In addition, six Amtrak trains per week make 

scheduled stops at the Maricopa Station, typically taking 5 to 10 minutes to load 

and unload passengers and baggage. The Amtrak loading platform is located approximately 120 feet east of the SR–347 crossing; since the Amtrak trains normally 

extend through the intersection, these also cause long back-ups and congestion. 

Emergency Access.—To many people in Maricopa, the SR–347 crossing at the 

UPRR is literally the only way across the railroad tracks. Due to the location of fire 

stations and the restriction of only having one police station in the city, this means 

emergency vehicles also commonly have to wait for the passing of a train before 

they are able to continue responding to a code response. Maricopa is concerned 

about the SR–347/UPRR crossing as a hindrance to providing proper public safety 

responses. 

Hazardous Materials.—With the volume and type of freight carried along the 

UPRR Sunset Line through the middle of downtown Maricopa, there is an everpresent threat of a hazardous materials incident. Spills of this nature can take upwards of 12 to 24 hours to resolve. The shutdown of this vital crossing, leaving residents unsure of alternate routes and hindering emergency service response as well 

as citizens commuting to and from work, would cause serious repercussions for the 

community. Traffic congestion could also delay proper response of hazardous materials teams. 

Current Status.—A grade separation Feasibility Report/Environmental Overview 

(FR/EO) was completed in March 2007. The purpose of the investigation was to develop and evaluate various alternatives for achieving the grade separation. The FR/ 

EO presents five options for achieving the project goals, and evaluates each based 

on a range of criteria including cost, effectiveness, and community impacts. 

Since March 2007, no progress has been made on this project. Steps left to be 

taken include the completion of a Design Concept Report and an Environmental Im-
358 

pact Statement and engineering design. Once project development is completed, bidding and construction can proceed. The city of Maricopa strongly supports a congressional appropriation of $1.8 million for environmental studies with regard to the 

SR–347 grade separation project in the fiscal year 2011 Transportation and Housing 

and Urban Development and Related Agencies Appropriations bill. To date, the city of Maricopa has invested $500,000 in the project and is expected 

to add more to this total. Additionally, the Arizona Department of Transportation 

has committed $400,000 to this project thus far. To keep this project on schedule, 

Federal funding is necessary and we strongly support the subcommittee allocating 

$1.8 million to complete the environmental studies for this project. 

Justification for Dedication of Federal Funds.—SR–347 is the primary access to 

one of the fastest growing areas in the country, carries pass-through traffic to San 

Diego and Mexico and serves as a key economic corridor for the Arizona region. The 

UPRR Sunset Route is one of the busiest transcontinental rail lines in the United 

States, transferring freight between the Port of Los Angeles, California and El Paso, 

Texas. We have two significant interstate transportation routes intersecting within 

a local municipality, burdening the city and placing residents at a heightened risk. 

Federal action to remedy this is warranted given the gravity of the situation, the 

scale of the solution required and the scarcity of alternative options. 

The speed of regional growth has outpaced the ability of local and State authorities to provide for the health, safety and welfare of travelers crossing the UPRR line 

on SR–347. Once safety concerns are identified, it is imperative to seek a solution 

to this problem at all levels. The transcontinental nature of the UPRR rail line is 

a national issue. The housing boom that created Maricopa and brought residents 

from all across the country is a national phenomenon. The reality that a significant 

and possibly fatal safety issue exists today should drive away any notion that this 

is anything less than a national issue. A safety issue as this, with emergency needs, 

should be addressed before conditions worsen and additional accidents or fatalities 

take place. We should solve this problem before another tragedy takes place and 

this is why we are urgently asking Congress to address this problem now before another fatal accident takes place. 

Conclusion.—The UPRR crossing at SR–347 is one of the most dangerous rail 

crossings in Arizona. Because it bisects the fastest growing area of Arizona, traffic 

is congested, public safety is compromised, and children are at risk because of its 

proximity to a high school. The only way to resolve this dangerous situation is an 

over or under pass at the current grade crossing. Therefore, again, the city of Maricopa strongly supports $1.8 million in funding through the PHLD program under 

the Federal Highway Administration in the fiscal year 2011 Transportation and 

Housing and Urban Development and Related Agencies Appropriations bill for the 

completion of the environmental studies for State Route 347 grade separation 

project thus keeping it on an optimal schedule for completion. 

Finally, it is important to note that our Senators—Kyl and McCain—do NOT request earmarks and, therefore, we will not receive any funding in the Senate. However, we are confident that with our support in the House from Congressmen Grijalva and Pastor that this project will be a conferenceable line-item and we hope 

you will support this important request. Not one more life should be sacrificed at 

this dangerous crossing. 

Thank you for your time and attention to this important matter. 

PREPARED STATEMENT OF THE COOK INLET HOUSING AUTHORITY

My name is Carol Gore, and I currently serve as the president and CEO of Cook 

Inlet Housing Authority. On behalf of Cook Inlet Housing Authority, I appreciate 

this opportunity to submit testimony to the Senate Appropriations Subcommittee for 

Transportation, Housing and Urban Development regarding the Department of 

Housing and Urban Development’s proposed fiscal year 2011 funding allocation for 

the Indian Housing Block Grant program. 

Cook Inlet Housing Authority is headquartered in Anchorage, Alaska. It is the 

Tribally Designated Housing Entity for Cook Inlet Region, Inc. and has a service 

area of 38,000 square miles, covering much of south-central Alaska. According to 

Census 2000 figures, Cook Inlet Housing Authority’s service area contains a Native 

American population of approximately 36,000 individuals, roughly 30 percent of 

Alaska’s Native American population. We estimate that more than one-half of the 

Native American families living within Cook Inlet Housing Authority’s service area 

are living at or below HUD-defined low-income levels. 

The Indian Housing Block Grant program, created by the Native American Housing Assistance and Self-Determination Act, or ‘‘NAHASDA,’’ is Cook Inlet Housing 
359 

Authority’s primary source of funding for affordable housing and housing-related activities for low-income Native American families. The program enables Cook Inlet 

Housing Authority to develop and operate elder and family rental housing, provide 

affordable home loans and down payment assistance, deliver housing readiness case 

management, issue tenant-based and project-based rental assistance vouchers, and 

provide weatherization upgrades. Cook Inlet Housing Authority also works with a 

number of local providers to combat homelessness and provide supportive housing 

for individuals with special needs. This leveraging of local capacity provides a nonduplicative mechanism to use existing expertise and programs to enhance homelessness and supportive housing opportunities for low-income Native American families 

living within our region. 

The Indian Housing Block Grant is critical for another, more technical and fundamental reason. Congress intended for NAHASDA recipients to use their Indian 

Housing Block Grants to leverage additional funding for affordable housing in Indian country. By using its Indian Housing Block Grant to secure investment from 

other sources, Cook Inlet Housing Authority has been able to bring significant additional resources to serve the affordable housing needs of all tribal members living 

within our region without segregation by income or location. We describe this 

leveraging model as providing our region with the benefits of living within a Village 

where all people and resources are valued. By leveraging our NAHASDA funds, we 

are benefiting our people and community in a way that celebrates and welcomes our 

Native American population providing them quality homes in a variety of neighborhoods. Simultaneously, our leveraging model has enabled us to serve more AIAN clients than we could otherwise serve if we developed housing strictly with NAHASDA 

funds on a house-by-house basis. NAHASDA encourages leveraging. We thank Congress for the wisdom and guidance to provide this opportunity to bring private capital and funding to our Indian housing. Leveraging is part of the reason why 

NAHASDA has been a resounding success throughout the United States. 

However, despite the successes and innovations NAHASDA has spawned, housing 

conditions in Indian country are far inferior to those of the general U.S. population. 

According to the 2000 U.S. Census, nearly 12 percent of Native American households lack plumbing, compared to 1.2 percent of the general U.S. population. Indian 

households are nearly three times more likely to be severely overcrowded. We are 

making good progress, but our success has only just now begun to reach the private 

banking industry and other grant funding sources. Absent NAHASDA funds for 

leveraging, we have little chance of continuing our progress. With NAHASDA, we 

are perceived to have ‘‘skin in the game’’ by other funders. We are investing in our 

people and our communities—often bringing $1 to $9 from other sources for every 

NAHASDA dollar. 

It is for precisely these reasons—the success of NAHASDA and the disparity in 

housing conditions between Native American communities and the general U.S. population—that Cook Inlet Housing Authority is so confused by the administration’s 

2011 budget request for the Indian Housing Block Grant. The President’s 2011 

budget seeks $580 million for the Indian Housing Block Grant, an amount 17 percent less than the level enacted for 2010 and the lowest single-year funding amount 

for the IHBG since the Native American Housing Assistance and Self-Determination 

Act became law in 1996. 

Why a successful program that effectively addresses the housing needs of an extremely underserved population should bear a disproportionate burden when it 

comes time to trim the Federal budget is simply baffling. Cook Inlet Housing Authority has heard unsubstantiated assertions that there is a lack of capacity in Indian country that prevents the timely expenditure of Indian Housing Block Grant 

funds. To the contrary, it is our understanding that NAHASDA recipients have 

clearly demonstrated their capacity to obligate and expend American Recovery and 

Reinvestment Act funding in accordance with Federal requirements. 

It is true that some NAHASDA recipients may hold on to their annual Indian 

Housing Block Grant funding for limited periods, but they do so for legitimate reasons. Because of the nature of the housing industry in cold weather climates, construction seasons may be limited. In Alaska, we can miss an entire construction season because the water transportation system is either too low or doesn’t thaw in 

time for delivery. Moreover, small tribes receiving minimum NAHASDA allocation 

sometimes preserve their Indian Housing Block Grant funding over multiple years 

until they have pooled enough resources to engage in meaningful and strategic 

housing activities. This practice is expressly permitted by NAHASDA. 

It is also confusing that the administration’s budget request proposes such a substantial cut to the Indian Housing Block Grant only months after Congress implicitly recognized the efficacy of NAHASDA by providing millions of dollars for the Indian Housing Block Grant through the American Recovery and Reinvestment Act. 
360 

Had the Recovery Act funding been described to tribes and tribally designated housing entities as an advance rather than a supplement intended to address critical 

housing shortages in Indian country while stimulating the American economy, Cook 

Inlet Housing Authority would have vigorously opposed Recovery Act NAHASDA 

funding. Such an ‘‘advance’’ followed by a funding cut would require tribes and 

housing organizations to hire a significant number of new employees in order to 

spend Recovery Act funding, only to lay off those very workers and additional staff 

once Recovery Act funding is spent. This was clearly not the intent of Congress. 

Because NAHASDA is an effective program enabling tribes and their designated 

housing entities to address the severe shortage of safe, affordable housing in Indian 

country, Cook Inlet Housing Authority respectfully requests that Congress fund the 

Indian Housing Block Grant at $875 million for 2011. This funding level will restore 

Indian Housing Block Grant funding to the fiscal year 2010 funding level and provide an additional $175 million to address inflationary forces and cost increases that 

were not taken into consideration between 1996, when NAHASDA was passed, and 

2010. 

On behalf of Cook Inlet Housing Authority, thank you for the opportunity to provide testimony opposing the administration’s proposed cuts to the Indian Housing 

Block Grant and supporting an increase in the amount of $175 million for that program. 

PREPARED STATEMENT OF THE ELY SHOSHONE TRIBE HOUSING DEPARTMENT

It has been brought to my attention that the fiscal year 2011 budget proposed by 

President Obama includes unprecedented cuts to funding under the Native American Housing and Self-Determination Act (NAHASDA). As you may be aware, housing conditions and the availability of housing in Indian Country fall far below those 

of the general U.S. population. For example, according to the 2000 U.S. census, 

nearly 12 percent of Native American households lack plumbing compared to 1.2 

percent of the general U.S. population. Further, Indian households are nearly three 

times more likely to be severely overcrowded. 

Since the inception in 1996 and funding and implementation in 1998, NAHASDA 

has been the cornerstone of tribal housing programs. The President’s budget proposes cutting funding for the Indian Housing Block Grant (IHBG) to $580 million, 

which is nearly 18 percent lower that the fiscal year 2010 funding level and would 

be the lowest single-year funding ever allocated to IHBG since NAHASDA was enacted. The proposed budget does not include sufficient resources for the Indian Community Development Block Grant (ICDBG) and completely eliminate the muchneeded Training and Technical Assistance (T/TA) that tribes need to plan, implement and manage their housing programs. I urge you to support increased funding 

for the IHBG at $875 million, the ICDBG at $100 million, and to reinstate the allocation for T/TA at $4.8 million. 

Thank you in advance and consideration. 

PREPARED STATEMENT OF THE FOND DU LAC BAND OF LAKE SUPERIOR CHIPPEWA

Mr. Chairman, members of the subcommittee, I am Karen R. Diver, chairwoman 

of the Fond du Lac Band of Lake Superior Chippewa. On behalf of the band, I would 

like to thank you for this opportunity to submit testimony on fiscal year 2011 appropriations relating to the United States Department of Housing and Urban Development. We submit this testimony to urge Congress to increase the Federal funding 

levels for Indian housing programs that are provided through the Department of 

Housing and Urban Development. Specifically, we ask that Congress appropriate $875 million for the Native American Housing Block Grant Program (NAHASDA), and increase all other HUD programs serving Native Americans. Although the NAHASDA program is the principal 

source of Federal financial assistance for housing on Indian reservations, the President’s proposed fiscal year 2011 budget would reduce funding for this program to 

only $580 million. This is substantially below the fiscal year 2010 enacted level of 

$700 million, and, in fact, is well below funding that had been provided for this program in each of fiscal years 2005 through 2009—which had averaged $630 million 

annually but which had not been adjusted to address increases in housing costs 

caused by inflation. While the band very much appreciates the additional funds provided for this program through the American Recovery and Reinvestment Act of 

2009, the ARRA funds should supplement and not reduce program funding levels. 

Indeed, because of the severe and persistent deficiencies in housing in Indian Country, program funds should be increased above the fiscal year 2010 enacted level. 
361 

Native Americans suffer the most substandard housing—at a rate of six times 

that of the population at large. The Fond du Lac Band, like tribes nationwide, has 

longstanding and severe housing needs. Our reservation, located in northeastern 

Minnesota, is part of our aboriginal homeland. The reservation was established for 

us by treaty with the United States on September 30, 1854 as our permanent home. 

We have 3,900 enrolled tribal members, and provide a wide range of services not 

only to our members, but to approximately 6,500 Indian people who live and work 

on and near our reservation. 

The Fond du Lac Reservation did not receive public housing until 1965, 30 years 

after public housing was established for all other Americans. The implementation 

of the housing program for Fond du Lac followed many years of failed Federal policy, which served to break up families by placing children in boarding schools and 

foster homes, and which relocated many of the residents of the Fond du Lac Reservation from the reservation to urban areas. In recent years, especially with the 

decline in the Nation’s economy, many band members have come back to the reservation in the interest of obtaining jobs that the band has been able to provide as 

a result of the band’s recent strides in economic development. 

Although our reservation encompasses 100,000 acres of land, the Federal allotment policy, which was applied to the Fond du Lac Reservation in 1889, left us with 

the poorest lands; our most valuable lands went to timber companies and homesteaders. In addition, our reservation is located in a geographic area that contains 

mostly marginal lands that require costly drainage projects for the land to be useable. Our lands are considered a difficult environment for affordable housing because they require high development costs associated with substandard soils and expensive sewage systems and a lack of decent infrastructure. In an effort to meet our 

members’ housing needs, the band has found it necessary to invest significant funds 

to remediate the band’s current lands, purchase other lands, and construct the infrastructure (septic systems, water and sewer lines, roads, and utility services) that 

is essential to serve those lands. 

The band cannot do this alone. The band has long depended on the funds made 

available to Indian tribes through HUD to assist us in meeting the housing needs 

of our members. But the deficits in housing for Indian people are so entrenched and 

so severe that they will not be remedied without continued Federal financial assistance. We currently have 73 units of home ownership housing and 231 units of low rent 

housing. Many of our housing units are over 15 years old, with the oldest units built 

more than 30 years ago, in 1970. Because of the age of our housing stock, the units 

are constantly in need of maintenance and repairs. Approximately 30 percent of our 

housing units require major renovation, such as the replacement of roofs and siding, 

as well as upgrades in plumbing and other utility systems, and the replacement of 

windows and doors. Other units require routine repairs and maintenance, the average cost of which is $5,000 per year. 

The Fond du Lac Housing Division currently has a waiting list of approximately 

300 applicants seeking low income and home ownership housing. We have many 

other tribal members who are also in need of housing, but who have moderate incomes and therefore are not even shown on our waiting list. To meet the needs of 

our members we need to build at least 300 new housing units. Our greatest need 

is for low income rental units and funds to cover the cost of repairs and maintenance. We also have ongoing needs to build new and upgrade existing septic systems to serve that housing, the cost of which is estimated to be approximately $1– 

$2 million. 

The disparity between housing conditions among our members and that of the 

general population is shown by the 2000 Census. In Minnesota, 0.5 percent of the 

population lives in homes lacking complete plumbing. In contrast, among Fond du 

Lac members that figure is 10 times higher—5.1 percent. In Minnesota, 0.48 percent 

of the population lives in homes that lack complete kitchens. In contrast, among 

Fond du Lac members, 4.2 percent live in homes without complete kitchens. In addition the poverty rate in Minnesota is 7.9 percent, while the poverty rate among 

Fond du Lac members is 14 percent. 

Because of the severity of our housing shortage, approximately 20 percent of our 

people currently live in overcrowded homes. It is not uncommon on our reservation 

and among our people to find 10 or more individuals living together in a 2-bedroom 

home. Overcrowding, in turn, taxes the house itself by accelerating the wear and 

tear on those homes. 

Overcrowding and dilapidated housing creates other risks. As discussed by the 

U.S. Commission on Civil Rights, in its report, A Quiet Crisis: Federal Funding and 

Unmet Needs In Indian Country, at 62–63 (July 2003), the high rate of overcrowded 

housing among Native Americans increases the risk of fire and accidents, and cre-
362 

ates unsanitary conditions, with increased spreading of communicable but normally 

preventable illnesses. Overcrowded housing is especially harmful to children, who, 

as the Commission found, are likely to ‘‘suffer sleep deprivation and inability to concentrate in school.’’ In addition, overcrowded housing ‘‘often results in stress, which 

can magnify family dysfunction and eventually lead to alcohol and child abuse.’’ A 

Quiet Crisis at 63. We see these problems at Fond du Lac. 

Our members who are compelled to live in overcrowded homes are also often only 

a step away from being homeless. As set out in a recent study of homeless and nearhomeless persons on northern Minnesota Indian Reservations, including the Fond 

du Lac Reservation, ‘‘[d]oubling up with family or friends is often the last housing 

arrangement a person has before becoming literally homeless, and it is common for 

people to go back and forth between doubling up and homelessness.’’ Wilder Research, Homeless and Near-Homeless People on Northern Minnesota Indian Reservations (Nov 2007), http://www.wilder.org/download.0.html?report=2018. The Report further found a substantial number of Indians on the six reservations studied 

to be in this near-homeless status. 

Homelessness is an equally severe problem among Fond du Lac members. In 

1994, the Minnesota Housing Finance Agency reported that while the homeless rate 

for all Minnesota residents was 0.92 percent, the homeless rate among Fond du Lac 

members was 6.54 percent. See Minnesota Housing Finance Agency, Comprehensive 

Housing Affordability Strategy 1996–2000 at 28, 43, 49 (December 29, 1995). The 

problem of homelessness continues to exist. A 2006 study shows that a disproportionately high number of Native Americans in Minnesota are homeless. See Wilder 

Research, Overview of Homelessness in Minnesota 2006: Key Facts from the Statewide Survey (April 2007), http://www.mnhousing.gov/initiatives/housing-assistance/ 

Resources/index.aspx. The study reports that although Native American adults are 

only 1 percent of the population of the State, they are 11 percent of the adults identified as homeless. And while Native American youth (age 11 to 17) are only 2 percent of the youth population in the State, they are 22 percent of the homeless youth 

that are unaccompanied by an adult. Id. at p 9. 

We see the problem of homelessness among our members every day. The band 

regularly receives requests from band members who are homeless and in need of 

housing. The band currently has no facilities to provide temporary shelters to house 

our members when emergencies arise and there are no homeless shelters in close 

proximity to the Fond du Lac Reservation. Instead, in an effort to combat this problem, the band has found it necessary provide temporary shelter to homeless band 

members in the band’s Black Bear Hotel and other local hotels and motels. 

In addition, several years ago, the band established an emergency rental assistance program. Under this program, the band provides emergency shelter to band 

members in need of housing by paying the security deposit and first month’s rent 

on a rental unit anywhere within a 60 mile radius of our reservation. The band has 

provided rental assistance to many band members since the program was created. 

But although this program does address the immediate housing crisis faced by a 

family that becomes homeless, it is not a long term solution for many of our members who do not have sufficient financial resources to continue to pay the higher 

rents that are generally charged for housing outside the reservation. Those members 

risk becoming homeless again a few months after emergency rental assistance is 

provided. The band needs more units of affordable low-income rental housing to 

meet the needs of these individuals. However, because of budget limitations, we do 

not have enough funds to cover the cost of building and maintaining a sufficient 

number of low income rental housing units. 

The Fond du Lac Band also needs to address the housing needs of our elderly population by providing assisted living accommodations for them if they so choose. Our 

elders are our teachers and mentors and we need to honor and respect them by giving them comfort and security, and allow them to live in a secure, healthy and 

worry-free environment. While the band has two housing complexes for our elders, 

there are not a sufficient number of units within those complexes to meet the need. 

Further, the units in those complexes do not have the medical and related facilities 

if the elders require greater assisted care. In such circumstances, our elders must 

find a nursing home outside the reservation. 

The band relies on its annual grant from the Department under the NAHASDA 

program to meet some of these housing needs. The band has also relied on Indian 

Community Development Block Grants, which the band has been able to use for infrastructure. However, the funding for these programs has not materially increased 

over the years. At the same time, the costs of the supplies, materials and labor necessary to remodel and modernize our aging housing stock have increased every year 

with inflation. Each year we are forced to do more with less. Current funding levels 

simply do not meet the housing needs. The lack of any real increases in the 
363 

NAHASDA program before fiscal year 2010 and in the other HUD programs that 

are intended to serve Indians will only make this housing crisis worse. The Federal 

Government’s trust responsibility demands that this Indian housing crisis be addressed. 

Housing represents the single largest expenditure for most Indian families. The 

development of housing has a major impact on the national economy and the economic growth and health of regions and communities. Housing is inextricably linked 

to access to jobs and healthy communities and the social behavior of the families 

who occupy it. The failure to achieve adequate housing leads to significant societal 

costs. 

Decent, affordable, and accessible housing fosters self-sufficiency, brings stability 

to families and new vitality to distressed communities, and supports overall economic growth. Very particularly, it improves life outcomes for children. In the process, it reduces a host of costly social and economic problems that place enormous 

strains on the education, public health, social service, law enforcement, criminal justice, and welfare systems. For these reasons the Fond du Lac Band strongly urges 

Congress to increase funding for our housing needs so we can meaningfully address 

the needs of the core of our communities. 

Miigwech. Thank you. 

PREPARED STATEMENT OF THE RAILWAY SUPPLY INSTITUTE, INC. 

Thank you for the opportunity to submit this statement. 

The Railway Supply Institute (RSI) appreciates the opportunity to provide this 

subcommittee with our views on important transportation funding policy. 

Established in 1908, RSI is the international association of suppliers to the Nation’s freight, passenger rail systems, and rail transit authorities. The domestic railway supply industry is a $20 billion a year business with some 500 companies employing 150,000 people. Approximately 25 percent of sales involve Amtrak, commuter railroads and transit authorities. A strong national freight and passenger rail 

system will not only continue to sustain good paying domestic jobs but will lead to 

future job creation as well. 

RSI supports both our Nation’s freight and passenger rail operations. We need a 

strong, national railroad passenger system that contributes to reducing dependence 

on foreign oil; reducing carbon emissions into the atmosphere; reducing congestion 

on our highways; improving transportation safety; reducing airport congestion; and 

that will enhance our ability to move vast numbers of people in emergency evacuation situations (i.e. 9/11, Katrina, etc). 

As representatives of those who supply our Nation’s railroad industry, we submit 

that a more balanced national transportation policy that places more emphasis on 

rail will significantly contribute to meeting our Nation’s stated policy objectives that 

are designed to make this Nation stronger. 

Our key requests for intercity passenger trains for fiscal year 2011 are: 

—Amtrak’s budget request: $592 million for operations; $1,299 million for capital 

(including $281 million for Americans with Disabilities Act compliance work); 

$305 million for debt service; $7 million for FRA oversight. 

—Amtrak’s fleet strategy requirement: $446 million. 

—Capital grants for States: $4 billion, with an appropriate portion designated for 

rolling stock acquisition. 

In addition, we urge the subcommittee to consider fully funding the FRA Railroad 

Safety Technology Grant Program in the amount of $50 million. The grant program 

is intended to accelerate the installation of Positive Train Control (PTC) on key portions of the Nation’s rail system. As you know, the Rail Safety Improvement Act 

of 2008 (RSIA) mandates the deployment of interoperable PTC systems by December 

31, 2015 on mainline tracks that carry passenger trains or Poison Inhalation Hazard/Toxic Inhalation Hazard materials. The new grant program was authorized 

under RSIA and has an 80/20 cost-sharing requirement. Funding assistance would 

help the railroads continue to expand needed capacity to meet both freight and passenger demands while still complying with the PTC mandate. 

Finally, RSI requests that the subcommittee provide full funding for the Federal 

Railroad Administration’s rail research and development program, ideally to the administration’s requested level of $40 million. FRA’s R&D program provides vital 

safety support including research on track issues, equipment crashworthiness, hazardous materials transport, human factor issues such as fatigue and many other 

areas supporting the Nation’s rail safety program and saving lives. 

Your continued support for a healthy and vital rail network is good public policy 

and good for the Nation. 
364 

Thank you for considering our views. 

PREPARED STATEMENT OF THE HOOPA VALLEY TRIBE

This written testimony is submitted in support of appropriations for the Hoopa Valley Tribe’s Senior Nutrition (Elder) Center in the amount of $1,150,000. The 

agency involved is Housing and Urban Development and the programs involved include Economic Development Initiatives. 

The Hoopa Valley Tribe is a federally recognized Indian tribe governed by a chairman and a seven member tribal council. Our responsibilities include governing our 

tribal members and land; administering, managing and protecting our tribal property; safeguarding and promoting the peace and general welfare of the Hoopa Valley 

Indians; and negotiating with Federal, State and local governments. 

Located in the rural and remote areas of Northern California, the Hoopa Valley 

Indian Reservation is 55 miles from the larger populated areas of Eureka and 

Arcata. The Hoopa Valley Tribe is the largest land based tribe in California. Our 

reservation is referred to as the ‘‘12 mile square;’’ it encompasses approximately 144 

square miles (98,355 acres) including the Valley floor. 

According to the U.S. Census Bureau (Census 2000), there are approximately 

2,633 people living on the Hoopa Valley Reservation. About 84.7 percent of the residents are American Indian. Poverty, inadequate education, high rates of unemployment and limited access to health services are creating significant and alarming 

health disparities among our people. Around 32 percent of Hoopa residents are currently living in poverty, which is 2.3 times the statewide figure of 14.2 percent and 

2.6 times the nationwide figure of 12.4 percent. These statistics include our elders 

who are disproportionately affected by chronic conditions and are principally low income individuals living on fixed incomes. 

The K’ima:w Medical Center is an entity of the Hoopa Valley Tribe. It is an ambulatory clinic which offers a comprehensive set of services that include medical, dental, community health, nutrition, social services, senior nutrition, full laboratory and 

radiology services as well as specialty clinics for vision, podiatry and telemedicine. 

The service area of K’ima:w Medical Center includes the reservation as well as the 

surrounding areas of Willow Creek, Salyer and Johnson. 

The tribe and its K’ima:w Medical Center are seeking appropriations to construct 

a new Senior Nutrition (Elder) Center. Our current center is located in a very old 

building. We have safety concerns as well as simply not enough space for the services and activities we wish to offer our seniors, and which our seniors need. The 

Center we envision would become a focal point for the community and a place where 

seniors in the community could go for nutritious meals, community programs, medical screenings, physical therapy, and general health education. The Center would 

enable us to promote a more fit and healthy senior population through these 

screenings, exercise, activity and nutrition. Importantly, the Center would serve 

tribal members and non-tribal members in the community. 

Caring for our elders is of utmost importance to the Hoopa Valley Tribe. The Senior Nutrition (Elder) Center would greatly aid in improving the lives of senior citizens on the reservation. Because of the vast area and remote nature of our reservation, seniors can easily experience isolation from time to time. This Center would 

help alleviate this problem. It would provide a gathering place for elders to create 

and maintain social relationships and preserve their connection to the community. 

It would also provide opportunities for tribal members to learn from the tribe’s elders as they administer care or simply visit with them at the Center. 

The Center’s services would not only enhance the quality of life for our elders but 

would also help prevent and detect unnoticed healthcare problems. Poor nutrition 

and delayed detection of illnesses can lead to serious consequences. It is expected 

that the Center would help prevent healthcare problems and the substantial medical costs associated with same. Our elders face high rates of diabetes, dyslipidemia 

and high blood pressure. The Center would help seniors take control of their health 

before more serious problems arise. 

The tribe’s current senior nutrition program serves meals to tribal and non-tribal 

elders in the community. Last year, we served 6,582 meals on-site and 7,953 meals 

via home delivery. This was an increase of 332 meals over 2008. We expect these 

needs to continue to rise and an upgraded Center is vital to meeting expected increased demands. Our services in this regard are critical as the meal we serve is 

likely the only opportunity for a nutritious meal for a senior, and may very well be 

the only opportunity for a meal, period. 

Finally, a new Senior Nutrition Center would provide jobs in our remote area 

which is in need of economic development. The project is expected to create at least 
365 

15 construction positions. Further, permanent staff would be hired once the new 

Senior Nutrition Center is operational. Having more people employed on the reservation will stimulate the local economy, something which is seriously needed 

given our poverty rate and remote area. 

The Total Project Cost and Total Appropriations Request are: 

—Senior Nutrition (Elder) Center—Total $1,550,000 

—Construction of the building: $1,150,000 

—Kitchen equipment, furniture, additional building expenses—$400,000 

Of the Senior Nutrition Center’s total costs, $1,550,000, the tribe plans to contribute $400,000 (26 percent) through the use of tribal funds and more community 

fund raising. 

Funding in the amount of $1,150,000 is requested for the construction of a new 

Senior Nutrition Center on the Hoopa Valley Reservation. 

PREPARED STATEMENT OF THE NATIONAL ASSOCIATION OF RAILROAD PASSENGERS

Thank you for the opportunity to submit this statement. Thank you also for the 

positive role that you and your subcommittee have played over the years in providing funding for intercity passenger trains. 

Our key requests for intercity passenger trains for fiscal year 2011 are: 

—Amtrak’s budget request: $592 million for operations; $1,745 million for capital 

(including $281 million for Americans with Disabilities Act and $446 million for 

the fleet strategy); $305 million for debt service; $7 million for FRA oversight. 

—Capital grants for States: $4 billion, with an appropriate portion designated for 

rolling stock acquisition. 

—Any funding needed to restore service to Las Vegas. Amtrak, as part of its 

statutorily mandated California Zephyr performance improvement plan is considering restoring Salt Lake City-Los Angeles service. This would put Las Vegas 

back on the Amtrak map and restore direct Denver-Los Angeles service. Around 

1996, when Amtrak was considering route reductions, the head of what was 

then Amtrak’s Chicago-based ‘‘strategic business unit’’ told our chairman, ‘‘If I 

had known Congress was going to put back routes, based on the economics, I 

would have recommended the Desert Wind (Salt Lake City-Los Angeles) first.’’ 

—Funding needed to restore service between New Orleans and Florida, consistent 

with the PRIIA requirement that Amtrak by July 16, 2009, submit a plan to 

restart service. 

—Funding needed to restore service between Salt Lake City and the Pacific 

Northwest and between Chicago and the Pacific Northwest via southern North 

Dakota and southern Montana, as Amtrak studied in response to the mandates 

in PRIIA. 

Equipping Trains for Growth.—A major factor hurting customer satisfaction and 

inflating operating costs is the 37-year average age of its locomotives and cars, including 92 long-distance ‘‘Heritage’’ cars that are between 53 and 61 years old. 

Amtrak’s fleet strategy assumes ridership growth of only 2 percent. That is too 

conservative, given the need to increase capacity on existing routes and to add 

routes. We appreciate Amtrak’s emphasis on their plan’s ‘‘scalability,’’ that is, the 

fact that car acquisitions can be increased if the market calls for it and funding is 

provided. Indeed, some trains are already outpacing similarly conservative ridership 

projections. 

Nonetheless, this illustrates the financial challenge: failure to meet the funding 

targets Amtrak identified puts us close to a no-growth scenario regarding both additional capacity on existing routes and expanding the network to parts of the country 

that are not adequately served, a category that includes some of the fastest-growing 

regions in the United States. 

In addition to funding fleet needs directly, consideration should be given to the 

use of tax credits and/or asset depreciation benefits to encourage private leasing 

companies to buy equipment and lease it to States and perhaps Amtrak. Part of the 

goal is to reduce the high up-front costs that taxpayer-supported agencies face when 

procuring new equipment. 

Also of critical importance is the $281 million Amtrak request to fulfill its obligation to bring stations into compliance with the Americans with Disabilities Act— 

money that is left out of the administration’s budget. The Association supports Amtrak’s current ADA policy as set forth in ‘‘Amtrak Guidelines on Platform Design’’ 

(April 2008). Previously, we joined with Amtrak, the Class I railroads and commuter 

railroad agencies in strongly opposing a rule that had been under consideration by 

U.S. DOT that would have required full length platforms for level boarding. In fiscal 
366 

2010, Amtrak was instructed to spend the $144 million for ADA which in effect reduced other vital capital expenditures. 

The Importance of Trains.—More and better passenger trains and intermodal connections are crucial to maintaining mobility for our citizens, enhancing the quality 

of life in our communities, bolstering our Nation’s economic competitiveness and energy efficiency, providing good jobs for Americans and reducing our transportation 

system’s negative environmental impact. 

Mobility and quality of life issues become more relevant as the proportion of older 

citizens dramatically increases, and as young people become more receptive to nonauto transport. 

The national interest is well served by enabling as many people—especially older 

people—as possible to lead a satisfying life with little or no driving. This can improve both safety and mental health, as people in auto-dependent environments who 

cannot drive suffer from the resulting sense of isolation. 

Fewer Teenaged Drivers.—At the same time, the Millennial Generation—people in 

their teens and twenties—is greatly attracted to a less car-dependent lifestyle. They 

increasingly do not view acquiring a driver’s license as a ‘‘rite of passage to maturity’’ for 16-year-olds. Indeed, my two sons of driving age, now 21 and 19, both got 

their drivers’ licenses a year or two after turning 16, becoming serious about getting 

their licenses only after realizing that mass transit served their transportation 

needs poorly. Media reports confirm that my sons are not unique, including 

WRAL.com in Raleigh (January 25), Tampa’s News Channel 8 (February 11), and 

New York Times (February 25, 2008). 

Ridership and Polls.—Americans’ desire for improved train service is demonstrated through increasing ridership on Amtrak and rail transit systems nationwide. Amtrak gained riders for 6 straight years—from 2002 to 2008. The 2008 runup in gasoline prices was a big factor in ridership growth of 11 percent from 2007 

to 2008. While Amtrak and transit ridership fell in 2009, due in part to the recession and lower gasoline prices, Amtrak ridership still was 5 percent above the 2007 

level. Amtrak ridership through the first half of fiscal year 2010 (October–March) 

was 4.3 percent above the year-earlier level (long-distance trains were up 5.2 percent). 

For years, polls have consistently shown strong support for increased investment 

in passenger trains. A recent one, by Kelton Research—taken February 1–7, 2010 

for HNTB Corporation—showed 88 percent ‘‘open to high-speed rail for long-distance 

travel within the U.S.,’’ according to a February 18 report in Metro Magazine, which 

also cited 83 percent support for increasing the share of Federal funding that goes 

to public transit and high-speed rail infrastructure. HNTB’s Peter Gertler said, ‘‘The 

pain we felt when gasoline was hovering near $4 a gallon has receded, yet we can’t 

stand by for the next crisis to hit to address the underlying issues of congestion and 

our dependence on limited fossil fuels.’’ 

Amtrak’s Funding Request.—We are concerned that reducing Amtrak’s other capital items to make way for the ‘‘full ADA funding,’’ which in effect happened this 

year, damages the overall system, with detrimental impact on all passengers including those with disabilities. Shorting the capital request creates a problem for the 

effort to let passenger trains assume their rightful place as a primary mode of transportation providing a desirable travel choice for all Americans—as envisioned by 

President Obama. 

Grants to States.—We strongly support the general approach that U.S. DOT took 

in awarding the $8 billion in capital grants announced January 28. I commented 

on NBC Nightly News on January 30 that I was impressed both with ‘‘the amount 

of funds involved and the intelligence with which it was distributed.’’ 

Operating Grant.—This is critical, in part because the big increase in the capital 

budget (including Recovery Act funds) drives up operating costs, as not all personnel 

costs associated with capital projects can be capitalized. Moreover, the mandates of 

PRIIA also create upward pressure on operating costs. The organization is handling 

more than twice the amount of work of 5 years ago. This underscores the urgency 

of maintaining Amtrak’s operating grant at the full requested amount of $592 million. 

The Transportation for America Coalition’s ‘‘United States of Transit Cutbacks’’ 

map vividly portrays the irony of transit agencies from Philadelphia to Phoenix receiving new Federal capital funds while withering operating support is forcing consideration of unacceptable service cuts—including the elimination of all service on 

certain days of the week, bus route terminations, station closures, and dramatic frequency reductions. As Secretary LaHood put it, it doesn’t make sense to buy so 

many new trains and buses when we can’t afford to pay operators to run them. On 

the intercity side, consideration should be given, at least in emergency situations, 
367 

1There are approximately 562 federal-recognized Indian tribes and Alaska Native villages in 

the United States, all of whom are eligible for membership in NAIHC. Other NAIHC members 

include State-recognized tribes that were deemed eligible for housing assistance under the 1937 

Act and grandfathered in to the Native American Housing Assistance and Self-Determination 

Act. 

to allowing operation of State-supported intercity trains on a 50/50 matching basis, 

without making Amtrak swallow the difference. 

Oak Ridge National Laboratory Statistics.—The following table, showing 2007 

data, comes from the annual Transportation Energy Data Book (Edition 28, released 

in 2009), published by Oak Ridge National Laboratory under contract to the U.S. 

Department of Energy: 

Mode BTUs per 

passenger-mile 1

Amtrak .......................................................................................................................................................... 2,516 

Commuter trains .......................................................................................................................................... 2,638 

Certificated air carriers ............................................................................................................................... 3,103 

Cars .............................................................................................................................................................. 3,514 

Light trucks (2-axle, 4-tire) ......................................................................................................................... 3,946 

1 BTU = British Thermal Unit; passenger-mile = one passenger traveling one mile. 

Overnight Trains.—We support Amtrak’s initiative, discussed in the release, to 

combine the Texas Eagle and Sunset Limited into a daily, full-service Chicago-Los 

Angeles train via St. Louis, Dallas/Fort Worth, San Antonio, El Paso and Tucson. 

A connecting daily train between San Antonio and New Orleans via Houston is also 

planned, and we understand that some through New Orleans-Los Angeles cars will 

be restored if demand is strong. Currently, New Orleans-San Antonio-Los Angeles 

service runs tri-weekly. 

Hudson River Tunnels; North Station-South Station Rail Link.—We continue to 

be concerned about the construction of Hudson River rail tunnels that will not connect to Penn Station but only to a dead-end, deep cavern station under 34th Street. 

We continue to discuss this with New Jersey Transit. We support the $6 million 

that Massachusetts requested to complete environmental work on a potential rail 

link that would unify Boston’s commuter rail networks and connect Amtrak’s Northeast corridor to northern New England. 

Northeast Corridor Fares.—At an April 10 NARP membership meeting in Philadelphia, Dr. Vukan Vuchic of the University of Pennsylvania said trains ‘‘should 

play a maximum role in society, and not just serve businessmen. Students, tourists, 

young and old, should be able to ride.’’ Amtrak’s current fares don’t support that. 

This may be partly due to faulty judgments by Amtrak, but relentless pressure to 

reduce the operating grant is probably the bigger cause. 

Thank you for considering our views. 

PREPARED STATEMENT OF THE NATIONAL AMERICAN INDIAN HOUSING COUNCIL

INTRODUCTION

Good afternoon Chairwoman Murray, Ranking Member Bond, and distinguished 

members of the Senate Subcommittee on Transportation and Housing and Urban 

Development, and Related Agencies. My name is Marty Shuravloff. I am the chairman of the National American Indian Housing Council (NAIHC), the only national 

tribal non-profit organization dedicated to advancing housing, physical infrastructure, and economic development in tribal communities in the United States. I am 

also an enrolled member of the Leisnoi Village, Kodiak Island, Alaska. I want to 

thank the subcommittee for the opportunity to submit testimony for its consideration as it prepares its fiscal year 2011 appropriations bill. 

BACKGROUND ON THE NATIONAL AMERICAN INDIAN HOUSING COUNCIL (NAIHC)

The NAIHC was founded in 1974 and has, for 36 years, served its members by 

providing valuable training and technical assistance (T/TA) to all tribes and tribal 

housing entities; providing information to Congress regarding the issues and challenges that tribes face in terms of housing, infrastructure, and community and economic development; and working with key Federal agencies in an attempt to address such issues and meet such challenges. The membership of NAIHC is expansive, comprised of 271 members representing 463 1 tribes and tribal housing organi-
368 

2See http://www.bls.gov/news.release/empsit.nr0.htm. 

3 Bureau of Indian Affairs Labor Force Report (2005). 

4Many of these reservations are in the State of South Dakota, which has one of the lowest 

unemployment rates in the Nation. However, on some South Dakota reservations, the unemployment rate exceeds 80 percent. 5 U.S. Census Bureau, American Indian and Alaska Native Heritage Month: November 2008. 

See http://www.census.gov. 

zations. The primary goal of NAIHC is to support Native housing entities in their 

efforts to provide safe, quality, affordable, culturally relevant housing to Native people. 

BRIEF SUMMARY OF THE PROBLEMS REGARDING HOUSING IN INDIAN COUNTRY

While the country has been experiencing an economic downturn in general, this 

trend is greatly magnified in Indian communities. The national unemployment rate 

has risen and has hopefully passed its peak at an alarming rate of nearly 10 percent; 2 however, that rate does not compare to the unemployment rates in Indian 

Country, which average 49 percent.3 The highest unemployment rates are on the 

Plains reservations, where the average rate is 77 percent.4 Because of the remote 

locations of many reservations, there is a lack of basic infrastructure and economic 

development opportunities are difficult to identify and pursue. As a result, the poverty rate in Indian Country is exceedingly high at 25.3 percent, nearly three times 

the national average.5 These employment and economic development challenges exacerbate the housing situation in Indian country. Our first Americans face some of 

the worst housing and living conditions in the country and the availability of affordable, adequate, safe housing in Indian Country falls far below that of the general 

U.S. population. 

—According to the 2000 U.S. Census, nearly 12 percent of Native American 

households lack plumbing compared to 1.2 percent of the general U.S. population. 

—According to 2002 statistics, 90,000 Indian families were homeless or underhoused. 

—On tribal lands, 28 percent of Indian households were found to be over-crowded 

or to lack adequate plumbing and kitchen facilities. The national average is 5.4 

percent. 

—When structures that lack heating and electrical equipment are included, 

roughly 40 percent of reservation housing is considered inadequate, compared 

to 5.9 percent of national households. 

—Seventy percent of the existing housing stock in Indian Country is in need of 

upgrades and repairs, many of them extensive. 

—Less than one-half of all reservation homes are connected to a sewer system. 

There is already a consensus among many members of Congress, HUD, tribal 

leaders, and tribal organizations that there is a severe housing shortage in tribal 

communities; that many homes are, as a result, overcrowded; that many of the existing homes are in need of repairs, some of them substantial; that many homes lack 

basic amenities that many of us take for granted, such as full kitchens and plumbing; and that at least 200,000 new housing units are needed in Indian Country. 

These issues are further complicated by Indian land title status. Most Indian 

lands are held in trust or restricted-fee status; therefore, private financial institutions will not recognize tribal homes as collateral to make improvements or for individuals to finance new homes. Private investment in the real estate market in Indian Country is virtually non-existent. Tribes are wholly dependent on the Federal 

Government for financial assistance to meet their growing housing needs, and the 

provision of such assistance is consistent with the Federal Government’s centuriesold trust responsibility to American Indian tribes and Alaska Native villages. 

THE NATIVE AMERICAN HOUSING ASSISTANCE AND SELF-DETERMINATION ACT

In 1996, Congress passed the Native American Housing Assistance and Self-Determination Act (‘‘NAHASDA’’) to provide Federal statutory authority to address the 

above-mentioned housing disparities in Indian Country. NAHASDA is the cornerstone for providing housing assistance to low-income Native American families on 

Indian reservations, in Alaska Native villages, and on Native Hawaiian Home 

Lands. The Indian Housing Block Grant (‘‘IHBG’’) is the funding component of 

NAHASDA. Since the passage of NAHASDA in 1996 and its funding and implementation in 1998, NAHASDA has been the single largest source of funding for Native 

housing. Administered by the Department of Housing and Urban Development 
369 

6 Eligible activities include but are not limited to downpayment assistance, property acquisition, new construction, safety programs, planning and administration, and housing rehabilitation. As HUD’s funding justification acknowledges (see http://hud.gov/offices/cfo/reports/2011/cjs/ 

nahb-grants2011.pdf, Page N–8), a large portion of tribal funds are spent on planning, administration, and operating expenses. 7Part of the rationale for reducing IHBG funding was what may appear to be a delay in use 

of available tribal housing funds. However, such apparent delay is an aberration. Since 

NAHASDA was initially funded in fiscal year 1998 through fiscal year 2009, tribal expenditure 

rates are 88 percent. Based on a HUD ARRA spending report dated March 20, 2010, tribes are 

spending HUD and ARRA funds at a rate that at least equals and, in some cases, exceeds the 

national average. 

(‘‘HUD’’), NAHASDA specifies which activities are eligible for funding.6 Not only do 

IHBG funds support new housing development, acquisition, rehabilitation, and other 

housing services that are critical for tribal communities; they cover essential planning and operating expenses for tribal housing programs. Between 2006 and 2009, 

a significant portion of IHBG funds, approximately 24 percent, were used for planning, administration, housing management, and services. 

AMERICAN RECOVERY AND REINVESTMENT ACT (ARRA) AND FISCAL YEAR 2010 INDIAN

HOUSING FUNDS

NAIHC would like to thank Congress, particularly this subcommittee, for its increased investment in Indian housing in fiscal year 2010. AARA provided over $500 

million for the IHBG program. This additional investment in Indian Country supports hundreds of jobs, has allowed some tribes to start on new construction 

projects, and has assisted other tribes in completing essential infrastructure for 

housing projects that they could not have otherwise afforded with their IHBG allocations. Tribes have complied with the mandate to obligate the funds in an expedient manner, thus helping stimulate tribal and the national economies. In addition 

to ARRA funding, Congress appropriated $700 million for the IHBG in fiscal year 

2010, the first significant increase for the program since its inception. This positive 

step reversed a decade of stagnate funding levels that neither kept pace with inflation nor addressed the acute housing needs in Native communities. 

THE PRESIDENT’S FISCAL YEAR 2011 BUDGET REQUEST FOR THE INDIAN HOUSING BLOCK

GRANT

On February 1, 2010, President Obama submitted to Congress a $3.8 trillion 

budget request. It proposes $580 million for the IHBG, which is a decrease of $120 

million (¥17 percent) from the fiscal year 2010 funding level.7 At the same time, 

HUD’s overall budget was reduced by only 5 percent. Should Congress accept the 

President’s budget request, it would be the lowest, single-year funding level for the 

NAHASDA since it was enacted in 1996. To put this in proper perspective, funding 

appropriated by Congress in fiscal year 1998, 12 years ago, was $20 million more 

than the President’s budget request for fiscal year 2011. 

While the NAIHC and its members are aware of and appreciate the large investments made in Indian housing, we are disappointed that the current request fails 

to continue the positive budget trajectory of recent years. Therefore, the NAIHC 

strongly urges Congress to not only appropriate funds above the President’s budget 

request, but to fund the IHBG at $875 million due to the increasing costs for housing development, energy efficiency initiatives, and other inflationary factors. Since 

the President’s budget request was released, many of our members have expressed 

their deep concerns. They believe, and we agree, that this budget impacts not only 

housing, but also the very hope for self-sustaining economies in Indian Country. 

Reduced funding would result in the loss of jobs for our people, reversing the positive impact of ARRA; the deterioration of existing housing units; and the curtailment of many housing projects that are currently under development. Without sufficient funding and proper training and technical assistance, progress regarding tribal 

housing will not only cease; years of hard work will be reversed, as tribes will lack 

the funds to maintain and operate existing housing units, much less provide new 

ones. Many tribes are at risk of losing between a quarter and a third or more of 

their housing budgets if the President’s budget request were to take effect, the impact of which would be devastating. 

OTHER INDIAN HOUSING AND RELATED PROGRAMS

The Title VI and Section 184 Indian Housing Loan Guarantee Programs 

The President’s budget request includes $2 million for the title VI Loan Guarantee program and $8.25 million for the section 184 program. The title VI program 
370 

is important because it provides a 95 percent guarantee on loans made by private 

lenders, which is an incentive for lenders to get involved in the development of 

much-needed housing in tribal areas. Section 184 is specifically geared toward facilitating home loans in Indian Country. We request that these programs be funded 

at $2 million and $9 million, respectively. 

Indian Community Development Block Grant (ICDBG) 

While appreciated, proposed funds of $65 million for the ICDBG are insufficient 

to meet the current needs for essential infrastructure, including sewer and running 

water, in Indian Country. We request that this program be funded at $100 million. 

Native Hawaiian Housing 

Low-income Native Hawaiian families continue to face tremendous challenges, 

similar to those that tribal members face in the rest of the United States. The President’s budget request of $10 million for the Native Hawaiian Housing Block Grant 

is appreciated, but the budget includes no funding for the section 184A program in 

Hawaii. While it has taken some time to get this program started—because lenders 

are not familiar with the section 184A program—providing no funding would be a 

step backward for Native Hawaiian families working toward home ownership. We 

urge Congress to consider this before agreeing to the administration’s proposal to 

eliminate funding for the program. 

TRAINING AND TECHNICAL ASSISTANCE (T/TA) AND THE PROPOSED TRANSFORMATION

INITIATIVE

The President’s budget request would eliminate entirely the much-needed, exceptional T/TA that has been provided by NAIHC since NAHASDA was implemented. 

The provision of T/TA is critical for tribes to build their capacity to effectively plan, 

implement, and manage tribal housing programs. Eliminating funding for T/TA 

would be disastrous for tribal housing authorities and would be a huge step in the 

wrong direction. Tribes need more assistance in building capacity, not less. Since 

NAIHC’s funding for T/TA was restored in 2007, requests for T/TA have steadily 

grown. The funding that NAIHC is currently receiving is insufficient to meet the 

continuous, growing demand for T/TA. Therefore, we are forced to make difficult decisions regarding when, where, and how to provide the most effective T/TA possible 

to our membership. 

The President’s budget request proposes an agency-wide Transformation Initiative 

Fund (‘‘TIF’’) with up to 1 percent of HUD’s total budget, which would draw funds 

away from essential housing programs, including $5.8 million from the IHBG account, ‘‘to continue the on-going comprehensive study of housing needs in Indian 

Country and native communities in Alaska and Hawaii.’’ While the NAIHC membership believes the TI may have merit, we do not believe that transferring nearly $6 

million from the IHBG account to conduct a study on housing needs is a wise or 

even defensible use of Federal taxpayer funds. More importantly, the $6 million affects funding that has historically been appropriated to NAIHC for T/TA. Through 

resolutions, the NAIHC membership has repeatedly taken the position that a portion of the IHBG allocation should be provided to NAIHC for T/TA, which is a reflection of their confidence in NAIHC and the continuing demand for the essential capacity-building services that we provide. We request that funding in the amount of 

$4.8 million for T/TA be included in the fiscal year 2011 budget. 

CONCLUSION

NAHASDA was enacted to provide Indian tribes and Native American communities with new and creative tools necessary to develop culturally relevant, safe, decent, affordable housing. NAIHC has very specific concerns regarding the President’s budget request for Indian housing funding levels and we urge Congress, with 

the leadership of this subcommittee, to not permit excessive funding reductions in 

the NAHASDA program. To do so would be an enormous step backwards and devastate the progress that has been made in the past 12 years to improve housing 

conditions in Indian Country. Based on the facts outlined above and the potentially 

devastating impact a dramatic cut to Indian housing funds will most certainly have 

on Indian Country, NAIHC requests funding in the amounts outlined above in order 

to meet the immense needs in Indian country. 

Thank you, Chairwoman Murray, Ranking Member Bond, and the members of 

this subcommittee for allowing us to express our budgetary priorities and concerns 

regarding Native American housing needs. Your continued support of Native American communities is truly appreciated, and the NAIHC is eager to work with you 

and your professional staff on any and all issues pertaining to Indian housing programs and living conditions for America’s indigenous people. 
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PREPARED STATEMENT OF NA TANYA DAVINA STEWART

Subcommittee Members: I am submitting this testimony concerning the Federal 

and local transportation agencies charged with the creation and implementation of 

transportation projects in Lake County, Indiana and their non-compliance with Executive order 12898, 1994 and the provisions of Environmental Justice —‘‘the fair 

treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.’’ 

On April 16 and 17, 2010, the Northwestern Indiana Regional Planning Commission (NIRPC), the Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA) held corrective action workshops as a result of NIRPC’s 

certification review to address the ongoing challenges NIRPC has with their technical analysis and lack of adherence to environmental justice mandates. 

During the course of the workshops several issues emerged that are of grave concern to those of us who were in attendance. We stated our concerns to NIRPC and 

feel compelled to address this subcommittee since NIRPC receives Federal funding 

from you. 

—On the Issue of Fair Treatment.—The Federal funding ratio of 80:20 for projects 

places an excessive burden upon cities that are experiencing extreme revenue 

shortfalls. Gary, Indiana and the entire Northwest Indiana Region once reigned 

as an industrial giant and the steel industry was the backbone of the economy. 

In this post-industrial age, cities like Gary have been slow to transition to the 

information and technology economies. This is a regional as well as a national 

problem. Our economic base continues to erode along with our property values 

that incidentally, are the source of our scant city revenues. Is it possible for the 

Federal Government to make special allowances when it comes to funding basic 

road maintenance projects by lowering or eliminating the cost distressed cities 

have to pay especially when budget cuts dictate that a city may be unable to 

prioritize such basic yet essential projects? Safe and paved streets are a quality 

of life issue. 

—On the Issue of Meaningful Involvement.—NIRPC receives most of its funding 

from Lake County residents. The diverse ethnic and intergenerational demographic make-up of the county is not reflective in NIRPC’s workforce and governing board. NIRPC’s board is appointed by dictates of State law and consists 

of elected officials. We are aware that NIRPC’s board appointments are not an 

issue for the Federal Government to resolve. In keeping with the call for meaningful involvement as put forth by the definition of environmental justice and 

in our right to fully engage in our democracy; it is imperative that we also hold 

positions of power on the board and/or have a say in whom we desire to represent our interests on the board in order to be more involved in the decisionmaking on projects that will affect our lives. Our calls to have grassroots organizations, youth, the elderly, and differently able people represented in these 

positions of power have fallen upon deaf ears and we feel are a direct violation 

of our rights. It is our tax dollars that fund NIRPC yet we do not play a significant role in the development, implementation, and enforcement of the policies 

and transportation projects that directly impact our lives. If the Federal Government continues to fund agencies like NIRPC then it is your responsibility 

to weigh in on ensuring said agencies truly involve the community residents in 

every stage of the development of projects. 

During the meeting, a board member of NIRPC just happened to mention 

that NIRPC had recently created a 501c3 on Economic Development within 

their organization. NIRPC had already appointed the 501c3 board that is comprised of elected officials and members from the business community. If a city 

within NIRPC’s jurisdiction wants to move forward on an economic development 

plan and is in need of additional revenue from the Federal Government, that 

city would have to go through NIRPC to secure Federal dollars. Based upon 

NIRPC’s history of non-inclusion of marginalized people and their technical 

analysis and environmental justice shortcomings as cited by the certification review process, we are gravely concerned about the acquisition of NIRPC’s new 

power. 

We implore the Federal Government to re-evaluate their funding allocation policies. When Federal funds for transportation are directed to State governments and 

Metropolitan Planning Organizations (MPO) how are those monies dispersed? Do 

cities with the greatest need receive the bulk of the money or cities more adapt with 

the grant writing process? Is the national objective to secure and maintain center 

cities and make them more energy efficient and accessible or is it to continue to 
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fund urban sprawl and construct new highways that will decimate farmland and 

open spaces we all rely upon for food and oxygen? 

Sending monies to the State government and MPO’s may be an efficient mechanism to maintain Federal and State highways and regional projects like light and 

speed rail but may not be an efficient distribution of funds for local projects like 

street and bridge maintenance. When cities have to compete for monies from a funding pool that encompasses projects that include regional and State projects, cities 

may lose out on funding opportunities and continue to decline, especially during economic down turns. 

We ask that you take our funding concerns and efforts to hold MPO’s like NIRPC 

to the high standards of inclusion set forth by Executive order 12898, 1994 into consideration as you weigh in on the fiscal year 2011 appropriations and general national transportation policies. 

PREPARED STATEMENT OF THE NATIONAL AIDS HOUSING COALITION

The National AIDS Housing Coalition (NAHC) requests $410 million for the 

Housing Opportunities for Persons With AIDS Program (HOPWA) for fiscal year 

2011. NAHC is a national non-profit membership housing organization founded in 

1994 that works to end the HIV/AIDS epidemic by ensuring that persons living with 

HIV/AIDS have quality, affordable and appropriate housing. NAHC’s members are 

people living with HIV/AIDS, service providers, developers, researchers, public 

health and housing departments and advocates. 

Research presented through NAHC’s Research Summit Series overwhelmingly 

confirms housing as a strategic point of intervention to address HIV/AIDS and the 

impacts of homelessness and the concomitant effects of race and gender, poverty, 

mental illness, chronic drug use, incarceration and exposure to trauma and violence. 

Housing has been shown as cost effective by stabilizing people with HIV/AIDS and 

reducing reliance on other public systems. 

The HOPWA program is relied upon by HIV/AIDS service organizations nationwide to assure that stable, affordable housing and the critical supportive services 

that help people remain housed is available to those coping with the debilitating 

and impoverishing effects of HIV/AIDS. HOPWA’s hallmark is its flexibility to provide a continuum of housing and housing-related case management and supportive 

services for low income individuals and their families living with HIV/AIDS. 

HOPWA dollars are used for short and longer term rents, facility-based assistance 

as well as limited rent, mortgage or utility payments that play a critical role in 

homelessness prevention. HOPWA can also be used for new development and rehabilitation. Finally, in the face of shrinking resources, HOPWA’s importance to community strategic planning efforts cannot be underestimated—facilitating better coordination of local and private resources and filling gaps in local systems of care 

to meet housing need among people with HIV/AIDS and their families. 

AIDS HOUSING IS CENTRAL FOR HIV/AIDS HEALTH

Lack of housing is associated with remaining outside of medical care and improved housing status has been shown to significantly affect access to healthcare, 

including anti-retroviral treatment (ART) and adherence. In summary: 

Housing Impacts Continuity of Care.—Over time, housing status is among the 

strongest predictors of entry into HIV care, primary care visits, continuous care, and 

care that meets clinical practice standards. 

Housing Improves Health Outcomes.—Improved housing status has a significant, 

positive association with better HIV-related health, including CD4 counts, viral 

load, and co-infection with HCV or TB. 

AIDS Housing is a Powerful Weapon Against Homelessness.—Research confirms 

that homelessness is a major risk factor for HIV, and HIV is a major risk factor 

for homelessness: for example, at any given time, up to 16 percent of people living 

with HIV/AIDS are homeless, while as many as 70 percent report a lifetime experience of homelessness or housing instability. 

AIDS Housing is Prevention.—Over time, persons who improve their housing status reduce their risk behaviors by one-half. Access to housing improves access and 

adherence to ART, which lowers viral load and reduces the risk of transmission. 

AIDS Housing is Cost-effective.—AIDS housing investments reduce other public 

costs by improving the health of people living with HIV/AIDS and preventing new 

infections, making housing dollars a wise use of limited public resources. 
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HOUSING NEED AMONG PEOPLE WITH HIV/AIDS

Over 56,000 people became infected with HIV in the past year in the United 

States. Experts estimate that over one-half of people living with HIV/AIDS will need 

some form of housing assistance during the course of their illness, while national 

research has shown that housing is the greatest unmet service need for people living 

with HIV disease. Data indicates that approximately 72 percent of PLWHA have incomes below $30,000; the number in need is likely to increase proportionally with 

the weakened economy and sustained high unemployment levels. 

In 2010, HOPWA will continue providing housing support for over 58,000 households in 133 formula eligible jurisdictions, providing assistance in all 50 States, the 

District of Columbia, Puerto Rico and the Virgin Islands. Three new jurisdictions 

became eligible for formula funding—Little Rock, Arkansas; Albuquerque, New Mexico; and Allentown, Pennsylvania. In addition, 93 competitive grants are currently 

operating. The program is tied to positive client outcomes in the 58,367 households 

served in the current fiscal year, making it possible for assisted individuals to better 

attend to their health needs, function in their families and society. AIDS housing 

is a cost-effective way to end homelessness and achieve positive individual and community health outcomes. HUD reports that 94 percent of all HOPWA rental assistance households in a recent program year were able to achieve maximum stability, 

reducing risks of homelessness and participating in healthcare. NAHC recommends a funding level of $410 million, which would permit assistance to an additional 14,000 people with HIV/AIDS in need of housing assistance 

and reduce unmet need by over 10 percent. 

EXAMPLES OF AIDS HOUSING NEED ACROSS THE COUNTRY

AIDS housing need has exploded in virtually every region of the country. As the 

affordable housing crisis envelopes higher income people, persistently vulnerable 

populations are squeezed out of assistance. Though waiting lists are no longer maintained in many jurisdictions, affordable housing need continues to grow. 

In Alabama, just 414 people with HIV/AIDS and their families receive HOPWA 

assistance, while 2,173 HOPWA-eligible households have unmet housing needs. The 

tenant-based rental assistance program has been closed to new applicants since 

June 2008. Of the families on the waiting list, 77 percent are living at or below the 

poverty level. 

Across Massachusetts, 1,699 families are on waiting lists for AIDS housing assistance—355 in greater Boston alone. 

In San Francisco, the city’s centralized housing waiting list has over 1,000 people 

and has been closed to new applicants since November 2001. 

There are 4,637 people living with HIV/AIDS on the waiting list for housing assistance in Dallas—almost one-third of all HIV-positive people in the city. In needs 

assessments, housing assistance was consistently ranked second in overall unmet 

need, surpassed only by dental care. 

The overall number of unmet AIDS housing need in Central Ohio from 2004–2009 

is 770 households, based on the current Consolidated Plan for the city of Columbus. 

OTHER LOW INCOME HOUSING PROGRAMS REMAIN CRUCIAL

Of course, HOPWA will never fully meet the housing need for all those living with 

HIV/AIDS and their families. AIDS housing providers urge full and adequate funding for the range of low-income housing programs relied upon in the continuum of 

housing and services for people with HIV/AIDS, including Homeless Assistance 

Grants, Tenant-Based Rental Assistance, Public Housing, and section 811 Housing 

for People with Disabilities, among others. 

In conclusion, NAHC urges the subcommittee to fund the Housing Opportunities 

for Persons With AIDS program at the highest level possible for fiscal year 2011 

to accommodate new formula jurisdictions expected to become eligible and to assist 

existing programs in moving closer to meeting the actual housing needs in their jurisdictions. 

NAHC respectfully asks the subcommittee to approve funding of $410 million for 

the Housing Opportunities With AIDS program for fiscal year 2011. 

PREPARED STATEMENT OF THE UNIVERSITY CORPORATION FOR ATMOSPHERIC

RESEARCH (UCAR) 

On behalf of the University Corporation for Atmospheric Research (UCAR) and 

the larger university community involved in weather and climate research, I submit 

this written testimony for the record of the Senate Committee on Appropriations, 
374 

Subcommittee on Transportation and Housing and Urban Development, and Related 

Agencies. 

UCAR is a consortium of 75 universities that manages and operates the National 

Center for Atmospheric Research and additional programs that support and extend 

the country’s scientific research and educational capabilities. UCAR is supported by 

the National Science Foundation and other Federal agencies, including the U.S. Department of Transportation (USDOT)’s Federal Highway Administration (FHWA) 

and Federal Aviation Administration (FAA). 

I want to thank the subcommittee for its leadership in supporting research and 

development programs at the FAA and FHWA. I urge you to support the President’s 

commitment to ensuring safer, more efficient air and road travel. One essential 

piece of this commitment to modernizing air and surface travel is providing drivers, 

pilots, and other vehicle operators with access to real-time weather information. I 

urge you to support these relatively small but critically important R&D programs 

within the FAA and FHWA budgets. 

FEDERAL HIGHWAY ADMINISTRATION (FHWA)

The highest priority for the USDOT and the FHWA is transportation safety. Last 

month, the National Highway Traffic Safety Administration released a report projecting that traffic fatalities have declined for the 15th consecutive quarter, the lowest annual level since 1954. Still, 24 percent of weather-related vehicle crashes occur 

on snowy, slushy or icy pavement, causing 1,300 deaths and more than 116,800 injuries annually. There are also economic costs: snow and ice significantly increase 

road maintenance costs, and State and local agencies spend more than $2.3 billion 

on snow and ice control operations annually. 

Since the late 1990s, researchers and engineers from several national labs and 

universities have played a pivotal role bringing the surface transportation and 

weather communities together to increase traffic safety, efficiency, and mobility. Applications of successful research and development supported by the Road Weather 

Research and Development Program (SAFETEA–LU sec. 5308) have significantly 

reduced the cost of State DOT winter snow and ice control activities and are likely 

to have significantly reduced weather-related accidents. This program, authorized at 

$5 million per year, has proven quite successful. For example, the Winter Maintenance Decision Support System, which supports pavement snow and ice control operations, was successfully developed, tested, and implemented by the private sector 

in more than 13 States. The Road Weather Research Program is also developing advanced weather and road condition safety applications as part of the USDOT’s 

IntelliDrive Initiative. 

In the absence of a new surface transportation reauthorization bill, the President’s fiscal year 2011 request keeps funding for the Road Weather Research Program frozen at $4 million. It is imperative that this be increased to the authorized 

level of $5 million per year. A fully-funded Program would support the development 

of technologies that integrate weather and road condition information into traffic 

management centers, improve understanding of driver behavior in poor weather, develop in-vehicle information systems and wireless technologies that provide warnings to drivers when poor weather and road conditions exist, improve the understanding of the impact of weather on pavement condition, and develop new active 

control strategies optimized for poor weather and road conditions. I urge the subcommittee to fund the Road Weather Research and Development Program at its full 

authorized level of $5.0 million in fiscal year 2011. 

THE FEDERAL AVIATION ADMINISTRATION (FAA)

Projections indicate that the demand for aviation will increase by a factor of two 

or three over the next two decades. Expansion of aviation is likely to continue and, 

as in the past, could outpace economic growth. To meet future aviation capacity 

needs, the United States is developing and implementing a dynamic, flexible and 

scalable Next Generation Air Transportation System (NextGen) that is safe, secure, 

efficient and environmentally sound. 

I urge you to support the President’s overall fiscal year 2011 request of $16.5 billion for the FAA, an increase of $476 million above fiscal year 2010 enacted levels. 

This increase reflects the administration’s recognition of future passenger growth 

and its commitment to safety and performance. 

INTEGRATING WEATHER INTO THE FUTURE AIR TRANSPORTATION SYSTEM

The primary goal of NextGen is to address and meet the rapidly changing needs 

of the National Airspace System (NAS). Providing accurate, timely weather information required by aviation decisionmakers is fundamental to NextGen’s success in 
375 

achieving capacity, efficiency, and safety goals. Improved weather forecasts, plus a 

shared source of decision support information for NAS decisionmakers, are crucial 

elements of achieving the goal of reducing the weather impact. The first step, 

though, is establishing a clear understanding of the impacts that have the most effect on NAS efficiency and capacity. The most visible impact to us all is ‘‘delays,’’ 

both airborne and ground, affecting both airplanes and people. Delay translates to 

operational cost for the airlines, and lost productivity for the users of the system— 

people and cargo. 

RESEARCH, ENGINEERING, AND DEVELOPMENT

The fiscal year 2011 request of $190 million for the Research, Engineering, and 

Development (RE&D) line office at the FAA continues important work in current 

research areas, including aviation weather research. This 7.6 percent increase over 

fiscal year 2010 supports enhanced NextGen research and development efforts in 

the areas of air-ground integration, weather information for pilots, and environmental research for aircraft technologies and alternative fuels to improve aviation’s 

environmental and energy performance. The following programs can be found within 

the RE&D line office of the President’s fiscal year 2011 FAA budget request. 

WEATHER PROGRAM

Aviation weather research and applications are critical to the FAA’s safety, operations and efficiency record. A number of research projects are underway, through 

the Weather Program and in collaboration with industry representatives, which 

focus on in-flight icing, turbulence, winter weather and deicing protocols, thunderstorms, ceiling, and visibility. 

One example system that translates a large amount of weather data into a significant safety and delay impact is the Weather Decision Support for Deicing Decision 

Making System (WSDDM). The accumulation of ice on aircraft prior to take off has 

long been recognized as one of the most significant safety hazards affecting the aviation industry today. Using WSDDM, airport snowfall rate in terms of liquid water 

content is translated into deicing fluid application procedures and aircraft holdover 

times. 

While the goal of the Weather Program is to increase safety, capacity, and support 

NextGen, I am very concerned that the request of $16.5 million simply will not support the R&D needs of the program which is down almost 2 percent from last year’s 

level and operating with one-half the funding level of 10 years ago. To address the 

challenges and meet the research needs of NextGen, the Weather Program must receive, at a minimum, $18 million for fiscal year 2011. 

WEATHER TECHNOLOGY IN THE COCKPIT

The crash of an Air France jet last year over the Atlantic Ocean, killing all 216 

passengers and 12 crew members, is an example of the limits of pilots’ ability to 

cope with severe weather. Pilots currently have little weather information as they 

fly over remote stretches of the ocean, which is where some of the worst turbulence 

occurs. Providing pilots with at least an approximate picture of developing storms 

could help guide them safely around areas of potentially severe weather. 

The Weather Technology in the Cockpit Program leverages research activities 

with other agencies, academia and the private sector by enabling the adoption of 

cockpit technologies that provide pilots with hazardous weather information and improve situational awareness. It seeks to ensure the adoption of cockpit, ground, and 

communication technologies, practices, and procedures that will provide pilots with 

shared and consistent weather information to enhance common situational awareness, plus engage the aircraft as a ‘‘node’’ that autonomously exchanges weather information with surrounding aircraft and ground systems. One system being developed combines satellite data and computer weather models with cutting-edge artificial intelligence techniques to identify and predict rapidly evolving storms and other 

potential areas of turbulence, and alert pilots and air traffic controllers to storms 

and turbulence over the continental United States. 

I am very disappointed that the fiscal year 2011 request for this small but lifesaving program was reduced almost 3 percent from fiscal year 2010 to $9.3 million. 

I urge you to fund the Weather Technology in the Cockpit program at $10 million, 

at a minimum. 

FACILITIES AND EQUIPMENT

In the FAA’s Facilities and Equipment line office, I would like to call your attention to two very important programs, NextGen Network Enabled Weather (NNEW) 
376 

and Reduce Weather Impact, and ask you to support the fiscal year 2011 request 

for both. 

NEXTGEN NETWORK ENABLED WEATHER (NNEW)

Exploring, identifying, and employing methods and techniques that will help facilitate the flow of operation-specific weather-related data and information to end 

users is critical. The NextGen Network Enabled Weather project is dedicated to 

using and developing technologies and standards for NextGen that will support effective dissemination of weather data. The concept of a 4–D Weather Data Cube is 

a foundational element of NextGen. It is envisioned that this virtual data cube will 

comprise weather data and information from disparate data contributors and locations. From this Cube, end users (e.g., air traffic managers, pilots, etc.) will be able 

to obtain a common weather picture of the NAS. The fiscal year 2011 request for 

NNEW is $28.25 million, an $8 million increase over fiscal year 2010. To develop 

the NextGen weather dissemination system smoothly and efficiently, I urge you to 

support this request. 

NEXTGEN REDUCE WEATHER IMPACT

The goal of the NextGen Reduce Weather Impact Program is to provide increased 

capacity in U.S. airspace to reduce congestion and meet projected demand in an environmentally sound manner. The Program addresses implementation of improved 

forecasts and provides weather forecast information tailored for integration into 

traffic management decision support systems. Some of this work starts with identification of the air traffic management impact of interest, and then translating 

weather into metrics associated with that impact. 

The current weather observing network is inadequate to the needs of NextGen. 

Improvements will be central to the Reduce Weather Impact Program. Working with 

appropriate scientific, modeling and user communities, current sensor information 

and dissemination shortfalls will be identified and evaluated. Investigating technologies for optimizing and improving automated aircraft weather reporting will 

also be conducted. To continue this work, I urge you to support the President’s fiscal 

year 2011 request of $43.2 million for the NextGen Reduce Weather Impact Program, an increase of $7.6 million above fiscal year 2010. 

On behalf of UCAR, as well as all U.S. citizens who use the surface and air transportation systems, I want to thank you for the important work you do in supporting 

the country’s scientific research, training, and technology transfer. We appreciate 

your attention to the recommendations of our community concerning the fiscal year 

2011 FHWA and FAA budgets and your concern for the safety of the Nation’s transportation systems. 

PREPARED STATEMENT OF THE NATIONAL RECREATION AND PARK ASSOCIATION

Thank you Chairwoman Murray, Ranking Member Bond, and other members of 

the subcommittee for this opportunity to submit written testimony on the fiscal year 

2011 appropriations bill. 

NRPA is a 501(c)3 national non-profit organization with more than 21,000 members. We represent both citizens and park and recreation professionals. Our mission 

is to advance parks, recreation and environmental conservation for the benefit of all 

people. Because we represent the public park and recreation agencies in the United 

States, we touch the lives of over 300 million people in virtually every community. 

As your subcommittee works to craft the fiscal year 2011 appropriations bill, we 

request that you include $4.2 billion for the Community Development Block Grant 

(CDBG) Program. 

The CDBG program equips communities with the resources they need to address 

serious community development challenges. The program has been an invaluable 

tool to help cities replace decaying infrastructure and provide safe places to live, 

work, learn and become physically active. Unfortunately, despite proven success, the 

CDBG formula grant program has seen a decrease in funding over the past few 

years going from $4.9 billion in fiscal year 2004 to $3.9 billion in fiscal year 2010. 

This is a decrease of more than 20 percent in only 6 short years. 

According to the Department of Housing and Urban Development, approximately 

$100 million of CDBG funds are utilized annually for parks and recreation projects. 

This is not surprising since studies have shown that parks and recreational resources are often key components to the revitalization of communities and blighted 

areas as they increase property values, reduce storm water runoff, mitigate urban 

heat islands and improve health and wellness. The flexibility afforded through the 
377 

CDBG program allows communities to implement funds in ways that best meet 

their specific needs such as including park and recreation projects as part of a comprehensive redevelopment initiative. 

The 2005–2010 5 year community development plan for Olympia, Washington 

cited an unmet need of $2.7 million for parks and recreation projects relative to 

community development. Throughout the State hundreds of projects are seeking 

funding for the acquisition of, and improvements to, parks and recreation facilities 

in order to improve the livability of moderate to low income neighborhoods and promote healthier, sustainable communities. Such projects are well positioned to be 

funded through the CDBG program. 

Missouri has utilized CDBG funds to address a host of community development 

needs throughout the State. In 2009 St. Louis leveraged over $5 million in CDBG 

money to improve accessibility of playgrounds for children with disabilities, for environmental remediation to reduce stormwater runoff, for sidewalk, and streetlight 

enhancements to make parks safer for families, and parks and recreation infrastructure improvements to support recovery efforts for neighborhoods suffering from high 

foreclosure and diminishing property values. 

The city of Tuscaloosa, Alabama leverages an average of nearly $1.5 million in 

CDBG money on an annual basis to fund projects that address community development needs. Among these were projects bringing park and recreation facilities into 

ADA compliance to make them more accessible for persons with disabilities, improving playground equipment to make them safer for children, building walking trails 

to help the city become healthier and more livable, as well as enhancing park and 

recreation infrastructure to provide economic stimulus in economically depressed 

areas. 

The importance of CDBG, however, goes beyond providing safe infrastructure. 

Funding provided through the CDBG program often serves as the catalyst for private investment. In fact, the National League of Cities concluded that over the more 

than 30-year life of the program, CDBG has leveraged nearly $324 billion in new 

private investment in our Nation’s communities. This equates to a three to one return on investment. 

CDBG funds also help to reduce crime and build a skilled workforce. Various 

parks and recreation departments throughout the country use CDBG funding in coordination with other community organizations, to provide educational services, employment training and youth development initiatives to low-income youth and their 

families. For example, in Phoenix, Arizona, the city parks and recreation department partners with a local non-profit called Kids Cafe ́ to provide a safe and secure 

after school environment for children. This program provides low-income children 

with healthy, nutritious meals, as well as tutors and mentors, and engages them 

in recreational sports. 

For more than 30 years the CDBG program has played a critical role in revitalizing neighborhoods and improving the quality of life in communities throughout 

this country. CDBG funding provides valuable resources that allow communities to 

tailor projects to address their unique community needs. From ensuring the energy 

efficiency of public buildings to reducing crime and providing safe recreational infrastructure, CDBG funding is building healthy, livable and economically viable communities. The National Recreation and Park Association strongly supports increased 

funding for the CDBG program and calls on Congress to fund the program at $4.2 

billion in fiscal year 2011. 

Thank you for this opportunity to present testimony. 

(i) 

LIST OF WITNESSES, COMMUNICATIONS, AND 

PREPARED STATEMENTS 

Page 

Alves, Theodore, Inspector General, National Rairoad Passenger Corporation 

(Amtrak) ................................................................................................................ 152 

Prepared Statement of ..................................................................................... 153 

American Indian Higher Education Consortium, Prepared Statement of the ... 354 

Benjamin, Hon. Peter, Chairman, Board of Directors, Washington Metropolitan Area Transit Authority ................................................................................. 285 

Prepared Statement of ..................................................................................... 291 

Statement of ...................................................................................................... 290 

Bertram, Chris, Chief Financial Officer, Assistant Secretary for Budget and 

Programs, Department of Transportation .......................................................... 1 

Boardman, Hon. Joseph H., President and Chief Executive Officer, National 

Railroad Passenger Corporation (Amtrak) ......................................................... 145 

Prepared Statement of ..................................................................................... 147 

Bond, Senator Christopher S., U.S. Senator From Missouri: 

Opening Statements of ........................................................... 4, 64, 123, 182, 229 

Questions Submitted by ................................................................................... 218 

Calvaresi-Barr, Ann, Deputy Inspector General, Department of Transportation ..................................................................................................................... 161

Prepared Statement of ..................................................................................... 162 

Cardin, Senator Benjamin L., U.S. Senator From Maryland: 

Prepared Statement of ..................................................................................... 293 

Statement of ...................................................................................................... 293 

City of Maricopa, Arizona, Prepared Statement of the ........................................ 357 

Coalition of Northeastern Governors, Prepared Statement of the ...................... 345 

Cochran, Senator Thad, U.S. Senator From Mississippi, Questions Submitted 

by ........................................................................................................................... 118 

Collins, Senator Susan, U.S. Senator From Maine: 

Prepared Statement of ..................................................................................... 7 

Question Submitted by ..................................................................................... 117 

Statement of ...................................................................................................... 7 

Cook Inlet Housing Authority, Prepared Statement of the .................................. 358 

Corbett, Jack, Director, MetroRiders.Org .............................................................. 326 

Prepared Statement of ..................................................................................... 328 

DeBernardo, Francis, Chairman, Riders’ Advisory Council ................................. 331 

Prepared Statement of ..................................................................................... 332 

Donohue, Kenneth M., Inspector General, Federal Housing Administration, 

Department of Housing and Urban Development ............................................. 225 

Prepared Statement of ..................................................................................... 251 

Donovan, Hon. Shaun, Secretary, Office of the Secretary, Department of 

Housing and Urban Development .................................................................... 61, 191 

Prepared Statements of ................................................................................. 73, 194 

Questions Submitted to .................................................................................... 218 

Statement of ...................................................................................................... 69 

Ely Shoshone Tribe Housing Department, Prepared Statement of the .............. 360 

Feinstein, Senator Dianne, U.S. Senator From California, Questions Submitted by ............................................................................................................... 113 

Fond du Lac Band of Lake Superior Chippewa, Prepared Statement of the ..... 360 
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Hoopa Valley Tribe, Prepared Statement of the ................................................... 364 

Illinois Department of Transportation, Prepared Statement of the .................... 350 

Jeter, Jackie, President, Amalgamated Transit Union, Local 689 ...................... 323 

Prepared Statement of ..................................................................................... 324 

Lahood, Hon. Ray, Secretary, Office of the Secretary, Department of Transportation ............................................................................................................... 1, 179 

Prepared Statements of ................................................................................... 9, 186 

Statements of.................................................................................................... 8, 184 

Lautenberg, Senator Frank R., U.S. Senator From New Jersey, Questions 

Submitted by ........................................................................................................ 116 

Leahy, Senator Patrick J., U.S. Senator From Vermont, Questions Submitted 

by ........................................................................................................................... 113 

Mikulski, Senator Barbara A., U.S. Senator From Maryland, Statement of ..... 287 

Murray, Senator Patty, U.S. Senator From Washington: 

Opening Statements of .................................................. 1, 61, 121, 179, 225, 285 

Questions Submitted by........................................................................ 36, 110, 282 

National AIDS Housing Coalition, Prepared Statement of the ........................... 372 

National American Indian Housing Council, Prepared Statement of the ........... 367 

National Association of Railroad Passengers, Prepared Statement of the ......... 365 

National Recreation and Park Association, Prepared Statement of the ............. 376 

New York State Department of Transportation, Prepared Statement of the ..... 348 

Railway Supply Institute, Inc., Prepared Statement of the ................................. 363 

Sarles, Richard, Interim General Manager, Washington Metropolitan Area 

Transit Authority ................................................................................................. 297 

Prepared Statement of ..................................................................................... 298 

Stevens, Hon. David H., Commissioner, Federal Housing Administration, Department of Housing and Urban Development .................................................. 225 

Prepared Statement of ..................................................................................... 236 

Statement of ...................................................................................................... 233 

Stewart, Na Tanya Davina, Prepared Statement of ............................................. 371 

Szabo, Hon. Joseph C., Administrator, Federal Railroad Administration, Department of Transportation ................................................................................. 121 

Prepared Statement of ..................................................................................... 130 

Statement of ...................................................................................................... 128 

University Corporation for Atmospheric Research (UCAR), Prepared Statement of the ............................................................................................................ 373 
(iii) 

SUBJECT INDEX 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

FEDERAL HOUSING ADMINISTRATION

Page 

Additional Committee Questions ............................................................................ 282 

CBO Scoring ............................................................................................................. 244 

Continuing Concerns ............................................................................................... 263 

Default Rate ............................................................................................................. 280 

Description of HUD’s Loss Mitigation Program Tools .......................................... 250 

Facilitating our Recovery, But Protecting the Taxpayer ...................................... 248 

FHA ........................................................................................................................... 233 

Facilitating Recovery ........................................................................................ 237 

Financial Condition .......................................................................................... 259 

Losses ................................................................................................................ 268 

Policy Changes to Address Risk and Strengthen Finances .......................... 253 

Priorities for Investments ................................................................................ 283 

Risks .................................................................................................................. 282 

Staffing Shortfalls ............................................................................................ 232 

Financial Reform ..................................................................................................... 271 

GSE Losses ............................................................................................................... 278 

GSEs Reform ............................................................................................................ 266 

Helping Prevent an Economic Catastrophe ........................................................... 236 

Historical Perspective .............................................................................................. 251 

Home: 

Affordable Modification Program (HAMP)................................................. 279, 284 

Equity Conversion Mortgage (HECM) ............................................................ 245 

HUD Inspector General Efforts on Fraud and Abuse .......................................... 276 

HUD’s Central Role in Preventing Foreclosures and Stabilizing Neighborhoods ..................................................................................................................... 245 

Increased Risks to FHA .......................................................................................... 260 

January Policy Announcements and Legislative Requests .................................. 239 

Making Home Affordable Program ........................................................................ 272 

MMI Fund ................................................................................................................ 264 

New Short Sale Program ........................................................................................ 283 

Operation Watchdog ................................................................................................ 258 

Rebuilding FHA’s Capital Reserves ....................................................................... 238 

Recovery of Losses ................................................................................................... 265 

Reforms to Date ....................................................................................................... 239 

Strategic Defaults .................................................................................................... 280 

The Current Landscape ........................................................................................... 252 

OFFICE OF THE SECRETARY

A Changing Environment ....................................................................................... 73 

Additional Committee Questions ....................................................................... 110, 218 

Affordable Housing for Seniors ............................................................................... 110 

Backlog in Public Housing Capital Improvements ............................................... 94 

Barriers to New Starts Program ............................................................................ 214 

Building the Framework—HUD’s Sustainability Partnerships With Other 

Agencies ................................................................................................................ 196 

Challenge Grants ..................................................................................................... 209 

Choice Neighborhoods........................................................................................... 72, 223 

Program ............................................................................................................. 107 

vs. HOPE VI ..................................................................................................... 67 
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Community Development Fund Catalytic Investment Competition Grant Distribution ................................................................................................................ 114 

Drug Elimination Program ..................................................................................... 116 

Emergency Capital Needs ....................................................................................... 117 

Energy Innovation Fund ......................................................................................... 192 

Ensuring HUD’s Long Term Leadership on Sustainable Homes and Communities ...................................................................................................................... 197 

Federal Housing Administration.............................................................. 62, 67, 70, 89 

Mortgage Reform .............................................................................................. 109 

Goal: 

1.—Strengthen the Nation’s Housing Market to Bolster the Economy 

and Protect Consumers ................................................................................ 76 

2.—Meet the Need for Quality Affordable Rental Homes ............................. 78 

3.—Utilize Housing as a Platform for Improving Quality of Life ................ 82 

4.—Build Inclusive and Sustainable Communities Free from Discrimination ................................................................................................................. 84 

5.—Transform the Way HUD Does Business ................................................. 87 

Homelessness ........................................................................................................... 72 

Housing First ........................................................................................................... 117 

HUD: 

EPA and DOT Contributions to Sustainable Housing and Community 

Initiative Program ........................................................................................ 219 

VASH Program ................................................................................................. 96 

HUD’s: 

2010 Transformation ........................................................................................ 73 

Role .................................................................................................................... 213 

Increase in Annual Premium .................................................................................. 90 

Investing in People and Places ............................................................................... 75 

Laying the Foundation—Recovery Act Investments in Sustainable Homes 

and Communities ................................................................................................. 195 

Leveraging ................................................................................................................ 221 

Livability .................................................................................................................. 211 

Low-income Housing Tax Credits ........................................................................... 111 

Making Home Affordable Program ...................................................................... 92, 100 

Manufactured Housing ............................................................................................ 118 

Measurement Criteria ............................................................................................. 211 

Mortgage Modification ............................................................................................. 63 

Neighborhood Stabilization Program Funding Distribution ................................ 113 

Office of Sustainable Housing and Communities .................................................. 191 

Oversight .................................................................................................................. 222

Prioritizing Funding ................................................................................................ 220 

Project Costs ............................................................................................................. 222 

Proposed Cuts.......................................................................................................... 64, 65 

Public Housing Capital Fund ............................................................................... 95, 116 

Regional Planning Grants ....................................................................................... 201 

Relationship Between HUD, EPA and DOT in the Sustainable Housing and 

Communities Initiatives Program ...................................................................... 219 

Requirements for Receiving a Grant ...................................................................... 220 

Roadmap to Transformation ................................................................................... 75 

Rural: 

America ............................................................................................................. 98 

Homelessness .................................................................................................... 101 

Housing Fund ................................................................................................... 66 

Section: 

8 and New Initiatives ....................................................................................... 63 

811 ..................................................................................................................... 113 

202................................................................................................................. 111, 113 

And 811 Programs ..................................................................................... 104 

And Low-Income Housing Tax Credits .................................................... 111 

Housing for Low-Income Seniors ............................................................. 115 

Supportive Housing for the Elderly ......................................................... 117 

Supportive Housing for the Elderly Act .................................................. 111 

Self-Help: 

Home Ownership Program (SHOP) Funding ................................................. 115 

Housing Program .............................................................................................. 112 

Shared Equity Programs ......................................................................................... 99 

Small and Rural Communities ............................................................................... 207 

Staff Turnover .......................................................................................................... 222 
Page

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Staffing ..................................................................................................................... 221 

For Initiative ..................................................................................................... 104 

State of the Housing Market .................................................................................. 91 

Supportive Housing for the Elderly Act ................................................................. 110 

Sustainability vs. Livability ............................................................................... 220, 221 

Sustainable Communities....................................................................................... 72, 99 

Initiative ............................................................................................................ 102 

The Need for Federal Leadership to Advance Sustainable Homes and Communities ...................................................................................................................... 194 

Transforming Rental Assistance ............................................................ 66, 71, 95, 106 

Transparency ........................................................................................................... 218 

For Taxpayers ................................................................................................... 68 

In HUD Programs ............................................................................................ 101 

DEPARTMENT OF TRANSPORTATION 

FEDERAL RAILROAD ADMINISTRATION

Alternative Funding Sources/Grants ..................................................................... 135 

Americans with Disabilities Act ............................................................................. 142 

Amtrak Fleet ............................................................................................................ 132 

Equipment Refresh .................................................................................................. 137 

5-Year Capital Plan ................................................................................................. 136 

FRA Management and Administration .................................................................. 131 

High-Speed Rail................................................................................................... 131, 141 

National Passenger Rail Corporation (Amtrak) .................................................... 132 

Positive Train Control ............................................................................................. 134 

Rail: 

Research and Development .............................................................................. 131 

Safety ................................................................................................................. 140 

Railroad Safety ........................................................................................................ 130 

OFFICE OF INSPECTOR GENERAL

Amtrak has Made Improvements in Financial Management .............................. 165 

ARRA Projects .......................................................................................................... 170 

Capital Plan and Fleet Plan Funding .................................................................... 167 

Devils Lake ............................................................................................................... 175 

Fleet Maintenance ................................................................................................... 173 

FRA Faces Significant Challenges in Meeting its Mandate ................................ 164 

Funding Corridors ................................................................................................... 173 

Legislation Dramatically Expanded FRA’s Role ................................................... 163 

Role of FRA .............................................................................................................. 171 

Upgrading the Amtrak Fleet .................................................................................. 168 

OFFICE OF THE SECRETARY

Additional Committee Questions ............................................................................ 36 

Capacity-building Funding ..................................................................................... 212 

Children in Air Traffic Control Tower ................................................................... 15 

Cost Effectiveness .................................................................................................... 214 

Cross Border Trucking ............................................................................................ 217 

Current DOT and Partnership Efforts ................................................................... 187 

Cyber Security ......................................................................................................... 35 

Data Collection for Small Communities ................................................................ 208 

Ferry Funding .......................................................................................................... 28 

Fiscal Year 2011 Budget Request .......................................................................... 189 

Freight Rail .............................................................................................................. 19 

Funding for Infrastructure ...................................................................................... 209 

High Speed Rail......................................................................................... 10, 17, 25, 31 

Highway 

Safety ................................................................................................................. 10 

Trust Fund ........................................................................................................ 204 

Infrastructure Fund ................................................................................................. 24 

Interagency Partnership for Sustainable Communities ....................................... 186 

Investing in Transportation Infrastructure ........................................................... 11 

Livability.................................................................................................................. 11, 29 

Livable Communities: 

Promote Quality of Life .................................................................................... 187 
Page

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Livable Communities—Continued 

Investments Support Both Rural and Urban Communities ......................... 188 

Looking Forward ...................................................................................................... 189 

Metropolitan Planning Organizations .................................................................... 206 

Mexican Trucks ..................................................................................................... 28, 217 

National: 

Highway Traffic Safety Administration Budget Request .............................. 13 

Infrastructure Innovation and Finance Fund ................................................ 15 

NextGen .................................................................................................................... 10 

Non-motorized Transportation ............................................................................... 202 

Pennsylvania Expressway ....................................................................................... 22 

Positive Train Control ............................................................................................. 27 

Rail Transit Safety.................................................................................................. 10, 27 

Recovery Act ............................................................................................................. 11 

SAFETEA–LU .......................................................................................................... 21 

Small Towns and MPOs .......................................................................................... 210 

TIGER Program ....................................................................................................... 26 

Toyota Recalls .......................................................................................................... 12 

Transit-oriented Development ................................................................................ 206 

Transportation Investments ................................................................................... 210 

NATIONAL RAILROAD PASSENGER CORPORATION (AMTRAK) 

Accessible Stations Development Plan .................................................................. 151 

Amtrak’s Aging Fleet .............................................................................................. 146 

Challenge: 

1.—Competing Successfully for New State Supported Services and Then 

Delivering High Quality Cost-Effective Service ......................................... 154 

2.—Improving Human Capital Management Practices, Including Strategic Workforce Planning, and Training and Development ...................... 156 

3.—Managing the Risks Associated With Amtrak’s Goal of Modernizing 

its Information Technology Systems and Infrastructure ........................... 157 

4.—Managing Risks Associated With Projects Funded Through the Recovery Act ............................................................................................................ 158 

Fiscal Year 2011 Request ........................................................................................ 148 

Fleet Plan ................................................................................................................. 148

WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY 

Budget Shortfall ....................................................................................................... 318 

Corrective Action Plans ........................................................................................... 319 

Financial Stability ................................................................................................... 302 

Measuring Progress and Performance in Metro Safety ........................................ 311 

Metro: 

Access ................................................................................................................ 320 

Modernization ................................................................................................... 315 

Serves the Federal Government ...................................................................... 291 

Metro’s Capital Needs ............................................................................................. 292 

Safety ........................................................................................................................ 299 

Service Reliability .................................................................................................... 301 

Top Safety and Hazard Concerns ........................................................................... 313 

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