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S. HRG. 111–1247 

INNOVATIVE PROJECT FINANCE 

HEARING 

BEFORE THE

COMMITTEE ON 

ENVIRONMENT AND PUBLIC WORKS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 28, 2010 

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

( 

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

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

BARBARA BOXER, California, Chairman 

MAX BAUCUS, Montana 

THOMAS R. CARPER, Delaware 

FRANK R. LAUTENBERG, New Jersey 

BENJAMIN L. CARDIN, Maryland 

BERNARD SANDERS, Vermont 

AMY KLOBUCHAR, Minnesota 

SHELDON WHITEHOUSE, Rhode Island 

TOM UDALL, New Mexico 

JEFF MERKLEY, Oregon 

KIRSTEN GILLIBRAND, New York 

ARLEN SPECTER, Pennsylvania 

JAMES M. INHOFE, Oklahoma 

GEORGE V. VOINOVICH, Ohio 

DAVID VITTER, Louisiana 

JOHN BARRASSO, Wyoming 

MIKE CRAPO, Idaho 

CHRISTOPHER S. BOND, Missouri 

LAMAR ALEXANDER, Tennessee 

BETTINA POIRIER, Staff Director 

RUTH VAN MARK, Minority Staff Director 
(III) 

C O N T E N T S 

Page 

SEPTEMBER 28, 2010 

OPENING STATEMENTS 

Boxer, Hon. Barbara, U.S. Senator from the State of California ........................ 1 

Alexander, Hon. Lamar, U.S. Senator from the State of Tennessee ................... 5 

Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland ................ 5 

Merkley, Hon. Jeff, U.S. Senator from the State of Oregon ................................ 8 

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

statement .............................................................................................................. 42 

WITNESSES 

Kienitz, Roy, Under Secretary for Policy, U.S. Department of Transportation . 8 

Prepared statement .......................................................................................... 11 

Responses to additional questions from: 

Senator Boxer ............................................................................................ 17 

Senator Cardin .......................................................................................... 18 

Senator Inhofe ........................................................................................... 20 

Villaraigosa, Antonio R., Mayor, City of Los Angeles, California ........................ 30 

Prepared statement .......................................................................................... 33 

Kopelousos, Stephanie C., Secretary of Transportation, Florida Department 

of Transportation ................................................................................................. 43 

Prepared statement .......................................................................................... 45 

Seltzer, David, Principal, Mercator Advisors LLC ................................................ 55 

Prepared statement .......................................................................................... 57 

Response to an additional question from Senator Inhofe ............................. 65 

ADDITIONAL MATERIAL 

Testimony submitted by the Riverside County Transportation Commission, 

September 27, 2010 .............................................................................................. 70 

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INNOVATIVE PROJECT FINANCE 

TUESDAY, SEPTEMBER 28, 2010 

U.S. SENATE, COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS, Washington, DC. 

The full Committee met, pursuant to notice, at 10 a.m. in room 

406, Dirksen Senate Office Building, Hon. Barbara Boxer (Chairman of the full Committee) presiding. 

Present: Senators Boxer, Alexander, Cardin, and Merkley. 

OPENING STATEMENT OF HON. BARBARA BOXER, 

U.S. SENATOR FROM THE STATE OF CALIFORNIA 

Senator BOXER. Good morning, everybody, and welcome to our 

hearing. 

There is a growing consensus that smart investments in transportation are an important part of the solution to the serious economic challenges we are facing. We must make sure that our existing infrastructure is sound and plan for future investments that 

create jobs, maximize economic development, reduce our dangerous 

dependence on foreign oil, clean up our air, and strengthen our 

global competitiveness. 

In these difficult economic times it is more important than ever 

to look for tools that can stretch the resources we have. We need 

to get the maximum benefit for every transportation dollar we 

spend. 

Today’s hearing is going to focus on potential changes to Federal 

surface transportation programs and funding that will encourage 

additional State, local, and private investments in transportation 

and accelerate the benefits of those investments. 

The 30/10 Initiative in Los Angeles County is an example of how 

timely Federal assistance can leverage local investments in transportation. In 2008 the citizens of Los Angeles County approved a 

half a cent sales tax dedicated to transportation, a powerful statement that the people of L.A. County are willing to help pay for a 

transportation system they need now. 

This measure, known as Measure R, will generate an estimated $40 billion over the next 30 years, including $13 billion for transit 

projects throughout the County. Mayor Villaraigosa, who is going 

to be joining us, has advocated the idea that with Federal assistance Los Angeles could speed up delivery of the transit projects expected to be funded with Measure R so they could be funded over 

10 rather than 30 years. 

I see the Mayor right behind Roy Kienitz. Welcome. 
2 

Accelerating these projects would create an estimated 160,000 

jobs while easing congestion and reducing dangerous pollution. 

That means healthier families and a healthier economy in the L.A. 

region. 

I believe the 30/10 Initiative can serve as a model that can be 

replicated in many cities and States and counties across this country. And as we develop the next comprehensive surface transportation law, we have this opportunity to make changes to programs 

that will leverage resources to create more jobs and build the highway and transit systems our communities need faster. 

For example, I have been looking at changes to part of the existing transportation law called TIFIA, Transportation Infrastructure 

Finance and Innovation Act. TIFIA helps communities leverage 

their transportation resources by providing loans and loan guarantees. According to the Federal Highway Administration, every dollar made available through TIFIA can mobilize up to a total of $30 

in transportation investments. So at a time when we are trying to 

make sure our deficit does not increase, we want to leverage investments. This is the word, leverage. Everybody comes out the winner 

here. 

We need that kind of tool as we look at the next Reauthorization 

Bill. TIFIA has been a successful program. But improvements are 

needed if it is going to achieve the kind of transformative results 

we all want to see moving forward. Already, mayors from across 

the country are asking for greater opportunities for this kind of innovative partnership. 

I would like to place into the record a resolution from the U.S. 

Conference of Mayors calling for expansion of TIFIA and bonding 

programs so communities can accelerate job creation and the other 

benefits of transportation improvements. So, without objection, we 

will put that mayors’ letter into the record. 

I want to thank Transportation Secretary LaHood for his commitment to this idea—this 30/10 Initiative—and for agreeing to 

work on expanding this model in the upcoming transportation bill. 

We could not ask for a better partner when it comes to forward 

thinking transportation issues. 

So, I look forward to hearing from today’s witnesses on the best 

ways we can reform our national transportation policy so we can 

better serve the needs of local communities across this country. We 

all know that the 21st century transportation system is absolutely 

essential to creating jobs and ensuring future economic prosperity. 

There is no leading nation on earth that could be a leading nation 

if they cannot move people, if they cannot move goods. Everything 

would come to a halt. 

So, I am very happy that we have these two panels. We are going 

to need everybody’s ideas and advice and everybody’s engagement 

as we work across party lines to craft our new transportation authorization bill. 

Senator Alexander. 

[The referenced material follows:] 
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OPENING STATEMENT OF HON. LAMAR ALEXANDER, 

U.S. SENATOR FROM THE STATE OF TENNESSEE 

Senator ALEXANDER. Thanks, Madam Chairman. 

This is a time when we need to be restraining growth on spending. But if you were in a private sector and all you could think of 

to do over a long period of time was to freeze spending you would 

be fired for not being willing to make hard decisions and not being 

a good manager. 

So, while freezes may help us get off to the right track, over time 

we are going to have to remember that there are some things in 

which we need to invest and other places we need to cut. And one 

area where we must have a good, a good system to stay competitive 

in the world is in transportation. 

So, I look forward to hearing the witnesses’ ideas, and I thank 

the Chairman for calling the hearing. 

Senator BOXER. Thank you so much, Senator. 

Senator Cardin. 

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 

U.S. SENATOR FROM THE STATE OF MARYLAND 

Senator CARDIN. Thank you, Madam Chair. 

I just really want to thank you for the series of hearings that you 

have had as we determine the next surface transportation reauthorization bill. I think we are well positioned to bring a bill out, 

thanks to your leadership. And thank you for this hearing because 

this is a critically important issue, how we are going to finance it, 

not just at the national level but with our partners at the States. 

For a long time we relied primarily on the gasoline tax—not just 

at the national level, but our States—to finance our transportation 

programs. It may have worked in the past, but it will no longer 

work today or in the future because part of our energy policy must 

be to use less fossil fuels. We are investing a lot of money in conservation, a lot of money in alternative fuels. That is what we need 

to do. But on the other hand, if that is all we rely upon to finance 

our transportation programs, it is not going to work. 

So, we need to look at new ways to do this. With our tremendous 

needs out there, I agree with Senator Alexander, we are going to 

have to make tough choices. But we know that for the sake of our 

economy, for the sake of our job growth and competitiveness, we 

need to invest in a stronger transportation infrastructure. And part 

of that includes investing much more aggressively in public transportation which will help us with our energy policy as well as with 

quality of life. 

In my State of Maryland, Governor O’Malley has put together a 

Blue Ribbon Commission to take a look at transportation funding 

in our State. I know that is being done in many others, and I know 

you need to take a look at the proposals that come out of these 

State commissions. They are looking at private-public partnerships 

to advance transportation projects. 

In Maryland we are looking at value capture as one of the ways 

of doing it, consistent with our Smart Growth Initiatives in our 

State where we think we can have win-win programs, that a partner with the private sector enable us more flexible financing in 

order to advance economic growth in Maryland and our Nation. 
6 

The bottom line is we have got to get this right. This is a matter 

of job growth. This is a matter of economic competitiveness. And 

we need to make sure that at the end of the day we have the financing necessary to keep America competitive. 

And with that, Madam Chair, I will ask consent to put my entire 

statement in the record and look forward to our witnesses. 

[The prepared statement of Senator Cardin follows:] 

STATEMENT OF HON. BENJAMIN L. CARDIN, 

U.S. SENATOR FROM THE STATE OF MARYLAND

Thank you, Madam Chairman, for holding this hearing today examining a critical 

issue we need to address as we work toward reauthorizing the surface transportation program for the country. 

The Highway Trust Fund and its revenue sources—namely the gas tax—have 

been a reliable mechanism for financing highway and transit programs for five decades. This is no longer the case. 

The combination of higher fuel prices, a growing number of fuel efficient vehicles 

on the road, and a stagnant gas tax rate has caused transportation expenses to outpace transportation revenues. 

A critical part of U.S. energy policy will be in the area of increased energy conservation and energy efficiency. These are policies that will reduce our reliance on 

foreign oil, reduce carbon emissions, and during these trying economic times save 

consumers money. 

To many this means driving less, purchasing fuel efficient vehicles, perhaps even 

buying electric cars like the new Nissan Leaf or plug-in hybrids like the Chevy Volt, 

or using public transportation to get around. 

Unfortunately, funding for our surface transportation system suffers when people 

make these thoughtful and positive transportation decisions. This is because transportation funding is so reliant upon sustained—if not increased—fossil fuel consumption. 

This divergence in policy and our cultural shift away from rampant fuel fossil consumption mean we need to rethink how we raise revenue to pay for future transit 

and road projects. 

States have faced tremendous challenges to raise the funds needed to complete 

transportation projects. Many States are reevaluating the means in which they raise 

revenue and fund vital transportation projects. 

This has certainly been the case in Maryland. As a result Maryland has assembled a Blue Ribbon Commission to help tackle the enormous task of finance assessment and revenue stream development. 

The Commission is comprised of 28 different stakeholders from the various transportation sectors including freight rail, transit providers like WMATA, and highway 

builders. Transportation advocacy organizations like Triple-A and Smart Growth organizations as well as labor unions are all working together to help the State of 

Maryland tackle funding questions as it relates to: 

• Funding sources and structure of the Maryland Transportation Trust Fund. 

• Short- and long-term transit, highway, and pedestrian/bicycle construction and 

maintenance funding needs. 

• Options for public-private partnerships, including partnerships with local governments. 

• The structure of regional transportation authorities and the ability of those authorities to meet transportation needs. 

• The impact of economic development and smart growth on transportation funding. 

• Options for sustainable, long-term revenue sources for transportation. 

This collaborative effort will bring about the next generation of financing mechanisms the State will use to advance its transportation goals for the future. 

With growing fiscal constraints on the State, Maryland is also engaging in a number of private-public partnerships to advance transportation projects. 

One of the more common methods being used to maximize the benefits of both 

public and private investment in a project is through a ‘‘value-capture’’ system. 

Incorporating publicly funded infrastructure into private land values is helping finance public infrastructure across the State. 

As residents and business owners continue to place greater value on mobility and 

access to multi-modal transportation options, value capture financing is helping advance Smart Growth initiatives throughout Maryland. 
7 

1Political Economy Research Institute, How Infrastructure Investments Support the U.S. 

Economy: Employment, Productivity and Growth (January 2009), 26. http:// 

www.peri.umass.edu/fileadmin/pdf/otherlpublicationltypes/greenleconomics/ 

PERIlInfrastructurelInvestments 2 Clean Water Council, Sudden Impact: Assessment of Short-Term Economic Impacts of Water 

and Wastewater Projects in the United States (June 2009), 6. http://www.nuca.com/files/public/ 

CWClSuddenlImpactlReportlFINAL.pdf 3 Id. 

4 Id. 12. 

5The United States Conference of Mayors, Mayors Water Council, Local Government Investment in Municipal Water and Sewer Infrastructure: Adding Value to the National Economy 

(August 2008), i. http://usmayors.org/urbanwater/documents/ 

LocalGovt%20InvtInMunicipalWaterandSewerInfrastructure.pdf 

By increasing the value of land surrounding transit and other targeted transportation facilities, the State in partnership with municipalities can incentivize compact, accessible growth so developers can get the greatest amount of return on investments, particularly in transit corridors. 

By capturing profits gleaned through public spending, value capture also provides 

greater funding opportunities for community reinvestment and job growth. 

Tackling how we finance transportation infrastructure on a national scale is no 

small task. 

There are certainly lessons we can learn from the States, but ultimately we need 

financing mechanisms that complement the national goals we set for the Nation’s 

transportation infrastructure. 

As we work to reduce congestion and fossil fuel consumption and improve transport efficiency and the safety of our Nation’s transportation infrastructure we need 

financing mechanisms that work toward these goals as well. 

Public investment in transportation infrastructure is incredibly important to getting America back to work, and it is imperative we develop sustainable and equitable means to pay for these investments. 

I also look forward to working with colleagues on this Committee to develop this 

critical aspect to the next surface transportation authorization bill, which must be 

a priority for this Committee to complete. 

President Obama’s Labor Day speech calling for renewed investment in our Nation’s transportation infrastructure is a welcome sign. Building roads, bridges, new 

high speed rail lines and developing efficient transit systems are all incredibly important initiatives to get thousands of Americans back to work on projects that will 

improve American competitiveness in the global economy and vastly improve our 

citizens’ quality of life. 

A notable omission from the President’s discussion of infrastructure investment 

is a call for critical investment in our Nation’s crumbling water infrastructure. 

In addition to investments in transportation I would like to take this opportunity 

to point out that we need to make similar investments in water infrastructure. 

Infrastructure investment in water systems has one of the highest job creation potentials when compared across other broad categories of public infrastructure investment. 1

A recent report by the Clean Water Council demonstrates that investments in 

water infrastructure would have ‘‘immediate, substantial and far-reaching effects on 

the economy.’’ 2

In examining short-term economic impacts, a $1 billion investment in water infrastructure: 

• Could result in an estimated 20,003 to 26,669 jobs across the Nation, with more 

than one-half of the jobs created in industries other than water and wastewater construction. 

• Almost triples in size throughout the national economy based on its total demand for goods and services. 3

• In California, would create 12,390 to 19,574 jobs, with about 7,000 of these jobs 

in the pipe construction sector where average earnings of $68,000 exceed the statewide median household income. 4

Over the long-term, the U.S. Conference of Mayors recently found that: 

• $1 of water and sewer infrastructure investment increases Gross Domestic 

Product (GDP) by $6.35. 

• And every job in water and sewer infrastructure creates 3.68 jobs in the national economy to support that job. 5

I recognize the subject of today’s hearing is on transportation finance, but given 

our Committee’s broader jurisdiction and the focus Mr. Kienitz’s written testimony 

put on the President’s Labor Day announcement, I wanted to raise this issue. 
8 

I want to remind the Administration and my colleagues that we must also make 

much needed investments in water infrastructure as well as investments in our 

transportation infrastructure. 

Senator BOXER. Thank you so much. 

Senator Merkley. 

OPENING STATEMENT OF HON. JEFF MERKLEY, 

U.S. SENATOR FROM THE STATE OF OREGON 

Senator MERKLEY. Thank you, Madam Chair. 

In Oregon, we have had a process of looking for the choke points, 

if you will, the places where strategic investment would make a 

real difference. And we have had a series of programs called 

ConnectOregon, ConnectOregon I, ConnectOregon II and 

ConnectOregon III. 

Certainly, as we wrestle with addressing key parts of our transportation system financing is a fundamental challenge. And I am 

interested to hear all of the creative ideas that we will be discussing today, and thank you for coming and sharing your 

thoughts. 

Senator BOXER. Thank you. 

So, with that, we are honored that we have been joined by Hon. 

Roy Kienitz, Under Secretary for Policy, U.S. Department of Transportation. 

Will you not proceed, please? 

STATEMENT OF ROY KIENITZ, UNDER SECRETARY FOR 

POLICY, U.S. DEPARTMENT OF TRANSPORTATION 

Mr. KIENITZ. Thank you, Madam Chair. Thank you, Senators. 

Good morning. 

On Labor Day, as I think everyone here knows, the President 

gave a speech in which he made the first major policy announcement about transportation to come from him since taking office. 

And the big news is that he is going to throw his support behind 

a 6-year reauthorization of the transportation program here, something that I think every member of this Committee has supported 

for a while. So, I hope we can add our voices to yours. 

There are a couple of features of that announcement that I wanted to highlight, the first of which is that we believe funding levels 

need to be higher above the current baseline. And so we want to 

work with folks on that going forward, to figure out how to do that 

in a way that is paid for. The second of which is, given the economic situation right now, it seems appropriate to frontload a significant share of that money and we have suggested the first $50 

billion to be made available as soon as possible. 

So, that is how we start this week. That program could have 

some very tangible accomplishments. That is hopefully enough resources to allow us to build or rebuild 150,000 miles of roadway, 

construct or maintain 4,000 miles of rail, and in the first year we 

are hoping to have an aviation component, too, which is enough to 

do at least 150 miles of runway projects. But obviously over 6 years 

there is a huge amount that we can do. 

In that reauthorization there are a lot of opportunities. One of 

them that I want to talk about today is the idea of supporting programs like the Los Angeles 30/10 Program. I think for us that 
9 

starts with the first thing you have do, which is to name your goals 

if you want to make sure you are pursuing them. So, the Secretary 

has worked on a strategic plan which has been released in draft 

form and hopefully will be released in final form soon. 

And our strategic goals are pretty simple: economic competitiveness, safety, state of good repair of the existing system; environmental sustainability;, and community livability. The way to get toward those things starts to get a little bit more complicated. I testified before this Committee in March about the benefits of programs 

like the Los Angeles 30/10 Program, and we continue to believe 

that the Federal Government needs more and better tools to be 

able to support programs like that. 

The tools that we have right now, as I have testified before, are 

very focused on individual projects, what are the merits of this 

project, goes from where to where, what are the costs and benefits 

of a particular project. What they are proposing to do is a program 

of projects which, when pieced together, creates a network. And I 

think that is what we all agree is the future. We need to get away 

from segment by segment thinking and get toward network thinking. 

And that is the experience in Oregon and Maryland and other 

places where they look at the system as a whole. Some places we 

propose a transit investment, and some places we have to rebuild 

the bridge that already exist but configure it differently, whether 

it is for bicycles, pedestrians or cars or transit, and other places we 

need to invest in highway capacity. But that should be case by 

case. 

The problem with programs that we have now is that on the formula side they tend to be very divided by mode. A highway dollar 

is only a highway dollar, and a transit dollar is only a transit dollar. You cannot do this type of place by place thinking. And the second of which is, on the loan programs, the amounts are small, and 

the rules are very constrained. This created the problem for the 

Los Angeles Program in that they are proposing to do something 

that is 10 times bigger and much more flexible than what are current programs allow. 

These programs, the TIFIA program that the Chair mentioned, 

were imagined in an era when ideas like this were just little germs 

starting out, and so the size was small, and the ambitions were 

modest, and we have now reached an era where we have succeeded 

beyond our wildest dreams, but it means we need new tools. 

I will say the TIFIA program also currently has gone from a 

state 5 or 6 years ago of not having enough people to give the 

money away to now being horribly oversubscribed. And in fact, we 

have probably, I think, about $110 million in subsidy that we can 

provide to these projects, and we have had people who have asked 

for $13 billion in subsidy. I do not even know what the ratio is 

there, but it is 40 to 1 or something like that. 

So to remedy these flaws, in our surface reauthorization proposal 

that we are actively working on under the President and 

previewed, we are looking to come up with a method to address all 

of these problems, the first of which is to mix grants and loans in 

a flexible way, to do it without dependence on what mode of trans-
10 

portation is involved; it can be highway, transit, rail, ports, freight, 

passenger, whatever that is. 

Third, that the investment decisions are driven by sound analytics, whether that is ridership forecasting or benefit cost analysis. 

And fourth, that there is some kind of an organization, certainly 

inside DOT and perhaps involving others, whose job it is to do 

those multi-modal investments. 

The proposal that we have made to do that is this concept of an 

infrastructure bank. That has been somewhat poorly defined up 

until now, and perhaps that is our responsibility as much as anyone else’s. And the good news is the supporters read into it everything that they hope it can be, and the skeptics read into it everything they fear it might be. So, we hope that as time goes forward 

we can put together a proposal that clarifies a lot of those issues 

and that hope to put some fears to rest about what it might be. 

But our basic goal is to be able to do the things I listed, mix 

grants and loans, pick projects based on merit, and do the analysis 

about what to fund without regard to what mode of transportation 

it comes from. 

There are obviously other ways to achieve those goals, and this 

Committee can consider our proposal and many other ideas. But I 

think we are firm in believing that some decent portion of the Federal program needs to transition from being pure formula into a 

discretionary program which is designed to pick out the best possible investments on a nationwide level that help us advance toward our goals. 

So, I think our goal is to work with this Committee going forward and the other Committees of jurisdiction, hopefully as soon 

as possible, to put together a robust proposal. And perhaps one of 

the tests of it will be, does it meet the needs of the people who are 

on the cutting edge trying to do this stuff; they are leading, and 

are we able to follow. And we hope we will. 

So, thank you very much. 

[The prepared statement of Mr. Kienitz follows:] 
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Senator BOXER. Thank you very much. 

The infrastructure bank has some support in Congress. Other 

people oppose it. So the reason I focus on TIFIA is because it is 

part of our—it is already there. So, I think the Administration, I 

hope, will recognize that if something is already in law, it may be 

easier to go to that model. 

I am not saying give up on infrastructure bank. That would probably have to be done over in the Finance Committee, as I understand it. Is that correct? It would not be this Committee. But 

TIFIA is there. 

So, what I want to get at is this. The beauty—and you have 

been—the Department has been so supportive of the L.A. idea, and 

I just want to press you on the point. Here you have a situation 

where voters in a local area have voted to say this is so important 

to us, having our roads fixed and our transportation systems moving, that we are willing to tax ourselves a half a cent for 30 years. 

And we would hope—I would hope—that we can help those local 

communities that take that step. L.A. is not the only one. I mean, 

when I was in Marin County they always passed sales tax measures, and other counties and cities all over the country do it. 

So, what I am thinking as we go forward and we look at TIFIA, 

one way to expand the program beyond what it is now is to say if 

there is an area that does vote for a steady stream of revenue, that 

the Federal taxpayers know is coming, that if we can come in and 

accelerate those programs, because it will help with jobs, it will get 

people the results much quicker. I mean, some people have voted 

for this they will not be around in 30 years to see the final project 

completed. 

If this can be speeded up without risk to the taxpayers because 

the steady stream of revenue is coming, is that—are you open to 

working with us, assuming we have support from Senator Inhofe 

on the other side of the aisle? And we are not taking this up until 

after this election is over. It is not going to get caught up in election year politics. 

If we can reach some sort of agreement, would you work with us 

to reform TIFIA in such a way that it rewards those counties, cities, States that are willing to take that step so that we, the Federal 

Government, is not taking a risk? But what we are doing is accelerating the funding at the front end, kind of what your idea is for 

the 6-year bill, to accelerate the funding, do not take a risk with 

it, know you have the steady stream, and get it going over 10 

years, in this case. 

Mr. KIENITZ. In a word, yes, we are absolutely willing to do that. 

What I would say is two points, the first of which is the thinking 

that you are describing is very much in line with what we are looking at for the future of credit assistance going forward. 

The second point that I would make is that what we are discussing internally about how this infrastructure bank might actually work actually sounds a lot like what you exactly described. 

So, I am hoping by virtue of the policy process we have going forward we can end up with something that is, frankly, an iteration 

of the tools of TIFIA but larger, more flexible and more integrated 

with DOT’s discretionary grant programs. Because in some cases 

you have a self-help or local option sales tax community coming in 
23 

and saying I have 100 percent of the money I need, I just have it 

at the wrong time. 

Senator BOXER. Right. 

Mr. KIENITZ. Another case is you have a poor community, as Senator Kerry at our Banking Committee hearing the other day that 

Senator Merkley chaired, came in and spoke about Fall River, Massachusetts, which is willing to tax itself to pay for the projects that 

they need, but the community does not have the wealth necessary 

to pay 100 percent of the cost. In that case, you might want to do 

a part grant, part loan. And what we are looking to do is set up 

some kind of entity that can judge those things and make those decisions so that enough resources are able to help. 

Senator BOXER. And would it run as a—the Bank would put 

money back in as the funds came in to repay the Federal Government? Would it just be rolling back into the Bank? 

Mr. KIENITZ. We have not finally determined it, but my guess is 

no. Everywhere I go everyone says well you are not going to create 

another Fannie Mae, are you? And I think, frankly, that model is 

substantially out of favor at this moment. 

We are working on the Federal Credit Scoring Act, which is exactly how TIFIA works. You assess the risk of the loan up front, 

a subsidy amount is set aside, and then that is put back into the 

Treasury—— 

Senator BOXER. So the funds would go back into the Treasury? 

They would not go back into the infrastructure bank? 

Mr. KIENITZ. Right. And so the—— 

Senator BOXER. So how does the infrastructure bank get the 

funding? 

Mr. KIENITZ. It would get it through appropriations from Congress. You end up having that cycle because if Congress appropriates the funds, the funds go back to the Treasury, then Congress 

can appropriate them again. What it means is that the cycling of 

the dollars flows through here rather than flowing internally within the Bank. And I think that provides, to some degree, I do not 

know if a check on the process is the right way but a check in with 

authorizers to make sure people feel it is being used properly. 

Senator BOXER. Well, I think we ought to discuss that because 

my experience is when the funds go back to the general Treasury, 

then they do not specifically get used for transportation. That is 

why I like the Highway Trust Fund. 

I do not know where Fannie Mae and Freddie Mac come into this 

at all. It has nothing to do with it. Nothing. What I am talking 

about is like the Land and Water Conservation Fund, where the 

funds go there. What I am talking about is like the Highway Trust 

Fund, where the funds go there. So, I do not, I would never support 

an independent infrastructure bank. 

I am just telling you now—this is really important—you may not 

have the support for an infrastructure bank in other Committees. 

I do not even know about in this Committee. But in other Committees you may not have it. And so you need to be open to using your 

other tools, such as TIFIA, and making it function more like an infrastructure bank. It is a question of having to start off with a 

whole new idea and get the support for it as opposed to taking 
24 

something that is already in the law and changing it to meet the 

need. 

I am open to all the solutions. But this Committee, I think if I 

could just speak, I think, for most of the members, I think we are 

very interested in leveraging the dollars and not adding to the deficit. I mean, that is basically what the perfect world is. And so I 

hope you will work with us because I do not know whether the infrastructure bank has the support, and we do not control that here 

in this Committee. 

I am just trying to be realistic here. My goal—I do not care what 

we call it because I do not care about those things, but what I do 

care about is that the Federal Government is able to leverage State 

and local funding in a way that does not put our taxpayers at risk 

and accelerates projects and creates jobs and does it soon. With all 

that in mind, we have to be flexible on how we approach it. 

So, I hope the Administration will be flexible with us. Regardless 

of what we call it, if we are able to do those things, and if it goes 

through another Committee I am thrilled with it, it does not matter. But I just want to make sure that we do not lose this opportunity, the great idea that came out of Los Angeles that I think is 

going to benefit the whole country. Let us not lose it because we 

are tied to one particular way to, you know, accelerate the funding 

or generate the funding. 

Senator Alexander. 

Senator ALEXANDER. Thanks, Madam Chairman. 

Mr. Under Secretary, thank you for coming. When the Department makes its 6-year proposal, I think it would be a constructive 

idea to say this is how much money we have over the next 6 years 

based upon our revenue sources, and this is what we can pay for. 

In other words, say we have this much money, and we have this 

many requests, but to begin with we are going to recommend as 

the top priority for Federal funding the following proposals. And 

then, that is Section One. And Section Two would be, here are 

other areas where we think there is a Federal interest, and in 

these areas we need X more money. 

Would that not be a reality check on the Congress and the American people so we could see just what that much money will 

produce for us? 

Mr. KIENITZ. Yes, sir. That seems like a reasonable approach. I 

am trying to figure out how we would put that together. We have 

not made any internal decisions yet on total size of what the Administration is going to propose so we are not quite at a point to 

do that yet—— 

Senator ALEXANDER. Well, I know, which is why I am saying, in 

other words, I mean how much money are we going to have a year 

for the next 6 years based upon the current projections? 

Mr. KIENITZ. I think the current revenue allows us $290 billion 

over the next 6 years. I think that is something that is about right. 

Senator ALEXANDER. OK. Well, let us just say Congress says to 

you, all right, that is all you are going to get. What can you buy 

with that? And you say, well, let us all look at the country’s future, 

and for $290 billion a year this is what we can afford to do. And 

then you say after that, but we think there are some other things 

that need to be done, and they are going to cost Y, and before we 
25 

start talking about how to pay for them, let us talk about whether 

we need them. 

The reason I mention that is I was driving the other day in Tennessee along what we call I–840, which is a four-lane interstate 

quality highway that we built when I was Governor in 1985 primarily to—we built 100 miles of interstate highway, 100 percent 

paid for by the State government rather than 90 percent Federal 

and 10 percent State. That required our third gas tax increase in 

6 years. But nobody minded because it was for the purpose of 

bringing in the auto industry which is now one-third of our manufacturing jobs. 

There is always a discussion about what States should do, and 

what cities should do, and what the Federal Government should do. 

There is nothing to keep Tennessee from deciding that it wants the 

best highway system in the State and that it wants other transportation advantages and then finding a way to pay for it. And if we 

have poor communities within the State, and this happens every 

time we raised the gasoline tax which is the way we did it then, 

many of the rural areas benefited from the State-wide tax increase 

because they had, they are relying on property tax. 

So, I wonder if we should not get back to the idea of—and there 

is the further argument that States are able to build roads sometimes more rapidly and at less of a cost than the Federal Government because of Federal rules and regulations and the inability of 

Members of Congress to have a regular appropriations process from 

year to year. 

So, I am wondering whether this is not the time for a good dis- cussion about saying, OK, we have got about $290 billion a year 

for about 6 years, these are our priority projects, and they are paid 

for. Now, if you want anything else, you are going to have to build 

them in the States. And there may be a few other things that the 

Federal Government ought to do, and then we could focus our new 

money on that. 

Mr. KIENITZ. Yes, Senator, I think that makes an enormous 

amount of sense. What the data has actually shown is in fact the 

Federal contribution to the whole system that has not grown in 

pace with costs. And what you have seen over the last 10 to 15 

years is a gradual but inexorable increase in the share of the total 

system costs that is paid by State—— 

Senator ALEXANDER. Well, what is wrong with that? I mean, a 

cent on the gas tax in Tennessee is a cent on the gas tax in Tennessee whether the Federal Government raises it or whether the 

State government raises it. And we used to think—it may not still 

be true—that we could build a road faster and cheaper than the 

Federal Government could by the time we got through all the rules. 

Mr. KIENITZ. There is nothing necessarily wrong with it. My 

point is that it is already happening. The exact thing that you stated is already happening. I mean, when I worked in State government in Pennsylvania we spent huge amounts of energy trying to 

raise revenues locally or at the State level because we knew that, 

at least in those years, we were unlikely to get X amount—— 

Senator ALEXANDER. Well, to make a last point, and I look forward to discussing this with you because I think this is very important, there is a wide bipartisan attitude on this Committee toward 
26 

these issues. We do not want to just give the impression to cities 

and counties and States around the country there is big grab bag 

of money here for any project that you can compete for. 

I would rather us say, we have some very important Federal priorities, and we have enough money to pay for those. Now after 

that, States are going to have to do it, and the Federal Government 

is going to have to consider a discrete number of high priority 

projects that have national significance or regional significance, 

and we will find additional ways to pay for those. 

We might have to raise some money, we might have to do something like the Chairman is suggesting or expand something, but 

that would help us get away from the idea that there is just sort 

of an unlimited amount of money that everybody should go rush to 

compete for, and in this day and time, that might be welcome. 

Thank you, Madam Chairman. 

Senator BOXER. Thank you very much. 

Senator Cardin. 

Senator CARDIN. Thank you, Madam Chair. 

Mr. Under Secretary, thank you for your testimony. I am going 

to try to cover a couple of points, if I might, during the time that 

I have. 

I want to start first with my concern on the financing of public 

transit. My, I guess, major concern is that as you look at the historical way that we have financed transportation programs using a 

gasoline tax, the advocates for highways and roads say, well, that 

is our money, it goes for highways and roads. 

In Maryland our roads are in terrible condition as far as volume 

is concerned; the second most congested area in the Nation is right 

here in the Nation’s Capital. You try to get from the Capital out 

to Rockville at 5 p.m. and you have got yourself a long drive. It is 

much better if we had better public transportation. We do have 

transit, but when you try to get across county from Prince Georges 

County to Montgomery County, there is a purple line being suggested for public transit. Now, that is going to cost a lot of money. 

And I support that. That is going to help us on our highways because it is going to take cars off the highways. 

We do not get credit for those dollars. So, tell me your thoughts, 

or the Administration’s thoughts, on how we are going to capture 

the transportation revenues to fairly reflect the value of the transportation infrastructure so that public transit is in a fair position 

moving forward on surface transportation. 

Mr. KIENITZ. Thank you, Senator. We are focused on that question, and as we are putting together a financial structure for our 

proposal, which we will hopefully be able to unveil, we are looking 

precisely at that matter. It goes to whatever revenue source you 

have, how do you allocate them, but also goes to what kind of revenue source do you use to support a program. I am not in a position to say anything about it other than we hear you, and we hope 

to have a good answer to your concern. 

Senator CARDIN. Well, and I am just going to underscore the 

point that the transportation funding proposals in the past have 

enjoyed broader support because it is called a user fee. And all I 

am suggesting is that we need to have a better justification in our 

infrastructure financing to recognize the value of public transit. It 
27 

helps the motorist. And we need to be able to articulate that, and 

it starts with the Administration. 

Mr. KIENITZ. Yes, sir. 

Senator CARDIN. The second point I want to bring up is really 

Senator Alexander’s point on how we finance this. I am somewhat 

concerned. I am for creative financing, for leveraging the best that 

we can particularly as it relates to the private sector. And in Maryland we have used some creative financing in order to advance 

transportation programs. I think our Governors have done that 

with the public interest in mind and have done it in a prudent way. 

However, when you suggest that we are going to frontload which, 

I think most of us agree, or you have this new mechanism of this 

infrastructure bank, I think some of us get concerned as to whether 

we are delaying fiscal reality as far as making sure the revenues 

are there to finance a 6-year program, perhaps frontloading the 

first couple of years expecting Congress to come back, or the next 

Administration to finance the last few years, but or running additional deficits and not paying for the programs the way that we 

should. 

Can you give me any sense of comfort from this Administration’s 

views on this as to whether in fact we are going to have an adequately financed transportation program for 6 years—you said you 

favor 6 years, but that we will be able to have the type of investments not only the first 2 years but for all 6 years? 

Mr. KIENITZ. What I can say is that the President’s statements 

have been, I hope, pretty clear on this matter which is obviously 

we want a 6-year bill, as you said. Second, we want it to be paid 

for. And third, we want a funding level that is robust, above what 

is currently affordable, and enough to support a long-term program. 

The one difference, perhaps, is the pattern in the past has always been year 1 of the 5 or 6 years is the smallest and year 5 

or 6 is the largest, and our economic team looked at that and compared that against national economic trends where year 1 is where 

the economy is soft, and hopefully by years 4, 5, and 6 the economy 

will be roaring again. We felt that the balancing time of those dollars should perhaps be reversed just for purely macroeconomic reasons. 

Senator CARDIN. I understand the need to invest now, but I can 

tell you 5 years from now you are not going to be able to buy as 

much with the same dollars as today. So, if you do not build in the 

natural progression, including maintenance of infrastructure, then 

you are going to shortchange the out years. 

Thank you, Madam Chair. 

Senator BOXER. Thank you. 

Senator Merkley. 

Senator MERKLEY. Thank you very much, Madam Chair. A couple of questions. 

We have the program in Oregon of working with TIFIA, and one 

of the comments that our State transportation team gave to us is 

that they largely have not utilized it because they can get a lower 

rate on their own bonding than they can. And I was a little surprised about that as to why that would be the case. I wanted to 

ask a question about that. 
28 

They also said because it is limited to one-third of a project, their 

recommendation is to have that one-third boundary expanded. So, 

maybe if you could comment on that as well, it would be helpful. 

Mr. KIENITZ. Yes, sir. On the matter of one-third, that is a comment we have heard from basically everybody who has commented 

on the TIFIA Program. I think the original idea was the Federal 

Government was very inexperienced at doing the credit rating on 

these projects, and so TIFIA would be safer if we were making sure 

that there were enough of other people’s money in the project, that 

they were doing the due diligence and the credit rating, too, and 

so we were not sort of exposed by ourselves. 

So, I think that was the origin of that idea. We since have heard 

from everybody, particularly in the last 2 years as the private financing sources for infrastructure have not dried up but become 

significantly more difficult to get your hands on, that the demand 

for TIFIA to cover 50 percent or two-thirds of a project is a lot 

higher. So, we have heard that from everybody and are going to see 

how far we are able to go on that front. 

On the question of interest rates, it is certainly true, one of the 

reasons that the program was undersubscribed 4 or 5 years ago is 

for exactly that reason. The rates that were available in the private 

market were just too competitive, and you did not have to go 

through the Federal process. And so people went elsewhere. 

What we are finding now is that what we offer now is not so 

much the lowest rate, although the rates are very low, what we 

offer is 25-, 30- or 35-year credit with no repayment of principle 

until your project actually opens the doors and is collecting revenue, which could be 5 years, and even deferral of principle payments beyond that. Those are terms that the private market just 

is not offering right now. 

Now, in another year or 2 or 3, maybe the private market will 

come back and start offering that. But that is what our applicants 

have told us, it is the patience of the capital that the Federal Government can bring to it, and it is the thing that the market is not 

offering right now. 

Senator MERKLEY. It is helpful. Another comment that they put 

forward was that generally, the structure is more amenable to very 

large projects, and is it feasible to run loans through a State bank 

and therefore break it into smaller pieces and make it available to 

smaller communities often which may have more difficulty with 

bonding? 

Mr. KIENITZ. Yes, sir. That is something that when I was in 

Pennsylvania we actually did. We had one of these State infrastructure banks in which we could advance dollars to fund a local 

project, and the locals could pay us back over time with other grant 

dollars or formula dollars that they had gotten. The repayment period there, though, is typically 3, 4, 5 years, so if once you are talking about a 25- or a 30-years process, much more due diligence is 

required there. But I take your point that TIFIA has tended to give 

loans in the $100 million, $200 million, and $300 million range. If 

you have got a community with a $15 million project, that is tougher. 

The State infrastructure banks have filled that niche to some degree. But since they are getting repaid with formula dollars and 
29 

the formula dollars are only authorized a couple of years out, that 

has generally been the limitation. 

Senator MERKLEY. And finally, the Oregon State Transportation 

looked very closely at three potential public-private partnerships 

and found, after a number of years of studying them, found really 

two challenges. One is that doing the projects required not just tolling upon the project but tolling upon parallel roads that had always been toll-free, huge public reaction to that. And second, when 

they ran the numbers they consistently found that it was cheaper 

for the State to be the entity than it was the private partner. 

And they looked at a lot of places, a lot of projects done elsewhere around the country and around the world, and found that 

often these public-private partnerships were far more expensive to 

the public in the long term than when the public put up their own 

cash. And so they studied those three projects and eventually set 

them aside. But any thoughts or insights related to that? 

Mr. KIENITZ. Yes, sir. In my experience both at DOT and before 

coming to DOT we found many of the same things, that with the 

private infrastructure investors, their great advantage is that they 

are willing to be creative, go out and hunt for capital, and they will 

set it up however you want to set it up. As for the Government, 

we have a little bit more of a regimented structure. But we are not 

looking to make money. We are just looking to get our money back. 

They are looking to make money, and so the return on their investment that they are hoping for is going to be significantly higher. 

The question has always been, if you can get pure public financing for a project, the financial picture is better than if you are 

going through purely private. The issue has been that the Government’s ability to do that has always been severely constrained. 

I think what the Chairman is talking about is a program that 

would offer a significantly larger share. The TIFIA Program has 

been very safe up until now. Its financial performance has been 

strong. And so I think we all have the confidence to expand that 

model quite a lot and that it would still be safe. But that has always been the issue. Governments have been afraid, wary about 

getting into the business in a way that the private sector, at least 

up until a couple of years ago, was less wary. 

Senator MERKLEY. Thank you. 

Mr. KIENITZ. Yes, sir. 

Senator BOXER. Well, thank you so much. Can you just tell your 

boss that we appreciate all the work he is doing to help us with 

the 30/10 Initiative? 

Mr. KIENITZ. I will. Thank you. 

Senator BOXER. We appreciate it. 

And now we will ask our Panel II, Hon. Antonio Villaraigosa, 

Mayor, city of Los Angeles, great leader in transportation, we are 

so pleased that you are here; and Hon. Stephanie Kopelousos, Secretary, Florida Department of Transportation, welcome Secretary; 

and Mr. David Seltzer, Principal at Mercator, am I saying it right? 

Mr. SELTZER. Close. 

Senator BOXER. Say it. 

Mr. SELTZER. Mercator. 

Senator BOXER. Mercator, yes? Advisors. 
30 

We are so pleased you are here. We have a vote at 11:30. That 

gives us plenty of time because we have a 15 minute window. So, 

we have a good hour to listen and to ask questions. 

So Mayor, we will start with you. 

STATEMENT OF ANTONIO R. VILLARAIGOSA, MAYOR, 

CITY OF LOS ANGELES, CALIFORNIA 

Mr. VILLARAIGOSA. Thank you, Senator Boxer, Senator Merkley, 

members of the Committee. Thank you for the opportunity to address you today. 

I want to say, on behalf of the people of Los Angeles, and thank 

Chairman Boxer for her leadership, her support. Her interest in 

transportation infrastructure is critical not just to our county and 

our State, but I think to the Nation. Your focus on innovative 

project finance has helped move this issue forward at a very, very 

critical time. Your ability to spearhead a unique coalition of labor, 

business, and environmental leaders in support of L.A.’s 30/10 Initiative has been invaluable. 

And I would also like to thank Secretary LaHood and the Obama 

administration for their infrastructure proposal. 

I do not have to tell you all, you know better than anyone that 

the American Society of Civil Engineers gave the U.S. infrastructure an overall grade of a D. They estimate that the need in the 

next 5 years for infrastructure is $2.2 trillion. The Administration’s 

infrastructure plan is an important one. Our roadways, transit, rail 

systems, and airports ensure the vitality of our economy. Jobs are 

created and the economy grows when people and goods move efficiently from place to place. 

We are investing less than other countries as a percentage of our 

GDP. We are investing about 2 percent of our GDP. Europe is investing roughly 5 percent. And I do not have to tell you that China 

is investing 9 percent and growing. 

And according to the report of the Congress of the National Surface Transportation Infrastructure Financing Commission, the total 

combined highway and transit spending as a share of GDP has fallen 25 percent since the beginning of the Federal Highway Trust 

Fund. According to data from the Congressional Budget Office, this 

expenditure has averaged 1.9 percent of GDP from 1956 until 1970, 

but only 1.4 percent from 1990 to 2004. 

I think we all agree that America deserves a first class transportation infrastructure network, and innovative financing tools such 

as the national infrastructure bank would help build it. 

But as you said, Madam Chair, there are financing mechanisms 

now that we could use to accelerate that. And I want to focus on 

the need for the Federal Government to approve a national program of innovative financing tools so that local and State government can put people back to work. 

As I have said to this Committee before, but I do not believe that 

Senator Merkley was in the Committee when I made those remarks last time, was as Speaker of the California State Assembly, 

I remember in the 1990s when people would come to the legislature 

asking for the State to invest in this or that initiative, and I would 

always say, if it such a good idea, how much of your money are you 
31 

putting up? The beauty of what we are proposing here is that we 

are putting our money up. 

I do not have to also tell you that the national unemployment 

rate is still 9.6 percent in the most recent statistics. Simultaneously, the U.S. deficit is estimated at $1.5 trillion. We must 

spend tax dollars more wisely and leverage the available funding 

in a smarter way. 

We cannot expect the Federal Government to bear the entire cost 

of our infrastructure needs. I think Senator Alexander was speaking to that a few minutes ago. Cities and States cannot pay to 

build the systems entirely on their own, either. New partnerships, 

new financing mechanisms, and innovation are essential to building infrastructure in many regions. 

We need incentives to increase local funding for transportation 

infrastructure. Cities and regions that are coming to the table with 

more local money in hand should be rewarded and incentivized. We 

need tools that let local government build infrastructure faster, and 

to bring projects to the shovel-ready stage we need to have certainty that financing will be available over time. 

I am suggesting two new tools to encourage investment in infrastructure and to help create jobs. These tools will be a catalyst for 

major transit initiatives across the country. They will help us put 

people back to work, and they will help improve our air quality. 

First, the TIFIA Program should be expanded and modified. Second, we should establish a new category of infrastructure bonds 

with a high interest rate subsidy. 

As you know, TIFIA, the Transportation Infrastructure Finance 

and Innovation Act, is a Federal direct loan program. This program 

can and should be expanded. Congress needs to increase the pool 

of money so that it can support more major projects across the 

country. 

And we need to give TIFIA greater flexibility. We need to move 

beyond project by project loans to think about funding transit systems and networks. Finally, we need an up front commitment that 

loans will be available in the future at an interest rate lock to increase funding certainty. 

Now, infrastructure takes years to develop and build. We need 

a robust TIFIA Program that can support significant public works 

investments in multiple cities and States. The second proposal 

would create a new category of qualified tax preferred bonds to 

fund major transit projects. 

In the American Recovery and Reinvestment Act of 2009 Congress created a program for school construction. The program provided tax preferred bonds with very high subsidies. We need a 

similar program to help fund major transportation infrastructure 

investment. These bonds would allow issuers to finance more than 

twice the dollar value of capital improvements than is possible with 

traditional tax-exempt bonds for any given annual revenue stream. 

They would not only stimulate greater investment, but also take 

pressure off the conventional Federal grant programs. 

These tools will create jobs; they will help cities realize the environmental health and mobility benefits associated with their transportation projects. These tools should be created now or should be 
32 

incorporated in the next Surface Transportation Reauthorization 

Bill. 

With high unemployment and great needs for infrastructure, I 

am hopeful these tools may be created sooner rather than later. 

That is why, as you said, while the infrastructure bank may be a 

good idea, these programs currently exist; they can be expanded in 

a way to move projects now. 

We would take advantage of these financing tools for our 30/10 

Initiative in L.A. We may be the car capital of the world, but we 

are building a sustainable transit system of the future. In 2008, 68 

percent of our voters approved Measure R, a 30-year, $40 billion, 

half-penny transportation sales tax. At least 65 percent of the 

funds will be spent on transit improvement and systems. 30/10 is 

our proposal to build 12 Measure R transit projects in a decade instead of a planned 30 years. 

The 12 transit projects will create 166,000 jobs. Now, we talked 

about the national unemployment rate of 9.9 percent. In L.A. it is 

14.3 percent. And I can tell you, this would be an important shot 

in the arm for our region. According to the L.A. Economic Development Corporation these jobs will have economic impact of more 

than $22 billion. 

I do not have to tell you that L.A. is an economic engine for the 

Nation. L.A. and Long Beach ports move 44 percent of the seaborne 

goods. We have a gross domestic product of $718 billion. Only California, Texas, New York, and Florida have economies larger than 

L.A. County. We represent 5.5 percent of the U.S. economy and 38 

percent of the California economy. 

Notwithstanding that, we are struggling. And so a project like 

this could not only reinvigorate us, it could help other cities like 

Houston, Salt Lake City, Atlanta, and Chicago who have told us 

they would benefit from the tools that we are proposing. 

Together we can jumpstart regional and national economic recovery using our local investments in infrastructure. This model will 

enable the Federal Government to leverage its resources strategically based on local community needs and their willingness to be 

bold. 

Again, Madam Chair, I want to thank you for your leadership in 

this effort. 

The one thing that has become crystal clear at a time when we 

are looking at historic deficits and debt is that we need creative financing mechanisms to incentivize localities. Senator Alexander 

talked about the State building its highway system. This city, this 

county, is willing to do the yeoman’s work in doubling the size of 

our rail system, reducing carbon emissions by 500,000 tons, saving 

10 million gallons of gas a year, increased transit boardings by 77 

million. This can be replicated around the country with creative financing mechanisms of the kind that I have mentioned. 

Thanks very much. 

[The prepared statement of Mr. Villaraigosa follows:] 
33 
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37 
38 
39 
40 
41 
42 

Senator BOXER. Thank you so much for your very important 

leadership. You know, as we get ready to mark up a bill, we are 

making the record here on this important issue. 

Before I call on the Secretary, I wanted to put into the record the 

opening statement from Senator Inhofe who is at an Armed Services Committee hearing. And I think it is important for me to read 

to you what he says because we—although everyone knows we 

have had our difference on the environment, when it comes to public works we tend to see things alike. So, let me read what he says 

about the TIFIA Program. 

He says, another way to leverage non-Federal funds is a loan 

program contained in the current highway program called TIFIA. 

Although it took time to get going, TIFIA now is very popular and 

recently received applications for 10 times the amount it can lend. 

It is used in many situations including as a component of the PPP 

financing or by States to supplement more traditional financing. 

Clearly, this is a successful program that must be dramatically expanded. 

He goes on to talk about the infrastructure bank and raises, I 

would say, some important issues where he feels it would actually 

be a substitute for other mechanisms and not really add much to 

what we have. 

So, I think it is important as we go forward, and the reason I 

think it was so important to have this hearing and others before 

we actually sit down to write the bill, we need to find the areas 

where there is agreement across the aisle. If we find that agreement, we will get a bill done. If we do not find that agreement, we 

will not. 

And so I am very pleased with the support for TIFIA here, and 

I think we, you know, definitely have a place here where we can 

join in partnership. 

So, with that, I will put that in the record, if there is no objection, and call on Hon. Stephanie C. Kopelousos, Secretary, Florida 

Department of Transportation. 

Madam Secretary, welcome. 

[The prepared statement of Senator Inhofe follows:] 

STATEMENT OF HON. JAMES M. INHOFE, 

U.S. SENATOR FROM THE STATE OF OKLAHOMA

As I’ve said here before, I believe in Federal infrastructure spending and see it 

as one of the primary purposes of Government. Given our enormous infrastructure 

needs it is difficult to imagine that the next highway bill could ever meet all of these 

needs—especially since the Highway Trust Fund is in dire condition. Not only do 

we need to get the most for our Federal highway dollar, but we also need to encourage State and local governments and the private sector to invest as much as possible in roads and bridges. 

This hearing is on innovative financing, which really accomplishes both: getting 

the most out of each Federal dollar and leveraging non-Federal funds. The two 

forms of innovative financing I’m most excited about are public-private partnerships 

and the TIFIA program. 

One of the most frequently discussed ways to leverage non-Federal investment is 

through public-private partnerships, or PPPs. With PPPs, State or local governments enter into an agreement to raise private capital and transfer risks to the private sector, making challenging and unaffordable projects possible. This is a way 

to unleash an enormous amount of private investments in public infrastructure. 

This financing source is as important to helping us address our infrastructure crisis 

as a robust Federal highway bill. 
43 

Another way to leverage non-Federal funds is a loan program contained in the 

current highway program called TIFIA. Although it took some time to really get 

going, TIFIA now is very popular and recently received applications for 10 times the 

amount it can lend. It is used in many situations, including as a component of PPP 

financing or by States to supplement more traditional financing. Clearly, this is a 

successful program that must be dramatically expanded. 

I will end on a final note about infrastructure banks, which is a very hot topic 

these days. First of all, we have government infrastructure banks for transportation: 

at the Federal level we have TIFIA, and at the State level we have State infrastructure banks which are capitalized by the Federal Government. What most proponents 

of a new infrastructure bank want is a mechanism to give out more grants. Banks 

don’t give out grants; they give out loans. There is also currently a mechanism for 

giving out Federal transportation grants—it is called the highway bill. I don’t believe an infrastructure bank will increase total transportation investment—it will 

only take money away from what would otherwise go through the existing highway 

and transit programs. The only thing you are going to do is move decisionmaking 

from States to US DOT officials in Washington—an outcome I do not support. 

I look forward to the testimony from our witnesses. Thank you. 

STATEMENT OF STEPHANIE C. KOPELOUSOS, SECRETARY OF 

TRANSPORTATION, FLORIDA DEPARTMENT OF TRANSPORTATION 

Ms. KOPELOUSOS. Madam Chairwoman, Senator Merkley, I appreciate it. It is a real honor and a privilege to be here today to 

talk about innovative financing for projects. Florida has been a real 

leader, and I want to touch on three today, our experience with 

public-private partnerships, the TIFIA Program, as well as tolling. 

When you look at public-private partnerships, we have had a real 

expansion of our program under some legislation that Governor 

Crist did as soon as he got into office that enhanced our capabilities. And I will tell you, we have 10 current public-private partnerships under contract today, and I will give you several of the benefits that we have experienced in Florida. 

One is leveraging the financial assistance, clearly important. Two 

has been the innovation that we have gotten from the private sector that has helped us move some of these important projects forward, also advancing these priority projects where they have been 

sitting on hold because we just truly did not have the financing. 

And probably one of the most important things that we have been 

able to leverage is sharing of the risk, sharing the risk with the 

private sector that allows the State to get the best value. 

I want to focus on just a couple of the projects that we have experienced and some of the good ideas that we have had. We have 

been able to—a project in southwest Florida that we did under a 

design-build-finance, which was I–75, we added an additional lane, 

now six lanes for 30 miles along that highway. We delivered that 

project 5 years ahead of when we would be able to do it by just 

using the normal funding. So, the community is excited about it, 

we delivered it right before Christmas last year, and I will tell you, 

a great present for them. 

Another concept that we have able to use with two of our projects 

is the availability payment that we have used through our publicprivate partnership legislation in the State. We have been able to 

do two significant projects. The Port of Miami Tunnel fixed a real 

congestion problem out of port as well as in the downtown area. 

But probably the one that we are the most excited about is our 

595 Project in Broward County, truly one of our most congested 

areas in the State. We are adding three reversible lanes to a tune 
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of about $1.2 billion. We are able to do this 15 years before we 

would normally get this program in our current system. So, we 

have seen true success on those. 

I really want to touch on what the Mayor said about the TIFIA 

Program. We have used it. We were the first in the country to utilize a TIFIA Program and just applaud USDOT for continuing to 

make it stronger and better. But we do believe that there need to 

be some enhancements, true enhancements. 

Two of the projects that I mentioned, 595 and the Port of Miami 

Tunnel, we truly would not have been able to do those projects, get 

those projects across the goal line, without the little help with the 

TIFIA Program, and that has been successful. But to add on to 

what the Mayor said, we are looking for some of the same flexibilities, true increases to the moneys that we have going to the program, and look at increasing the eligibility amount per project. 

Right now, it is capped at 33 percent. It may need to be a little 

more on some projects; it could be a little less. So, take a look at 

that. 

One of the other issues we found in our project on 595 was really 

to look at possibly a 30-day window prior to our financial close on 

the project to lock down what the interest rate would be on the 

loan. It provided some instability and some concerns with the private sector, and I think if we could get that changed that would 

really help us in moving some of these larger projects forward. 

And in tolling, to address some of Senator Merkley’s issues about 

public-private partnerships, we in Florida have a turnpike enterprise that has been truly successful. We have been able to add 

about 595 lane miles with the enterprise and really expand our 

tolling throughout the State, and I think that is where the mix of 

using public-private partnerships as well as our turnpike that we 

have been able to get the best value out of our State resources as 

well as the innovative tools that we are using. 

In closing, if we could just encourage you in the next Federal bill 

to look at enhancing our financial tool box, I think to continue to 

enhance that is important, help facilitate public-private partnerships where they are needed and where they best serve the States, 

as well as continue the strong role of State DOTs through the formula-based programs that are equitable, importantly streamlined 

and that really meet the national goal that we are all looking for 

in this next Federal bill. 

Senator, we are here to help. We appreciate the availability of 

your staff and Senator Inhofe’s staff. As Florida, we do not have 

a Senator on this Committee, and your staffs have been extremely 

available to us, and we appreciate having that input. 

Thank you. 

[The prepared statement of Ms. Kopelousos follows:] 
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Senator BOXER. Well, thank you so much. That means a lot, and 

I will tell Senator Inhofe what you said. We appreciate it. 

Mr. Seltzer. 

STATEMENT OF DAVID SELTZER, PRINCIPAL, 

MERCATOR ADVISORS LLC 

Mr. SELTZER. Chairman Boxer, thank you for inviting me to testify this morning. 

My name is David Seltzer, and I am a principal at Mercator Advisors. We are a consulting firm that advises policymakers and 

project sponsors on how best to finance major infrastructure 

projects and programs. I would like to briefly share with you our 

firm’s views on innovative project finance tools that could stimulate 

more investment in this fiscally constrained environment. 

Credit assistance and tax incentives are powerful Federal policy 

tools today because A, they maximize the financial capacity of 

State, local, and project revenue streams by lowering interest costs, 

and B, they have a much smaller budgetary impact than traditional grants. 

USDOT’s primary credit program for surface transportation is, of 

course, TIFIA. And from a budgetary viewpoint Federal credit is 

more cost effective than grants since the fiscal charge is based not 

on the face amount of the loan but on its expected losses from default. 

The average budget score on TIFIA loans has been only 10 cents 

on the dollar. And as Under Secretary Kienitz said, earlier this 

year DOT announced that it had received 39 letters of interest 

from project sponsors seeking $12.5 billion in new TIFIA loans for 

projects totaling nearly $41 billion. However, available funding can 

support less than 10 percent of that expressed credit demand. 

So, the three recommendations that we would offer for the TIFIA 

Program are first, increase the TIFIA funding. Based on the tangible demand, the funding level should be at least tripled to about 

$375 million per year over the next 6 years. That would support 

$20 billion-plus of new loans, leveraging over $60 billion in total investment. 

Second, incentivize applicants to identify those new funding 

streams. The primary reason for the Nation’s infrastructure gap is 

insufficient revenue streams to support the new investment. If 

TIFIA prioritized applications where a vast majority of project 

funding, say at least two-thirds, came from sources other than Federal grants, it would reward State and local governments like Los 

Angeles County who make the difficult decision to impose the 

taxes, fees, or user charges necessary to support new programs. 

And third, allow up front credit commitments for transformational programs. TIFIA was originally conceived as a project 

finance tool oriented toward individual projects. And as a result, 

the Federal credit commitments were tied to project-specific milestones such as environmental approvals. Today, however, transportation agencies are recognizing that a portfolio of large interrelated 

projects can produce systemic regional benefits in terms of mobility, air quality, and economic development. 

It would aid these plans, like the 30/10 Proposal or Initiative, if 

the TIFIA financing commitments were more predictable over the 
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multi-project delivery period. And this could be achieved by authorizing DOT to make up front, programmatic, conditional commitments provided that no underlying loan would be funded until the 

applicable environment and other public approvals were met. 

Now in addition to credit assistance, we believe tax incentives 

should be a central component of any comprehensive Federal strategy. Like credit, tax incentives encourage greater investment 

through reducing financing costs, and they, too, are scored at just 

a fraction of the cost of grants. And while Tax Code changes are 

not under this Committee’s jurisdiction, we recommend Congress 

consider expanding two existing tax incentive programs. 

First, the Qualified Tax Credit Bonds. Last year, Congress authorized various tax subsidies to reduce State and local borrowing 

costs, including the $22 billion School Bond Program with a 100 

percent Federal interest subsidy. A similar program targeted to 

major transportation projects could more than double the level of 

investment compared to tax-exempt bonds. Congress could specify 

an annual volume cap to control the fiscal impact, which could be 

allocated by the Transportation Secretary to those projects conferring the highest economic and social return. 

Second, Build America Bonds. It appears that Congress may extend the expiring Build America Bonds, or BABs Program, for at 

least another year. BABs, which subsidize 35 percent of interest, 

currently are limited to projects without private sector involvement. 

In recent years, however, the private sector has played a larger 

role in developing, managing, and financing projects and taking 

risk. We think a strong policy argument could be made to extend 

BABs eligibility to projects with private participation that are 

available to and benefit the general public, such as highway transit 

and other transportation facilities. 

Thank you for the opportunity to appear before you. 

[The prepared statement of Mr. Seltzer follows:] 
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Senator BOXER. Well, thank you all. 

I wanted to start with you, Mr. Seltzer. When we talk about dramatically increasing TIFIA, which I support, the point you make is 

very key. That you dramatically expand it, but it is leveraged so 

the Federal Government is not spending that much more, but the 

dollars go much further. What is the multiplier effect, do you think, 

approximately, for every dollar we put in there? 

Mr. SELTZER. Well, based on the historic TIFIA performance, the 

average budgetary cost of each loan has been say 10 cents on the 

dollars. So, there is a 10 to 1 leverage in terms of budgetary cost 

effectiveness. And then the TIFIA share is limited to not more than 

one-third, and oftentimes less than that, so there is at a least a 

threefold multiple on that. So, it is in excess of 30 to 1 multiplier 

for the budgetary scored cost of the program. 

Senator BOXER. Thank you. I think that is very key, and I think 

that is why you see support for expanding this program from Senator Inhofe, and I think we have it across party lines. And that is 

why I am harping on TIFIA so much because I see people coming 

together around it, rather than getting off in an argument about 

some new program which may be very good but could slow us 

down. And I think it is key. 

Mayor, I wanted to ask you about the support for this program 

from the Mayors. We do have a letter from them. Could you describe the level of interest in this as you speak to your colleagues? 

Mr. VILLARAIGOSA. The U.S. Conference of Mayors unanimously, 

on consent, approved the 30/10 Initiative as a model for the kind 

of innovative financing cities need across the country. In addition 

to that, I mentioned a number of cities that have specifically indicated interest. And, in addition to that, Secretary LaHood was last 

week here in DC at the Conference of Mayors where he mentioned 

the 30/10 Initiative as a model. So has Governor Rendell, who has 

talked about this as a template for infrastructure investment 

across the country. 

Senator BOXER. Well, I want to pursue this because, in a time 

when everybody talks about partisanship, I was so impressed with 

the group that you brought back here when we had that press conference. And as I remember it, correct me if I am wrong, you had 

business leaders, you had labor leaders, you had—— 

Mr. VILLARAIGOSA. Public health and environmental leaders—— 

Senator BOXER. All right. So, you describe—— 

Mr. VILLARAIGOSA. We had a broad cross section of—— 

Senator BOXER. Just describe to us the support for this concept. 

Mr. VILLARAIGOSA. Well, bankers, small business people, the 

Chamber of Commerce, some of the ethnic business organizations, 

the public health advocates were there, environmental organizations, labor, the leader of the AFL-CIO, Mr. Trumka, was with you 

and I at a rally in Los Angeles where he said that this is a template for what we need to do, that we need to replicate 30/10 across 

the country. 

Senator BOXER. Well, let me just close my question to the Secretary. 

To me, you know, I am sitting here, and I am thinking of the 

beauty of this proposal, and three words come to my mind, 

leveraging, accelerating, and partnership. And you are blending all 
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of these ideas together. And to me, and I think to others on this 

Committee, those are three things we really need to do. So, Madam 

Secretary, how would you respond to this 30/10 idea? 

Ms. KOPELOUSOS. Senator, I think the issues are clear. There is 

much need around this country for infrastructure, from all aspects 

of it, and I think the more we can leverage at every level—not just 

State or local but at the Federal level as well—the better off we 

are going to be in delivering the infrastructure that we need. We 

need to determine, are we going to have a world class infrastructure around our country—— 

Senator BOXER. No question. 

Ms. KOPELOUSOS. And what level we want, and then how are we 

going to get there. 

Senator BOXER. And do you think if we were to include this notion, an expansion of TIFIA with a commitment to leverage local 

funds, to accelerate funding so we get it done quicker because right 

now, as the Mayor has told me, bids are coming in 25 and 30 percent less. Is that true in Florida? 

Ms. KOPELOUSOS. Yes, absolutely. We are seeing 20, 27 percent. 

Senator BOXER. My goodness. So, you could actually save so 

much money you could even do more at the end of the day. So, the 

answer here is, if we were to do this, and encourage local action, 

do you think it would send a signal to the cities and counties and 

States that they will have funds, the possibility of having their 

funds leveraged and accelerated, do you think that would help local 

communities step up to the plate? 

Ms. KOPELOUSOS. Chairwoman, I think it would. I think, too, in 

high growth States like you and I live in, we have had to address 

those issues numerous ways, and I think any enhancement of the 

tools with TIFIA, we have been able to use it in Florida, it has 

been through some tweaks, and I applaud Chris Bertram and the 

team at USDOT for what they have done with the TIFIA Program 

now, but any enhancement of that would truly benefit, I think, at 

least those in Florida. 

Senator BOXER. Excellent. Mayor, anyone who wants to add, we 

have a little time. 

Mr. VILLARAIGOSA. I just wanted to mention, and thank you for 

your testimony, Mr. Seltzer, that 30 to 10 multiplier effect with 

TIFIA, that is with the expansion of TIFIA, well, that is with the 

TIFIA Program and obviously if it was expanded threefold, all the 

more. But with the creation of Qualified Transit Improvement 

Bonds, you would be adding another multiplier effect here because 

you are creating a new category of bonds for transportation infrastructure much as you have for forestry conservation, renewable 

energy projects, energy conservation, and new schools. 

Senator BOXER. You mean the Build America Bonds that Mr. 

Seltzer spoke about. Is that correct? 

Mr. SELTZER. Senator, there are actually two different classes of 

bonds, expanding Build America Bonds to allow the public-private 

partnerships and expanding the existing Qualified Tax Credit 

Bonds to allow major surface transportation projects to take advantage of that same tool. 

And while I recognize it is not—it has to go to the tax writing 

committees, many good ideas for Tax Code measures in the past 
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have come out of this Committee, such as the Private Activity 

Bonds for highway and intermodal facilities. 

Senator BOXER. Anything else that anyone on the panel would 

like to add? If not, I would ask the three panelists if they could 

meet me in this room so I can thank you so much for coming today. 

So, see you there shortly. 

I want to thank Senator Inhofe’s staff for giving us his opening 

statement so I could read part of it into the record. 

And we stand adjourned, and our hope is to get a bill done, to 

at least start the bill writing process before the end of this year. 

Thank you very much. 

[Whereupon, at 11:15 a.m., the Committee was adjourned.] 

[Additional material submitted for the record follows:] 
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