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FINANCING INFRASTRUCTURE 

INVESTMENTS 

(110–136) 

JOINT HEARING 

BEFORE THE

COMMITTEE ON THE BUDGET 

AND THE

COMMITTEE ON TRANSPORTATION AND 

INFRASTRUCTURE 

MAY 8, 2008 

HEARING 

BEFORE THE

COMMITTEE ON TRANSPORTATION AND 

INFRASTRUCTURE 

JUNE 10, 2008 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

(II) 

COMMITTEE ON THE BUDGET 

JOHN M. SPRATT, JR., South Carolina, Chairman 

ROSA L. DELAURO, Connecticut, 

CHET EDWARDS, Texas 

JIM COOPER, Tennessee 

THOMAS H. ALLEN, Maine 

ALLYSON Y. SCHWARTZ, Pennsylvania 

MARCY KAPTUR, Ohio 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL BLUMENAUER, Oregon 

MARION BERRY, Arkansas 

ALLEN BOYD, Florida 

JAMES P. MCGOVERN, Massachusetts 

NIKI TSONGAS, Massachusetts 

ROBERT E. ANDREWS, New Jersey 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

BOB ETHERIDGE, North Carolina 

DARLENE HOOLEY, Oregon 

BRIAN BAIRD, Washington 

DENNIS MOORE, Kansas 

TIMOTHY H. BISHOP, New York 

GWEN MOORE, Wisconsin 

PAUL RYAN, Wisconsin, 

Ranking Minority Member 

J. GRESHAM BARRETT, South Carolina 

JO BONNER, Alabama 

SCOTT GARRETT, New Jersey 

MARIO DIAZ–BALART, Florida 

JEB HENSARLING, Texas 

DANIEL E. LUNGREN, California 

MICHAEL K. SIMPSON, Idaho 

PATRICK T. MCHENRY, North Carolina 

CONNIE MACK, Florida 

K. MICHAEL CONAWAY, Texas 

JOHN CAMPBELL, California 

PATRICK J. TIBERI, Ohio 

JON C. PORTER, Nevada 

RODNEY ALEXANDER, Louisiana 

ADRIAN SMITH, Nebraska 

JIM JORDAN, Ohio 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JAMES L. OBERSTAR, Minnesota, Chairman 

NICK J. RAHALL, II, West Virginia, Vice 

Chair 

PETER A. DEFAZIO, Oregon 

JERRY F. COSTELLO, Illinois 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

BOB FILNER, California 

EDDIE BERNICE JOHNSON, Texas 

GENE TAYLOR, Mississippi 

ELIJAH E. CUMMINGS, Maryland 

ELLEN O. TAUSCHER, California 

LEONARD L. BOSWELL, Iowa 

TIM HOLDEN, Pennsylvania 

BRIAN BAIRD, Washington 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

BRIAN HIGGINS, New York 

RUSS CARNAHAN, Missouri 

JOHN T. SALAZAR, Colorado 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

NICK LAMPSON, Texas 

ZACHARY T. SPACE, Ohio 

MAZIE K. HIRONO, Hawaii 

BRUCE L. BRALEY, Iowa 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

MICHAEL A. ACURI, New York 

HARRY E. MITCHELL, Arizona 

CHRISTOPHER P. CARNEY, Pennsylvania 

JOHN J. HALL, New York 

STEVE KAGEN, Wisconsin 

STEVE COHEN, Tennessee 

JERRY MCNERNEY, California 

LAURA A. RICHARDSON, California 

ALBIO SIRES, New Jersey 

VACANCY 

JOHN L. MICA, Florida 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

JOHN J. DUNCAN, JR., Tennessee 

WAYNE T. GILCHREST, Maryland 

VERNON J. EHLERS, Michigan 

STEVEN C. LATOURETTE, Ohio 

FRANK A. LOBIONDO, New Jersey 

JERRY MORAN, Kansas 

GARY G. MILLER, California 

ROBIN HAYES, North Carolina 

HENRY E. BROWN, JR., South Carolina 

TIMOTHY V. JOHNSON, Illinois 

TODD RUSSELL PLATTS, Pennsylvania 

SAM GRAVES, Missouri 

BILL SHUSTER, Pennsylvania 

JOHN BOOZMAN, Arkansas 

SHELLEY MOORE CAPITO, West Virginia 

JIM GERLACH, Pennsylvania 

MARIO DIAZ-BALART, Florida 

CHARLES W. DENT, Pennsylvania 

TED POE, Texas 

DAVID G. REICHERT, Washington 

CONNIE MACK, Florida 

JOHN R. ‘RANDY’ KUHL, JR., New York 

LYNN A WESTMORELAND, Georgia 

CHARLES W. BOUSTANY, JR., Louisiana 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

THELMA D. DRAKE, Virginia 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

ROBERT E. LATTA, Ohio 

(III) 

CONTENTS Page 

Proceedings of: 

May 8, 2008 .......................................................................................................... 1 

June 10, 2008 ....................................................................................................... 125 

May 8, 2008 

Summary of Subject Matter .................................................................................... v 

TESTIMONY 

Dalton, Patricia A., Managing Director, Physical Infrastructure Team, Government Accountability Office ............................................................................. 49 

Orszag, Peter, Director, Congressional Budget Office .......................................... 6 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Altmire, Hon. Jason, of Pennsylvania .................................................................... 100 

Carnahan, Hon. Russ, of Missouri ......................................................................... 96 

Costello, Hon. Jerry F., of Illinois .......................................................................... 96 

Mitchell, Hon. Harry E., of Arizona ....................................................................... 99 

Tsongas, Hon. Niki, of Massachusetts ................................................................... 99 

PREPARED STATEMENTS SUBMITTED BY THE WITNESSES 

Orszag, Peter ............................................................................................................ 8 

Dalton, Patricia A. ................................................................................................... 52 

SUBMISSIONS FOR THE RECORD 

DeLauro, Hon. Rosa L., a Representative in Congress from the State of 

Connecticut, questions submitted to Ms. Dalton and Dr. Orszag .................... 97 

Walz, Hon. Timothy J., a Representative in Congress from the State of 

Minnesota, questions submitted to Ms. Dalton and Dr. Orszag ...................... 100 

Orszag, Peter, Director, Congressional Budget Office, responses to questions 

for the record ........................................................................................................ 100 

Dalton, Patricia A., Managing Director, Physical Infrastructure Team, Government Accountability Office, responses to questions for the record ............. 102 

June 10, 2008 

Summary of Subject Matter .................................................................................... 106 

TESTIMONY 

Blumenauer, Hon. Earl, a Representative in Congress from the State of 

Oregon ................................................................................................................... 129 

Calvert, Hon. Ken, a Representative in Congress from the State of California . 132 

DeLauro, Hon. Rosa, a Representative in Congress from the State of Connecticut .................................................................................................................. 127 

Ehrlich, Everett, President, ESC Company .......................................................... 160 

Ellison, Hon. Keith, a Representative in Congress from the State of Minnesota .................................................................................................................... 130 

Florian, Mark, Managing Director, Goldman, Sachs and Company ................... 160 

Penner, Rudolph, Senior Fellow, the Urban Institute .......................................... 160 

Schwartz, Bernard, Chairman and Chief Executive Officer, BLS Investments 

LLC ........................................................................................................................ 160

Page

IV 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Blumenauer, Hon. Earl, of Oregon ......................................................................... 177 

Calvert, Hon. Ken, of California ............................................................................. 183 

Carnahan, Hon. Russ, of Missouri ......................................................................... 185 

Costello, Hon. Jerry F., of Illinois .......................................................................... 186 

Cummings, Hon. Elijah E., of Maryland ............................................................... 189 

DeLauro, Hon. Rosa L., of Connecticut .................................................................. 196 

Ellison, Hon. Keith, of Minnesota .......................................................................... 202 

Johnson, Hon. Eddie Bernice, of Texas .................................................................. 206 

Mitchell, Hon. Harry E., of Arizona ....................................................................... 208 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Ehrlich, Dr. Everett M. ........................................................................................... 209 

Florian, Mark ........................................................................................................... 217 

Penner, Rudolph G. ................................................................................................. 223 

Schwartz, Bernard L. .............................................................................................. 235 

SUBMISSIONS FOR THE RECORD 

Schwartz, Bernard, Chairman and Chief Executive Officer, BLS Investments, 

LLC, ‘‘Why Prosperity Requires Public Investment’’ ........................................ 242 

ADDITIONS TO THE RECORD 

American Society of Civil Engineers, written statement ..................................... 249 

Commission on Public Infrastructure, Center for Strategic and International 

Studies, Felix G. Rohatyn, Co-Chair, along with Warren Rudman, Co-Chair, 

written statement ................................................................................................. 256 

National Association of Water Companies, written statement ............................ 260 

Water Resources Coalition; Brian Pallasch, Co-Chairman, American Society 

of Civil Engineers; Marco Giamberardino, Co-Chairman, Associated General 

Contractors; written statement ........................................................................... 266 

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(1) 

FINANCING INFRASTRUCTURE INVESTMENTS 

THURSDAY, MAY 8, 2008 

HOUSE OF REPRESENTATIVES,

COMMITTEE ON THE BUDGET,

COMMITTEE ON TRANSPORATION AND INFRASTRUCTURE, 

Washington, DC. 

The Committees met, pursuant to call, at 10:09 a.m., in room 

2167, Rayburn House Office Building, Hon. John Spratt [chairman 

of the Committee on the Budget] presiding. 

Present for Committee on the Budget: Representatives Spratt, 

Blumenauer, Scott, Baird, Ryan, Simpson, Alexander, and Smith. 

Present for Committee on Transportation and Infrastructure: 

Representatives Oberstar, Taylor, Tauscher, Schmidt, Latta, and 

Sires. 

Chairman SPRATT. Despite the numerous votes we are about to 

have today, I think it behooves us to begin the hearing. Before 

turning to the two witnesses we have today for their testimony, let 

me ask unanimous consent that the committee agree to the following rules to facilitate this hearing. First of all, for the purpose 

of questioning witnesses, we will alternate between the two committees beginning with the Budget Committee Democrats, followed 

by the Budget Committee Republicans and then proceed to the 

Transportation and Infrastructure Committee Democrats, Republicans. As usual, members who were present at the beginning of 

this hearing will be recognized by seniority, and the members arriving later will be recognized in the order that they appear. Members will have 5 minutes to ask questions, to make statements. 

After all members have had a chance to address the witnesses, 

members may follow up with an additional 5 minutes if time permits. All members will be allowed to submit an opening statement 

for the record. Those members who do not have the opportunity to 

ask questions will be given 14 days to submit questions for the 

record. And the written testimony of all witnesses will be made 

part of the record so that they may summarize their testimony to 

allow time for questions and answers. Is there any objection to 

those rules and procedures before we begin this hearing? Hearing 

none, so ordered. 

I told Mr. Oberstar that I felt a bit self-conscious sitting in his 

chair here to which he has long established the right. I have a feeling we are being set up for something on the Budget Committee 

by the gracious hospitality that they have extended to us, but we 

are delighted to meet with them today. I look forward to this hearing. This is a joint hearing of the Committee on the Budget and 

the Committee on Transportation and Infrastructure. Today’s hearVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 P:\DOCS\42883 JASON
2 

ing is the first joint hearing, to the best of my knowledge, held by 

these two committees. 

Historically, our committees have not always seen eye to eye. 

And I hope this hearing signals the commitment to work together 

on infrastructure issues because they are vitally important. Today 

we will put our budget and infrastructure experience together to 

explore how we can fund or finance capital projects in the Federal 

budget. Our witnesses include Dr. Peter Orszag, Director of the 

Congressional Budget Office, and Ms. Patricia Dalton, managing 

director of GAO’s physical infrastructure team. Public infrastructure is vital to us and to our economy, whether we are talking 

about highways or mass transit or rail or aviation or drinking 

water or wastewater treatment. Despite their vital importance, infrastructure investments have not kept pace with repair, maintenance and the need for expansion and replacement. 

As a result, there is a growing interest in how we can maintain 

the appropriate level and the proper kind of infrastructure investment. The Transportation and Infrastructure Committee understands our infrastructure needs, after all, it is their charter. The 

Budget Committee wants to better understand ways that we can 

fund or finance such investments and how we can evaluate the assorted options. The Federal support for infrastructure usually 

comes in the form of grants embodied in the authorizing legislation 

and funded during the appropriations process. But there are numerous means of financing. Some are described as banks, some as 

revolving funds. Some increase borrowing or create new forms of 

borrowing. Some establish entities to manage or operate such 

projects. 

All of these proposals, along with a new highway bill looming on 

the horizon in the not too distant future, give these two committees 

a chance to put our heads together. And putting these two committees together, there are a lot of heads. Maybe a third of the House, 

Mr. Oberstar. We want to understand the budgetary implications, 

the amount and manner by which we increase our capital investments. We want to know under what scenarios it is appropriate to 

consider investment mechanisms other than direct Federal financing, of any policy tradeoffs of one mechanism over the other. We 

need to understand the new proposals for financing infrastructure 

improvements, keeping in mind there is never, in the end, such a 

thing as a free lunch. We hope this hearing will be a starting point 

for a longer and larger conversation about how to fund and finance 

infrastructure investments and how to evaluate such proposals. I 

now turn to Chairman Oberstar for his opening statement. 

Mr. OBERSTAR. Thank you very much, Mr. Chairman. Welcome 

to our committee. I am glad to have you here and I am glad to be, 

once again, part of the Budget Committee, which I served on for 

my limited 6 years in the 1980s and into 1990. And I want to welcome the gentleman from Wisconsin, Mr. Ryan, who represents 

three of the most important constituents in the United States, my 

granddaughters in Kenosha, Wisconsin. 

And as I said to him, we could be having this meeting at 

Tenuta’s Deli in Kenosha, a wonderful welcoming place. But I want 

to welcome everyone back to the subject of capital budgeting. Let 

me just read a few brief highlights—13 percent of the Nation’s 

3 

aging dams are classified as ‘‘high hazard.’’ Municipal water systems need $100 billion to keep up with demand. Nearly 1 of every 

2 miles of paved highways needs resurfacing or reconstruction. 

Half of America’s bridges are too old, too weak to adequately and 

safely handle today’s traffic; 56 of the 184 principal locks in the 

Nation’s inland waterways will require major repairs over the next 

20 years. Deepwater ports have insufficient capacity and are stifling trade. That from a report by the Subcommittee on Economic 

Development, which I chaired in 1982, a report that my then-colleague and later Chair of the House Government Reform Committee, Bill Clinger from Pennsylvania, spent an enormous amount 

of time working on, developing the hearings. We spent months 

crafting this report. 

We concluded in our recommendations to the committee and to 

the House the adoption of a capital investment budget is a move 

toward a prospective public policy, rather than the retrospective action that is too often indicative of public works decisions. A capital 

budget would provide important information not available to the 

Congress and the executive branch so that they can then make capital decisions weighing the evidence, evaluating resources and projecting future needs. That is what we need. 

In the course of that hearing, there was an extraordinary moment when David Stockman turned around and said, yes, I think 

a capital budget would be a good thing. But as an annex to the 

Federal budget, not as an integral part of it. Now, those figures I 

read off from 1982, you can say that today, 260 of the Nation’s inland waterway locks are inadequate to handle the capacity. Today 

it takes 820 hours round trip from Clinton, Iowa to New Orleans 

to export grain from America’s heartland. That is 3 weeks travel 

one way. We have to do better than that, because the locks are 600 

feet long and the barge tows are 1,200 feet long, and you have to 

split them in half, send 600 feet through—the next 600 feet 

through tie them together and then go onto the next of those five 

inadequate locks. 

And on the Illinois-Ohio river system, they need an additional 12 

each—1,200 foot lock—we passed that legislation through this committee, through the House, by an overwhelming vote, overrode a 

presidential veto. Yet not a dime, not a single project entered into 

the President’s budget for the coming fiscal year. 

I don’t want to go back and update all these figures. But just on 

bridges we said half. That meant 73,784 structurally deficient 

bridges in the U.S. that are on the verge of collapse. We need to 

invest in America. On Monday, I participated as the keynote speaker for the European transport ministers’ meeting in Slovenia, the 

land of half of my ancestors, to talk about our investment needs 

in infrastructure in waterways, highways, airways, railways and 

ports and to exchange with the European ministers on their plan. 

This is their plan—the Trans-European Transport Network (TEN– 

T). 

But this plan was formally presented to the council of ministers, 

all 27 of them, yesterday, by Jacques Barrat, who is the European 

Union Transport Commissioner. The TEN–T Plan would provide 

$350 billion over 10 years for highway, railway, high-speed passenger, high-speed rail, ports and lockage systems that will link 

4 

the Atlantic Ocean through the English Channel to the Black Sea, 

to the Seine River, to the Rhine, to the Danube and to the Black 

Sea to link with a water highway. They already ship enormous 

amounts of goods. $350 billion. They have every one of their priority projects listed page by page, process by process, funding 

source by funding source. 

We don’t have that kind of capital budgeting. We need to do that. 

Some say it will be too much money, it will be too big a challenge. 

But if we don’t know what the picture is, then how can you 

prioritize? How can you make choices? We have to make those 

choices. They are tough choices to make, of course. But that is our 

responsibility as Members of Congress. 

So I plead to develop a capital budgeting process. I think we need 

to have a roadmap, a water map, an airways map, a railways map 

as Europe is doing or we will fall behind. Just one final observation. In 1989, China had 168 miles of interstate quality highway. 

Today, they have 22,500 miles and in 10 years they will have 

55,000 miles. With their investment, they have reduced the travel 

time by truck from Beijing to Hong Kong from 55 hours to 25 

hours. Nowhere in America, with all of our investments, have we 

reduced truck travel time by 30 hours on any stretch of roadway. 

We have increased it by that amount of time. They have reduced 

the travel time by truck from Beijing to Shanghai from 35 hours 

to 14 hours. We have not made those kinds of investments and improvements. If we are going to compete in this world economy, then 

we have to make those investments. Thank you very much. 

Chairman SPRATT. Thank you, Mr. Oberstar. Mr. Ryan. 

Mr. RYAN. Thank you, Chairman Spratt. And I also want to 

thank Chairman Oberstar for his gratitude and his kind invitation 

to bring us here. I hope I get invited back after I read my opening 

statement. I also want to thank our witnesses for joining us today, 

Director Orszag and Patricia Dalton, managing director of GAO’s 

physical infrastructure team, welcome. And I look forward to your 

testimony. Before I share my statement on the subject of this hearing, I am going to take just a brief moment to talk about the transportation issue first on the minds of the American people. And I 

hear the bell, so I realize we have some time constraints here. And 

the issue that is first on the minds of the American people is clearly the skyrocketing price of gasoline. 

One of the things almost certain to come up today as we look at 

alternative financing mechanisms for public infrastructure is the 

possibility of increasing the gas tax. I think that is the last thing 

we want to do at this time. We need to be looking at ways of reducing the gas price burden on the American people. And that is why 

today I will introduce legislation that will suspend the 18.4 cent 

tax on gasoline for the summer and give American families at least 

a little relief. I know there is a concern, probably a lot in this room 

about the impact this proposal will have on the highway trust fund. 

So my bill holds the highway trust fund harmless and it goes a 

step further. It will actually shore up the trust fund by eliminating 

its 2009 shortfall. This may sound impossible, but it is not. We can 

address both these high priority issues, relief from high gas prices 

and needed infrastructure improvements. And we can do it without 

costing the taxpayers a single dime. We will do it by addressing a 

5 

third issue that is also on the list of the American people’s concerns 

and that is Congress’ pork-barrel spending. If Congress will agree 

to give up earmarks for just one year as laid out in the KingstonWolf proposal, we could save $14.8 billion. This is a proposal that 

proposes a bipartisan commission to make sure that we have a system that is transparent and accountable to the American people 

who have lost faith in the way we spend their dollars. We could 

use that money to give taxpayers a little relief at the pump for the 

summer and still have more than enough money left over to shore 

up the trust fund in 2009, something that I know is a major priority for the transportation and infrastructure committee. Now, 

while my bill takes care of the highway trust fund’s short-term financing problem, there is—there is a longer-term issue on highway 

financing and that is what we are here to talk about today, clearly 

public infrastructure, from roads and bridges to dams and sewers 

is vitally important to the growth and productivity of our economy 

and to our way of life. There are two issues before us. First, how 

do we ensure Federal funding is allocated to high priority infrastructure that has a high benefit cost ratio. And second, what is 

the best means of financing this activity? Today we are here to discuss this second issue, what role, if any, alternative financing 

mechanisms can or should play in the funding of Federal investment in public infrastructure. 

In the past, the Budget Committees have concluded, as have 

CBO and GAO, that these alternative financing mechanisms from 

sale-leasebacks to third-party financing to tax credit bonds to be a 

more expensive, less transparent way to acquire and use capital assets when compared to conventional appropriations in treasury borrowing. And as Dr. Orszag notes in his testimony, there is no free 

money here. It is pay me now or pay me later. Regardless of what 

kind of mechanisms we use, alternative or otherwise, the bills still 

have to be paid. 

And while we have many worthy demands of Federal spending, 

the American taxpayers and thus Congress don’t have a limitless 

supply of money to fund them. So Congress has got to set priorities 

so we can ensure that our most critical public infrastructure 

projects get every bit of funding they need in the most cost effective 

way. 

Finally, as Dr. Orszag knows and has testified before the Budget 

Committee, the question of how we might finance extra spending 

on infrastructure or anything else will soon be moot if we don’t get 

to the business of reforming our entitlement programs. If we continue to push off entitlement reform, these programs will make 

most of our funding decisions for us. Because after paying for them, 

there simply won’t be enough money left in the budget to even finance our highest domestic priorities. This will take place regardless of what financing methods we use for these other programs. 

Federal infrastructure makes an important contribution to our 

economy. The chairman is right to point out the needs for America 

in the future. And I hope we can find the best way to address these 

key priorities in a transparent and a responsible way. And once 

again, I thank every one for being here. I thank you, chairman, for 

your invitation. And I look forward to the views of Dr. Orszag and 

Ms. Dalton. 

6 

Chairman SPRATT. Mr. Mica, the ranking member of this committee is not here, I believe. Mr. Oberstar, Mr. Ryan, if it is agreeable to you, I thought we would start with Dr. Orszag, give him 

5 minutes and that will leave us about 5 minutes to get to the 

floor. We have got 6 votes, nearly an hour on the floor. And I beg 

your pardon, but we didn’t set the schedule. Let’s go ahead and see 

if we can’t make use of what time is available. Dr. Orszag, we will 

give you 5 minutes. But you can take your time when we come 

back to make sure you have a full presentation of your testimony. 

STATEMENT OF PETER ORSZAG, DIRECTOR, CONGRESSIONAL 

BUDGET OFFICE 

Mr. ORSZAG. Thank you very much, Mr. Spratt. I will try to be 

brief in this initial period. Mr. Oberstar, Mr. Ryan, members of the 

two committee, thank you for having me this morning. Growing 

delays in air travel and surface transportation, bottlenecks in 

transmitting electricity, inadequate school facilities all suggest that 

some targeted additional infrastructure spending would be economically justifiable. 

First, let’s get some facts. As the first slide shows, the Nation 

spends about $400 billion a year on infrastructure. And I tried to 

give you a breakdown. I don’t know if you can see that of that $400 

billion. Of that, the Federal Government provides about $60 billion. 

This is from 2004. And Federal Government spending is very concentrated, particularly in highways. 

So $30 billion of the $60 billion or so in Federal spending on infrastructure is dedicated towards highway spending. State and 

local governments spend a disproportionate share of their money in 

other areas. You see that on utilities and other. And similarly, the 

private sector spending on infrastructure is disproportionately concentrated in things like electricity generation and transmission. 

The second slide that I have may be of more interest to people. 

For the first time, the Congressional Budget Office has gone 

through the various studies that exist on what would be needed to 

maintain current service levels from our infrastructure and what 

could be economically justifiable; that is, what projects could generate larger benefits than costs. And let me focus, for example, on 

highways. We currently spend about $67 billion a year on highway 

spending. The Federal Highway Administration has estimated that 

it would cost about $79 billion a year to maintain current levels of 

service. And so an additional, let’s say, $10 to $12 billion a year 

would be required to maintain current levels of service and that as 

much as $132 billion a year could be justified in terms of benefits 

exceeding costs. So that would be an extra roughly $60 billion or 

so. 

In aggregate for transportation infrastructure, additional spending to maintain current levels of spending—current levels of service 

would amount to perhaps $20 billion a year and perhaps as much 

as $80 billion a year could pass an economically justifiable test. 

Now, it is important to remember that although the economic rationale for some additional infrastructure spending is strong, it depends very specifically on the individual projects. Some projects 

generate large additional benefits, others not so much. 

7 

So to say that these levels of spending may be economically justifiable is not to say that just pumping that amount of money into 

infrastructure would generate benefits. It depends very sensitively 

on which specific projects are chosen or where the money is directed. It is also the case that these estimates are dependent on 

and sensitive to what else is happening. And in particular, if we 

priced and used the existing infrastructure that we have more efficiently, these numbers would go down. 

So, for example, the Federal Highway Administration has suggested that widespread implementation of congestion pricing would 

reduce investment needed to maintain the current highway system 

by $20 billion, significantly reducing the necessary investments 

that we are showing there. Fourth, I want to note that the existence of additional economically justifiable investments does not determine who should pay for it. And in general, the benefits principle suggests that Federal taxpayers are often the least efficient 

source for financial support of an infrastructure investment after 

the direct beneficiaries of the investment and local and State taxpayers. Even when Federal support for a given type of infrastructure is justified in principle, implementation problems may make 

it undesirable in practice. GAO for example, found that States offset roughly half of the increase in Federal highway grants between 

1982 and 2002 by reducing their own spending and that the rate 

of substitution increased during the 1980s. 

Let me just finally say in my final 30 seconds that I think there 

is a lot that the Federal Government could be doing to better utilize and make more efficient the support that we already provide 

for infrastructure. My testimony goes through the inefficiencies in 

the current tax subsidies for tax exempt State and local bonds and 

ways that that could be made more efficient. And I would also note 

that we own a significant amount of property and other forms of 

infrastructure that could be much more efficiently managed and 

that could provide offsets or sources of funding for new investments 

in things like highways. Thank you very much, Mr. Chairman. 

[The statement of Peter Orszag follows:] 

8 

PREPARED STATEMENT OF PETER R. ORSZAG, DIRECTOR, 

CONGRESSIONAL BUDGET OFFICE


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Chairman SPRATT. We will recess—— 


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[Recess.] 

Chairman SPRATT. We will let you proceed with your testimony. 

Mr. ORSZAG. I thought I was done, Mr. Chairman. 

Chairman SPRATT. You are completed? 

Mr. ORSZAG. For now, yeah, sure. 

Chairman SPRATT. Okay. Ms. Dalton, we are glad to have you 

and we look forward to your testimony. As in the case of Dr. 

Orszag, your complete statement has been made a part of the 

record. You can summarize it as you see fit, but take your time. 

STATEMENT OF PATRICIA A. DALTON, MANAGING DIRECTOR, 

PHYSICAL INFRASTRUCTURE TEAM, GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. DALTON. Thank you, Chairman Spratt and members of the 

committee. I really appreciate the opportunity to testify on infrastructure financing issues today. These are important issues because the Nation’s physical infrastructure is under strain raising a 

host of safety, security and economic concerns. My remarks today 

are going to focus on the challenges associated with our infrastructure, principles that we at GAO have identified to help guide efforts to address these challenges and existing and proposed options 

to fund investments in the nation’s infrastructure. The challenges 

are numerous. 

For example, just by increases in transportation spending at all 

levels of government and improvements to the physical condition of 

highways and transit facilities over the past 10 years, congestion 

has worsened and safety gains have leveled off. In addition, demand has outpaced the capacity of our Nation’s surface transportation and aviation systems resulting in decreased performance 

and reliability. Water utilities nationwide are under increased 

pressure to make significant investments. Needs across the country 

are estimated to range between $485 billion and $1.2 trillion over 

the next 20 years. For example, about a third of our water utilities 

report that 20 percent of their pipes are at the end of their useful 

life. Clearly these and other challenges need to be addressed. Additional investment is clearly warranted. However, calls for increased 

investment in infrastructure come at a time when traditional funding is increasingly strained and the Federal Government’s fiscal 

outlook is worse than many may understand. 

Addressing these challenges is complicated by the breadth of the 

Nation’s physical infrastructure which is owned, funded and operated by all levels of government and the private sector. Moreover, 

infrastructure policy decisions are inextricably linked with economic, environmental and energy policy concerns. Given these 

types of challenges and the Federal Government’s fiscal outlook, it 

is clear that the Federal Government cannot continue with business as usual. Rather a fundamental re-examination of government 

programs, policies and activities is needed, including in the infrastructure area. Questions to be asked include what are our goals 

and are they tied to the national interest? What is the Federal 

role? Are performance and accountability built into the funding decisions? Are we using the right tools, the best tools? Is the approach physically sustainable? Funding for the Nation’s infrastructure comes from a variety of Federal, State, local and private 

50 

sources. As primary owners of the infrastructure, State and local 

governments and the private sector generally account for a larger 

share of infrastructure funding than the Federal government, however the Federal Government has played and continues to play an 

important role in funding infrastructure. 

Various existing funding approaches could be altered or new 

funding approaches could be developed to help fund investments in 

our infrastructure. These various approaches can be grouped into 

two categories for funding, taxes and user fees. An example of a tax 

is clearly the Federal fuel taxes on gasoline and jet fuel, which are 

attractive because they provide a relatively stable stream of revenue and their collection and enforcement costs are relatively low. 

Examples of user fees include air passenger facility charges or 

highway tolls. The concept underlying user fees; that is, users pay 

directly for the infrastructure they use is a long standing aspect of 

infrastructure programs. 

Financing strategies on the other hand can provide flexibility to 

bridge gaps when traditional pay as you go funding sources are 

scarce as they are nowadays. Financing mechanisms can create potential savings by accelerating projects to offset rapidly increasing 

construction costs and offer incentives for investment from State 

and local governments and from the private sector. The Federal 

Government currently offers several programs that provide infrastructure financing. For example, the TIFIA program provides 

loans for transportation projects of national significance. The government also has authorized a number of revolving funds that are 

used to dedicate capital to be loaned for qualified infrastructure 

projects. 

In general, loan dollars are repaid, recycled back into the revolving funds and subsequently reinvested in the infrastructure 

through additional loans. Such funds exist at both the Federal and 

State level. They include State infrastructure banks, the clean 

water State revolving fund and the drinking water State revolving 

fund. Several proposed bills would make additional financing mechanisms available for infrastructure. For example, the proposed 

Build America Bond Fund would provide $50 billion in new infrastructure funding through bonds. The National Infrastructure Development Act bill introduced by Ms. DeLauro, would establish a 

loan program administered by a government sponsored entity to 

fund a variety of infrastructure projects. 

A National Infrastructure Bank Act would provide an infrastructure bank at the national level as a revolving fund. Although each 

of these financing mechanisms has different merits, each mechanism in the final analysis is a form of debt, but ultimately must 

be repaid with interest. Furthermore, since the Federal Government’s cost of capital is generally lower than that of the private 

sector, financing mechanisms such as bonding should be recognized 

as more expensive than full upfront funding. 

To help policymakers make explicit decisions about how much 

overall Federal spending should be devoted to investment, we previously have proposed establishing an investment component within the unified budget by recognizing the different effects of various 

types of Federal spending. An investment focus within the budget 

51 

would provide a valuable supplement in the unified budget’s consideration of macroeconomic issues. 

Moreover, with direct attention to the consequent choices within 

the budget under existing budget limitations, a level which is now 

not determined explicitly by policymakers but is simply the result 

of numerous individual decisions. In conclusion, various investment 

options have been and likely will be continued to be identified to 

repair, upgrade, expand and better use our Nation’s infrastructure. 

Ultimately, Congress and other Federal policymakers will have 

to determine which option or more likely which combination of options best meets the needs of the Nation. There is no silver bullet. 

The suitability of any of these options will depend on the level of 

Federal involvement the policymakers decide in a given area. We 

look forward to continuing to work with the committees as you consider these various options. Thank you, Mr. Chairman. 

[The statement of Ms. Dalton follows:] 

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Chairman SPRATT. Thank you very much. Just to start off the 

questions. We have had several hearings here at which the topic 

of capital budgeting has been raised as if it is a beginning at least 

towards more rational planning, more rational budgeting and funding of infrastructure projects. How would we take the Federal 

budget and recast it into capital and noncapital operating budgets? 

Is that a viable idea and does it accomplish anything that we 

couldn’t do by other means just as easily? 

Mr. ORSZAG. I guess I will start on that, Mr. Chairman. As you 

know, we released a study this morning on a capital budget. And 

let’s separate how you would do it from whether you would want 

to. With regard to whether you would want to, there are trade offs, 

but I would note it is awkward to move to accrual accounting, 


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which is what a capital budget is, just for part of the budget. Most 

of the budget is cash based. And moving to accrual accounting for 

capital spending but not for entitlement spending or lots of other 

parts of the budget is an awkwardness and it raises the question 

of whether one should move to full accrual accounting. And on that, 

I would just note that there are lots of countries that have evaluated that question, decided not to do it and that also there are 

many countries that have not moved to a capital budget for precisely that reason, that it is awkward to do it just for this part of 

the budget. Secondly, that if you were going to do it, just for part 

of the budget, there is a lot of pressure that would come to bear 

on the definition of what capital is. So if you have one system for 

capital and another system for noncapital, it becomes very attractive to start labeling everything as capital and one would have to 

pay particular attention to the definition of capital spending. 

With regard to how you could do it, that is frankly not as complicated as the normative question of whether you should. It would 

involve simply taking out—moving away from a cash basis system 

of accounting for capital investments, however defined, instead of 

when you buy something for a dollar of capital, that currently is 

scored as a dollar. Instead, what would happen is that you would 

not score that dollar; but instead as the capital depreciated, there 

would be an allocation each year, a charge each year for the depreciation. 

Chairman SPRATT. Ms. Dalton, do you have any observation 

about capital budgeting and what it might offer us? 

Ms. DALTON. The one additional point I would make is one thing 

to consider where I don’t think it will work very well at the Federal 

level is that we don’t own a lot of the infrastructure. We do fund 

a lot of it, but it is owned at the State and local levels. So therefore, when you are looking at capital budgeting, fundamentally it 

assumes that you are owning the infrastructure and from an accrual basis, you are using that asset over time and depreciating 

that. When the Federal Government doesn’t own the infrastructure, you don’t have that opportunity from an accounting standpoint. 

Chairman SPRATT. Would human investments be considered— 

could they be considered a capital investment as part of the capital 

budgeting? 

Mr. ORSZAG. Well, I think you’re touching upon one of the tensions which is that the theory behind a capital budget is that there 

are things that we pay for today that have long-term economic benefits. It is traditionally interpreted as physical capital, but many of 

the same arguments would apply to research and development 

spending, to education spending. Some people would even argue 

things like—— 

Chairman SPRATT. Do you need a discrete or several discrete revenue streams or income streams that you can then attach, levy or 

tax in order to repay the front-end capital costs? 

Mr. ORSZAG. Not conceptually with regard to a capital budget. 

You do need that sort of thing with regard to other financing mechanisms that have been under discussion. But with regard to a capital budget by itself, you know, conceptually at least you could just 

say that amount of capital or that definition of capital is not countVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00106 Fmt 6602 Sfmt 6602 P:\DOCS\42883 JASON
85 

ed when it is purchased but rather as it depreciates. And that can 

be independent of whether there are user fees or specific tax revenues that are tied to that capital. 

Chairman SPRATT. And how would you treat the funding of capital projects differently from, say, other projects which is funded on 

a year-to-year basis? Would you borrow and then have an identified 

source of money to pay back the capital outlays? 

Mr. ORSZAG. Well, one of the consequences, again, would be—and 

maybe this is getting to your question—one of the consequences 

would be there would be more of a divergence than currently exists 

between the reported deficit and the amount of financing that the 

Federal Government would require. So if we went out and we purchased a dollar of investment goods or of capital goods and that 

was excluded from the budget, only the depreciation would be 

counted in future years, we would still need to finance that dollar 

in terms of borrowing or some other financing mechanism. And 

that would be another source of divergence between the reported 

deficit and the treasury’s borrowing needs. 

Chairman SPRATT. Ms. Dalton? 

Ms. DALTON. There is nothing I could add to that. 

Chairman SPRATT. There are different ideas being proposed that 

would give us a different way of identifying activities that generate 

expenses and are different from—that could be used to complement 

existing revenue sources. The gasoline tax, for example, which 

could be complemented by a congestion tax. Is a potential congestion tax sufficient to really put much stock in what could be done 

with it in terms of financing capital improvements and highway 

improvements, transportation improvements of various kinds? 

Mr. ORSZAG. I will take a crack at that. Congestion pricing has— 

it is almost a twofer. It has two potential benefits. I know there 

are concerns about it that we could talk about also, but it has two 

significant benefits. First it could raise revenue that could be used 

to finance new investments; and secondly, it reduces the amount of 

investment that is necessary to undertake or to maintain current 

services or to exhaust the economically beneficial projects that are 

out there. It allows us to use the infrastructure that we have or 

that we would build much more efficiently and the evidence on this 

is very clear. When you price something by time of day or by congestion, you do get the results that you are looking for in terms of 

reducing congestion costs and more efficiently using the infrastructure that we have. And that would apply to highways. It applies 

frankly to landing rights at airports. It applies in lots of different 

settings. 

Chairman SPRATT. You can see how cities like London and New 

York can apply taxes of this kind. But is it feasible for the Federal 

Government to apply a congestion tax which depends very much on 

local conditions? 

Ms. DALTON. You are correct, Mr. Chairman, in that it does depend on local conditions. And traditionally the congestion taxes 

have been imposed at the local level or the State level reflecting 

the demand on the infrastructure in trying to spread that demand 

over time usually. 

Mr. ORSZAG. But, for example—and I agree that this is traditionally not a Federal role. But, for example, one could construct sceVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00107 Fmt 6602 Sfmt 6602 P:\DOCS\42883 JASON
86 

narios or policy options—I will just give you one possibility—that 

you could require a higher State and local match on Federal grants 

for projects that do not have congestion pricing relative to those 

that do. There are lots of different ways that you can have the Federal Government encourage this and try to recapture some of the 

potential benefits. 

Chairman SPRATT. Thank you very much. Let me turn now to 

Mr. Simpson. 

Mr. SIMPSON. Thank you, Mr. Chairman. And thank you for setting up this hearing. I appreciate it. It is a subject that is of interest to me and should be of interest to all of us, because, you know, 

no matter where you travel in the world, you come back with the 

conclusion that one of the reasons that we have become the strong 

economy of the world is because of our infrastructure and the investment that we have made in it over the years, that our forefathers made in it. 

In fact, it is kind of interesting, I would have liked to have heard 

the debate when the Eisenhower administration proposed the 

interstate highway system. I am sure the debate was are you kidding me, we are not going to need interstates in Idaho and Montana and Wyoming. And in fact, when they built them there, I can 

remember driving 50 miles down the road and never passing another car. And while it was real nice, now those areas—actually 

some of them have some pretty good congestion in them. Those 

were forward looking individuals that did that. And I am afraid 

that we haven’t done the same or aren’t doing the same and future 

generations are going to pay for that if we don’t invest in the infrastructure of this country, not only roads and bridges and railways 

and waterways, and as you said, our water systems and so forth. 

Let me ask you, does capital budgeting make much sense without 

capital planning? 

Ms. DALTON. I certainly don’t believe so. I think one of the things 

that we need to be looking at is having a comprehensive capital 

plan identifying what we are trying to achieve, what our goals are, 

what the role we should be having in this infrastructure or any 

type of capital expenditures so that we have a way to prioritize 

what needs to be done. Clearly there is an awful lot that we need, 

we would like. What are our highest priorities and how do we set 

those. I think a capital planning approach would assist in that decision making. 

Mr. ORSZAG. And I would just agree that again, the return to different projects vary substantially and just kind of throwing money 

at infrastructure does not get you what at least economists would 

hope for. 

Mr. SIMPSON. Let me express one of my frustrations that I have 

had here, is that we don’t have plans for those kinds of things. And 

as you know, we are sometimes accused of doing congressional directive spending, otherwise known as earmarking things, which I’m 

not opposed to. The problem is I never know where that stands in 

terms of a national need when you start looking at what projects 

are. And my assumption is that a local person that represents a 

district knows that district better than I do and so forth. So I have 

a tendency to listen to them. 

87 

But I don’t know how it fits the national need. And another example is that I sit on the Energy and Water Subcommittee. The 

Army Corps of Engineers comes in and wants to dredge harbors to 

make deepwater harbors and so forth. There are harbors all over 

this country. And I don’t know that there is—well, I know there is 

not a plan to say how are the ones that we are going to actually 

make deepwater harbors going to fit into the overall transportation 

system? We need a plan somehow. Then we’ve got to sit down and 

say how are we going to pay for that plan. And it obviously can’t 

be just the gas tax and the local units are about property taxed 

out. Registration fees in most places are getting high. We’ve got to 

find some alternative ways of doing it. 

And as we were mentioning before this hearing started, I think 

people are willing to pay when they see improvement in the system. If they are just hiring more employees and stuff, they have 

got some concerns. Go ahead and respond if you would like. 

Ms. DALTON. One of the things I was going to point out was one 

of the things that capital planning will do is that it helps you in 

choosing between projects, because there may be three or four different solutions for a particular problem; which one is the best? A 

rigorous analysis and evaluation of the project through a capital 

planning approach lets you choose. 

You know, you may be presented with two different things. Well, 

one person says this is the best; another one will say that. Well, 

how do you tell? And through that rigorous analysis, hopefully it 

will lead you to better decision-making, so that the return on that 

investment will be greater. 

What kind of performance can I expect out of a rail project 

versus building another highway? 

Mr. SIMPSON. Mr. Oberstar, I appreciated his opening statement; 

he seems very interested in this. And I would hope the T&I Committee would actually sit down and take some time and work on 

how to put together a capital plan, because, to me, that is a 

multiyear project of putting that together. 

Ms. DALTON. It is one of the reasons that we at GAO believe that 

having an investment component as part of the unified budget 

would be helpful, in that it would, at least as a start, start beginning together all of the investment projects and efforts that we 

have under way and identifying them clearly in the budget to assist in making those decisions. 

Mr. SIMPSON. Well, as we mentioned earlier, this is something 

that—I have been interested in the trust funds and how the trust 

funds are used. And Mr. Blumenauer and I are going to introduce 

a resolution dealing with the trust funds and studying the trust 

funds and how they are used. Because sometimes I think they are 

used improperly or not used as they should be. Some of them are 

actually growing in amount when we have a need out there. 

And I will be talking to you, I am sure, in the near future, as 

we do that, to see how we can work on that so that we are using 

the resources appropriately. 

And then look at, as I said earlier, how are we going to pay for 

this? We have got to find some innovative ways to pay for it, some 

that we probably don’t employ right now that are totally different. 

So I appreciate it. 

88 

And, thank you, Mr. Chairman. 

Chairman SPRATT. The Chair recognizes Mr. Smith. 

Mr. SMITH. Thank you, Mr. Chairman. 

And to our witnesses, I appreciate your time. 

In rural Nebraska, we have seen an obvious pattern of economic 

growth along four-lane interstates or expressways, and certainly 

our State trust fund is suffering, just like the Federal. And I would 

say that simply adding the gas tax on a per-gallon basis doesn’t 

really address things long-term, kind of piggybacking off of Mr. 

Simpson’s comments. 

But as we do look to the future and some population differences 

just within Nebraska, we see congestion being addressed using 

trust fund dollars in the urban areas. I would challenge whether 

or not that is enough forward-thinking, by merely adding lanes, actual lane miles. Whereas in rural Nebraska we can leverage more 

economic growth, I think, looking to the future, just as the interstate system did many years ago. 

Do you have some suggestions of how dollars should be spent in 

terms of adding lane miles versus other types of transportation infrastructure? 

Ms. Dalton, if you would? 

Ms. DALTON. Yes, I think there are some things that can be 

looked at, because, in some ways, in some areas, you really can’t 

build your way out of the congestion. You have to look at how can 

we use what we have better. 

And there are a number of tools. Congestion pricing is just one 

of them. There is also technology that can be used. We have seen 

that here in this area, with some of the lighting systems to get on 

the interstates and trying to regulate the flow of traffic. 

Congestion pricing helps to spread the demand out over time, so 

that if you are going to travel from 4 o’clock to 6 o’clock in the evenings, it may cost you more than if you are traveling at 6:30 or 

3:30. And that just helps move the flow of traffic. 

And those are certainly tools that should be used in conjunction 

with overall infrastructure, construction and development, and trying to look at what are the least expensive but also the most effective alternatives in terms of performance, and what are we trying—it basically gets down to what are we trying to accomplish. If 

we are trying to reduce congestion, are there ways to spread that 

out? Do we really need to, as I said, build another lane? Are there 

alternative transportation systems available, such as bus transit? 

Mr. SMITH. I guess also, you know, proactively developing things, 

rather than just waiting for the auto count to get up to the point 

where we can react. 

Ms. DALTON. Exactly. Right. And you mentioned economic development. You know, where is that development going to occur? Can 

you anticipate that? And, certainly, if you can anticipate it and 

build ahead of time and accommodate it, you are in a much stronger position. 

That is why oftentimes local governments will, as there is a 

housing development going in, they work with the developer to 

build in the infrastructure as part of that development, as one example of trying to anticipate what is going to happen. 

Mr. SMITH. I see. Very good. 

89 

Dr. Orszag, if you would address, perhaps, any information you 

might have that speaks to the effectiveness of transportation dollars being spent in more rural areas in a more proactive fashion. 

Do you guys quantify any of those expenditures and how that is leveraged? 

Mr. ORSZAG. No, we haven’t. 

And I would say most of my written testimony, not surprisingly, 

given my background and our outlook, is based on cost-benefit 

analysis and similar things. There obviously are other considerations that policymakers want and do take into account. But it is 

the case under most cost-benefit analyses that rural projects often 

don’t look as good as projects in more concentrated areas. 

Mr. SMITH. And how far into the future would that gauge? 

Mr. ORSZAG. It depends on the outlook of the underlying study. 

Sir, I can’t give you a generic answer to that question. 

Mr. SMITH. Then, as well, do you ever look at perhaps a multiState effort? 

I mean, the Heartland Expressway is an example in mid-America 

where it is several States. Actually, Ports-to-Plains Corridor is a 

multi-State effort, rather than just one State at a time. 

Does that get much credit in the big picture? 

Mr. ORSZAG. Well, let me sort of broaden the question. It is clear 

that, as we tried to lay out, infrastructure investments generate 

additional economic activity. And, obviously, the more that the different components of the system fit together so that you don’t have 

inconsistencies across the Nation’s infrastructure, the better, in 

terms of generating economic activity. 

Mr. SMITH. All right. 

Thank you, Mr. Chairman. 

Chairman SPRATT. Thank you. 

Mr. Blumenauer? 

Mr. BLUMENAUER. Thank you, Mr. Chairman. 

I deeply appreciate having this hearing, and I hope that there 

will be an opportunity for us to explore in greater detail in the future, because I am concerned. 

I heard my friend from Nebraska raise some concerns that he 

has, in terms of making sure that the infrastructure needs are appropriately met. And I think, from where I sit, the deficiency we 

have now is not having an overall vision or plan about how the 

pieces fit together. Because there are some areas, frankly, that may 

not pencil out in the short term, but they are part of a network. 

And if we don’t have a network, rural America and small-town 

America is shortchanged. 

Too often, we see investments in some rural areas that are just 

like darts thrown at a map. They have political cache, but they 

aren’t part of meeting the overall needs of agriculture, of electrical 

infrastructure. And I am hopeful, I know I have been in consultation with my friend from Idaho, about a way to look at the big picture, maybe actually have an infrastructure plan for this century. 

Mr. Orszag, something that is not on your plan in terms broken 

out, but you have ‘‘utilities and other,’’ in terms of water infrastructure that is going to probably be the greatest stressor with climate 

change, with depletion of water supplies, with an aging infrastructure. 

90 

These are things that I am hopeful that we, as a Congress, can 

be able to zero in, flesh out, help have a big picture, and then think 

about what is economically justifiable and how the pieces fit together. 

You have passenger rail, an economically justifiable investment; 

we don’t have an element there. But we have aviation, that with 

one-third of the trips in this country now 350 miles or less by airplane, that doesn’t pencil with $120-a-barrel oil. They economically 

don’t work. 

We have the potential, if we could look at it comprehensively, 

with some modest investment in rail passenger service, to eliminate some of the pressures for aviation, for instance, for airport expansion. We would actually get capacity, and we would be able to 

have something that would be more pleasurable for the riding public. 

Mr. Orszag, we have talked in the past about present-value accounting that currently in a capital budget may help move us in 

this direction. But there are so many elements here in the transportation system that don’t take into account the dollars we know 

we are going to spend or the cost that we are going to avoid. 

Have you had any further thought about what we could do with 

the Budget Committee to look at this long-term picture of infrastructure investment and ways that we will be able to coax more 

value out of the system to deal with rail, to deal with water, to deal 

with surface transportation, motorway, that would reflect avoided 

costs, that would reflect investments that will make money over 

time, that would have a fairer application of our budget rules? 

Mr. ORSZAG. Well, let me answer that in two ways. 

First, we did come out this morning with a report on capital 

budgeting, in particular. And I can talk more about that. 

But, secondly, and part of your question is, what is the long-term 

benefit or return to these various different investments? And we 

did try in this document, in the testimony that we prepared, the 

written testimony, which is longer than normal for us, to go 

through the evidence on the returns to infrastructure spending. 

And while they are positive on average, they vary a lot by specific 

project. And they are also lower than some early estimates from 

the early 1980s suggested. 

So, there is a long-term benefit to additional infrastructure investment. It obviously depends very sensitively on the specific 

projects, on the specific types of infrastructure. 

I would also just note quickly, you had mentioned wastewater 

and drinking water. We do have estimates in the testimony that 

is based on previous work by CBO, suggesting that the Nation is 

spending about $26 billion a year currently on those, and that investments would need to average between $30 billion and $47 billion a year to basically maintain current services and do a little 

more. 

Mr. BLUMENAUER. Thank you. I will look to further examination. 

I am sorry we were chopped up a little bit. 

Mr. Chairman, I appreciate your indulgence and having this 

hearing. 

The point of inquiry, I will warn you, next, Dr. Orszag, when I 

am sure our paths will cross, is the notion that, if we are able to 

91 

actually have a comprehensive infrastructure plan and a vision, 

whether that wouldn’t help us actually coax more value, avoid 

some of the problems Ms. Dalton is talking about, and be able to 

put us ahead overall. 

Mr. ORSZAG. I just hope our paths don’t cross while we are both 

on bicycles. That could get a little messy. 

Mr. BLUMENAUER. Thank you. 

Chairman SPRATT. Mr. Baird? 

Mr. BAIRD. I thank the Chair. 

I thank our distinguished witnesses. 

This may have been addressed already. Forgive me. I was at another meeting. 

I certainly felt that the most recent stimulus package amounted 

basically to dropping money out of helicopters and was not our best 

investment. There are some business provisions of the stimulus 

package that make sense, but the rebates I did not think did. 

We did some surveys in my own State and district about projects 

which were ready to go, in the sense that they were permitted, designed, could be actually putting people to work in the same time 

frame it has taken us to get the stimulus package out, and that 

would produce jobs with paychecks and lasting infrastructure to 

the good of people for many years to come. 

It has been quite frustrating, because there seems to be this 

sense that—it is a shibboleth but I don’t think a fact—that infrastructure investment doesn’t stimulate the economy. I wonder if 

you could talk a little about that, what seems to be received wisdom by the economists’ side, but in direct conflict to the evidence 

I get on the ground when I talk to school boards or local communities, et cetera. Frankly, you walk around these Capitol grounds 

and you see needed infrastructure repairs right there. 

Educate us on this, if you would. 

Mr. ORSZAG. I think that one might be for me. Let me say two 

things. 

First, as I tried to indicate earlier, there is a long-term return 

or a long-term benefit to infrastructure spending. We are now just 

talking about the degree to which money can flow out the door 

quickly in a period of economic weakness, which is a different question. 

There I have pushed my folks hard. And I would just again say, 

outside of road resurfacing, where it looks like money can flow 

more rapidly, that I have been eager to receive the list of specific 

projects that people believe can move fast. Because it is often the 

case that, when you start to actually go down those lists—and I 

don’t want to just take it on faith; I want to be looking at the specifics involved—that you get responses like, ‘‘Oh, no, we meant we 

could get it permitted rapidly, not actually have money out the 

door.’’ The question is, how quickly can money actually go out the 

door? 

Mr. BAIRD. But permitting isn’t free. You don’t magically get a 

permit. I mean, someone has to be employed to do the paperwork 

for the permitting. 

And so my belief is there is a continuum of projects in the pipeline, some of which are at the permitting stage, some of which are 

92 

at the design stage. People actually get paid money and then pay 

taxes on that money. 

Mr. ORSZAG. Yes. The question is just, what share of the cost of 

the project is occurring rapidly? And the cost of the permitting 

process is often only a very small share of the overall cost of the 

project itself. 

So the question is really, what is the spend-out rate? If you are going to spend $100 on this project, what share of that $100 do you 

get out the door rapidly? 

Mr. BAIRD. Let me ask this: If I pump $20 billion into the economy and it is going to transportation infrastructure, whether the 

money is going to employ a geologist or a hydrologist to work on 

permitting, even a lawyer, heaven forbid, or whether some of those 

projects—which I am convinced they are, because my school districts have shown me the plans—actually get some people nailing 

boards and pulling wire, that is money that is going to a domestic 

workforce in all of those cases. 

And whether or not that permit is done now or 5 years from now 

is a bit chronologically fungible. But doing it now sets up later 

projects. So you have to invest in it at some point. So the point is, 

there are many stages on infrastructure projects that we could invest money in right now. 

And the second point is this: Relative to a flat-screen plasma TV 

made in Korea, that, except for the exchange, the import and export by shipping and the guy that works at Best Buy and gets a 

2 percent commission, the stimulus to me and the long-term benefit 

for our society is vastly superior. 

The cost-benefit ratio to the feds and the public of building a 

water treatment plant or fixing your school, I would wager, pencils 

out a good bit better than buying that plasma TV. 

Mr. ORSZAG. Well, a couple things. 

First, it is true that the larger the share of imported value-added 

or imported goods and whatever is purchased with the stimulus 

money, the less impact there is on domestic production. I would 

note that a lot of the rebate checks will probably go for things like 

food at restaurants and what have you and not just for plasma 

televisions, and that some component of infrastructure spending 

also involves imported inputs or imported goods. 

Again, I think the real question is, out of that $20 billion, and 

assuming it is a well-chosen project, there will be long-term economic benefits. If your objective, as most of the policy debate earlier this year was framed, was to get the economy a jumpstart now, 

within the next 3 or 4 or 5 months, what share of that $20 billion 

can go out the door within that 3 or 4 months. And that is a separate question from whether we should be spending the $20 over 

time or not or the returns to it. 

Again, I would just come back to, I want to see the specific 

projects that can get a big share of their $20 billion or their $100 

or whatever it is out the door really fast, and by that I mean 

months. 

Mr. BAIRD. One last comment on that. I don’t think it is necessary that the checks arrive and the building starts in order to get 

$20 billion of economic stimulus. If you promised me that 4 months 

from now there would be money made available to me to do someVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00114 Fmt 6602 Sfmt 6602 P:\DOCS\42883 JASON
93 

thing on my home, I could start working on that home today and 

put the people to work on the promise of the money. So I don’t 

have to write the check today to have the stimulus effect today. 

I yield back. 

Ms. DALTON. The one thing I would add is, on the spend-out 

rates, when you are going to do a project, you have committed the 

money, you may start spending. Oftentimes with infrastructure, 

that spend-out rate goes over time, often over years, so you in all 

likelihood won’t have that immediate impact on the economy, 

which is one of the issues with an economic stimulus package. 

There are ways, if you can identify projects that are ready to go 

and the spend-out plans are immediate, yes, they could influence 

the economy. 

Mr. BAIRD. My problem was I saw no effort to do that in this 

stimulus package. And I think it was a terrible lost opportunity. 

Chairman SPRATT. Mr. Simpson? 

Mr. SIMPSON. I just want to say that I agree with my friend from 

Washington, that we could have spent this a lot more wisely, and 

I think it would have had a better stimulus effect. I will guarantee 

you that I can show you communities, cities, that have wastewater 

treatment facilities, they are waiting for their match from the Federal Government. And within 4 weeks, they could be spending 

money, literally, because they have things ready to go, highways 

that are ready to be built and so forth that we just don’t have the 

money for. 

I think we could have had a much more effective stimulus plan, 

and, quite frankly, that is why I voted against it. 

So, anyway, it is an interesting discussion we are going to have, 

but it is one that is vital to the future of this country that we have, 

because if we are going to have the infrastructure for the next generation and if we are going to keep America on the leading edge 

of the economies of this world, we had better start investing in our 

infrastructure. And it is one we are going to have to sell the American public, and we are going to have to take some political courage 

to do it. 

So I appreciate it. I am sure that we will be calling you and talking to you substantially in the near future about this. As Congressman Blumenauer and I were just talking about, we plan on making 

this one of our highest priorities in the next Congress. 

So I appreciate it. Thank you. 

Chairman SPRATT. A couple of final questions. I thought Doris 

Matsui was here, but she has left. 

Back in January 2008, the National Surface Transportation Policy and Revenue Commission recommended an annual investment 

of $225 billion for surface transportation. Has GAO or CBO undertaken an examination of that? 

Ms. DALTON. We currently, Mr. Chairman, are taking a look at 

that, the recommendations of the policy commission. That work 

isn’t completed yet. 

I will say, on the $225 billion, what we have seen so far is that 

it is based on their highest needs scenario, and we are really trying 

to work to get beneath those numbers at this point. We are not—— 

Chairman SPRATT. Does CBO—excuse me. Go ahead. 

94 

Ms. DALTON. I was going to say, what we are looking for is, what is the support for that $225 billion? 

Mr. ORSZAG. And the reason the figures that I presented to you 

this morning differ from those include that it is not clear whether 

the investments proposed were economically justifiable or were, 

sort of, held to that standard. And also it is not clear if the opportunity cost of capital—that is, when you put $1 into this project, 

it means that you either have to pay interest, if you want to think 

about it that way, or are you are foregoing opportunity to invest 

in something else—was actual fully taken into account. 

Chairman SPRATT. Have you produced any sort of written anal- ysis of the $225 billion? 

Mr. ORSZAG. I don’t think we have produced a written analysis 

of it, no. 

Chairman SPRATT. Okay. As you know, the Budget Committee’s 

principal annual output is something called a budget resolution. Do 

you have any recommendations for whether or not we should target 

or somehow identify or classify how much of the budget is going for 

capital purposes and improve the budget system for allocating to 

capital needs? 

Mr. ORSZAG. Again, as was earlier discussed, I do think there are 

things that can be done without moving to a full capital budget to 

better identify and classify capital investments and to give some 

structure and rigor to the process of deciding both on the aggregate 

amount and on the specific projects. 

With regard to the aggregate amount, as I have already said, 

there does appear to be additional capital spending that would be 

required to maintain current services and that would be economically beneficial in the sense of generating larger benefits than 

costs. 

And I would also say that I think there are significant things we 

can do to offset those costs through both some of the pricing mechanisms that we discussed and also through better management of 

the infrastructure that we already own, including Federal buildings 

and property and other capital assets that we already currently 

own and, I think, arguably, we are not doing a terrific job managing. 

Ms. DALTON. I would add that another benefit would be that it 

would bring together all of the various investment expenses and 

hopefully agreement on what we consider to be investments. 

We have talked a lot about transportation. Dr. Orszag just mentioned Federal buildings. We have talked about human capital. Are 

those part of the investment component or not? 

And I think it would be helpful, as part of the budget resolution 

and budget structure, to make some of those distinctions and determinations. 

Chairman SPRATT. Any further observations from either of you 

before we close the hearing? 

Mr. ORSZAG. I would just note on this last question that, as part 

of the study on capital budgeting that we put out this morning, we 

do have a section on, for example, creating a separate enforcement 

cap under a possible new statutory pay-as-you-go rule for capital 

spending and other things you can do along the lines that you seem 

to have been suggesting. 

95 

Chairman SPRATT. Ms. Dalton? 

Ms. DALTON. I would just conclude with that I think this is a 

good opening discussion of what we want in terms of our goals, 

what the Federal role should be, what are we trying to achieve. A 

lot of our programs were developed in the mid-1900s or earlier; do 

they fit with the 21st century? 

And I think, as we start looking at investment in total, it will 

help us in those decisions as to, do these programs still work, what 

do we need in the future? We definitely need more investment, but 

how do we want to go about that and get the greatest return from 

that investment. 

Chairman SPRATT. We will definitely continue this inquiry, but 

the next time we hold a hearing, we will look for a better day. 

Thank you very much for your patience, your forbearance and 

not least your excellent presentations and testimony. It has been 

extremely useful to us. And while we didn’t have as many members 

as we would have liked here, rest assured your work product will 

redound to the benefit of the whole institution, particularly our two 

committees. 

Thank you very much, indeed, for coming and testifying. 

Ms. DALTON. Thank you, Mr. Chairman. 

Chairman SPRATT. The hearing is now adjourned. 

[The statement of Mr. Carnahan follows:] 

96 

[The statement of Mr. Costello follows:] 

PREPARED STATEMENT OF HON. JERRY F. COSTELLO, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF ILLINOIS

Thank you, Mr. Chairman. I am pleased to be here today as we examine financing 

our infrastructure investment. I would like to welcome today’s witnesses. 


carnahan.eps
97 

The United States has an extensive system of highways, ports, locks and dams, 

and airports. Yet, we have neglected our infrastructure over the years and as a result, it needs major improvements and modernization. 

For example, our Interstate System is almost 50 years old. Thirty-two percent of 

our major roads are in poor or mediocre condition; one of every eight bridges is 

structurally deficient; and 36 percent of the nation’s urban rail vehicles and maintenance facilities are in substandard or poor condition. 

I strongly believe we have an obligation to maintain it and modernize our infrastructure it as it becomes antiquated. According to the Transportation for Tomorrow 

report, a significant surface transportation investment gap exists that can only be 

filled by an annual investment level of between $225 billion and $340 billion by all 

levels of government and the private sector. If we look at our current capital investment from all sources in all modes of transportation, it is $85 billion, well below 

the recommended level. 

I am Chairman of the Aviation Subcommittee and according to the FAA’s Operational Evolution Plan (OEP), new runways and runway extensions provide the 

most significant capacity increases. The FAA’s 2007-2011 National Plan of Integrated Airport Systems (NPIAS) states that during the next five years, there will 

be $41.2 billion of AIP-eligible infrastructure development, an annual average of 

$8.2 billion. However, the FAA states that the current NPIAS report may understate the true cost of needed capital investment. The 2007—2011 Airports Council 

International—North America (ACI-NA) Capital Needs Survey estimates total airport capital needs—including the cost of non-AIP-eligible projects—to be about $87.4 

billion or $17.5 billion per year from 2007 through 2011. 

The FAA’s ‘‘Capacity Needs in the National Airspace System, An Analysis of Airport and Metropolitan Area Demand and Operational Capacity in the Future’’ report 

found that 18 airports around the country are identified as needing additional capacity by 2015, and 27 by 2025. As you can see, aviation infrastructure is muchneeded and that is why in HR 2881, we increased the PFC and also increased the 

authorization for AIP by $4 billion over the Administration’s proposal. 

Continued congestion and delays in our skies, on our roads, in our ports and on 

our waterways is costing us excessive amounts of money. We must and can do better. We must find a way to make the necessary improvements to our entire transportation system to make sure the highest level of safety is maintained and that 

the US economy remains strong. I am interested in hearing more from our witnesses on their recommendations as Congress looks for ways of financing the much 

needed infrastructure investment. 

With that, I look forward to today’s hearing as we discuss financing infrastructure 

investment. 

[Questions submitted by Ms. DeLauro follow:] 

MS. DELAURO’S QUESTIONS SUBMITTED TO DR. ORSZAG

The Government Accountability Office released a report in February 2006 entitled 

‘‘Excess and Underutilized Property Is an Ongoing Problem.’’ In short, the report 

makes clear that the problem of unused federal property ‘‘puts the government at 

significant risk for wasting taxpayers’ money and missing opportunities to benefit 

taxpayers.’’ Such properties are costly to maintain and could be put to more costbeneficial uses, including being sold to generate revenue. I believe a reasonable action for the federal government to take would be to sell these unused federal properties, which in a sense is unused and idle infrastructure, and use that revenue to 

benefit the taxpayers by putting it toward renovating our public infrastructure. We 

could, for example, use that to offset the $18 billion cost for funding the ‘‘ready to 

go’’ infrastructure projects identified by state transportation departments across the 

country in a recent American Association of State Highway and Transportation Officials (AASHTO) survey. 

When we are talking about infrastructure, we are talking about the heart of our 

economy, jobs, GDP growth and fiscal responsibility. Government does not always 

create jobs, but it can set forth creative policies that do in fact bring about opportunity. Funding these ‘‘ready-to-go’’ projects would create approximately 850,000 

jobs and create over $110 billion in economic activity. Offsetting the cost by mandating the sale of these unused federal properties would allow us to do that in a 

fiscally responsible and paid for way. I would appreciate, from a budgetary perspective, your observations and thoughts on such a policy? 

98 

MS. DELAURO’S QUESTIONS SUBMITTED TO MS. DALTON

I introduced a bill, the National Infrastructure Development Act (HR 3896). The 

bill would establish a tax exempt National Infrastructure Development Corporation 

that would make loans, purchase securities, issue ‘‘public benefit’’ bonds and offer 

other insured financing packages, in order to maximize private investment to fund 

our most critical infrastructure projects. Within five years the Corporation would 

prepare a plan to transition to a government-sponsored enterprise, including broad 

distribution to long-term investors with all voting securities ultimately transferred 

to non-federal government investors. The Corporation would at that point become 

self-financed through user fees or other dedicated sources of revenue, as well as the 

sale of public stock. 

In your prepared testimony you refer to proposals intended to increase investment 

through new financing mechanisms in the nation’s infrastructure. You touch on 

bonds as a source of up-front capital, yet an expensive investment for the federal 

government. You also talk about a national infrastructure bank and the associated 

pros and cons, including defaults on loans and inflation. In short, you suggest there 

is no silver bullet to address the multi-faceted infrastructure challenges we face. I 

understand that my proposal surely also has pros and cons and is by no means a 

silver bullet, yet I believe it is well worth considering as a key component of any 

bold infrastructure plan to rebuild America. In my mind, the Federal Government 

simply cannot do this on its own. We must build effective private-partnerships and 

we must leverage significance private sector investment if we are going develop a 

21st Century state-of-the art infrastructure. 

Accordingly, I would like to get your expert opinion on the concept of a GSE, a 

Fannie Mae type entity, in the realm of infrastructure. What do you see as the pros 

and cons in relation to the other financing proposals out there? Do you think there 

are certain infrastructure sectors, water treatment for example, where it might 

work better than others? Are there perhaps geographic areas where it might work 

best, perhaps funding big city infrastructure projects? 

[The statement of Mr. Mitchell follows:] 

99 

[The statement of Ms. Tsongas follows:] 

PREPARED STATEMENT OF HON. NIKI TSONGAS, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MASSACHUSETTS

I thank the Committee on Budget and the Committee on Transportation and Infrastructure for holding this important hearing to explore alternative mechanisms 

for investing in our nation’s infrastructure. This hearing could not be more timely 

or more relevant. In recent years, federal appropriations have failed to fully meet 

the demands of our nation’s aging infrastructure while current alternative funding 

mechanisms, such as the Highway Trust Fund, are poised to run multi-billion dollar 

deficits. 

These shortfalls come at a particularly critical time for Massachusetts, which 

must maintain some of the oldest infrastructure in the country in a climate that 

is often punishing to the state’s roads, bridges, ports, airports, and railroads. Even 

though Massachusetts’ share of the nation’s population has decreased, its total number of inhabitants continues to grow, further adding to the strain on its infrastructure. 

According to data from the American Society of Civil Engineers, more than half 

of the bridges in Massachusetts have been deemed ‘‘structurally deficient’’ or ‘‘functionally obsolete,’’ 40 dams have been deemed deficient, and 71 percent of major 

roads are in ‘‘poor or mediocre condition.’’ Nationwide, 33 percent of the nation’s 

major roads are in ‘‘poor or mediocre condition’’ and 36 percent of major urban highways are congested. 


mitchell.eps
100 

Failure to adequately invest in our nation’s infrastructure has had a direct impact 

on our safety, our energy dependence, and our economic health. In my district, examples abound of the effect that infrastructural improvements can have on the 

economy. For instance, construction of an interchange on Interstate-93 near 

Tewksbury and Andover would alleviate existing traffic congestion, providing a 

major economic stimulus. The area is home to such global industry leaders as 

Wyeth, Proctor and Gamble/Gillette, Charles River Laboratories and others, each of 

which is currently unable to expand its operations as long as transportation resources remain so restricted. Similarly, at the national level, investments in infrastructure have been shown to stimulate both short term job growth and long-term 

economic health. According to the U.S. Department of Transportation, every $1 billion of federal highway investment supports 34,779 jobs. These jobs have a subsequent magnifying effect throughout the economy. 

By making critical, coordinated investments in our transportation systems, we can 

spur economic development, create jobs, restore confidence in the safety of our system, and maintain our global competitiveness. 

[Questions submitted by Mr. Walz follow:] 

MR. WALZ’S QUESTIONS SUBMITTED TO THE WITNESSES

To all witnesses: 

• How would you say the level of coordination and cooperation between units of 

government at the federal, state, and local level is working now, and what would 

you suggest to improvement this coordination? 

• We have been hearing a great deal lately about a temporary gasoline tax break. 

What do you think the impact of such a proposal would be in helping develop our 

national infrastructure? 

• What incentives for the private sector could intensify their participation in public-private partnerships to develop our transportation infrastructure? 

• Which experiences from foreign countries do you take into consideration when 

determining what strategies we should use? 

PREPARED STATEMENT OF HON. JASON ALTMIRE, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF PENNSYLVANIA

Thank you, Chairman Oberstar, for holding today’s joint hearing with the Committee on the Budget to examine methods that can be taken to finance investments 

in our nation’s infrastructure. I would like to also thank Chairman Spratt for agreeing to join us today. His Committee’s expertise will be of great benefit to us today 

as we discuss investment opportunities and how these investments will fit into our 

nation’s budget. 

Like many of my colleagues on this committee, I have serious concerns about the 

future of our nation’s infrastructure. Increased congestion on our roads and rail 

lines is resulting in significant costs to American taxpayers. In 2005, congestion on 

our nation’s roadways cost motorists over $78 billion, which equates to an average 

cost of $710 per traveler. It is apparent that steps must be taken to improve and 

expand our infrastructure. 

Furthermore, the tragic collapse of the Interstate 35W bridge in Minnesota last 

year brought to America’s attention what many members of this Committee have 

known for years—the infrastructure in this nation is in desperate need of repair. 

In the six counties that I represent, there are currently more than 1,000 bridges 

considered structurally deficient. These repairs and improvements will not be cheap. 

It will truly take the combined efforts of the Transportation and Budget Committees 

to develop a comprehensive plan for future investments that can finally begin to address this growing problem and I look forward to being a part of this process. 

Chairman Oberstar, I would like to thank you again for holding this hearing. 

[Responses to questions for the record from CBO follow:] 

RESPONSES FROM THE CONGRESSIONAL BUDGET OFFICE TO QUESTIONS FOR THE

RECORD

Question: The Government Accountability Office released a report in February 

2006 entitled ‘‘Excess and Underutilized Property Is an Ongoing Problem.’’ In short, 

the report makes clear that the problem of unused federal property ‘‘puts the government at significant risk for wasting taxpayers’ money and missing opportunities 

to benefit taxpayers.’’ Such properties are costly to maintain and could be put to 

101 

more cost-beneficial uses, including being sold to generate revenue. I believe a reasonable action for the federal government to take would be to sell these unused federal properties, which in a sense is unused and idle infrastructure, and use that revenue to benefit the taxpayers by putting it toward renovating our public infrastructure. We could, for example, use that to offset the $18 billion cost for funding the 

‘‘ready to go’’ infrastructure projects identified by state transportation departments 

across the country in a recent American Association of State Highway and Transportation Officials (AASHTO) survey. 

When we are talking about infrastructure, we are talking about the heart of our 

economy, jobs, GDP growth and fiscal responsibility. Government does not always 

create jobs, but it can set forth creative policies that do in fact bring about opportunity. Funding these ‘‘ready-to-go’’ projects would create approximately 850,000 

jobs and create over $110 billion in economic activity. Offsetting the cost by mandating the sale of these unused federal properties would allow us to do that in a 

fiscally responsible and paid for way. I would appreciate, from a budgetary perspective, your observations and thoughts on such a policy? 

Response: As noted in CBO’s testimony, the General Services Administration reports that about 10 percent of all federal government facilities are either underused 

or empty. Remarkably, no information is readily available about the market value 

of those facilities, and federal agencies destroy thousands of facilities each year that 

have little or no market value. Some of the facilities do not meet current building 

and safety standards and some pose environmental hazards. 

Selling unused federal properties could be desirable for a number of different reasons. More detailed analyses of the inventory of federal facilities and the state of 

the local markets for such facilities appear to be warranted. 

RESPONSES FROM THE CONGRESSIONAL BUDGET OFFICE TO QUESTIONS FOR THE

RECORD FOR CONGRESSMAN WALZ

Question 1. How would you say the level of coordination and cooperation between 

units of government at the federal, state, and local level is working now, and what 

would you suggest to improvement this coordination? 

Response: As noted in CBO’s testimony, the Government Accountability Office 

and other researchers have found that federal highway grants generally do not increase total spending dollar for dollar, because state and local governments reduce 

spending from their own funds. Greater clarity about the appropriate roles of each 

of the three levels of government (and the private sector) in supporting the development of additional infrastructure could facilitate a clearer division of responsibility, 

which in turn could reduce uncertainty and allow for better planning. 

Question 2: We have been hearing a great deal lately about a temporary gasoline 

tax break. What do you think the impact of such a proposal would be in helping 

develop our national infrastructure? 

Response: CBO has not analyzed such proposals. 

Question 3: What incentives for the private sector could intensify their participation in public-private partnerships to develop our transportation infrastructure? 

Response: Private firms will be motivated to participate in partnerships with the 

public sector to the extent that they anticipate a level of profits that is sufficiently 

attractive given the risks involved. Partnerships are not sources of ‘‘free money’’: Although private firms may, in some cases, reduce total costs through management 

efficiencies, all infrastructure is ultimately paid for by some combination of users 

and taxpayers. Accordingly, private firms will evaluate the revenues expected from 

those sources (through contract fees and/or rights to charge fees to the users of infrastructure services) and any forms of cost-sharing by the public sector (such as 

tax-preferred financing and loan guarantees). 

Question 4: Which experiences from foreign countries do you take into consideration when determining what strategies we should use? 

Response: CBO does not make policy recommendations (except on issues relating 

to the budget process) but does examine other countries’ experiences where relevant 

to our analyses. In the case of investment in infrastructure, foreign experiences with 

user fees, asset management, and capital budgeting can provide useful perspectives 

on questions facing policymakers in the United States. For example, CBO’s May 

2008 ‘‘Capital Budgeting’’ paper discusses the use of accrual budgeting in Australia 

and New Zealand—where it is applied not only to depreciation of government assets, but also to employees’ pension benefits and the future cost of environmental 

cleanup associated with government services—and the rejection of separate capital 

budgets by five countries in northern Europe. 

102 

[Responses to questions for the record from GAO follow:] 

RESPONSES FROM THE GOVERNMENT ACCOUNTABILITY OFFICE TO QUESTIONS FOR

THE RECORD

QUESTION FROM CONGRESSWOMAN DELAURO

Question: I introduced a bill, the National Infrastructure Development Act (HR 

3896). The bill would establish a tax exempt National Infrastructure Development 

Corporation that would make loans, purchase securities, issue ‘‘public benefit’’ bonds 

and offer other insured financing packages, in order to maximize private investment 

to fund our most critical infrastructure projects. Within five years the Corporation 

would prepare a plan to transition to a government-sponsored enterprise, including 

broad distribution to long-term investors with all voting securities ultimately transferred to non-federal government investors. The Corporation would at that point become self-financed through user fees or other dedicated sources of revenue, as well 

as the sale of public stock. 

In your prepared testimony you refer to proposals intended to increase investment 

through new financing mechanisms in the nation’s infrastructure. You touch on 

bonds as a source of up-front capital, yet an expensive investment for the federal 

government. You also talk about a national infrastructure bank and the associated 

pros and cons, including defaults on loans and inflation. In short, you suggest there 

is no silver bullet to address the multi-faceted infrastructure challenges we face. I 

understand that my proposal surely also has pros and cons and is by no means a 

silver bullet, yet I believe it is well worth considering as a key component of any 

bold infrastructure plan to rebuild America. In my mind, the Federal Government 

simply cannot do this on its own. We must build effective private-partnerships and 

we must leverage significance private sector investment if we are going develop a 

21st Century state-of-the art infrastructure. 

Accordingly, I would like to get your expert opinion on the concept of a GSE, a 

Fannie Mae type entity, in the realm of infrastructure. What do you see as the pros 

and cons in relation to the other financing proposals out there? Do you think there 

are certain infrastructure sectors, water treatment for example, where it might 

work better than others? Are there perhaps geographic areas where it might work 

best, perhaps funding big city infrastructure projects? 

GAO response: We agree that we will need to consider all options, and as you 

mentioned, we will likely need to use a variety of options as there is no silver bullet. 

We also agree that the federal government cannot do it all—it will take the collective efforts of all levels of government and the private sector to address our infrastructure challenges. In considering the different options, one of the first steps is 

determining the federal role—because the suitability of any of the options depends 

heavily on the level of federal involvement desired. 

In terms of the advantages, government-sponsored enterprises (GSE) can be designed to sustain their operations from business income. In addition, GSEs are distinguished from other chartered private entities by investors’ perception of an implicit federal guarantee of GSEs’ debt obligations. Therefore, a GSE potentially 

could borrow funds at a lower interest rate since the risk is perceived to be lower. 

The perceived federal guarantee, however, is also a disadvantage—that is, there is 

an assumption that the federal government would step in and bail the GSE out if 

needed. 

One area where GSEs could be particularly useful is in the funding of infrastructure projects of regional or national significance—that is, projects that benefit regions or the nation as a whole. These projects can be large and costly, requiring the 

cooperation and financial support from multi-jurisdictions. However, as we have previously reported, it can be difficult for state and local governments to secure funding 

for these kinds of multi-jurisdictional projects because transportation projects that 

provide benefits that are more readily discernable to immediate localities are favored. The GSE could provide an alternative financing source for these types of 

projects. 

QUESTIONS FROM CONGRESSMAN WALZ

Question: How would you say the level of coordination and cooperation between 

units of government at the federal, state, and local level is working now, and what 

would you suggest to improve this coordination? 

GAO response: We did not examine the level of coordination and cooperation between the different levels of government for our testimony. However, last year we 

issued a report on intermodal transportation, which enables freight and passengers 

103 

to cross between different modes of transportation efficiently and can improve mobility, reduce congestion, and cut costs. We identified several barriers that inhibit 

intermodal transportation, including limited collaboration among the many entities 

and jurisdictions involved. For example, the Department of Transportation (DOT) 

operating administrations and state and local transportation agencies are organized 

by mode—reflecting the structure of funding programs—resulting in an organizational structure that DOT’s own assessments acknowledge can impede coordination 

between modes. In addition, collaboration between the public and private sector can 

also be challenging; for example, some transportation officials told us that privatesector interests in airport, rail, and freight have historically not participated in the 

regional planning process. These barriers impede state and local agencies’ ability to 

carry out intermodal projects and limit DOT’s ability to implement Congress’ goal 

of a national intermodal transportation system. To help address these barriers, we 

recommended that the Secretary of Transportation direct one office or administration to lead and coordinate intermodal efforts at the federal level by improving collaboration and the availability of intermodal guidance and resources. 

Question: We have been hearing a great deal lately about a temporary gasoline 

tax break. What do you think the impact of such a proposal would be in helping 

develop our national infrastructure? 

GAO response: We have not examined the gasoline tax break proposals in detail. 

We would note, however, that fuel taxes are the primary revenue source for the 

Highway Trust Fund, which is the major source of federal highway and transit 

funding. Therefore, unless an alternative revenue source was identified, the suspension of the gasoline tax would negatively impact the balance of the Highway Trust 

Fund. Furthermore, the most recent Highway Trust Fund projections, which do not 

factor in the proposed tax break, predict that the balance of the fund will be exhausted by 2012. 

Question: What incentives for the private sector could intensify their participation in public-private partnerships to develop our transportation infrastructure? 

GAO response: As we reported in February 2008, the private sector has traditionally been involved as contractors in the design and construction of highways. In 

recent years, however, the private sector has become increasingly involved in assuming other responsibilities including planning, designing, and financing. The private sector, and in particular, private investment groups, including equity funds and 

pension fund managers, have recently demonstrated an increasing interest in investing in public infrastructure. They see the sector as representing long-term assets with stable, potentially high-yield returns. As a result, the private sector has 

also entered into a wide variety of highway public-private partnership arrangements 

with public agencies. 

In addition to the expected return on investment, there are several other incentives that can encourage the private sector to participate in highway public-private 

partnerships. For example, the private sector can also receive potential tax deductions from depreciation on assets involving private sector investment and the availability of these deductions were important incentives to the private sector to enter 

some of the highway public-private partnerships we reviewed. Obtaining these deductions, however, may require lengthy concession periods. In the United States, 

federal tax law allows private concessionaires to claim income tax deductions for depreciation on a facility (whether new highways or existing highways obtained 

through a concession) if the concessionaire has effective ownership of the property. 

Effective ownership requires, among other things, that the length of a concession 

be greater than or equal to the useful economic life of the asset. Financial and legal 

experts, including those who were involved in the Chicago and Indiana transactions, 

told us that since the concession lengths of the Chicago Skyway and the Indiana 

Toll Road agreements each exceed their useful life, the private investors can claim 

full tax deductions for asset depreciation within the first 15 years of the lease agreement. The requirement to demonstrate effective asset ownership contributed to the 

99-year and 75-year concession terms for the Chicago Skyway and Indiana Toll 

Road, respectively. One tax expert told us that, in general, infrastructure assets 

(such as highways) obtained by the private sector in a highway public-private partnership may be depreciated on an accelerated basis over a 15-year period. 

Private investors can also potentially benefit from being able to use tax-exempt 

financing authorized by the Safe, Accountable, Flexible, Efficient Transportation Equity Act for the 21st Century—A Legacy of Users (SAFETEA-LU) in 2005. Private 

activity bonds have been provided for private sector use to generate proceeds that 

are then used to construct new highway facilities under highway public-private 

partnerships. This exemption lowers private sector costs in financing highway public-private partnership projects. As of January 2008, the Department of TransporVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00125 Fmt 6602 Sfmt 6621 P:\DOCS\42883 JASON
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tation (DOT) had approved private activity bonds for 5 projects totaling $3.2 billion 

and had applications pending for 3 projects totaling $2.2 billion. DOT said it expects 

applications for private activity bond allocations from an additional 12 projects totaling more than $10 billion in 2008. 

Finally, the private sector can potentially benefit through gains achieved in refinancing their investments. Both public and private sector officials with whom we 

spoke agreed that refinancing is common in highway public-private partnerships. 

Refinancing may occur early in a concession period as the initial investors either 

attempt to ‘‘cash out’’ their investment—that is, sell their investment to others and 

use the proceeds for other investment opportunities—or obtain new, lower cost financing for the existing investment. Refinancing may also be used to reduce the initial equity investment in highway public-private partnerships. Refinancing gains 

can occur throughout a concession period; as project risks typically decrease after 

construction, the project may outperform expectations, or there may be a general decrease in interest rates. 

Question: Which experiences from foreign countries do you take into consideration when determining what strategies we should use? 

GAO response: In previous reports, we have examined how foreign countries approach various transportation challenges and solutions. For example, based on experiences from foreign countries we recently concluded that consideration of highway 

public-private partnerships in the United States could benefit from more consistent, 

rigorous, systematic, up-front analysis. By weighing the potential benefits of highway public-private partnerships against potential costs and trade-offs through careful, comprehensive analysis, decision makers can better determine whether publicprivate partnerships are appropriate in specific circumstances and, if so, how best 

to implement them. We found that governments in other countries, such as Australia, have developed such systematic approaches to identifying and evaluating 

public interest and require their use when considering private investments in public 

infrastructure. While similar tools have been used to some extent in the United 

States, their use has been more limited. Using up-front public interest evaluation 

tools can assist in determining expected benefits and costs of projects; not using 

such tools may lead to aspects of protecting the public interest being overlooked. For 

example, projects in Australia require consideration of local and regional interests. 

Concerns by local governments in Texas that their interests were being overlooked 

resulted in state legislation requiring their involvement. To balance the potential 

benefits of highway public-private partnerships with protecting public and national 

interests, we recommended that Congress consider directing the Secretary of Transportation to consult with them and other stakeholders and develop and submit to 

Congress objective criteria for identifying national public interests in highway public-private partnerships. We also believe that, the Secretary should, when developing these criteria, identify what guidance and assessment tools are appropriate 

and needed to protect national public interests in future highway public-private 

partnerships. 

In 2006, we issued a report that examined how other countries—specifically, Canada, Germany, Japan, France, and the United Kingdom—approached efforts to reform intercity passenger rail systems. We found that intercity passenger rail reform 

efforts in other countries illustrate that, to be more cost effective and offer increased 

benefits in relation to expenditures, there are a variety of approaches—and several 

key reform elements—that need to be addressed when implementing any approach. 

Over the past 20 years, several countries have employed a variety of approaches in 

reforming their intercity passenger rail systems to meet national intercity passenger 

rail objectives—that is, primarily achieving more cost effective, value-added passenger service for the level of subsidies spent. These approaches, alone or in combination with each other, have been used to support other national objectives as 

well, such as increasing transparency in the use of public funds and providing transportation benefits and public benefits. For example, France and Germany changed 

their public funding structure by devolving decision making to local and regional 

governments in order to support the purchase of intercity passenger rail service, allowing local and regional governments to be more flexible and purchase service that 

best fits the preferences of the users. Prior to, or during, implementation of these 

various approaches, several elements key to comprehensive reform were addressed. 

The national governments of most countries we visited focused their efforts on the 

following elements: (1) clearly defining national policy goals; (2) clearly defining the 

various roles and responsibilities of all government entities involved; and (3) establishing stable, sustainable funding for intercity passenger rail. These elements were 

important to determining how passenger rail fit into the national transportation 

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system and to increase the value of both federal and nonfederal expenditures on 

such systems. 

[Whereupon, at 1:25 p.m., the committees were adjourned.] 

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125 

FINANCING INFRASTRUCTURE INVESTMENTS 

Tuesday, June 10, 2008 

HOUSE OF REPRESENTATIVES, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, Washington, DC. 

The Committee met, pursuant to call, at 10:09 a.m., in Room 

2167, Rayburn House Office Building, Hon. James Oberstar [Chairman of the Committee] presiding. 

Mr. OBERSTAR. The Committee on Transportation and Infrastructure will come to order. We are awaiting the arrival of our senior 

Republican Member on the Committee. He is en route. But we will 

have soon the rule providing for consideration of the Amtrak bill. 

And I know that several of our Members want to be on the floor 

for that, so I will just get started with my comments. I want to 

thank, at the very outset, our member panel for being here for 

their very interesting and persistent and thoughtful constructive 

work on financing infrastructure investments. We will hear from 

that panel in just a moment. Welcome Mr. Mica, thank you very 

much. 

Mr. MICA. Thank you for beginning and also for conducting this 

meeting. And I know I have to run to the floor in a few minutes. 

I understand our Amtrak proposal is up pretty soon. 

Mr. OBERSTAR. The rule on the bill. 

Mr. MICA. Okay. So we have got a little bit of time. 

Mr. OBERSTAR. The bill will be up after all of the—— 

Mr. MICA. I appreciate it after the one-minute diatribes. But 

thank you for hosting this important meeting, and also hearing 

from our colleagues. And what is interesting, I have read through 

some of the testimony and proposals of our colleagues, and I think 

we all have the same goal in mind. And that is providing more net 

dollars for America’s infrastructure. 

We have got three leaders here, another one expected, Mr. Calvert, who are interested in making certain that America is not a 

Third World nation as far as its investment and infrastructure, a 

position which Chairman Oberstar and I maintain. We have to stay 

ahead of the curve. And as we look at probably the most comprehensive reform in transportation policy, which will come with 

next year’s expiration of our current legislation, we want to make 

certain that we are all working together toward that goal. I have 

reviewed some of the proposals, as I say, and they provide some additional net dollars available through infrastructure banking. Mr. 

Blumenauer has a proposal that is similar to one that I have proposed and share his desire also to try to get us to develop a national strategic infrastructure and transportation plan. 

In fact, I had actually drafted a similar proposal to his, which 

had a commission at the top, and that was my first thought at the 

legislation and that approach in trying to get a solid hold on what 

projects are in our national interest. And oddly enough after sort 

of vetting that, I came to the conclusion to reverse the process, 

which was rather than have a commission that would come out 

with a report or a study or a recommendation, and, in fact, ConVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00147 Fmt 6602 Sfmt 6602 P:\DOCS\42883 JASON
126 

gress would have to be the ultimate arbiter of what is set in policy, 

that we would reverse that process. 

And so I have changed my approach, since if you contact any 

State, any governmental entity or jurisdiction, they can produce to 

you instantaneously what their infrastructure needs are. I was 

with Mayor Bloomberg, and he has, for New York City, a strategic 

plan. Each State just about now has a comprehensive strategic 

plan, and most of them incorporate most modes of transportation. 

So we took the reverse approach and have those flow from grassroots up. And having Congress in the position, which it ultimately 

will be in setting what our national strategic policy projects and 

priority plans are. We must also incorporate a way to finance them. 

Quite frankly, I think some of the proposals offered by my col- leagues are quite modest. I believe that we need instead of $500 

million, which I have heard the Chairman mention as a net 

amount, I would like to see $1.5 trillion in infrastructure and raise 

the $286 billion to what the Chairman has said to approach a half 

a trillion dollars. Then through public—well, through, first of all, 

through creative financing, bonding and leverage financing, finance 

an additional half a trillion dollars worth of projects. My administration has not been conducive to those types of proposals, which 

I believe make so much sense, because we can’t pay for all projects 

up front, we do need to finance them and create a fashion, which 

will give us another half a trillion dollars. And then the third half 

a trillion dollars would come from public-private partnerships. And 

if we define at the Federal level what public-private partnerships 

are available, whether it is dealing with a sale of portions of our 

interstate, whether it is public-private partnerships in developing 

in toll roads, in a whole host of public-private arrangements, I 

think the potential for another half a trillion dollars in that net 

value is there. 

So that sounds like a lot of money. Richard Nixon, of course, 

went in August, I believe it was 1954, to Lake George to the Governors Association Conference. The Federal budget in 1954 was $78 

billion and he proposed a half a trillion dollar National highway 

system. And I think that is the kind of conservative initiative that 

we need in these times that we need infrastructure. I yield back 

to the Chairman. 

Mr. OBERSTAR. I am delighted to hear my colleague and good 

friend, Mr. Mica, talk about half a trillion dollars as a conservative 

investment. And I welcome that conservatism because it is a progressive conservatism and it is investing in America’s productivity 

in our future. I have a number of comments that I intended to 

make at the outset, but I thought in light of the rule on the Amtrak bill coming up very early in this process, I yield to the Ranking Member, because I know he wants to be on the floor, and the 

other Members of the Committee want to be on the floor for the 

rule, however, I want to get on with this panel and intend to listen 

very carefully. 

I have read your testimony ahead of time. We have a second 

panel of financial and budget experts who are very special people, 

and several of whom have testified before at this Committee hearing. Dr. Everett Ehrlich; Mark Florian, Goldman-Sachs; Rudy 

Penner, a former CBO Director; and Bernie Schwartz, whom I have 

127 

known for many years over the time when he took over IBM’s 

failed efforts at modernization of the air traffic control system and 

brought it into the modern age with great improvements and our 

en route center technology and the TRACON technology. 

Unfortunately, we will not have Felix Rohatyn. 

[speaks French.] 

So Bob Rowe at the unveiling of my portrait said that we have 

two official languages in the Committee, I just used one of them. 

Thank you. And now, Ms. DeLauro, thank you. Please proceed. 

STATEMENT OF THE HON. ROSA DeLAURO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CONNECTICUT 

Ms. DELAURO. Thank you very much, Mr. Chairman. I take it in 

transportation that Mr. Rohstyn is in Paris, so good for him, if that 

is the case. 

Mr. OBERSTAR. We are not at war with anybody after what I 

said. 

Ms. DELAURO. First of all, let me just say thank you to you also 

just as a comment. 18 years ago when I first came to the Congress, 

my first Committee assignment was to the Transportation Committee. It is a love that I have, and I appreciate all of the good 

work that you have done and the innovation that this Committee 

is engaged in. And to Mr. Mica, thank you. I heard you on the news 

this morning on Amtrak, well done, and I thank you for your comments as well. This is an important hearing, and I am delighted 

to have the opportunity to testify. I am also so pleased to be here 

with my colleagues Earl Blumenauer, Keith Ellison, I am hoping 

we will see Mr. Calvert, as we examine these critical issues. 

As you know, when the Congressional Budget Office testified before this Committee last month, they indicated that as a share of 

gross domestic product, public spending on capital infrastructure 

has been relatively constant for the past several decades. Yet the 

CBO’s review suggests that billions of dollars of additional spending on infrastructure each year would make good economic sense. 

Indeed, with our national economy struggling, the smartest national investments are the ones that create jobs today and continue 

to pay off for years down the road and whose benefits reach our 

entire community. The National Service Transportation Policy and 

Review Study Commission, a January report, recommended an annual $225 billion investment to maintain and improve our transportation system. Approximately $140 billion more than is currently invested. The GAO says our national water infrastructure 

will need from $485 billion to nearly $1.2 trillion over the next 20 

years. And according to the American Society of Civil Engineers, 

the number of unsafe dams in America has arisen by more than 

33 percent since 1998 to more than 3,500 in 2005. 

It is clear we need a bold national infrastructure policy. Of 

course, we need leadership on this issue from the very top, from 

the White House. But Congress also has a critical role to play as 

well to provide both a vision and a way to realize it. Which is why 

I have introduced the National Infrastructure Development Act, to 

create an objective process for evaluating our infrastructure needs 

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structure, such as highways, roads, bridges, pipelines and public 

buildings. 

The legislation would create a national infrastructure development corporation and a subsidiary national infrastructure insurance corporation initially as Federal entities. The corporation 

would make loans, purchase securities and issue public benefit 

bonds to finance infrastructure projects. And the insurance corporation would further reduce the cost of those projects by ensuring the 

investments. The development corporation would include a board of 

directors consisting of 12 members, nine appointed by the President with demonstrated expertise in the field of infrastructure 

project development, finance or related disciplines. 

The board would determine which projects to be funded based on 

how they would meet national critical infrastructure needs and the 

degree to which private sector finance is being leveraged. It would 

also consider whether providing funds will help expedite the project 

in question. We would fund the corporation with $9 billion in appropriations over 3 years. After 5 years, it would develop a plan to 

transition into a government sponsored enterprise, entirely self-financed through user fees and the sale of public stock. 

We face a critical moment, and this proposal represents, I believe, a powerful opportunity to accomplish two important obvious. 

First, to establish an entity that can carefully look at projects and 

fund those which are the most critical to our Nation’s continued 

growth. Second, the proposal leverages private sector investment to 

the largest degree possible. This could not be more important during tight financial times in which Federal and State governments 

simply cannot finance these projects alone. SAFETEA-LU is expiring and we face funding constraints on our aviation, water and 

school building systems, among others. 

We need a new funding mechanism to supplement what we are 

doing. This legislation can fill that gap and meet our responsibilities. It is endorsed by the Associated General Contractors of America. The American Society of Civil Engineers, building and construction trades, Department AFL and the U.S. Chamber of Commerce, among many others. 

Mr. Chairman, I believe my proposal, as well as the proposal of 

my colleagues here today, offer innovative and effective ways to 

take our national infrastructure policy in a positive and in a strong 

direction. By ensuring our Nation can continue investing in its instructor we can rebuild America and keep our Nation highly competitive throughout the 21st century. And I thank you for the opportunity to testify this morning. 

Mr. OBERSTAR. You join the ranks of many graduates of the 

Committee on Transportation and Infrastructure that go on to 

other Committee assignments. Mostly they go to the Appropriations Committee, occasionally to Ways and Means. And you are one 

of those who went to the Ways and Means. 

Ms. DELAURO. Well, it is a way really to fund the programs that 

we think so highly of Mr. Chairman. 

Mr. OBERSTAR. Well, we start you out here in the Committee to 

learn how to do it, then you go somewhere else to do it. Mr. 

Blumenauer. 

129 

Mr. BLUMENAUER. Thank you Mr. Chairman. And I feel that I 

am just on leave from the Committee. I deeply appreciate the decade that I spent with you. 

Mr. OBERSTAR. It is a sabbatical, that’s all. 

STATEMENT OF THE HON. EARL BLUMENAUER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Mr. BLUMENAUER. And look forward in my other Committee assignments to find a way to help you generate the resources to be 

able to rebuild and renew America. The legislation that I am 

speaking to today compliments what my good friend from Connecticut talked about. I am intrigued with the notion of an infrastructure bank. What I hope to offer up for your consideration is 

the leadership from this Committee to develop a vision for how all 

of the infrastructure pieces fit together. We are in the midst of an 

infrastructure crisis. I think, if anything, we have understated it. 

From water, rail, the transmission of electricity, right down the 

line, all of the infrastructure we are actually, I think, investing less 

as a percent of our gross domestic product than we have in recent 

memory. And we have on a regular basis evidence in the news 

about sink holes opening up, levies failing, the strains on the system. And it is going to be only compounded by the impact of global 

warming and climate change. The numbers are staggering in terms of you pick one, $1 trillion, $2 trillion. We are losing the infrastructure investment race with 

our competitors overseas. Some are concerned about China and a 

potential military confrontation. I am worried that we are losing 

the infrastructure race to China. It was not ultimately our Polaris 

missiles and atomic cannons that brought down the former Soviet 

Union. It was their ability to compete with us economically. And 

we at this point are in a situation where we are losing the capacity 

to compete economically with the European Union, with China, 

with Japan. 

Even India is investing eight times what the United States is in 

terms of its gross national product. But it is not just more money. 

And I will work with you as a Member of the Budget Committee, 

as a Member of Ways and Means to find more resources. But it is 

how we spend the money and what we spend it on. Twice in the 

past the United States has developed a large vision for infrastructure development. You passed legislation several months ago commemorating the 200th anniversary of the Gallatin plan that was 

commissioned by President Jefferson with his Secretary of Treasury, Albert Gallatin, to develop a plan that led to the Erie Canal, 

that led to the Transcontinental Railroad, the Homestead Act, that 

helped knit a ragtag group of 13 colonies into a transcontinental 

Nation. 

And it served us well in the 1800s. A century ago, President Roosevelt convened a similar conference in Washington, D.C. That led 

to infrastructure for hydro projects, for the National Park Service, 

and actually planted the seeds for the national plans that ultimately resulted in the interstate highway system. We need a vision 

on the scale of what Roosevelt and Jefferson did so that we can 

bring people together on all, in a comprehensive fashion for what 

infrastructure should look like. 

130 

I am suggesting that we have a commission that would be jointly 

appointed by the legislative branch, by local governments and by 

the new administration so that we have a buy-in to how we are 

going to go ahead and do this. We have demographic strains where 

we are going to have 50 percent of the population, or excuse me, 

a 50 percent increase in our population by 2050. We are going to 

have reallocation in the Metropolitan areas. We have significant 

strain for rural and small town America. And energy prices skyrocketing. You are going to go to the floor in a few minutes to talk 

about your Amtrak reauthorization. And that is one other element 

where we are not putting the pieces together in terms of a robust 

rail passenger system at a time when we have airport congestion, 

where one-third of the trips for air transport are 350 miles or less 

and the economic model doesn’t work with $140 a barrel oil. 

It is why we need to look at it comprehensively. I strongly urge 

that you consider a commission like I am suggesting. I know my 

friend from Minnesota is going to reemphasize and has an approach there. But unless and until we have you help us frame what 

the big picture is and we get the buy-in with a new administration, 

with local governments and have this conversation take place in 

congressional districts across the country, we are not going to have 

the consensus, the momentum and the insight to be able to have 

the big picture. Not a lot of studies. You know what the need is. 

But we need to bring that together in a comprehensive fashion and 

get a buy-in into a bigger picture for how the infrastructure pieces 

fit together. I appreciate your courtesy, I appreciate your past work 

in terms of putting the spotlight on plans in the past, and hope 

that this Committee can help set the tone for how we are going to 

rebuild and renew this country. Thank you very much. 

Mr. OBERSTAR. Thank you for your energy and for your enthusiasm and for your ideas. Mr. Ellison, my good friend and colleague, a first-term Member from Minnesota. He has proven himself and worked very hard without a lot of fanfare, just a good 

nose-to-the-grindstone work. Glad to have you hear. Thank you. 

STATEMENT OF THE HON. KEITH ELLISON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA 

Mr. ELLISON. Thank you, Mr. Chairman. And let me start by 

thanking you, Chairman Oberstar, and Ranking Member Mica for 

holding this important hearing on the condition of our Nation’s infrastructure and proposals needed for improvements to it. The 

issue of investing in public infrastructure in the state of our ailing 

public infrastructure is a very real issue that demands our immediate attention. You and I stood together, shook up and amazed at 

our own infrastructure tragedy in Minnesota when the I-35 bridge 

collapsed. We will never forget those moments. But those moments 

help us focus our attention on the needs of our country now, which 

unfortunately other Members of our body can talk about tragedies 

that happened in their areas. 

But it is bigger than just tragedy, it is a question of our economic 

viability. And that is why I am so happy to appear before the Committee today to discuss the National Infrastructure Bank Proposal, 

which is H.R. 3401 that I have introduced along with Representative Barney Frank of Massachusetts. This legislation would create 

131 

an independent national bank with an initial outlay of about $60 

billion in tax credit bonds. The bank would also be able to receive 

private capital and hence would be able to potentially leverage millions of private dollars. The bank is modeled after the European investment bank whose financing of public projects has created one 

of the most modern and efficient transportation infrastructure systems the world has ever seen. The infrastructure bank would not 

displace existing formula grants or earmark infrastructure, it 

would target specifically large capacity building projects that are 

not adequately served by the current financing mechanisms. 

Eligible infrastructure projects to the bank’s jurisdiction would 

be limited to publicly owned mass transit systems, roads, bridges, 

drinking water, wastewater treatment systems and public housing 

properties. We ensure—to assure that we focus on public investment on projects with broad regional or national impact only 

projects that require a minimal Federal investment of $75 million 

would be eligible for bank financing. And these projects must demonstrate a substantial regional or national significance. Like other 

modern investment banks, once the bank identifies an investment 

opportunity, it will develop a financing package. This package 

would include direct subsidies, direct loan guarantees, long-term 

tax credit general purpose bonds. Most importantly, these bonds 

would be backed by municipal and state revenue which makes 

them some of the safest and most attractive investments. 

I believe this infrastructure bank could play a crucial role in 

tackling the major infrastructure deficit that currently exists in 

America. According to the American Society of Civil Engineers in 

its 2005 report card for America’s infrastructure, it will take an estimated investment of $1.6 trillion by 2010 to just bring the Nation’s existing infrastructure to working order. In addition, the research is clear that investing in public infrastructure can help 

stimulate economic growth. According to the Department of Transportation, each $1 billion 

of infrastructure investment creates 47,500 jobs. Many of these will 

be high paying high school jobs that can’t be outsourced or 

offshored. We also need to consider the cost to our economy. For 

the failure to not invest in a public infrastructure, according to the 

Brookings Institution, our economy lost $78 billion in productivity 

due to public ailing, public infrastructure from congested roads and 

antiquated rail systems. 

Mr. Chairman, no doubt there will be a course of diverse opinions on these issues. Some will say we can’t afford to meet our infrastructure needs. But in reality, we cannot afford to not meet our 

infrastructure needs, and the time to act is now. I believe the infrastructure, the tragic Interstate 35 bridge collapse which occurred in 

our State serves as a national call to action for this Congress and 

our Nation to focus on improving domestic infrastructure. In addition to health and safety, to maintain our competitive edge in the 

world America needs to dramatically increase our investment in 

public infrastructure. Americans deserve a need at public infrastructure of the 21st century that meets the demands of our lives 

and the 21st century. I look forward to working with this Committee and other Members of Congress to make a new national 

commitment to public infrastructure in this country. Thank you. 

132 

Mr. OBERSTAR. Thank you very much Congressman Ellison, and 

for your remarks about that I-35 W bridge. To paraphrase Benjamin Baniker, a tragedy is a terrible thing to waste. We wasted 

an opportunity with that tragedy. Had the Congress been in session for one more week, I think we would have enacted legislation 

that I proposed in conceptual form. There was an opportunity, and 

by the time August passed and Labor Day passed, an appetite for 

action had also passed. And you are right to call that to mind. 

I just recently this past Friday was with Mr. Walz, our colleague 

from the Rochester area, at the Winona Bridge. And their bridge 

engineer took a hammer and tapped one of the girders and the 

hammer went right through. Rust had gone right through one of 

the critical structures of the bridge. And I asked, would you have 

done this inspection if I-35 had not collapsed? He said no. And then 

there is bridge routine to Luke and Superior that is now being completely rebuilt, or not completely rebuilt, the gusset fits are being 

restored, replaced and reinforced. And the bridge in St. Paul. 

And there are many others. But this is what was predicted in 

hearings I held 20 years ago about bridge condition. And a professor of bridge engineering at a prominent university said then 

the bridge maintenance and repair and inspection is in the stone 

age. It still is. We have got to pull out of it and we have got to 

make some investments to make sure those things don’t happen 

again. Mr. Calvert, you have an interesting proposal. I look forward 

to hearing from you. 

STATEMENT OF THE HON. KEN CALVERT, A REPRESENTATIVE 

IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. CALVERT. Thank you, Mr. Chairman and Ranking Member 

Mica and Members of the Committee. Thank you for giving me the 

opportunity to testify here at the hearing today. As you know, I 

represent a congressional district in southern California that encompasses some of the fastest growing communities in the Nation. 

My constituents are found to have the highest commuting cost in 

the Nation and the unhealthiest commute in America. While the 

region I represent faces infrastructure challenges on a number of 

fronts, I would like to focus my comments today solely on the 

emerging goods movement challenge. As many of you know all too 

well, this challenge is not exclusive to southern California. Trade 

Gateway communities all over the Nation are experiencing increased burdens on freight infrastructure surrounding air, land and 

seaports. During most of last year, I met and discussed goods 

movement issues with a variety of stakeholders, including industry 

leaders, think tanks which represent truckers, railroads, port operators, retailers and transportation planners. 

In a proactive attempt to address the freight challenges I introduced, along with my colleague Jesse Jackson, Jr., the ON TIME 

Act. The bill, H.R. 5102, which was introduced on January 23rd of 

this year, will fund the construction of high priority transportation 

projects which will alleviate congestion in our Nation’s Gateway 

Corridors to a dedicated trade-based funding stream. The ON 

TIME Act would direct the United States Department of Transportation to designate key transportation corridors or National Trade 

Gateway Corridors extending out from every official air, land and 

133 

seaport of entry in the United States. Project eligibility under the 

ON TIME Act is limited to transportation projects located within 

the National Gateway Corridor. 

Furthermore, the legislation limits funding to surface transportation projects, such as highway improvements, truck climbing 

lanes, truck bypasses, grade separations and interchanges on key 

freight routes. Publicly owned intermodal freight transfer facilities 

and improvements to the transportation linkages out of port facilities also qualify as eligible projects. The bill grants States with the 

project selection authority, not the United States Department of 

Transportation or Congress, to ensure all interested parties have 

an opportunity to engage in the project selection process. 

The legislation requires States to seek the input from other government agencies, as well as the public and private freight stakeholders. The ON TIME Act derives its trade-based dedicated funding stream to the establishment of a capped and a nominal ad valorem fee on all goods entering and exiting through the official ports 

of entry. The ad valorem fee shall be equal to .075 percent of the 

stated value of the shipment with a cap or maximum fee of $500, 

whichever is less. 

The proceeds generated by the establishment of this fee which is conservatively estimated to be approximately $63 billion over the 

next 10 years, will be deposited into a National Trade Gateway 

Corridor fund which the ON TIME Act establishes is a separate 

trust fund account within the United States Treasury. The fee established on the ON TIME Act is designed to ensure that it is paid 

for by the beneficial cargo owner rather than the transportation 

service providers such as shipping lines, trucking or railroad companies. Additionally, the fee is designed to be collected and administered by the existing Federal Government agencies through the 

use of existing forms and processes to the fullest extent possible. 

The bill apportions the funds collected by the newly establishment 

fee to the transportation improvement projects within the National 

Trade Gateway Corridor in which it was collected. Therefore, all 

funds generated from the application of the fee on goods imported 

and exported at the Port of Charleston, for example, would be apportioned to the transportation projects within the National Trade 

Gateway Corridor designated for the Port of Charleston. While I 

recognize that a proposal like the ON TIME Act is most appropriate as a possible component of the next highway authorization, 

in the short term, the Committee could move forward by advancing 

legislation that would simply direct the Department of Transportation to designate the National Trade Gateway Corridors. 

I am confident if we work together, we can create real solutions 

to ease the congestion bogging down the freight and commuters in 

our Gateway communities. Thank you again for allowing me to testify. I look forward to your questions. Thank you, Mr. Chairman. 

Mr. OBERSTAR. I thank you very, very much, Mr. Calvert, and 

each of our colleagues for their splendid thoughts. Each have a 

slightly different approach to the needs. But just a month ago, I 

traveled to Slovenia to the annual meeting of the Ministers of 

Transportation, 27 ministers of the EU, who were having their conference and asked me to be their keynote speaker of Slovene, 

French, Dutch, whatever else. But to discuss with them also their 

134 

transEuropean transportation network, TEN-T, $350 billion investment. Not just money planned or discussed, but a 30-project system. 

This is not an eye test. I am just showing you it. You can’t see 

from there. I can hardly see it from where I sit. But it is 30 individual projects. $350 billion. The most ambitious of which is to link 

the North Atlantic through the English Channel to the Black Sea 

through the Seine River, past Bahi, to the Rhine, and then by further canal to the Danube and the Danube to the Black Sea, saving 

hundreds of hours of transit and hundreds of millions of euros annually in transportation costs. 

And others deal with extending their existing high speed passenger rail systems, expanding their freight rail network, moving 

more goods from truck to rail, reducing their fatalities, which five 

years ago were 53,000 a year on their comparable highway network 

to ours. But in 5 years, they have reduced that down to the level 

of fatalities on the U.S. highway system, 43,000. They are serious 

about this. They have a plan. They didn’t engage a commission, 

they engaged their ministers, they engaged their top policymakers, 

to lay out the needs, the sources of investment and to make the investments, and they are about half of the way through already 

ahead of schedule. 

Each of you, in your own specific ways, are proposing something 

similar. It really simply takes political will to get there. And we 

haven’t had political will to make those bold investments that we 

need at the White House in the last 8 years. There has been will 

on the part of the Congress. I recall very well Mr. Shuster challenging the Clinton administration and House Republican leadership to fence off the highway trust fund, to truly make it a trust 

and not subject to withholding of funds to build up surpluses and 

make deficits look smaller. 

And we succeeded in that effort. It was a bipartisan effort. Mr. Young advocated with the White House for a $375 billion investment in surface transportation as recommended by the Department 

of Transportation. The White House said no. Speaker Hastert made 

the same appeal. He finally told me that he was told by the White 

House staff he was welcome any time at the White House but not 

to talk about transportation. And we wound up with $286.3 billion, 

thanks in large part to Mr. Thomas, a Chair of the Ways and 

Means Committee who insisted on additional investments well 

above the administration threshold. 

So now we have four splendid ideas set before us. I take heart 

from what Mr. Mica said a little while ago about $1.5 trillion dollars of investment going beyond, I think that is total infrastructure 

investment, not just transportation. 

So Ms. DeLauro, let me ask, your testimony says that the board 

that you would establish would determine which projects to fund 

based on how they meet national critical infrastructure needs. 

What are the criteria? Do you spell those out or do you leave those 

up to the board to determine? How will—and private sector finance 

leveraging. The question I have is how do you make those decisions? The Wilson Bridge on the east coast through which 1 percent of gross domestic product of the Nation passes, or the Golden 

Gate Bridge on the west coast, which is a privately owned and opVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00156 Fmt 6602 Sfmt 6602 P:\DOCS\42883 JASON
135 

erated structure, but to which we have committed Federal funds to 

strengthen against earthquake and terrorist damage, how much 

total investment will the $9 billion over 3 years in the corporation 

generate. 

Ms. DELAURO. Let me just start with that. First of all, I would 

imagine that at that conference in Slovenia, Mr. Chairman, that 

you didn’t need simultaneous translation. 

Mr. OBERSTAR. No. For sure they can speak at least three languages. 

Ms. DELAURO. But I think it is very, very exciting what you outline there, and the kind of commitment and will that you have spoken about. Because my view is similar to yours and to Mr. Mica’s 

that without the will or the willingness to engage in serious public 

investment, that we are not going to succeed. My view is that we 

need the robust investment from the Federal level. But what I 

have tried to do with this proposal is to create the opportunity for 

there to be public and private investment. Because I don’t believe 

we can succeed alone in this effort. I think the scale of the problem 

is that serious. We are looking at a $1.6 trillion annual shortfall 

of funds. And I think we all know that that kind of money is not 

going to come from the Federal Government. And I think that we 

will succeed if we have the engagement of a public-private partnership. The national infrastructure development corporation would 

create $55.8 billion in economic activity. 

Mr. OBERSTAR. That is what you anticipate would be the leveraging, that is that the $9 billion would generate $55 billion 

dollars? 

Ms. DELAURO. That’s right. We would start with $3 billion a year over 3 years. And $30 million in terms of start-up costs. And this 

would become, over the time it would become a GSE a government 

sponsored entity, in the nature of Fannie Mae and Ginnie Mae. 

Mr. OBERSTAR. And then the criteria for the various projects 

would be—— 

Ms. DELAURO. I think that we haven’t filled out the criteria. And 

that that would become a function of the board. But there again, 

when we take a look at—you know, there is a question of what, in 

fact, is in the public good. And I think that that is something that 

has to be considered. But this is about leveraging private capital. 

It is not about privatizing our infrastructure. 

Mr. OBERSTAR. I understand that. I appreciate that. 

Ms. DELAURO. I want that to be clear. 

Mr. OBERSTAR. The reason I asked that, and I want each of the 

members to think about this, each of our witnesses, is that in consideration of SAFETEA-LU legislation I crafted the mega projects 

proposal. And it sailed through the House. We were going to have 

$17 billion. That eventually was cut down to $6 billion because we 

had to cut the whole program back. And then when we got to the 

conference with the Senate they didn’t want criteria, they didn’t 

want any national standards. I envisioned maybe six or seven national mega projects were going to get $1 billion to solve a critical 

juncture of confluence of goods movement, people and congestion. 

Huh-uh. 

The Senate told us very frankly we know how to make these investments and we will make the decision. We will take half of that 

136 

money and spread it out. So it all got frittered away out on the national stage. We have to go into this with a clear national commitment as Europe did. 30 projects, $350 billion. We don’t have to take 

a lesson from Europe, but we can take a lesson from their experience. Mr. Blumenauer, what do you envision the commission, how 

long a time do you anticipate it would take for a commission to review and make policy statements and to make recommendations to 

the Congress? 

Mr. BLUMENAUER. Mr. Chairman, it would be my hope that we 

would be able to streamline this process. As I mentioned briefly in 

my testimony, we don’t have to have any original studies. There is 

ample documentation about cost, about challenges. I hope synthesizing that information and being able to take the show on the road 

to help develop the criteria you talk about. We, I would hope that 

within the course of the next two years of the new administration 

and the new Congress that we would be able to use this to supplement the work that this Committee would be doing to be able to 

have the overview to give impetus for what you have tried to do 

in terms of buying into a big picture, having criteria, having grassroots support, which is why the commission that I am proposing 

would have a minimum of 50 hearings around the country, to be 

able to give the sort of stamp of approval for the big picture and 

help us with the synthesizing process. 

One of the challenges we face is that the responsibility is spread 

in Congress throughout, although the primary thrust is here with 

your Committee, we have Commerce, we have Ways and Means, we 

have Homeland Security, the Natural Resource Committee. This 

would I think help us engage the administration and some outside 

experts in the big picture. 

Mr. OBERSTAR. I thank you for that. I just am troubled. I think 

the National Surface Transportation Policy and Revenue Study 

Commission did a good job in 18 months. But I worry about commissions, having observed them over many years, that they are a 

little like college professors. I have never seen a college professor’s 

study proposal for less than three years. They are usually five-year 

grant proposals or at least three years. And we need some 

tangibles. So think more how you compress that whole process into 

a much shorter time frame. 

Mr. BLUMENAUER. I appreciate your admonition Mr. Chairman 

and would look forward to working with you and the Committee in 

doing that. Part of the good news is that the rest of America is not 

waiting for us. The Chamber of Commerce is rolling out, I think, 

40 hearings that they are going to have around the country, we 

have been working with some groups that are looking at major conferences and public gatherings. We are having one with Senator 

Cardin in Baltimore on Monday. The number of national unions, 

including the laborer’s union, are moving forward. 

I think that with your help, we could craft an admonition for a 

short time frame, engage the new administration, the grassroots effort, so that it comes back in a quick enough time that we can do 

this integrative process. And I look forward to working with you to 

make it happen. 

Mr. OBERSTAR. We will do that. Thank you. Mr. Ellison, the 

bonds issued by this national infrastructure bank proposed would 

137 

be backed by full faith and credit of the U.S. Government, is that 

your concept? 

Mr. ELLISON. Well, no, it is not envisioned that the Federal Government would be responsible for repaying the principal. The $60 

billion in tax credits would be issued with the full faith and credit 

of the Federal Government, you are right about that. The principal 

of these initial bonds would be paid from the bank’s revenues, 

which is taken from the subsidized loans that the bank offers to 

infrastructure projects around the country. 

Mr. OBERSTAR. Will government have to repay the principal? 

Mr. ELLISON. Well, the—well, because the bonds, the tax credit 

bonds, not paying an interest rate, the bank would not be responsible for interest payments of the bond, only the repayment on the 

original principle. 

Mr. OBERSTAR. Okay. Thank you. Mr. Calvert, your proposal, together with Representative Jackson, Jesse Jackson that is, is a 

very intriguing one. It harkens back for me to the Port Security Act 

that we passed in 2002. And Mr. Young, then Chairman of the 

Committee, and I, and Senator Hollings from South Carolina advocated very much what you are proposing, a container security fee, 

and the White House vigorously resisted. 

Finally, Mr. Young and I, Senator Hollings, just said, well, we 

will drop it, let us get the framework port security policy in place 

and then figure out what we are going to do from there. I remember at the White House at the signing of the bill, the President 

signed the bill and he said, thank you, Jim, for your help in getting 

this through, I know you had to give up a lot. I said, now, Mr. 

President, how are we going to pay for it. He said, well, we will 

do that, we will get there. Well, we haven’t. And I think that your 

container fee idea is a good one. A maximum of $500, do you know what the cost is, the transportation cost of moving a container from Long Beach, Los Angeles to 

the east coast. 

Mr. CALVERT. Significant. 

Mr. OBERSTAR. $800 minimum. Probably getting more these days 

with the price of fuel. So your maximum cap on this would be minimal. Do you know how much money, do you have any idea, ballpark idea what agrees with that? 

Mr. CALVERT. We are talking about approximately $63 billion 

over a 10-year period. 

Mr. OBERSTAR. Given what Mr. Mica said a moment ago, that is 

a modest investment. 

Mr. CALVERT. Well—— 

Mr. OBERSTAR. But it is a significant one. 

Mr. CALVERT. —it is a start. 

Mr. OBERSTAR. But it is targeted, isn’t it? 

Mr. CALVERT. That’s correct, it is targeted to the Gateway communities of the land, air and seaports throughout the United 

States. 

Mr. OBERSTAR. And intermodal applications? 

Mr. CALVERT. Yes, sir. And also grade separations, truck dedicated lanes. 

Mr. OBERSTAR. Some of the biggest cost items in the portfolio? 

Mr. CALVERT. That’s correct. 

138 

Mr. OBERSTAR. Thank you. Mr. Duncan. 

Mr. DUNCAN. Well, thank you very much, Mr. Chairman, and 

thank you for calling this hearing. I made extensive comments on 

this issue when we had the hearing with the National Surface 

Transportation Commission several weeks ago, and then again last 

week, when we had a hearing before the Highways and Transit 

Subcommittee, and so I won’t make additional comments at this 

time except to say that Ms. DeLauro has hit the nail on the head 

when she says that it will take obviously public and private investment. There is certainly an important role for this Committee and 

this Congress in regard to our Nation’s infrastructure. 

As I have pointed out many times, people in California use infrastructure in Tennessee and vice versa and there is a legitimate and 

important national role. And I share some of the Chairman’s skepticism about another commission. But because I have such great respect for my friend, Mr. Blumenauer, who was such a fine Member 

of this Committee, I have co-sponsored his bill, and I think he is 

headed in the right direction. 

And there is good suggestions from all the Members. Especially, 

I think Mr. Calvert has made some good suggestions too. I will 

have a chance to talk with all these members, and so I will save 

my questions for the witnesses on the next panel. Thank you very 

much. 

Mr. OBERSTAR. I thank the gentleman. Mr. Nadler. 

Mr. NADLER. Thank you Mr. Chairman. Congresswoman 

DeLauro, Rosa, in your bill, as I read your testimony, am I correct 

in deducing that these projects would have to be self-funding ultimately? 

Ms. DELAURO. Ultimately they become self-sustaining through 

user fees, through tolls, those kind of mechanisms. 

Mr. NADLER. So a project that could not be self-sustaining because it was more important for whatever reasons or more expensive than it could recoup in user fees or tolls, could be financed in 

part through this bank but not in total? 

Ms. DELAURO. That may be. What we want to try to do here is 

to try to make the entity after the initial period a self-sustaining 

one. And the best way to try to do that, in my view, is—you know, 

for instance, with water projects, there are already fees associated 

with water usage. It is a safe investment usually thought to be by 

the investment community. 

Mr. NADLER. The reason I ask is that clearly there are many infrastructure investments that are very important that could be selfsustaining over the long term, but also many that are very important that could not, and we have to make sure that we provide for 

them too. 

Ms. DELAURO. Let me just, if I can, for a second, because this 

is not meant to take—— 

Mr. NADLER. The place of everything else. 

Ms. DELAURO. —the place of everything. In essence, it is meant, 

as my colleague Mr. Blumenauer pointed out, this to supplement 

what is in place, not to take the place of, because that would be 

a mistake. And you could look at other ways in which you might 

be able to address some of these issues. And Mr. Chairman I also 

might add, while I said to you that the criteria would be estabVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00160 Fmt 6602 Sfmt 6602 P:\DOCS\42883 JASON
139 

lished by the board of directors of the corporation, there are further, and I won’t go through them, that are listed within the bill 

where the proposals can come from, what projects are ready to go 

projects in the first 3 years, evaluation processes, et cetera, in 

terms of eligibility criteria. I just wanted to make that clear. I am 

sorry, Mr. Nadler. 

Mr. NADLER. Okay. Thank you. Keith, Mr. Ellison, I will ask you 

the same question. In your proposal, as I understand it, these 

projects would also have to be ultimately self-sustaining in order 

to be financed through this bank? 

Mr. ELLISON. Yeah. The projects are ultimately envisioned to be 

self-sustaining. 

Mr. NADLER. Thank you. Earl, Mr. Blumenauer, I have no question. I simply want to observe that your history of the Gallatin, et 

cetera, is fascinating. I would also commend to you Henry Clay’s 

American play which came between Gallatin and the later things 

which we saw the developments of that, and provided some of the 

basis for the formation of our political party system. 

Mr. Calvert, I have a question for you. You say that in your proposal—well, you say a number of things, but it says that the legislation limits funding to service transportation projects such as 

highway improvements, truck climbing lanes, truck bypasses, et 

cetera. Publicly owned intermodal freight transfer facilities and improvements to the transportation linkage at port facilities would 

also qualify as eligible projects. So for example—I have two questions. One is a tunnel or a bridge for rail freight coming from a 

port, that would qualify? 

Mr. CALVERT. The local commission would determine whether or 

not that is a priority project. 

Mr. NADLER. I understand that. It would qualify as a possible 

project? 

Mr. CALVERT. It could very well qualify, yes. 

Mr. NADLER. Okay. Thank you. My second question, the bill apportions of funds collected by the newly established fees to transportation improvement projects within the National Trade Gateway 

Corridor in which it was collected. Therefore, all funds generated 

from the application of the fee on goods imported and exported to 

the port of Charleston for example would be apportioned to transportation projects within the National Gateway Corridor designated for the Port of Charleston. If we are looking at a national 

infrastructure system, and I know nothing about Charleston, we 

are just using it as an example because you used it, might it not 

be the case, for example, and isn’t this the purpose of the Federal 

Government, among other things, that it might serve a national 

purpose to invest more in the Port of Los Angeles than could be 

generated in Los Angeles, and maybe we should take some money 

from Charleston and give it to Los Angeles or vice versa? Isn’t that 

why we have a Federal Government? In other words, not every port 

has to be self-sustaining. And if it serves the national interest, we 

should be able to—just as we don’t say that every dollar of taxes 

collected in New York has to be spent in New York. 

Mr. CALVERT. The assumption behind this by the way is not that 

the fee would raise enough money to take care of all the problems 

in the transportation network related to freight. There would be 

140 

additional revenues that are collected by the Federal Government 

and could be determined to go to a port that may be deemed as a 

higher priority. Certainly the busier the port, the more revenue 

that that port would generate. Certainly the Port of LA, Long 

Beach, is a significant port facility in the United States. The Port 

of New York generates a significant amount of revenue. And there 

is significant projects that are needed to help alleviate some of the 

problems that those port facilities are having. 

Mr. NADLER. But there is no question of that. But my question 

is, if you are setting up—if we are saying we have a national infrastructure crisis, which we clearly do, and if we are looking for various revenue streams to support projects and to prioritize projects 

within that national need, shouldn’t we set up those financing 

mechanisms to be directed wherever the greatest need is? 

Mr. CALVERT. The users of the system are paying the fee. And 

so after a year of talking to the freight forwarders, the truckers, 

the railroad folks, the retailers that are using the system obviously 

to move goods, a consensus was that they did not want to see those 

amounts diminished by others who would determine what the priorities of those projects should or should not be. If the fee was in 

effect collected where the facilities need to be improved, then they 

were more or less in favor of this process moving forward. If the 

monies are diverted by well meaning folks, like appropriators, to 

other projects, there was less enthusiasm for this approach. 

Mr. OBERSTAR. The gentleman’s time has expired. 

Mr. NADLER. Thank you. 

Mr. OBERSTAR. Mr. Mica. 

Mr. MICA. Thank you. Just a couple of questions. First of all, I 

guess, Ms. DeLauro, you have a development bank with a net value 

of about $9 billion is it? 

Ms. DELAURO. Yes. 

Mr. MICA. And Mr. Ellison, you have a infrastructure bank 

backed by bonds in the neighborhood of $60 billion? 

Mr. ELLISON. That’s right. Yes, sir. 

Mr. MICA. The only problem I have is again the low dollar 

amounts. I was up in New York last week and told the Chairman 

about this. Went down to look at the Long Island subway extension 

to Grand Central Station. It is a $7.2 billion project. We got FTA 

to finally agree on moving forward with it. It is far in excess of $5 

billion for the Dulles Rail extension. The projects are getting very 

high in dollar amounts. I met with some financiers in New York 

when I was up there in promotion of our high speed rail private 

sector initiative. And one of them told me he is working on a $40 

billion project. I thought it was in Japan, but I know it was in Asia, 

that they are working on financing. 

Mr. MICA. So I just have questions about the numbers of dollars. 

That is why I said I want to look towards half a trillion in taking 

some of the revenue stream and expanding it—some for bonding, 

some for loan guarantees, some for government backing, some for 

creative leveraging, a host of those—so I think we are on the same 

target. 

Mr. Blumenauer, tell me, from the Commission how do you get 

into law the priority projects from your bill? 

141 

Mr. BLUMENAUER. The goal, Mr. Mica, is to develop a national 

infrastructure vision of how the pieces fit together. 

Mr. MICA. Yeah. And I agree with you that we don’t have that. 

But how do I get from—the Commission creates that; then in order 

to enact it, it has to be incorporated into law? 

Mr. BLUMENAUER. Absolutely. 

Mr. MICA. How do you get from—— 

Mr. BLUMENAUER. Part of what needs to happen is that Congress 

needs to be operating under an overall framework for how infrastructure pieces fit together. 

Mr. MICA. But that would be, again, the law that we pass. And 

the Commission is going to develop basically the blueprint. But 

then I need to get the blueprint into law. 

Mr. BLUMENAUER. Absolutely. And what I would hope is that if 

we would finally have a comprehensive infrastructure vision for 

this century, that it would guide what happens with reauthorization. 

For instance, we just passed—— 

Mr. MICA. Okay. Basically a guide. It doesn’t go into—— 

Mr. BLUMENAUER. We just passed a farm bill that has nothing 

aggressive in terms of water quality and water quantity. And we 

are going to have communities across the country spend billions of 

dollars to take farm waste, pesticide, and fertilizer pollution out of 

drinking water. If we had a framework that could be used to guide 

legislation as it goes through, we could have the various pieces fit 

together. 

Mr. MICA. I think we both agree that we need a strategic infrastructure plan. My concern is getting it into law. Because unless 

it is in law we can’t get it enacted and we can’t get it financed or 

funded. 

And the third part of my proposal also deals with moving the 

process forward, Mr. Ellison, which is my 437-day process plan, 

which is the amount of time it is going to take to replace that 

bridge in Minneapolis. Staff tells me that normally that takes 6 or 

7 years through the normal process. But we should be able to do 

that for most projects that are basically in the same footprint. 

And finally, Mr. Calvert, I think you have got a great proposal. 

I think it would generate revenue. But I think it needs to be part 

of a more comprehensive plan like Mr. Blumenauer is proposing 

and I am proposing, because even if I solve southern California’s 

problems and I get to the Nevada border, I get to some other jurisdiction and my road narrows from 10 lanes down to four lanes, and 

my rail goes to single track, and my other infrastructure is not adequate, then things instead of getting clogged up at the dock are 

getting clogged up somewhere else. 

So, yes, I think we need some of the vision that you have provided. That needs to be meshed into the larger plan so that we are 

doing the rest of the puzzle to make the whole thing work. Would 

you agree? 

Mr. CALVERT. Well, certainly you are correct this is a step forward. There isn’t a freight strategy in this country, as you all 

know. And there are certain areas in this country that are suffering the consequences of that. And I can’t think of any area 

moreso than southern California. 

142 

Mr. MICA. I just want to take your plan nationwide. 

Mr. CALVERT. What is that? 

Mr. MICA. I just want to take your plan nationwide. 

Mr. CALVERT. Well, it is nationwide. Obviously, all ports of entry, air, land and sea, would collect that fee; and it would collect $63 

billion in 10 years. 

Mr. MICA. And part is again this infrastructure plan. 

But we are going to have to look at all of the above when it 

comes to financing, because we have got some incredible—we have 

an incredible backlog of needs. 

Ms. DELAURO. Mr. Mica, may I just add something? 

Mr. MICA. If it is friendly, go ahead. 

Ms. DELAURO. Oh, it is always friendly. With regard to my proposal, it is $9 billion, 3 billion over the 3 years and the $30 million in start-up; but in terms of the economic 

activity we are talking about, you know, close to $60 billion in economic activity. 

But—I understand your point, but I think that what is the latter 

part of the way you want to divide up your revenue stream that 

you talk about, I concur that this needs to be a massive investment. But I think the degree to which we can work with the private communities in terms of that investment, and I will be very 

honest with you, I think at this juncture may be, and I am hoping 

that is not the case, there is more interest on our part, and we 

need a ready, willing, and able investment community to work in 

concert in order for us to begin to get to the scale that you are talking about. 

And that is why I believe that the way in which we can do it is 

through this proposal, other proposals, or some entity that provides 

the interest to the investment community of getting engaged with 

the public sector in order for us to carry out truly a national infrastructure development policy. And we need to be creative and innovative in that way in working with the investment community. 

Thank you. 

Mr. MICA. Mr. Chairman, you are going to have to give special 

footnote advice to the transcriber for this hearing because part of 

this is in French and part of this is conservatives talking very liberally and liberals talking very conservatively. 

Ms. DELAURO. One should never stereotype, Mr. Mica. 

Mr. OBERSTAR. Very pertinent observation. 

Mr. MICA. I never do that. I am just stating an observation. 

Mr. OBERSTAR. Mr. Ellison, you had a comment? 

Mr. ELLISON. Yes, in response to the Ranking Member’s comment, I just thought I would mention that we don’t envision that 

the infrastructure bank would just cover the whole regional project 

when an area would apply. 

Our expectation is that they would have to come up with matching funds. And so perhaps, even if we did an equal match, we are 

talking about 120 billion—not quite to that half a trillion you mentioned, but closer. 

Mr. MICA. We will get you there. We are going to work with the 

liberals on the other side to try to get you thinking in terms of 

spending more money. 

Mr. Bishop. 

143 

Ms. DELAURO. Let’s get the investors to do it. 

Mr. MICA. With the investors. 

Mr. BISHOP. No questions. 

Mr. OBERSTAR. No questions. 

Ms. Napolitano. 

Mrs. NAPOLITANO. Thank you, Mr. Chairman. And I am glad that 

we have vision in some of the proposals that are presented here 

today. This has been something that has been long, long overdue, 

investment in the infrastructure, especially Ken’s area. What goes 

through Ms. Richardson’s area goes through my area, the great 

separation, the pollution, the safety issues that we keep talking 

about in this Committee. 

But beyond that, we get into the areas of the port; and I am very 

interested in your comments, Mr. Calvert, in regard to being able 

to add some additional cost to the shippers. What I would also like 

to see is being able to fund Homeland Security to inspect them to 

see what is in them so you can have the ad valorem. Because at 

one point several years ago one of our major colleagues from your 

neck of the woods indicated that if we were able to inspect every 

rail car, every U.S. citizen would have seven lawn chairs, because 

that is how they are manifested. And we lose a lot of funding because of miscalculations, if you will. 

That being said, the areas I think that all of you are touching 

upon, which are totally critical, is the reinvestment in job development for this country which would build the economy. To the extent that it hasn’t been done in decades, that is critical to be able 

to insert not just money into people’s pockets, but jobs that are ongoing and investment into the infrastructure which has been so— 

how would I say—′′neglected′′ for many, many, many years. I look 

forward to hearing more about all those. 

I have questions, but at this point the questions are really, not 

necessarily useless, I just need to learn more about what each one 

of you are proposing and how we can meld and marry—this is not 

a one-size-fits-all—for funding for all the other areas that we have. 

And I would like to hear some of the comments about how you feel 

that this can help this country’s economy begin to get back on track 

by providing jobs and infusing a lot of what is needed in this country. 

Ms. DELAURO. Well, I think that the main premise of what I 

have been talking about is the way in which, by serious investment 

both by the Federal Government—continued serious investment by 

the Federal Government, which has been historic in the areas of 

infrastructure, and that in today’s world, given that the public sector—and we are not going to do the kinds of things that we have 

done historically with the millions and millions of dollars that went 

into what they called old ′′public works projects′′ and that what we 

now are looking at is the need for the public and private sector to 

come together to look at this $1.6 trillion shortfall that we have in 

being able to look at our infrastructure and transportation infrastructure, but also water. Let’s take a look at energy and 

broadband and some other areas that are critical. 

We are a great Nation and we built rail nationally, we did communications nationally; we have done other areas. And that kind 

of investment created economic growth. And with economic growth 

144 

that was—it created jobs. What I am talking about here when I 

talked about this $58 billion in economic activity creating 427,000 

jobs, or close to 500,000 jobs, because of what you generate in 

terms of being able to put people, you know, to work with good 

jobs. 

Mrs. NAPOLITANO. Ms. DeLauro, also, though—I am making a 

comment because I am losing time—we need to ensure that whatever is worked on, whatever is developed, that there is some provision to be able to do the further maintenance and ensure that that 

is not going to fall in disrepair—— 

Ms. DELAURO. Absolutely. 

Mrs. NAPOLITANO. —20, 30 years from now, which is what is 

happening. 

Anybody else want to comment? 

Mr. CALVERT. I just would point out that whatever fee is placed 

on—and I don’t call this a container fee; we call it a shipment fee 

because it is based upon an existing customs form, which makes it 

much less burdensome to collect that fee. Whatever that fee may 

or may not be, it needs to be equitable. 

As the Chairman knows and others know, the harbor maintenance fee, for instance, as an example, I think has not been handled properly, and maybe it is the fault of the appropriators. But 

the LA Port, for instance, is always complaining that they are not 

getting the fees back in the City of Los Angeles and Long Beach 

that they pay into that fund. 

If we are paying this fee, I think that those who are paying the 

fee should experience the benefit of that fee. And so that is the 

point I just want to make. 

Mrs. NAPOLITANO. Yeah. Not only that—— 

Mr. OBERSTAR. The gentlewoman’s time has expired. 

Mrs. NAPOLITANO. Thank you. Thank you, Mr. Chair. 

Mr. OBERSTAR. That is the problem with establishing a trust 

fund. You have to wall it off from reservations by the executive 

branch and by the legislative branch to make deficits look smaller 

or to shift dollars elsewhere, to be a cover for some other purpose. 

If we are going to establish trust funds, then we have to have 

the trust that the money will be used for the purpose for which the 

fee was collected. 

The gentleman from Wisconsin, Mr. Petri. 

Mr. PETRI. Thank you very much. Thank you very much, Mr. 

Chairman, for having scheduled this important hearing to help set 

up the reauthorization of the Surface Transportation Act and other 

areas. 

Thank you all for being here. 

I just want to make an observation first, and that is, as a country, it is my sense that we are sort of at an inflection point. The 

national effort in infrastructure investment has been dwindling in 

the United States for the better part of a generation now. And yet, 

in our history, every—from the beginning, when they were all interested in developing this great continent, and then almost every 

50 years since then, we have had leadership that has managed to 

lead the country to renew its commitment to having a first-rate infrastructure, from Henry Clay and the expansion westward, to Lincoln and the huge railroad investments that were a public-private 

145 

partnership, to Dwight Eisenhower, who led us to build the biggest 

public works project in the history of the world that transformed 

our economy and our country. 

But now to maintain that actually costs twice as much as to 

build new, because people are using that road and so they have to 

repair it and improve it while working around existing traffic; and 

we are spending less than we did when Eisenhower was President, 

as a country. 

India, China, others are stepping up to bat and increasing their 

investments dramatically because they know that that is the way 

to maintain and improve their standard of living; and yet if we 

can’t figure out how to do it, we will see ourselves gradually slip 

down. 

These things don’t happen overnight, but a generation of neglect, 

followed by a second generation of relative neglect will send us into 

a situation where we may not be able to recover and go the way 

of Argentina, which led the world—in this new world was one of 

the big leaders 100 years ago, and is now sort of struggling because 

of neglect. 

So I just have two real quick questions: One, on the Commission, 

you know, there are two kind of commissions. One is—and the 

worry is that you kick the problem down the road, and it can be 

used as an excuse for procrastination. I think the Chairman expressed that concern that we don’t really want to provide another 

occasion for delay. We need to marshal our forces and get the job 

done. So I would like, if you could, to address that. 

And the second question is that I think the public will rise to the 

occasion, provide leadership and increase investment. But they 

would want to have a good plan, not have it wasted and not have 

unnecessary delay. And we have tied ourselves up like Gulliver’s 

Lilliputian where we have a lot of well-meaning regulations and so 

on. And they do—we do have to have good environment, but do we 

have to spend 10 or 20 years to build a new airport or expand a 

road? Isn’t there some way we can work together to speed up these 

approval processes? 

So I will yield. 

Mr. BLUMENAUER. If you are addressing that to me, Mr. Petri, 

I took the Chairman’s admonition to heart. I mean, the whole 

thrust behind this is that there is a sense of urgency now. I think 

there is a recognition that infrastructure is in crisis, and that it is 

only going to become compounded by global warming and international competition and the fact that the Highway Trust Fund is 

going into deficit for the first time in history. 

So the whole thrust behind the creation of the Commission and 

tying this down is to make sure that it is not an excuse for procrastination, but instead provides a framework so that we can 

move forward. 

And it is not, I am convinced, a question of just more money— 

we do need more money—but the value proposition, how the money 

is spent and what it is spent on. I find it fascinating that, as we 

look around the country, there are local initiatives for transportation, for transit, for water, for parks and recreation; and 75 percent of them pass and they are financed by property taxes and 

sales taxes that are not always the most popular. But it is because 

146 

they have had the vision, they have had the connection, and they 

have had a plan to move forward, and people know what they are 

getting. 

It is my hope that we can create a national commission, have a 

sense of urgency with the new administration to move forward, and 

that with that sense of urgency and direction that it will be easier 

for people to make the adjustments in financing that are going to 

be necessary for water, for transportation, for broadband, for energy; and that they fit together. 

Mr. CALVERT. Mr. Chairman—one thing you mentioned, Mr. 

Petri, which I want to point out to the Committee, if the railroad 

builds a grade separation in the United States, they are exempt 

from NEPA, the National Environmental Protection Act. I think 

that it is something you should look into. 

If a private entity or another government entity is going to build 

a grade separation, they should be given the same exemption. It 

would save millions of dollars per grade separation, saving the taxpayers a tremendous amount of money without any real lessening 

of the environmental quality laws in the United States, because 

most of these grade separations are done in an existing urban area 

and, in fact, improve the environmental situation rather than degrade it. 

So that is a simple change, when you reauthorize the transportation act, which would have tremendous effect throughout the 

country. 

Mr. OBERSTAR. The gentleman’s time has expired. 

The gentleman from California raised an interesting point, which 

I am not quite sure is accurate, but at any rate we will pursue it. 

Ms. Hirono. 

Ms. HIRONO. Thank you, Mr. Chairman. And I thank the panelists for your leadership in providing us with these bills. 

Sitting on this Committee, it is clear to me that the infrastructure of all 50 States is critical to our Nation’s economic health. And 

all 50 States are experiencing huge gaps between their infrastructure needs and the funding to provide for these needs. So I am interested in—I am looking at the practical application of these proposals. 

Hawaii is the most isolated landmass in the world, and so statutory language requiring substantial regional or national significance poses challenges for us, because if too narrowly interpreted, 

people argue, because of our isolation, what happens in Hawaii 

stays in Hawaii. And that is not true. 

So Mr. Ellison and Ms. DeLauro, both of your bills use this kind 

of language, and I hope that it is not your intent, to leave out a 

State like Hawaii from being able to obtain these kinds of financing 

from the outset. 

Mr. ELLISON. Absolutely not. I think that Hawaii is a vital part 

of our national scene and needs to be fully engaged in this process. 

And I think what you are saying is borne in mind, and I think considers Hawaii; and I think we will be counted on to do that. 

Ms. DELAURO. This is a project or proposal that includes the application to all 50 States. This is not, you know, cherry-picking or 

doing anything else. This is meant to deal with infrastructure naVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00168 Fmt 6602 Sfmt 6602 P:\DOCS\42883 JASON
147 

tionally, and as far as I know, Hawaii qualifies under the national 

rubric. 

Ms. HIRONO. Good. Thank you. Because there have been other 

times when language such as this has pretty much iced out Hawaii; and as the only Member from the Hawaii delegation to sit on 

this important Committee in decades, if ever, I am glad to be able 

to point out these things. 

Mr. Calvert, along the same lines, I know that the State of California is pursuing the possibility of assessing fees on goods that go 

through your ports. And I certainly understand the stress on your 

roads and highways because of all of the goods that are going 

through. 

Now, Hawaii is one of the most—it is probably the most dependent on goods coming through shipping. And so I hope that as we 

discuss your proposal further that that kind of unique situation, 

where there are no highways, there are no alternative ways for 

people of Hawaii to obtain their goods—90-plus percent come 

through, I think, the ports of California—that we can give some 

recognition to the potential of a very, very adverse impact on the 

cost of goods to Hawaii. 

We already have some of the highest cost of living in the country. 

Mr. CALVERT. By the way, the fee would only be collected at the 

port of entry. So, in fact, it would only be one fee paid. 

So there wouldn’t be a duplication of fee in the State of Hawaii; 

you would pay that fee, the importers of goods, at the port of entry 

of Hawaii, and those funds would remain in Hawaii. 

As you know, there is a problem with these States and local communities imposing fees within the States and the communities because of the provisions of the Interstate Commerce Clause, which 

many in the freight industry claim is unconstitutional. And many 

attorneys agree. So more than likely a fee, if one is to be placed, 

has to be done by us here in the United States House of Representatives, and not by the State and local communities. 

So I would be happy to work with the gentlelady from Hawaii 

to make sure it is an equitable fee and Hawaii benefits from this, 

not be taken away from any benefit from this bill. 

Ms. HIRONO. Thank you very much. 

Thank you, Mr. Chairman. 

Mr. OBERSTAR. The gentleman from North Carolina, Mr. Coble. 

Mr. COBLE. Thank you, Mr. Chairman. Mr. Chairman, I may be 

in and out, so I may repeat some of the questions. 

At previous hearings witnesses have advised us that one of the 

reasons that we have a surging infrastructure problem is that some 

communities have not maintained their infrastructure and had no 

plan for replacement. If this is true—and I am inclined to think 

that it is—do you all agree with me that it would be reasonable to 

ask, as a condition of receiving Federal financial assistance, that 

this problem be corrected? 

Either of the panel members. 

Mr. ELLISON. Mr. Chairman, Representative Coble, I think in the 

course of this, my plan for infrastructure bank would be that local 

communities, regional projects would be presented. And I am hoping this would be a spark for greater planning regarding local 

148 

needs so that we would have communities thinking about what 

they need over the longer term. 

So that is sort of the idea behind focusing on regional—projects 

of regional significance, because then it would force communities to 

say, what are our needs; how are we maintaining what we have? 

Mr. COBLE. I’ve got you. 

Anybody else? 

Mr. BLUMENAUER. Part of what I would hope would come out of 

a national infrastructure vision would be a reassessment of what 

the appropriate role of the Federal Government should be. And I 

would hope that out of that comes the notion that there will be 

local skin in the game everywhere. 

The era of 100 percent Federal money, or largely Federal money, 

I think, as it relates to infrastructure should go away. And I would 

hope that part of what we could do in the context of an infrastructure plan for the country would be to harmonize what the match 

ratios would be for different types of infrastructure. 

Right now, you get 80 percent for a road project, you might get 

50 percent for a transit project, you get something else for a water 

infrastructure. And we find that the Federal formula sometimes 

drives the decision, not what is the best transportation solution. 

So I would hope that there would be local skin in the game, a 

uniform Federal match ratio, and that we rethink the myriad of all 

these goofy little things that we have embedded in statute over 

time. That is one of the reasons why it takes so long, is because 

we have so many permutations that no longer make sense. 

Mr. COBLE. I thank you for that. 

Mr. CALVERT. Mr. Coble, you have an excellent point on the issue 

of maintenance. As you know, if we are in the private sector, we 

depreciate capital improvement, we hopefully set aside dollars and 

make improvements along the way and maintain that equipment 

in good working order. 

Mr. COBLE. Thank you, sir. 

Mr. CALVERT. In government, that is not the case. And unfortunately, the government’s a reactive body to a disaster such as what 

happened in obviously well-publicized events here in the United 

States. 

We ought to, when we finish an infrastructure project, deliver to 

whoever the recipient of that project is going to be. They should 

also deliver to us a maintenance program and how they are going 

to maintain that project in future. 

Mr. COBLE. You mentioned dollars, Mr. Calvert. Speaking of dollars, let me ask you this. What is the practical effect of applying 

Davis-Bacon prevailing wage laws to Federal infrastructure funds? 

And—well, strike that. Let me put it a different way. 

Would this mean that fewer projects could be constructed? 

Mr. CALVERT. Well, obviously every State has different laws. And 

the effect of, quite frankly, in our State of California any public infrastructure project would be more than likely built under DavisBacon. For a person who believes that should not be the purview 

of the Federal Government, but left to the States to determine 

their own, right-to-work States, for instance, may have different 

laws. 

149 

So I would not pursue Davis-Bacon provisions with the Federal 

law. But that is my position. 

Mr. COBLE. I didn’t mean to ignore the lady from Connecticut. 

Ms. DELAURO. Thank you, Mr. Coble. The question of maintenance, I think, has got to be very, very much a part of the discussion and debate, whatever entity we try to put together. I think 

we—and I come from the northeast, which has a very old infrastructure. And we see the issue of deterioration and the lack of 

maintenance and what effect it has. 

And so, whatever new infrastructure project, including the one 

that I am talking about, I think we need to build in and sort 

through what is the best way in which we commit to maintenance 

and what is the Federal obligation there, what is the State and 

local obligation to deal with that, what kind of a proposal would 

come forward from a private sector in dealing with that? 

I think maintenance is critical. We have seen what happens 

when you don’t deal with maintaining what we have. And we have 

sorely neglected, as Mrs. Napolitano pointed out earlier, our infrastructure. And when it collapses, our economic development and 

our revitalization and the thriving economy collapses with it. 

Mr. COBLE. Thank you all very much. 

Mr. Chairman, I yield back. 

Mr. OBERSTAR. And now Mr. Arcuri. 

Mr. ARCURI. Thank you, Mr. Chairman. I would like to thank the 

panel. 

Just one brief comment that I have. You know, you talk about 

how we are going to fund this, and obviously that is critically important. But after we decide how we are going to fund it, my concern comes to what priorities do we use? 

And, Mr. Blumenauer, you brought it up. I think it is—no matter 

where I go in my district, people talk about water, sewer; that is 

their number one concern. Every mayor, every county executive has 

that concern and how they are going to fund it. 

Broadband, everyone wants it. 

Then when we move into the areas, though, of energy and transportation, there is a lot of controversy as to what is the best thing 

for the Nation, the region, for the State. 

How do you think that we prioritize these different projects? 

What suggestions do you have once we get the funding in place for 

setting up priorities? Do we have a national priority? Do we make 

the priorities based upon what the local communities want, or do 

we set a national priority list in terms of how we fund these? 

Mr. BLUMENAUER. It would be my hope that this process, particularly one that, for the first time, the Federal Government really 

does engage people at the State and local level in terms of the formulation, will help develop a consensus. I find as I work around 

the country—every month I go to one or two different communities—I find that there is much greater consensus about what the 

needs are, and that complying with Federal requirements with 

clean air, with clean water, with congestion, that there is less controversy than one would think when people are given a chance to 

come together and work on it. 

If we systematize what the Federal partnership is going to be, 

if we streamline the value proposition so there aren’t people—I 

150 

mean, right now in the Department of Transportation there are 

people cranking away on a stupid cost-effectiveness formula for 

transit that has no relationship to how any transit agency in America is operated. But they are still spending time and money on it 

in Republican and Democratic administrations. 

We have got to get to a point where we strip this stupid stuff 

out, that we streamline what it is that the Federal Government is 

going to do, that we give greater accountability for the money according to a broader framework. 

I think that this is something that Congress can agree to, and 

I think it will enable more money to move faster to areas of greater 

need. 

Mr. ARCURI. Well, again it is easy with respect—I think with 

water and broadband, everyone agrees. But when you get to transportation, then you get the push and pull between rail—do we 

move to road construction? Energy? You know, how do you make 

that decision of what priorities? 

Mr. BLUMENAUER. Having established, for example, criteria that 

transit projects are going to have to reduce the carbon footprint— 

I mean, I think that is a reality—and deal in a uniform fashion in 

terms of how we are going to move the greatest number of people 

for the amount of money involved. It will enable us, I think, very 

quickly as a nation to stop subsidizing airplane trips that are 19 

minutes from here to Philadelphia, for instance. 

I mean, the economic model I mentioned a moment ago doesn’t work for $140-a-barrel oil. It would argue for shifting more resources to rail passenger service and giving people flexibility, giving corridors opportunities in terms of how you are going to solve 

congestion problems. In some cases it will argue for beefing up rail 

as opposed to short hops for aviation. 

This will I think get us to the 30,000-foot level so that there are 

criteria to make those evaluations. 

Mr. ARCURI. Thank you. 

Ms. DeLauro? 

Ms. DELAURO. I think that what we are trying to do here is create an entity—at least what I am trying to do here is, where you 

do have a 12-member board, 9 of the members of the board of directors who are people appointed by the President, people who have 

experience in the area of transit, public housing, roads, bridges, 

water infrastructure, public finance or related disciplines where 

there is a—now that is a board of people who have the capability 

and the credentials in the area to deal with, you know, an examination of what it is that we need and where we need it, et cetera. 

Now, we have the Society of Engineers. We have all kinds of 

groups that are moving forward with what our priorities need to 

be, what areas are out there. So this is not reinventing the wheel. 

We will deal with input from State and, you know, local government in terms of those priorities. 

But what you have, and probably a heretical statement in many 

respects here, but there is—it is a way of, if you will, lifting the 

decision-making process out of what is beneficial to yourself or to 

me in terms of my own community. And obviously, that would continue because we have a local perspective, we listen to local government. 

151 

But I am saying it is about trying to utilize an independent 

board, if you will, with representation from government, et cetera, 

in helping to create that. 

You had the ministers, when the Chairman pointed out what the 

European governments have come up with here, they laid out a 

plan, and it was based upon some very serious analysis of where 

the shortfalls are. We have again a number—I am repeating myself—a number of entities today that do that year in and year out. 

And most of the time those projects and plans lie on the shelf and 

they collect dust. 

I think we can create a mechanism, and we have tried to lay that 

out in this, which will help us to make those kinds of determinations with the appropriate input. 

Mr. ARCURI. Thank you. 

Mr. OBERSTAR. The gentleman’s time has expired. 

This panel certainly is not collecting any dust. We have had panels of Members testifying before us many times in the last several 

years, and never has a Member panel attracted so much interest. 

Ms. Capito. 

Mrs. CAPITO. Well, thank you, Mr. Chairman. I think in light of 

your comments what we are really seeing here is that while we 

may have our differences on a lot of things, this is an area where 

we have so many similarities. I come from a State that has a lot 

of infrastructure needs, but some of our needs are not restructuring 

what we already have or repairing or redoing; it is still trying to 

reach people with clean water and waste water and broadband. 

And we know that to reach these areas it becomes so expensive, 

and that is why they are not being reached. 

So I would like to see something where we have a combination 

of not just restructuring what we already have, but still high 

prioritizing people who have never had that chance, never had the 

ability to access clean water in a fashion that most of our constituents have. 

The other thing I think that I am certain we have similarities 

on—and I don’t know if you address this in any of your bills—is 

the ′′time is money′′ aspect of infrastructure. I mean, I have a road 

in my congressional district, Route 35, you know, if we had started 

building it when we got our first estimate—oh, I wish we had, because now it is so inordinately expensive that to complete this is 

going to be a challenge for years to come. And so I think that is 

why GARVEE bonds and those types of things have been attractive. We did a design-build—the governor did a design-build on this 

segment of highway. 

But I don’t know how you answer that question or how you meet 

that challenge of moving forward. I do believe it goes back to what 

Congressman Blumenauer was saying, that you have got to have 

a lot of local skin in the game in order to set the priority to move 

it forward. 

And but it also has to be vetted. I think a lot of people in our 

local communities, you know, their project is the number one 

project for them. And so that is where it really becomes hard. As 

we all know, we are political people. It becomes very political at the 

same time. 

152 

So I don’t know if the ′′time is money′′ aspect of infrastructure 

development, if this is something that you all have gotten to—and 

the totally unserved areas, if anybody has any comment on that. 

Mr. CALVERT. The gentlelady, in fact, the name of my bill is 

called the ON TIME Act, so it is an appropriate name for what you 

are talking about. And obviously when you are moving—this bill is 

specifically about freight—when you are moving freight, absolutely 

time is money, especially with manufacturing processes in the 

United States where you literally manufacture goods as the basic 

parts are received. And so it is a cost to every consumer if, in fact, 

freight is delayed at the port facilities, whether it is air, land, or 

sea. 

So you are absolutely correct to say that it is necessary to get 

freight moving in America, because that would help alleviate costs 

to manufacturers, make them more competitive, and have fewer 

jobs go offshore because of that. So it is an important thing that 

we address through this process. 

Mr. BLUMENAUER. The reference I made to the value proposition 

in the plan, when we have construction costs going up 40 percent 

in the last 3 years—and it is going to be higher than that going 

forward—that is a huge potential benefit if we can get our act together. And I would hope it would be a primary thrust of a national commission on comprehensive infrastructure, addressing the 

precise point that you make. 

Ms. DELAURO. Just to say that in the first 3 years funding is directed towards projects that are ready to go. And so the notion is 

on how we can move and how we can get going. 

And then I think you are right in terms of the length of time that 

it takes. And I, you know, think this is what we are trying to do, 

to not have the kinds of delays that we have had in the past. But 

specifically it talks about the first 3 years of this, saying it is stuff 

that is ready to go. And I hear all the time that there are projects 

ready to go, and there just isn’t the financing to deal with them. 

And the purpose of the Infrastructure Development Act, Ms. 

Capito, is—really one of my primary concerns has been that there 

are areas of this country that don’t have the kinds of services that 

the rest of us have, and it is because of financing. I look at that 

particularly as Chair of the Ag Subcommittee of Appropriations. 

And I look at broadband; we are just not doing it, and it is not 

happening. And I think that is why it has to be public and private 

in order to make it happen. Thank you. 

Mrs. CAPITO. Thank you, Mr. Chairman. 

Mr. OBERSTAR. The gentlewoman’s time has expired. 

Mr. Carney. 

Mr. CARNEY. Thank you, Mr. Chairman. 

Mr. Blumenauer and Ms. DeLauro, your commissions do what 

differently than this Committee? Actually, what should we be—you 

know, where is the Committee missing the mark for what you are 

proposing here? 

Ms. DELAURO. I don’t have a commission. Mr. Blumenauer does. 

I will have to look at that. 

And this is an infrastructure bank. As I said earlier, this supplements the work of the Committee. This ultimately becomes an 

independent, government-sponsored entity similar to a Fannie Mae 

153 

or a Freddie Mac, there again meant to supplement other efforts 

in terms of you have got State investment banks, you have got the 

good work of this great Committee, and you would have this effort 

in trying to leverage—essentially, and maybe I haven’t made this 

point strong enough with regard to this proposal, this bill is about 

public-private partnerships to deal specifically with the shortfall 

that we experience every single year in being able to finance infrastructure. 

Mr. BLUMENAUER. The Chairman recalled some of the difficulties 

that we have had in recent years with administrations. Actually, 

I recall, as a Member of the Committee, we were arm wrestling 

with the Clinton administration and OMB. We have certainly had 

our differences with the current Bush administration and a lack of 

vision and a different approach. 

The Commission that I am recommending would have the new 

administration be part of the formulation so that it makes it easier 

to work with them in a cooperative fashion. It would have local and 

State because, as Ms. Capito is talking about, we have got lots of 

different needs around the country. We want to have them to be 

participating in the buy-in. 

Last but not least, as important as this Committee is, it doesn’t 

have exclusive jurisdiction in the House. We have issues that take 

place in some of the Superfund cleanups, in terms of water with 

Commerce, with Natural Resources, with Homeland Security, 

even—dare I say—with the Department of Defense, which is the 

largest manager of infrastructure in the world. 

So by having a comprehensive commission, State and local, the 

administration and other elements, it would give us an opportunity 

to have a comprehensive effort so that it increases the likelihood 

that we are pulling in the same direction because we have no time 

to waste. 

Mr. CARNEY. Do you want sort of a Ben Bernanke for transportation? 

Mr. BLUMENAUER. For infrastructure. 

Mr. CARNEY. For infrastructure. 

Mr. BLUMENAUER. Comprehensive infrastructure. 

Mr. CARNEY. Thank you. 

I missed Mr. Mica’s earlier comments on $1.5 trillion. I think 

that is what he was after. 

Mr. OBERSTAR. Yes, comprehensive for all infrastructure. 

Mr. CARNEY. Comprehensive. 

Is there any sense of how much that would generate in revenue 

for the government if we actually improved infrastructure and became more efficient, what that means? 

Mr. ELLISON. That question can be answered a lot of ways, Representative Carney, but I would like to say, on the job front for 

every billion dollars spent, we are looking at about 47,500 new jobs, 

generally union paying jobs, actually jobs you can’t offshore and 

you can’t outsource. 

So—it has an amazing and tremendous economic impact, and so 

I just thought I would add that. 

Mr. BLUMENAUER. One of the assignments I have taken for the 

Chairman with one of my other budget responsibilities on the 

154 

Budget Committee is, we need to do a better job of actually assessing the economic impact. 

Mr. CARNEY. Right. 

Mr. BLUMENAUER. Because there has been talk about, quote, ′′dynamic scoring,′′ but the current system does not take into account savings that occur by making investments properly or the 

ripple effects of doing it right. And as important as anything we 

need to do is to reassess how the budget rules craft, so that they 

don’t actually lead to nonsensical and artificially understating the 

value of our investments. 

Mr. CARNEY. Mr. Calvert, do you have a comment? 

Mr. CALVERT. I would only point out, yes, that obviously you 

spend a tremendous amount of money on infrastructure development. Like any business, if you spend money on capital improvement, you would hope it leads to efficiencies and in, effect, more 

profits down the road. But as you develop the mechanism to collect 

that fee or tax—and whatever mechanism you have, that it is an 

equitable one, and that those that are using the system pay, obviously, an equitable amount, and that those who benefit from the 

system benefit at least to the amount that they pay in. 

As we go through that process, I think if we can keep that basic 

tenet that we will be just fine. 

Mr. CARNEY. Let me tell you, as a Blue Dog, I don’t like to spend 

money we don’t have to, but when we spend money, I want a return on the investment. And if this does that, you know, we have 

got to actually be serious about how we approach this one. 

Thank you, Mr. Chairman. 

Mr. OBERSTAR. The gentleman’s time has expired. 

Mr. Platts? 

Mr. PLATTS. No questions. 

Mr. OBERSTAR. No questions. 

Mr. Diaz-Balart? 

Mr. DIAZ-BALART. No questions. Thank you. 

Mr. OBERSTAR. Ms. Fallin? 

Ms. FALLIN. Thank you, Mr. Chairman. I just have a couple of 

comments, and I appreciate all of our fellow colleagues that have 

come today to help us with a good discussion about important 

issues for our Nation. 

And I will just say on the record that I do support public-private 

partnerships, and I appreciate the good discussion and some of the 

ideas. 

I didn’t get to hear everything discussed today, but got to hear 

a little bit of it. And I do agree that we need to have a national 

plan for infrastructure, especially in light of the rising fuel costs, 

congestion delays, the issues that we have with our airlines and 

costs involving them, the aging of our infrastructure in general, 

whether it is railroads, bridges, airports, whatever it might be. So 

I appreciate the discussion of having a group that comes together 

with all the parties involved. 

But I know one of the issues that is very important to my State 

is that the local department of transportation, the director of our 

transportation and our transportation committee members who are 

appointed by our governor, also like to have input into what is a 

priority for our State as far as our spending needs. 

155 

So I guess my question is, how can we ensure that our States 

have a good role to play in determining the priorities of how that 

money will be spent, the timing that it will be spent, in light of us 

also needing to have a national plan to address movement throughout our Nation, especially on our major interstate areas? 

Mr. ELLISON. Well, Mr. Chairman, Representative Fallin, under 

my bill states and regions that wanted to apply, they would come 

up with the projects that they wanted funded. So they would always be right involved. And of course there would be an expectation that they would lay some money out on the table to get that 

Federal assistance. So they would be right there. 

Ms. DELAURO. In terms of the National Infrastructure Development Bank, proposals may come from the State revolving fund or 

another entity. ′′Entity′′ is defined as an individual, corporation, 

partnership, joint venture, trust, governmental entity or instrumentality, so absolutely included in terms of what the State and 

local government feel is in their best interests. 

Mr. CALVERT. In my legislation, the Department of Transportation would pick the national gateway corridors. However, the bill 

states that the project selection authority would not be the U.S. 

Department of Transportation or Congress, but a local—State and 

local-driven process in which those priorities would be driven. And 

also the users of the system, including the private entities that 

would be using the system, would also be involved to make sure 

that the system is prioritized to make sure that the money is spent 

a proper way. 

Mr. BLUMENAUER. The Infrastructure Commission that I am proposing would have representation from State and local in terms of 

the formulation. And one of the tasks of creating a national infrastructure division is to refine the role of the various partners in 

that equation. 

As I mentioned earlier, I think the era of 100 percent Federal 

money should not return. I think we ought to look at balancing the 

partnership and providing a framework so people can work comfortably within it. 

Ms. FALLIN. One other follow-up question, too: One of our other 

big concerns is that we send our Federal Highway Trust Fund 

taxes in, and many times we don’t get as much money back as 

some other States. So that also has been a huge concern of our 

State; we don’t mind doing our share, but we also want to have our 

share back. So how do you ensure that states will be treated fairly? 

Mr. CALVERT. From California’s perspective, being the largest 

donor State in the country, that is certainly an important issue. We 

have important needs in our own State. As I mentioned to Mr. Carney, any process that we do here, whether it is a Republican process or a Democratic process, it has to be thought of as equitable. 

And California is willing to do its fair share, as are other large 

States, but it has to be for a national purpose, where we all believe 

that we are getting something out of the process. And hopefully, 

that is what will happen in future transportation bills. 

Mr. BLUMENAUER. If you do it comprehensively for infrastructure, and you are dealing with transportation and water and 

broadband and energy transmission and aviation and rail, if you do 

156 

it comprehensively, it is easier to have an equitable balance than 

if you are just picking one and another. 

And so I would suggest the more comprehensive, the easier it is 

to reach the objective that you are seeking. 

Ms. FALLIN. All right. 

Thank you, Mr. Chairman. 

Mr. OBERSTAR. I thank the gentlewoman. 

And Mr. Hall. 

Mr. HALL. Thank you, Mr. Chairman. 

In my district and in the Hudson Valley of New York there are 

pressing needs both with regard to transportation and clean water, 

sewage treatment. It is a heavy commuter district. We have 13 

bridges on the deficient list. We have a number of dams on the deficient flagged list of dams in need of repair. 

We have infrastructure needs that I wouldn’t have thought of, 

maybe, until recently. Metro North Railroad, for instance, is suffering from a lack of parking spaces since the price of fuel went up 

so much that a lot of people are leaving their cars home and commuting to the New York area, to the New York City region by 

train. And so that is the kind of infrastructure that needs to be 

considered. 

Buses, which may not be thought of as infrastructure, but nonetheless in an area that is heavily populated, like Westchester 

County, where it is so densely populated it is hard to find a right 

of way for a new rail transit, it has been brought to my attention 

that buses that are designed to compete with the high-speed rail 

or airplanes in terms of comfort—ergonomically designed seats, 

drink holders, Internet access and so on—these high-quality 

accoutrements that we are used to seeing in other modes of travel 

would attract people to use the buses, which are currently thought 

of still as sort of the old Greyhound model. 

And they had the added advantage of being able to have managed bus lanes while they go through the major routes. And then 

when they go out into the counties, they can split and go on existing infrastructure, roads that already exist, to take people to diverse drop-off points. So just a couple of ideas there. 

In terms of skin in the game, for many of the communities in my 

district, they are strapped for cash; and property tax is a constant 

and yearly concern or, for some, a daily concern. 

If a 20 percent cost-share on a road or a 45 percent cost-share 

for a water grant is a high hurdle to climb, how would these infrastructure proposals help them? And would communities be able to 

band together to spread costs for projects with multijurisdictional 

benefits? 

And I would ask for a brief answer from each, starting with Ms. 

DeLauro, please. 

Ms. DELAURO. Well, I think that needs to get—we talked about 

skin in the game. I said at the outset, I—and I think that we want 

to deal with localities, but I want to see skin in the game from the 

investment community in terms of this public-private partnership 

effort. 

I think that we need to engage them and talk about what kind 

of incentives we can provide for investment into these projects. And 

157 

then we can sort out with a locality and stuff what makes sense 

in terms of the appropriate match. 

We looked at this in terms of when we did the COPS program 

here. We said, hey, you have got some money here for 3 years, and 

then after that you have to take on some of the responsibility or 

all of the responsibility. 

And I think we can sort that out. I don’t have a dollar amount 

for you; I don’t have a percentage for you. I think we have got to 

start to put pieces together and deal with it. 

I am, frankly, of the concern at the moment that we do not have 

the kind of capitalization of these projects at an investment level 

that is going to help us to meet the shortfall in your community 

and other communities. 

And then I think we can go from there to figure out how it is 

that we make this actually, when we say ′′public-private,′′ that is 

on the public side the Federal Government and State and local government in terms of their participation. 

Mr. CALVERT. I just point out on the freight proposal we have before us, it is 80-20, but of course the fees are collected by the users 

of the system, so their skin is in the game substantially. 

And so in my experience most communities that are given the opportunity for an 80-20 project take it happily in water projects or 

in transportation projects. So I think we can work out some kind 

of an equitable process by which it will work. 

Mr. ELLISON. Under my proposal, these are projects of national 

or regional significance. So, absolutely, local communities would be 

banding together with other local communities in order to get these 

kinds of projects funded and would be able to pool resources. 

I think that is exactly what you are asking, so that is an answer 

to the question. 

Mr. HALL. Mr. Blumenauer? 

Mr. OBERSTAR. The gentleman’s time has expired. 

Ms. Richardson? 

Ms. RICHARDSON. Yes. Thank you, Mr. Chairman. 

First of all, I would like to applaud my colleagues for your testimony today, particularly your concern with transportation and 

what is going on in this Nation. Given, though, many of you don’t 

serve in this jurisdiction, I really applaud your efforts to help us 

as we struggle to do better in this area. 

I am going to focus my questions, because I am limited in time, 

to Mr. Calvert, because your proposal most impacts my particular 

district. I have five questions for you. So if you could be as brief 

as possible, because I would like to say a closing comment. 

Number one, do you have a list of supporting companies and organizations that are supporting H.R. 5102? 

Mr. CALVERT. Yes. I can supply that for you. 

Ms. RICHARDSON. Thank you. 

Number two, why did you include exports in your proposal? 

Many would say that companies here in the Nation are having a 

difficult enough time competing with products in Japan and China 

and everyplace else. So why did you consider including exports? 

Mr. CALVERT. One, there are some regulations that are international regulations regarding trade. This is a fee, and if you exclude exports, it may be deemed as disproportionate to imports. 

158 

And so in order for this to meet legal requirements under collection 

of fees, exports were necessary. 

And obviously exports do impact transportation as well as imports. 

Ms. RICHARDSON. Third question, what is the cost of collecting 

these fees and administering the program? You said you were talking about a $63 billion profit over a 10-year period of time. 

Is that net, gross, or is this less? 

Mr. CALVERT. That is gross. It is a very nominal fee because you 

are using an existing customs form on a shipment fee. So, in effect, 

it would be a software change. I understand from those who are involved, it would be somewhere in, about, the 2 percent range. 

Ms. RICHARDSON. Okay. And Mr. Calvert, I am a little concerned 

about the wide scope of the use of the funds. In the notes that were 

provided to this Committee, it said that the second option of where 

funds could be utilized is for construction of, or improvements to, 

a publicly owned, intermodal freight transfer facility for providing 

access to such facility or for making operational improvements to 

such a facility. 

I will tell you, in my district, I am the home of the 710 freeway, 

the 405; 45 percent of the entire Nation’s cargo, almost half of the 

entire Nation’s cargo is going through my district. 

So could you describe why you felt the need to include the use 

of funding for construction of these intermodal facilities given the 

dramatic impacts on our roads and highways, which is what this 

Committee is really all about. 

Mr. CALVERT. Obviously—and I know your district well—obviously, we are trying to encourage shippers to get on more trains 

and use fewer trucks. 

And so, as this process moves forward—and by the way, it would 

be prioritized by the local community, your community, the State 

and the users of the system, to find the points that are clogging 

traffic through the system and clear it to get those trains and 

trucks through the system, through the highway system as quickly 

as possible. 

These dollars could be used to improve the 710 highway, for instance, for truck-dedicated lanes. It could be used for truck-dedicated lanes throughout the National Gateway corridor, how it is defined, to help move freight. Certainly rail is an important component of that and will continue to be an important component. 

As you know, we built the Alameda corridor, but we stopped 

building it, and now the train traffic is backing up throughout 

southern California all the way to the Cajon Pass. 

So this is a way for the local communities to collect a fee which 

would alleviate that traffic and collect a significant amount of 

money to pay for those improvements. 

Ms. RICHARDSON. Okay. 

My final question, Mr. Chairman, although I do agree that Mr. 

Calvert’s bill is well timed, some point of this is absolutely needed. 

I would like to respectfully request that we do a hearing, particularly in my district, since 50 percent of the Nation’s cargo is impacted by this idea. 

In California right now, the Port of Long Beach and Los Angeles 

is in the process of instituting an IE container fee. And I think it 

159 

is quite timely for this Committee and welcome all the many questions that were stated by Committee Members. I think it really 

speaks to the need of this issue. 

My final point, though, Mr. Calvert, I would like to bring up of 

my concern of your bill, your comment you said that the benefits 

should be at least as much as we put in. And in your bill you talk 

about a corridor of 300 miles. Well, California, we are pretty well 

congested, so in my particular, district 300 miles goes past San 

Diego into Mexico; 300 miles goes all the way up to Sacramento. 

And I have got to tell you, I am going to have a real hard time supporting why 50 percent of the entire Nation’s cargo is going 

through my district, and yet you would say San Diego would benefit, you would say Sacramento would benefit. 

So my question to you is, are you considering making an adjustment in terms of that corridor? Because that would be an extreme 

objection not only of myself, but many of my colleagues who represent southern California. 

Mr. CALVERT. As this bill moves forward I am sure that there 

will be improvements to the legislation. But I would like to point 

out that the Port of L.A., Long Beach is not the only areas impacted by the trade activity that takes place at that port. Obviously 

with 44 percent of all imports and exports taking place at that 

port, it has a tremendous amount of traffic. But the trains, the majority of the trains that leave the Port of L.A. Long Beach go 

through San Bernardino and Riverside Counties, the inlet empire. 

Most of the distribution facilities where the trucks are going are located in the inlet empire of the State of California. 

And so I would point out to the gentlelady that those impacts are 

shared by other communities, not just Los Angeles. And as a matter of fact, the train traffic is so backed up in Riverside, the standard grade crossing now is 25 minutes in the city of Riverside and 

the city of San Bernardino. 

So obviously we need to work together to help alleviate this. This 

is a regional problem in southern California. I have been working 

with the Port of L.A., Long Beach for a long period of time, and 

with the freight forwarders, the truckers, the American Railroad 

Association, the U.S. Chamber of Commerce, all the people that are 

interested in pursuing a solution to this problem. And I found that 

it is not simple, but we would be happy to work with the gentlelady 

to try to come up with an equitable solution. 

Ms. RICHARDSON. I welcome that. And Mr. Calvert, I would say 

I agree with you there are impacts throughout; however, a formula 

is definitely needed because it is not equal impacts. As you stated, 

if you expect people to be supportive they are going to have to feel 

that there is true equity, and I think there is more work to be 

done, but I welcome your openness. 

Mr. OBERSTAR. The gentlewoman’s time has expired. If the panel 

has not expired, I think they should be fatigued at this point. 

There has been a longer grilling of this panel than we have of most 

other noncongressional witnesses, and I thank you for your patience for remaining with us throughout this whole period of time. 

Usually Members come, give their statement and run off to a hearing or to a floor statement. But you have stayed with it and you 

have been responsive to all the searching questions by our colVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00181 Fmt 6602 Sfmt 6602 P:\DOCS\42883 JASON
160 

leagues on the Committee. And for that I thank you. I invite you 

all, and will make sure you get a copy of the statements of the subsequent witnesses on today’s hearings. It is very informational 

reading, very instructional, and I think it is extremely substantive 

material that will add to your understanding of the already advanced understanding of and proposals for the problems we are all 

facing. 

Mr. Calvert, I did want to observe, however, that whenever a 

railroad undertakes an action that triggers review by the Surface 

Transportation Board that also triggers a NEPA review. Should a 

railroad want to add a second line, for example, it must seek under 

Federal law review by the Surface Transportation Board and that 

entails NEPA review. 

Mr. CALVERT. Mr. Chairman, I ask a question for clarification. 

Could they ask for a negative declaration of that? 

Mr. OBERSTAR. Could they ask for what? 

Mr. CALVERT. A negative declaration? In effect, that they have 

that review. 

Mr. OBERSTAR. Usually railroads do. When they are making an 

acquisition, for example, they will ask for either a negative declaration or for a short course review of the acquisition. In some cases 

that is approved, in other cases it is denied. 

Mr. CALVERT. Thank you, Mr. Chairman. 

Mr. OBERSTAR. I thank the panel and the whole panel is dismissed. Our next panel is Dr. Everett Ehrlich, Mr. Mark Florian, 

Dr. Rudy Penner and Mr. Bernard Schwartz. And in that sense, 

Dr. Felix Rohatyn, whose testimony has already been submitted 

and will be included in the record. I want to welcome this panel. 

Thank you for your participation today and for the splendid statements that you have already submitted, which I read at great 

length and with keen interest. I think it is collectively a splendid 

contribution to the work of the Committee. 

TESTIMONY OF EVERETT EHRLICH, PRESIDENT, ESC COMPANY; MARK FLORIAN, MANAGING DIRECTOR, GOLDMAN, 

SACHS AND COMPANY; RUDOLPH PENNER, SENIOR FELLOW, 

THE URBAN INSTITUTE; AND BERNARD SCHWARTZ, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, BLS INVESTMENTS 

LLC 

Mr. OBERSTAR. And Dr. Ehrlich we will begin with you. 

Mr. EHRLICH. Thank you very much, Mr. Chairman. I am flattered by your invitation and to be on a panel with my three colleagues. I have submitted a statement for the record. Let me speak 

broadly and discursively about our topic today of infrastructure finance. We are here to consider the ways in which we pay for infrastructure because we find very frightening levels of needs that 

come out of engineering statements and other estimates. And the 

point that I want to make is that perhaps we are entering the 

worm wood at the wrong hole. Needs, when we talk about infrastructure, are a biological, not an economic term. 

When we have a statement of need for a dam or a bridge, is the 

dam the best solution, is it cost effective? Simply the fact that it 

is in disrepair doesn’t tell us, for example, whether or not we 

should rehabilitate it, whether or not we should build a new one 

161 

or whether we should let the dam go obsolescent or take it down 

and allow on other nonstructural solutions to provide the benefits 

with regard to electric power or wetlands preservation or whatever 

our objectives may be. 

The point is that we do not have a system that evaluates comprehensively all of our infrastructure opportunities. And my belief 

is that if we want to get more out of Federal resources, that we 

would do better to look at not how we pay for these projects, but 

how we select them. This is particularly true because of credit scoring in the 1990 Act that now takes direct outlays, loan guarantees, 

other forms of credit arrangements and puts them on a parity dollar-for-dollar basis in the Federal budget. The problem is less that 

we don’t have a new method of infrastructure finance, than we 

have 90/10 or 80/20 cost sharing or 100 percent cost bearing by the 

Federal Government regardless of the scope of national versus local 

benefits, regardless of the presence of nonstructural alternatives, 

regardless of whether or not user fees have been used to manage 

peek uses or otherwise to maximize our use of the asset. 

The proposal that came out of the CSIS Infrastructure Commission was to create a single national infrastructure bank. And not 

only would it be able to wield all of the tools that we have heard 

discussed and will hear discussed on this panel, such as direct subsidies or loan guarantees, or interest rate subsidies and the like, 

or whatever kind of assistance the government wants to provide to 

make an infrastructure debt instrument creditworthy, but also to 

have a place where all infrastructure proposals are evaluated using 

consistent parameters for the value of time, the interest rate, the 

cost of capital, the discount rate, the value of human life, to put 

all of them on an equal footing so that we know that we are allocating Federal dollars to the most pressing needs. 

And the infrastructure bank would create a variety of interesting 

opportunities, and I will highlight three very quickly. Representatives Calvert and Jackson have a proposal for a container system. 

And they have an idea that users would be willing to pay for it. 

And the point was made, I believe by Congressman Mica, that is 

inherently multi-state. Let the states come together with a package 

of user fee proposals, with perhaps supplementary private financing, go to the bank and say, we think that this is worth Federal 

involvement of X. And that can be directly negotiated. 

I will give you another example. New York City has a very daring vision for how it will exist in 2025. But when it takes that vision and tries to get funding for roads versus mass transit versus 

ports versus sewer, it has to go to different places. Let it take that 

comprehensive vision and take it to one place, to a national infrastructure facility, that would allow it to say, well, New York, if you 

raise this on your own and the State helps you, we will give you 

this. Or finally, we have very innovative new private financing entering the infrastructure area, and yet we have concerns about 

whether or not we are hocking assets or whether or not Federal 

and state prerogatives are being balanced. 

Let us establish a framework within which private money can refinance old assets or, more importantly, finance the construction of 

new assets within the framework of the bank and let the bank be 

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162 

ship, I think the right term is business deal, but let us make good 

business deals with the private sector with the bank as the Federal 

Government’s agent. Thank you, sir. 

Mr. OBERSTAR. Thank you very much for your rather concise 

statement of your written presentation. It is a remarkable feat. 

Mr. EHRLICH. We have a shared interest in my doing so. 

Mr. OBERSTAR. Mr. Florian. 

Mr. FLORIAN. Chairman Oberstar, Ranking Member Duncan and 

the Committee, thank you for the opportunity to present to you 

today. My name is Mark Florian. I run the infrastructure banking 

group at Goldman, Sachs. In my 23 years at the firm, I focused on 

financing of infrastructure development. It truly is my passion. The 

Nation’s transportation system, as the Committee knows, is in a 

crisis because current funding sources, as well as financing tools, 

are insufficient. As everybody knows, we are falling behind. The 

use of our highways have doubled in the last 25 years, yet the capacity of the system is only up 3 percent. The cost of maintaining 

and expanding this system has accelerated. 

Construction inflation is up 40 percent over the last 3 years. The 

cost of asphalt alone this year is up over 25 percent. The fuel tax 

has served our country well since 1956, but it is not keeping up. 

There is no silver bullet to our Nation’s transportation crisis, but 

there are a number of actual steps we can take in order to address 

our problems. Two main categories; more funding or revenues 

available which will help us to use broader capabilities in financing 

infrastructure investments. The gas tax is an important source of 

funding. We could try to increase the fuel tax in the short term, 

but it is a challenge from both a political will and a public acceptance perspective. One alternative that the Committee has considered is to index the fuel tax. I think that makes sense. We can 

index it either to CPI or to construction inflation. That being said, 

however, I think most importantly for the long-term it is imprudent to rely primarily on a funding source that is based on fuel consumption given the reality that Americans are shifting to more efficient vehicles so consumption will naturally go down vis-a-vis the 

vehicle miles traveled and cars that don’t even use gasoline are in 

our future, and not a distant future, one of the most promising solutions for the funding shortfall is to explore greater use of direct 

user charges, tolling or vehicle miles travel charges. 

We need to pursue greater use of user fees and availability of 

user fees in their various forms. At the same time we need to be 

cognizant that there are citizens of our country that have less 

means and we need to provide alternatives for all of our citizens, 

particularly those who don’t have the financial capacity necessarily 

to pay user fees. Secondly, in addition to funding, we need better 

and broader use of financing tools. We need to tap all the sources 

of capital. Taxes on debt, government funding tools, as well as private sector funds. The tax exempt municipal bond market supplies 

about $400 billion a year of funding for infrastructure. We need to 

encourage it and to expand it. And it is provided at a very attractive cost to capital. As a result of this Committee’s efforts under 

SAFETEA-LU, private activity bonds in TIFIA have been expanded 

and have been an important part of our transportation funding in 

recent years. 

163 

We need to expand these programs and streamline them. There 

has been a lot of interesting discussion about the exciting proposal 

for the national infrastructure bank. I believe this national infrastructure bank will only be effective if we specifically figure out 

what we intend to accomplish with this tool. There is no lack of 

capital to provide financing. We have the deepest capital markets 

in the world in the U.S. We don’t need another source of money to 

lend to projects. But we can use a source to subsidize and to help 

assist in infrastructure projects getting them done better, faster 

and cheaper. First the bank could provide an interest cost subsidy, 

lower rates. We have tax exempt bonds already. It should be competitive with tax exempt bond financing or better. 

Second, the bank could provide a credit subsidy, essentially lending to projects that are higher risk, much like TIFIA does today, 

but perhaps more aggressively. And third, the bank could provide 

project cost subsidies with grants for early stage developments. It 

is always important to keep in mind, though, that while financing 

tools are incredibly important, we need more funding. Without that 

funding we can’t finance. Public-private partnerships are also an 

opportunity. We should encourage these structures since our own 

U.S. pension plans are now interested in investing in them. We 

have seen that CalPERS, New Jersey teachers, Texas teachers, 

CalSTERS and many others are very, very interested in investing 

in infrastructure. 

We should tap into that source of capital. What are our end 

steps? What do we do from here? As we look to improve the quality 

of our Nation’s transportation infrastructure, I think there are four 

key objectives. First, faster delivery of projects. Second, better 

choices for users, more revenue available and using the broad 

range of financing alternatives. While the Committee’s focus on financing alternatives is appropriate, I urge you to continue your 

consideration of additional revenue sources that will underpin that 

financing that is necessary to fund our Nation’s needs into the future. Thank you. 

Mr. OBERSTAR. Thank you very much, Mr. Florian. I appreciate 

it very much. Dr. Penner, good to have you back at the witness 

table. I remember your years at CBO and your contributions over 

a very long period of time. 

Mr. PENNER. Well, thank you very much Mr. Chairman. And I 

would like to thank you and other Members of the Committee for 

this opportunity to testify. It is difficult to handle public investments in government budgets. The rewards from the investments 

are spread over an extended period, while the cost of investing is 

immediate. This creates something of a bias against investment. 

My full testimony describes six options for dealing with this bias. 

For highways and mass transit, there are very strong arguments 

for raising the fuel tax, but obviously that is difficult politically. A 

related, and I think superior option, probably not much easier politically, is relying more on tolling and congestion fees, which are 

now much easier to collect because of technological advances. They 

could generate very large amounts of revenue while increasing the 

efficiency of highway investment. 

Quite another approach would be to adopt capital budgeting for 

the Federal Government. I don’t think that would work very well 

164 

in our system. The basic idea of capital budgeting is to reduce capital’s disadvantage in the budget process by allowing it to be financed with borrowing, while requiring the operating budget to be 

balanced with tax and other revenues. The problem is that we seldom come close to balancing our operating budget. And if you allow 

the marginal operating expenditure to be financed by debt, you are 

no longer reducing capital’s relative disadvantage. If you do find a 

way to reduce it, then there is a danger in the budgeting process 

and all sorts of things get defined to be capital. 

My full testimony looks at various types of infrastructure banks, 

and they can be designed in a great variety of ways with varying 

degrees of control by the Federal Government. One form is a government sponsored enterprise. But they have to be carefully regulated to limit their risk taking. Given the problems in dealing with 

institutions such as Fannie Mae, I would suggest that the Congress 

should think long and hard before creating any new GSEs. One 

could create a revolving fund to deal with the problem of the 

lumpiness of investments for agencies that invest only occasionally. 

In years when an agency was not making large investments, they 

could contribute to the fund, and when they needed to invest, they 

could draw on their deposit or borrow for the fund. I think this is 

a promising idea that was discussed by President Clinton’s commission to study capital budgeting. It is certainly worth an experiment. 

The full testimony discusses public-private partnerships by 

which, I mean, a private ownership of parts of the infrastructure. 

I think that could be a useful way to bring more resources to infrastructure investment. Last, the testimony discusses ways of making Federal subsidies for highways more efficient. The structure of 

Federal grants is very complicated, but many think that a considerable portion just displaces investments that States and localities 

would make anyway. It would be useful to study minimum effort 

and cost sharing requirements to see if they could be designed to 

provide the Federal Government more bang for the buck. While 

that is not an easy task, there is a much simpler improvement efficiency out there that could be pursued, that is, looking at the tax 

exemption on municipal bond. 

It costs the Federal Government far more in lost revenues than 

it reduces interest costs at lower levels to government. A carefully 

designed tax credit could greatly improve the efficiency of this subsidy. Having said all that, it is clear that getting money for infrastructure investment is going to be very difficult in future years. 

Social security, Medicare and Medicaid expenditures are approaching one half of noninterest spending and are growing faster than 

tax revenues and the economy. This puts a hard squeeze on all the 

rest of the government, including infrastructure. I think that a 

greater use of tolling and congestion fees and public-private partnerships are the most efficient ways of countering this squeeze. 

Thank you very much, Mr. Chairman. 

Mr. OBERSTAR. Thank you, Dr. Penner. I really appreciate your 

testimony. Mr. Schwartz, good to have you back again at the Committee. I appreciate your contributions over a very long time. As I 

said at the outset, when you were at Loral and we were trying reVerDate Aug 31 2005 12:23 Mar 11, 2009 Jkt 000000 PO 00000 Frm 00186 Fmt 6602 Sfmt 6602 P:\DOCS\42883 JASON
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direct the energies of the FAA to modernize the air traffic control 

system, you made a great contribution. Thank you. 

Mr. SCHWARTZ. Thank you for your nice introduction. Chairman 

Oberstar and Ranking Member Mica and the Members of the Committee, thank you for the opportunity to appear before your Committee. Over several decades, our country has accumulated a sizable infrastructure deficit, and as a result there have been numerous breakdowns and bottlenecks that have impeded the free flow 

of goods and services in this country. There is a wide inventory of 

deficiencies in our infrastructure from congested roads to water 

systems, et cetera. I will not recite them here. But I will say that 

there has been a wide deterioration. As a matter of fact, most people regard our infrastructure as broken. And this deterioration has 

undercut the Nation’s economy and productivity, it has endangered 

our national security and it has undermined the quality of our life. 

One of the reasons for this infrastructure deficit is that our system for financing infrastructure has become increasingly inadequate with the passage of time. It has not kept up with the practices of other advanced industrialized economies. At the Federal 

level infrastructure is funded largely out of general revenues and 

highway trust funds, and at the State level the great majority of 

infrastructure is funded through the municipal bond markets as 

well as through state and local budgets. But these funding mechanisms have failed to keep pace with our national requirements. 

The current economic slowdown in turmoil in housing and credit 

markets threaten to further constrain State and local capabilities 

for infrastructure spending. Because States and municipalities rely 

heavily on property and sales taxes the housing correction in consumer slowdown will create a budgetary crisis even greater than 

we are having today. In addition to the absence of a Federal capital 

budget, the prevention, the lack of having a Federal budget, prevents us an appropriate sensible transparent and fully accountable 

method of funding the Nation’s investment in long-term productive 

assets which are so necessary for our global competitiveness. 

A Federal budget would better focus our national priorities in a 

timely fashion. Also, it would better structure the payment and 

amortization of long-term investment so as to match resulting revenues derived from the investment. I disagree with Dr. Penner’s approach to the Federal budgeting as being an additional problem. 

Most industrialized countries in the world do have a separate capital budget and operating budget and do very well with it. And 

every business in the United States is able to manage that problem 

as well. The major impediment to closing the infrastructure deficit 

is not lack of available cash, as Mr. Florian mentioned, or because 

of high interest rates. 

Notwithstanding recent credit problems and bank liquidity concerns, the world is awash with capital and long-term interest rates 

remain near historic low levels. In fact, there is no shortage of privately held funds to help pay for infrastructure, reconstruction and 

development if it is undertaken in a market sensitive manner. A 

new approach to funding infrastructure capital investment would 

open up new capital markets on international sources and domestic 

and fiduciary and pension funds. It would further enhance access 

to sizable pools of capital which require larger projects for scale 

166 

and efficiency. Recently several legislative initiatives have been introduced in the Congress. The Dodd-Hagel Senate bill S. 1926, 

would create a national infrastructure bank. 

Representatives Ellison and Frank have introduced similar provisions in 1301 and they spoke to those issues today. These bills 

would authorize up to $60 billion in U.S. Government guarantees 

for bonds with maturities up to 50 years for infrastructure projects. 

Properly structured government guaranteed bonds could leverage 

up to $300 billion. As proposed, the national infrastructure bank 

would not operate as a bank but as a Federal agency with no capitalization. 

However, if Ms. DeLauro’s legislation were modified for the bank to be capitalized for up to $10 billion, the bonds would be sufficiently flexible to achieve investment grade status as well as access 

to broader markets. In the House Congresswoman DeLauro’s bill, 

I think it is 3896, has proposed an Infrastructure Development Act 

of 2007 which would be capitalized at $9 billion over 3 years. This 

entity would act like a bank, even though it is not called a bank. 

It would be able to make loans, issue and settle debt and equity 

securities. All of these new institutional arrangements would help 

remove politics from the funding of infrastructure projects and provide needed professional expertise and standards to states and localities for project development. They would also help States acquire financing for projects of national and regional significance. 

Further, by offering Federal guarantees State and local governments would keep borrowing costs low and provide both leverage 

and flexibility. The adoption of the significant elements of these 

combined pieces of legislation is strongly urged in order to achieve 

the following imperatives; to create high skilled well paid jobs to 

put the economy on a net growth path it is estimated, as stated 

here earlier today, for example, that for each $1 billion spent in infrastructure there is a creation of 47,500 jobs. Secondly, to divert 

the economic gains of our economic economy into long-term investments and away from consumer stimulus programs which inevitably lead to excessive speculation. I would like to stress this in 

particular. 

Congress, in its attempt to offset the lack of jobs and a deteriorating economy, passed legislation for a stimulus that is short-term 

and would be a consumer-driven stimulus which, in the end, leads 

to the kind of excessive speculation that we have trouble with dealing. However, an infrastructure investment program provides for a 

stimulation but through long-term projects that continue to add to 

the economy’s wealth in the future. The third imperative is to enable us to close the infrastructure gap at a time of low borrowing 

costs, to create significant wealth in the form of productive longterm national resources, to increase future revenues and to provide 

access to new large capital markets here and abroad. 

In summary, public investment is the most responsible and reliable way to stimulate new private investment, create good jobs in 

the country and sustain innovation and productivity growth. This 

country can ill afford to delay infrastructure investment. 

And finally, America’s competitiveness depends on the healthy 

infrastructure and needs long-term job creations as part of its program. I commend the Committee for addressing this very long-term 

167 

but very, very substantial issue for the country. I think it is critical 

that this debate that we heard here today be continued. And I 

thank you for the opportunity to participate. 

Mr. OBERSTAR. Thank you very much, Mr. Schwartz, for your 

thoughtful comments and to each of the members of the panel for 

your contributions. Your back-up papers go in much greater depth 

into the oral summaries that you have already provided. I want to 

refer to the European Commission. The Transport Council that I 

addressed in the early part of May, May 5th, that council consisted 

of 27 transport ministers of the European Union. They have spent 

a great deal of time over a period of several years in fashioning a 

transEuropean transportation network above and beyond what individual member countries of the European Union have crafted, 

and boiled those down to 30 major projects that are of significance 

because they are transborder projects and because they relate to 

priority transportation needs. Of those 30, 19 are rail projects. 

Three are mixed, that is intermodal railroad projects. Two are 

inlandwaterways, one of which would link the North Atlantic to the 

Black Sea traveling across the heartland of Europe. And one they 

call motorways of the sea, a fascinating concept. 

High priority in their report has been given to more environmentally friendly transport modes. And they have a map for each 

one of the 30 projects, and a progress report on how much money 

has come from the European infrastructure bank, how much has 

come from national governments, how much has come from private 

sources, and the state of progress on each one of the 30 projects. 

It is a remarkably well-structured, thought-through plan. Some of 

the largest scale projects have been completed. The fixed link between Sweden and Denmark, Malpensa Airport, the railway line 

linking Rotterdam to the German border. And then the high speed 

Brussels—Paris-Brussels-Cologne-Amsterdam-London. Those are 

massive projects. 

The result of the Paris Brussels link is that there is no commercial air service between Paris and Brussels, it is all by high speed 

train. A trip that I took as a graduate, en route to a graduate program from Paris to Brussels in 1956 took 6 hours. Last year that 

trip was 80 minutes. One train leaves every 3 minutes from Brussels to Paris, and likewise from Paris to Brussels with 1,100 passengers aboard at 184 miles an hour from six in the morning to 

midnight, carrying millions. People commute daily between the 

capital of Europe and the capital of France. People commute from, 

business persons commute from Tours in the southeast Loire Valley 220 miles daily to Paris in an hour and 15 minutes. You could 

hardly get through security at the nation’s airports to your gate in 

75 minutes, and they are doing this. 

Now, they have their national—they have their European community budget. They have something called a cohesion fund. They 

have the European redevelopment fund, they have the European 

investment bank and then they have private sector sources. But all 

of this investment which in the short term is 350 billion U.S. Dollars, but in the long term will be in the range of well in excess of 

$1 trillion, is subject to a master plan that the ministers have 

agreed to. 

168 

Now, Dr. Penner, you have been a critic of capital budgeting, but 

I suspect you would not disagree that we should know what those 

capital needs are. 

Mr. PENNER. Absolutely, Mr. Chairman. And we should be very 

careful in selecting the kind of projects that we finance to make 

sure they pass cost benefit tests of one kind or another. But I think 

that is very different from capital budgeting. The capital budget is 

a way of planning how you divide your capital and operating expenditures. 

Mr. OBERSTAR. If you can just stop there and say we need to assess the portfolio of capital requirements of the civilian side of government. That is a first step, isn’t it? 

Mr. PENNER. Yes, that is a first step. But I don’t think you have 

to have capital budgeting to do that. I think the advantage of capital budgeting, if you do it right, is that you can finance the capital 

with debt and you can pay it off as it amortizes, therefore the citizens who actually use it are the ones who pay for it. But that only 

works if you balance your operating budget. And that is a great defect in our system. We don’t come anywhere close to that. 

In my full testimony, I give the numbers of capital investment. 

And you can define it to just include physical capital, you can include R&D, you can include education. If you include all of those 

things, the warranted deficit under capital budgeting would only be 

a little over $100 billion. And our deficit last year was well over 

$200 billion and this year it is going to be well over $400 billion. 

So unless you have the discipline to do it right, I don’t think you 

should do it at all. 

Mr. OBERSTAR. That is the key, that is the key. At that very witness table 20 or so years ago, David Stockman said that he was opposed to a capital budget because if we had one, Congress would 

want to fund it. However, I said, well, we are doing it now, but it 

is done in a haphazard fashion and we have no way of prioritizing 

unless we know what the total portfolio of capital needs. 

The European Commission has done that. They have looked at 

the total range of capital investments and then narrowed it down 

to transportation, to those transportation projects that have met 

national, that is European national benefits. So I think my personal preference is that we at least establish a capital budget so 

we have an assessment of the needs, then engage as a political will 

to prioritize and to invest in those. And you are quite right, Dr. 

Penner, to point out the difference in the operating budget and the 

capital budget. That is a separate matter for the Appropriations 

Committee and the Budget Committee. Dr. Ehrlich, you make a 

very interesting distinction between financing infrastructure that 

compares new projects to managing the old ones and allows nonstructural alternatives. The European Commission also introduced 

an element that I cited a moment ago, environmentally friendly. 

Why do you make that distinction? 

Mr. EHRLICH. Because we pay for people to build things, and we 

generally don’t pay for people to pursue those nonstructural alternatives. And they might be better, they might not. So a congestion 

charge akin to the one charged in London might be a better solution than building new mass transit or than other capital expenditures in a given urban area. Preserving wetlands or planning land 

169 

use might be a better solution to flood control than building new 

dams and levees. The system we have now doesn’t hunt up those 

answers. What it does is encourage localities to apply for capital 

grants so that they can get 100 percent funding from the Corps of 

Engineers. And if they don’t get it that year, the system encourages 

them to ride the merry-go-round for another year and come back 

and see if they can get it next year. So what is lost is directing 

their attention first to nonstructural solutions and second to getting the best solution that can be funded now in place. And so what 

we get are solutions biased towards capital and that are often delayed because of the process by which we select these projects. 

Mr. OBERSTAR. You are quite right to point out that distinction 

and the importance, and we have in the Water Resources Development Act that the President vetoed and Congress overrode, a new 

direction for the Corps of Engineers to review nonstructural alternatives. And that is a principle that we should probably extend to 

other aspects of our infrastructure portfolio. 

One of the tantalizing propositions for the surface transportation 

program is, in addition to the user fee gas tax, vehicle miles traveled, to which I would add weight. Now, the State of Oregon is experimenting with this vehicle miles traveled which requires a 

transponder in the vehicle, a satellite and downloading and gathering that information in some meaningful way to assess. Are you 

familiar, Mr. Florian, with how well that is working and at this 

stage. 

Mr. FLORIAN. Yes. I know the State of Oregon feels, and I don’t 

want to speak for the Oregon DOT, but I think they feel that their 

pilot program to explore vehicle miles traveled has been quite successful. And the way that system worked was basically your odometer when you go to the gas station it is checked, and to the extent 

you have traveled more miles you get a charge that is built into 

your tax bill. That is one technology. 

In Germany right now for trucks, there is a GPS system where 

there are transponders and the trucks are tracked across the country. And when they travel over a highway there is a pennies-permile charge that is allocated to them. And one of my concerns, Mr. 

Chairman, is I do think the fuel tax has been a terrific source of 

revenue for us, but I think the world is changing. It is not going 

to be a growing revenue source in the future and we need other alternatives like a VMT, vehicle miles travel charge or more tolling 

or other user fees. 

Mr. OBERSTAR. I would call them supplements. 

Mr. FLORIAN. Supplements, exactly sir. It is not a replacement. 

Mr. OBERSTAR. Yes. I think we are going to need the highway 

trust fund as a cornerstone for investment. Mr. Schwartz, you recommend that Congress capitalize a national infrastructure financing entity so that it can leverage a capital. What level of capitalization would be appropriate? Have you given that some thought? 

Mr. SCHWARTZ. Yes, I have. 

Mr. OBERSTAR. You have dealt with billion dollar projects in the 

private sector? 

Mr. SCHWARTZ. Yes, sir I have, and most of those were adopted 

under the discipline of a capital budget which requires a certain 

amount of oversight to see that you meet your objectives. I think 

170 

that it was mentioned earlier today that a $9 billion capitalization 

over a three-year period would be adequate for the kind of leverage 

and financing. And I think that is probably right. I favor, strongly 

favor theDodd-Hagel structure of infrastructure bank. It is not 

quite a bank, but a method of financing. And with a $60 billion authorization to offer guarantees that would attract much capital in 

the United States through pensions and other fiduciary pools of 

capital, and certainly in Europe. I think a $60 billion funding for 

infrastructure, plus a $10 billion capitalization to be used for banking purposes would be a very good mixture Mr. Chairman. 

Mr. OBERSTAR. Thank you. That is very helpful, very useful. Dr. 

Peter Orszag testified before the Committee last month and said 

that the government could save $3 billion to $6 billion a year by 

replacing the tax exemption on municipal bonds with partial tax 

credit bonds. 

Dr. Penner, you have been on the inside on this. What do you 

think about that? Would it make some sense to shift from tax exempt to partial tax credit bonds for supporting State and local government? 

Mr. PENNER. Absolutely, Mr. Chairman, because as I said in my 

full testimony, the current tax exemption costs much more in terms 

of the revenues we lose than the benefit that actually goes to the 

State and local governments. I guess looking at the CBO testimony, 

they figured that you break even at about a 21 percent tax rate, 

so that anybody above that is getting more of a tax advantage than 

the subsidy that is being conveyed to the lower level of government. So certainly a carefully thought out credit would be far, far 

superior to what we have now. 

Mr. OBERSTAR. That is great food for thought. I like Dr. Ehrlich’s 

reference to public-private partnerships as business deals. That is 

really what they are. But in the European context, those P3s are 

subjected to a public utility service sort of overview. And they are 

strictly subjected to public scrutiny. We don’t seem to have such a 

structure in our system. 

Mr. EHRLICH. But we are yet to be confronted with the issue, and 

therefore we are yet to devise a solution. I would find it unfortunate if every business deal surrounding an infrastructure asset 

were a pretext to create a new regulatory structure. But I think 

that it is possible, through the kinds of contracts and arrangements 

that we build into these deals, to create equity. 

An example I used in my testimony is that we would want the 

private manager of a toll road—a private owner and manager of a 

toll road—to charge some kind of congestion fees to optimize the 

use of the road. Now that in essence says here is a monopoly on 

the road, do with it what you will. And so you would want to balance that with something that looks like rate based regulation perhaps, saying, well, you really can’t make more than X or alternatively less than Y on the asset, but otherwise go and do what 

you need to do. You can’t create a regulatory regime surrounding 

every deal that scares away the money that you hope the deal will 

attract. 

Mr. OBERSTAR. We have 3 minutes remaining on this vote. I 

would propose that we—we have two more votes after this one, and 

they are 5 minutes each, and I propose that we recess and come 

171 

back so that the Members may have more time to ask more questions. We will stand in recess for about 20 minutes. 

Mr. OBERSTAR. The Committee will resume its sitting, with 

apologies to the witnesses for a delay of much longer than the point 

I anticipated we would be able to return. Votes on the House floor 

are beyond the control of even the Chair and even the House leadership. 

And I acknowledge that Mr. Schwartz had to leave. He indicated 

prior to his testimony that he had a commitment on the West 

Coast. And I understand if you miss your—even when you have 

your own aircraft, if you miss your departure time then you are in 

a long waiting queue. And that is not good. But his testimony has 

been very valuable. 

I want to return to the question of the vehicle miles traveled and 

a weight factor as a substitute for the highway user fee or gas tax. 

Mr. Florian, we started on that. I welcome the contribution of the 

other two members. How long do you think it would take, given 

where Oregon is today with their experience, with Germany’s experience in a similar initiative, how long do you think it would take 

to implement such a structure? And then how would such a scheme 

be calibrated to generate at least a substitute for the existing 18 

and a half cents and index it, if you will, into the future? 

Mr. FLORIAN. Thank you, Mr. Chairman. A couple thoughts on 

that. The technology exists today. But getting it implemented in a 

broad base is complicated. You know, we have tens of millions of 

vehicles across the country. So it is in use in Germany, it has been 

for a few years. The Netherlands is doing a study, and will likely 

put in a vehicle miles traveled charge for not only trucks, but also 

for all other vehicles as well. So they are in the process of looking 

at it and potentially implementing it. I think this could potentially 

be rolled out, if we studied it intensively with appropriate pilot programs, in the next 2 to 3 years. This could start to be—I am not 

saying comprehensive for all vehicles across the country, but we 

could start to roll this out perhaps starting with trucks, perhaps 

starting with certain regions of the country. So it is—the technology exists. There is another thing that would be very important. 

If we want to use a GPS-like system, it would be important for the 

OEM manufacturers to start to put that technology in all vehicles 

so we could utilize such a system. There might be a cost to that. 

We would need to analyze that and figure that out. 

But I actually think—I am personally concerned that the gas tax 

is going to start to certainly be flat, if not go down in pretty short 

order. Taxicab drivers in New York City are now buying hybrids, 

which tells you a lot. So I am concerned about the gas tax and its 

viability unless it gets ramped up dramatically in the next several 

years. So there is an opportunity here. 

Mr. OBERSTAR. Do you factor weight into this as well? Dr. 

Penner? 

Mr. FLORIAN. Yes, you can. 

Mr. PENNER. Yes, Mr. Chairman. I chaired a Committee for the 

TRB of the National Academy of Sciences, and we looked into this 

very carefully. And I really think it has incredible promise. I think 

the transition is very difficult. You hear a lot of people voice privacy concerns. And while the technicians assure me that that is no 

172 

problem, I think a lot of people worry about it, and you have really 

got to prove to people that you can do it without snooping on them. 

But in terms of the potential revenue yield, it is enormous. I mean 

if you really priced our Beltway the way economists say it should 

be priced you would collect billions of dollars just in this locality. 

So there would be no problem with thinking up ways of getting revenues if it was politically feasible. 

But I am very pleased, I think your most recent authorization allowed for some more experimentation, I believe. And I think that 

is very important. We have got to figure out how to do it and we 

have got to agree on the specifics of the technology. But I think it 

is one of the most promising things to come along for a very long 

time. 

Mr. OBERSTAR. Thank you for your thoughts. Dr. Ehrlich. 

Mr. EHRLICH. I think I am only going to second at greater length 

what was said. The privacy concerns are going to be very important. But we are building precedent now, because of EZ Pass and 

other comparable uses of technology, regarding privacy, and this is 

an area that we should establish what our expectations are early. 

Rolling it out, to my thinking, would take a period of something 

like 3 to 4 years. New manufacturers would have to be given a 

mandate. And then the cycle of either state maintenance or environmental vehicle inspection could be a window to require old automobiles to conform to the new standard and the like. 

The last point I would make, and this might be a parochial view 

as an economist, and I have talked about this with other transportation economists, the system would give you the ability to analyze 

trips, and therefore provide a database for comprehensive automotive transportation planning that we do not now have. We know 

about cars, we know about households, but what is the distribution 

of the distance of trips? What is their timing? We would now understand that and know in a much more rich way how people use 

roads, and therefore how to build them and how to manage them. 

Mr. OBERSTAR. Thank you. I think that is a very keen observation. It strikes me that a vehicle miles traveled plus weight relates 

more to the concept of a fee as defined by OMB historically over 

many years as a charge for—charge directly related to the service 

for which the fee is exacted. And by narrowing the focus down to 

vehicle miles traveled, your trip length, and the weight of the vehicle, this reflects the stress put on the infrastructure, the roadways 

and the bridges, better than the amount of fuel purchased times 

cents per gallon. It is a different concept for highways than we 

have for the Aviation Trust Fund, where the tax is a percentage 

of the value of your airline ticket, not expressed in miles traveled, 

although that ticket is supposed to reflect somehow miles traveled. 

Next question is what is apparent from your testimony and that 

of my congressional panel is that we have kind of a two-tiered approach. We have a cornerstone of financing through the Highway 

Trust Fund, but then we have mega needs. There are some really 

high profile project needs. I will go back and cite the Wilson 

Bridge. At the time it was proposed, there wasn’t a great deal of 

thought about its importance to the national transportation system 

or to the national economy. But as we dug into the issue, particularly in House-Senate conference, I made some calculations and 

173 

found that the Wilson Bridge transports 1 percent of the total gross 

domestic product of the United States. There are other similar 

entry points, intermodal points that are vital to the national economy. The transit of freight rail and passenger rail and interstate 

highway movement through Chicago is one such chokepoint, if you 

will, in the Nation’s system. If it takes, as it does, as long for a container to move seven miles through Chicago as it does for that container to move 1,800 miles from Long Beach, Los Angeles to Chicago, then there is something wrong with our system. And then it 

has to move 1,200 miles to the East Coast, because 70 percent of 

that container traffic from the West Coast is destined for the rest 

of the country, and a little more than half of it for the East Coast. 

The CREATE project in Chicago merits national investment. 

Why shouldn’t we have a national focus on unlocking that part of 

the grid? Alameda corridor is another such example. I think you 

can make the point that Seattle, with I-5, with the two freight 

rails, the UP and the BNSF in that corridor, and not only a northsouth interstate but an east-west interstate that intersect at that 

point, that this cries out for a national investment. 

Now just using those examples, wouldn’t those kinds of projects 

qualify for something above the board, whether a TIFIA type approach or national infrastructure bank approach, or as one of you 

has suggested, and I don’t remember now because the testimony 

has merged in my mind, a World Bank type approach? Is that approach sort of separating out onto a national scale these super 

projects that deserve a special category of financing that goes beyond the Highway Trust Fund? 

Mr. FLORIAN. I would be glad to comment, Mr. Chairman. I think 

that there are projects of national significance that benefit all of us, 

even though they might be in a particular locale. The CREATE 

project I know—I am from Chicago—I am very familiar with the 

grade separation and a lot of the key things that need to happen 

in Chicago to get freight rail through the city. And so I agree with 

you that is a project that affects everybody across the country. 

There is obviously a lot of congestion that has happened in southern California with the ports of Long Beach and Los Angeles. That 

needs to be fixed. One of my colleagues in my group actually did 

the financing for the Alameda corridor. So I do think there is a real 

rationale for targeting specific projects that—particularly in 

freight—that will open up corridors, create less congestion, and 

have more mobility across the country. I think freight is a natural 

for that, and that might be one way of separating out some focus 

with regard to projects with national significance. 

Mr. OBERSTAR. Dr. Penner? 

Mr. PENNER. Yes. I think projects like that could actually be financed under our current framework. Obviously, you would have 

to provide more resources for the trust fund one way or another. 

But I think there is a fundamental problem with our grant structure in that so much of the money is given away by formula, and 

that doesn’t really induce States to prioritize taking the national 

interest into account. And I think that really should be looked at 

very carefully, and see whether we could make more use of costsharing grants, or at least require more minimum effort. Because 

I don’t think we are getting out of the States what we deserve for 

174 

the amount of money we are sending them. And it is a very complicated business. And I could go on at great length about it. But 

that is one area where a technical commission might help sort out 

the main issues and how you might provide the best incentives for 

States. 

Mr. OBERSTAR. You are certainly right about that. I think one 

only has to go to the bridge program itself. Now several years ago, 

over a decade ago, the States asked for more flexibility. In fact, 20 

years ago they wanted to reduce the number of categories. I think 

we had at one time 50 or 60 categories in the Federal Surface 

Transportation Program. We got those down to well under 30, and 

a half dozen major categories. One of those is the bridge program. 

And they wanted flexibility so that if they didn’t need to dedicate 

the money to bridge repair or reconstruction or rebuilding to use 

it elsewhere. So we gave them that authority. And then just in the 

last 4 years they flexed $4-1/2 billion out of their bridge program 

to other categories of need in the State, and then a bridge collapses, and they say oh, my God, we don’t have enough money for 

the bridge program. Well, wait a moment. We gave you the authority, you used it somewhere else, and now you are complaining. 

So it comes back to again a statement in the panel’s testimony 

that the Highway Trust Fund is a kind of Federal-State revenue 

sharing program. 

Dr. Ehrlich? 

Mr. EHRLICH. That was mine, and I will stand by it. I mean it 

is the transportation equivalent of what I used to say to my kids: 

Here is 20 bucks, have a good time. When you get right down to 

it, saying that we will pick up $0.90 on the dollar or 75 for local 

connecting roads and the like becomes an invitation to shop for 

that kind of money. Rudy is right in that if we were to make that 

cost share negotiable in some way, we would get out of the States 

far more, and we would eliminate the biases inherent in saying we 

will pick up 90 percent, whatever it is. There would remain the 

freight projects we are talking about, the multimodal issue, the fact 

that there is money coming through several windows and the like, 

and there is a lot of coordination. 

I want to go back to that because there is one thing that projects 

we are talking about, these national scope projects, have in common. And that is they have a local steward. The City of Chicago. 

That fact can’t be avoided. So we have to recognize Chicago’s stewardship—we are not going to federalize it in some sense. There is 

not going to be any eminent domain exercised over it. Same thing 

in Alameda. We have to get that local steward’s incentives in line 

with the country’s, get it done now, create a workable balance between local costs and other users’ costs and the like, create an opportunity for private money to enter. 

I can imagine that Mark, understanding the Chicago freight 

issue, sees the opportunity for private money, but it has got to be 

part of what is really a mosaic of different contributions from different classes of user and our own superimposition of the national 

need and a national cost share. We need a place where all of that 

can get done. And we can either do it on an ad hoc basis or we can 

do it on an institutionalized basis. And in essence, the testimony 

I have given you today prefers the latter. 

175 

Mr. OBERSTAR. Will any such investment have public credibility 

if it is—unless it is—unless those priorities are set by an independent entity? 

Mr. EHRLICH. Let me free up my colleagues for a second. I think 

it will have credibility if the process that appraises projects has 

credibility. 

Mr. OBERSTAR. Okay. 

Mr. EHRLICH. It needs to be independent, it needs to be expert, 

it needs to resemble the World Bank—that is one model, the Public 

Company Accounting and Oversight Board is another—dedicated 

experts whom we wall away in some way to make these very important professional project appraisal decisions. Because if there is 

confidence in that process, then the markets will have an appetite 

for securities that derive their value from the projects that are 

being picked. If the people in securities markets look at this bank 

and think, well, who the heck is over there, what are they doing, 

then there is going to be no appetite for their securities. But if they 

have faith that there are transparent and expert standards being 

employed across a range of modes, then they will understand the 

value, much as they—much as Goldman did its own analysis in 

looking at the Indiana toll road or the Skyway, which allows me 

to segue to Mark. 

Mr. FLORIAN. I think the key, Mr. Chairman, is that citizens 

need to see the benefit of a particular project. And if there is a costbenefit analysis that shows that either that project that is getting 

done benefits the general populous in some way, shape or form, or 

because that project gets done it benefits others elsewhere, that if 

there is that linkage we have seen in other projects there is success. If there isn’t that linkage and it doesn’t have the credibility 

of a real benefit that comes from allocating dollars that way, that 

is when projects become controversial. 

Mr. PENNER. I think, too, that is the real value of moving toward 

a per mile fee adjusted for weight, and allowing the private sector 

to charge such fees. Because the amount of money you collect from 

a particular network of roads then is a very good indicator of how 

valuable they are to the public. And if you don’t collect much 

money, there isn’t much of a case for expanding that particular network. And then if you put it in private hands, of course they are 

interested in making a buck, so they will do the work of analyzing 

what they might collect with a very sharp pencil. And I think we 

can have some confidence in their calculations. 

Mr. OBERSTAR. Dr. Ehrlich suggested that a crucial element is 

having a central facility, in his words, that picks projects coherently, independently, provides subsidies transparently, and faces a 

market test. There are very few market tests that I have seen of 

any of the projects of State highway departments. They are based 

on vehicle miles traveled, they are based on fatalities. If you have 

a roadway that had no fatality it has a very low rating. One that 

kills 57 people in 15 years, that too often goes, as in the case of 

one in my district, goes unnoticed by State highway departments, 

because they put money someplace else. But turn the page to transit, and transit projects have to meet this very strict cost-effectiveness index test that has some subjective elements to it. But we 

don’t impose that same responsibility on highway and bridge 

176 

projects. We do with the Corps of Engineers. And we have raised 

the bar for the Corps of Engineers in the Water Resources Development Act that was passed over the President’s veto last fall. Raised 

very—well, much more rigorous testing than ever in the history. 

And we will probably up that again in the future. 

But if you have locks that are 600 feet long on the Mississippi 

River and barge tows that are 1,200 feet in length, and they have 

to split the barge tow, send 600 feet through, send the next 600 

feet through, lash them together, no wonder it takes 820 hours for 

a barge leaving Clinton, Iowa, northeast Iowa, to New Orleans 

round trip. 

And if you look at a map of the Southern Hemisphere, that point 

of Brazil that sticks out on the south Atlantic Ocean at that point 

is the port of Recife. And just below Recife is another port of 

Santos. They export soybeans from Brazil to the same markets that 

our soybean farmers in the Midwest are marketing, West Africa, 

East Africa, Pacific rim. They have a 2,500-mile advantage because 

that is how much further Recife is out into the Atlantic Ocean than 

New Orleans. And that is a 5- or 6-day sailing advantage. And if 

you add to that 3 weeks to get to the Gulf with your commodities, 

and then 2,500 miles on top of that, and grain moves in international markets on as little as an eighth of a cent a bushel, then 

we are losing enormously in the marketplace. There is no cost-effectiveness index applied to that movement of goods in the internal 

market of the United States. 

So we are making these infrastructure investments, you know, 

based on somebody on this Committee, somebody else from another 

region is on another Committee, and there is no global view. Now, 

the European TEN-T plan has a national view. And they really are 

Europeanists now in the EU. And they think in these big terms 

and how they are going to be competitive in the world marketplace. 

And that is where I think this panel is leading us. I think you have 

given us a real financial investment map by which to make judgments for the future, and I think this may be the most important 

testimony that we have received in our evaluation of where we are 

and where we are going and where we are going to make the next 

investments. 

Any other comments from any of you? Well, we will look forward, 

this will not—consider this part of a continuing conversation, and 

we will need to engage your expertise and your judgment, your insights as we move further down this road. My goal is we have a 

surface transportation bill, at least the outlines of it, and much of 

the substance of it, in place before the next administration takes 

office so they can’t mess it up. 

Thank you very much. The Committee is adjourned. 

[Whereupon, at 2:00 p.m., the Committee was adjourned.] 

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