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35–928 PDF 2007

PUBLIC-PRIVATE PARTNERSHIPS:

STATE AND USER PERSPECTIVES

(110–46)

HEARING

BEFORE THE

SUBCOMMITTEE ON 

HIGHWAYS AND TRANSIT

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MAY 24, 2007

Printed for the use of the 

Committee on Transportation and Infrastructure

(

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

JAMES L. OBERSTAR, Minnesota, Chairman 

NICK J. RAHALL, II, West Virginia 

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 

JULIA CARSON, Indiana 

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 

DORIS O. MATSUI, California 

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 

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 

RICHARD H. BAKER, Louisiana 

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 

(II)

SUBCOMMITTEE ON HIGHWAYS AND TRANSIT 

PETER A. DEFAZIO, Oregon, Chairman 

NICK J. RAHALL II, West Virginia 

JERROLD NADLER, New York 

ELLEN O. TAUSCHER, California 

TIM HOLDEN, Pennsylvania 

MICHAEL E. CAPUANO, Massachusetts 

JULIA CARSON, Indiana 

TIMOTHY H. BISHOP, New York 

MICHAEL H. MICHAUD, Maine 

BRIAN HIGGINS, New York 

GRACE F. NAPOLITANO, California 

MAZIE K. HIRONO, Hawaii 

JASON ALTMIRE, Pennsylvania 

TIMOTHY J. WALZ, Minnesota 

HEATH SHULER, North Carolina 

MICHAEL A ARCURI, New York 

CHRISTOPHER P. CARNEY, Pennsylvania 

JERRY MCNERNEY, California 

BOB FILNER, California 

ELIJAH E. CUMMINGS, Maryland 

BRIAN BAIRD, Washington 

DANIEL LIPINSKI, Illinois 

DORIS O. MATSUI, California 

STEVE COHEN, Tennessee 

ZACHARY T. SPACE, Ohio 

BRUCE L. BRALEY, Iowa 

HARRY E. MITCHELL, Arizona 

VACANCY 

JAMES L. OBERSTAR, Minnesota 

(Ex Officio) 

JOHN J. DUNCAN, JR., Tennessee 

DON YOUNG, Alaska 

THOMAS E. PETRI, Wisconsin 

HOWARD COBLE, North Carolina 

RICHARD H. BAKER, Louisiana 

GARY G. MILLER, California 

ROBIN HAYES, North Carolina 

HENRY E. BROWN, JR., South Carolina 

TIMOTHY V. JOHNSON, Illinois 

TODD RUSSELL PLATTS, 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 

CHARLES W. BOUSTANY, JR., Louisiana 

JEAN SCHMIDT, Ohio 

CANDICE S. MILLER, Michigan 

THELMA D. DRAKE, Virginia 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JOHN L. MICA, Florida 

(Ex Officio) 

(III)

(V)

CONTENTS Page

Summary of Subject Matter .................................................................................... vi

TESTIMONY 

Austin, Hon. Terri J., Chair, Indiana House Roads and Transportation Committee, Indianapolis, Indiana .............................................................................. 4

Cohen, Greg, President, American Highway Users Alliance, Washington, 

D.C. ........................................................................................................................ 36

Graves, Bill, President and CEO, American Trucking Associations, Alexandria, Virginia ........................................................................................................ 36

Lowenthal, Hon. Alan, Chair, California Senate Transportation and Housing 

Committee, Sacramento, California .................................................................... 4

Rendell, Hon. Edward G., Governor, Commonwealth of Pennsylvania .............. 20

Replogle, Michael, Transportation Director, Environmental Defense, Washington, D.C. ........................................................................................................... 36

Spencer, Todd, Executive Vice President, Owner-Operator Independent Drivers Association, Grain Valley, Missouri ............................................................. 36

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Altmire, Hon. Jason, of Pennsylvania .................................................................... 47

Boswell, Hon. Leonard L., of Iowa ......................................................................... 50

Matsui, Hon. Doris O., of California ...................................................................... 51

Mitchell, Hon. Harry E., of Arizona ....................................................................... 53

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Austin, Hon. Terri ................................................................................................... 58

Cohen, Gregory M. ................................................................................................... 62

Graves, Bill ............................................................................................................... 68

Lowenthal, Hon. Alan ............................................................................................. 77

Rendell, Hon. Edward G. ........................................................................................ 91

Replogle, Michael ..................................................................................................... 98

Spencer, Todd ........................................................................................................... 122

SUBMISSIONS FOR THE RECORD 

Lowenthal, Hon. Alan, Chair, California Senate Transportation and Housing 

Committee, Sacramento, California, background summary for State Senate 

hearing on ‘‘Tolls, User Fees, and Public-Private Partnerships: The Future 

of Transportation Finance in California?’’ ......................................................... 81

ADDITIONS TO THE RECORD 

Tysontunnel.org, written statement, submitted by Rep. Duncan ........................ 128

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35928.003
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35928.005
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(1)

HEARING ON PUBLIC-PRIVATE PARTNERSHIPS: STATE AND USER PERSPECTIVES 

Thursday, May 24, 2007

HOUSE OF REPRESENTATIVES, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, SUBCOMMITTEE ON HIGHWAYS AND TRANSIT, Washington, DC. 

The Subcommittee met, pursuant to call, at 10:05 a.m., in Room 

2167, Rayburn House Office Building, the Honorable Peter DeFazio 

[Chairman of the Subcommittee] presiding. 

Mr. DEFAZIO. Good morning. Thanks for being here. 

We are going to change the order a bit. Governor Rendell, being 

a multimodal guy, is on the train and the train is a bit delayed. 

So we are going to have the second panel first. 

This is, I believe, the third or fourth hearing this year we have 

held on private-public partnerships. I am not going to repeat the 

concerns expressed. We are continuing to investigate both the benefits and potential pitfalls of public-private partnerships. 

The Chairman and I sent out an advisory letter to State legislators and governors and DOTs a couple of weeks ago expressing 

some of the concerns we have. We are concerned about some onesided presentations that have been made. And we are still looking 

forward to—it has not yet happened—the Administration posting a 

more balanced discussion of the issues on their web site as opposed 

to the so-called model legislation. The Chairman and I are in the 

final moments of drafting up our own sort of advisory on these 

issues that will go into our concerns in more depth, and we hope 

to be providing that before the Memorial Day break. 

With that, I would turn to whichever of my Republican colleagues has decided to go first. 

Mr. DUNCAN. Thank you, Mr. Chairman. I have this down as the 

third hearing, but I think we also had a briefing by the GAO which 

was sort of like a hearing. So this is the third and a half, I guess. 

In February, we held what could be called an overview hearing on 

public-private partnerships. In April, we held a hearing on innovative contracting techniques. Today we will hear testimony from 

Governor Rendell of Pennsylvania and two State legislators on the 

States’ perspective on public-private partnerships. We will also 

hear from four witnesses representing users of our Nation’s highway system, to get their opinions on these partnerships. 

In my home State of Tennessee, our philosophy for funding 

transportation projects has been pay-as-you-go. We will spend no 

more than we take into the State Transportation Fund. Toll roads 

have not been a part of the funding mechanism for roads in TenVerDate 0ct 09 2002 17:27 Apr 08, 2008 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 P:\DOCS\35928 HTRANS1 PsN: JASON
2

nessee. But this does not mean that toll roads and other public-private partnerships do not have their place in the national toolbox 

of financing alternatives. 

It is also important to remember that these partnerships are 

much more than just toll roads. PPPs are contractual agreements 

between public and private sector partners that allow more private 

sector participation than has been traditional. We held an entire 

hearing in April on innovative contracting techniques. None of the 

technologies presented involved tolls. Some States are also exploring concepts such as availability payments and shadow tolls as 

ways to incorporate private sector financing into public infrastructure projects. Under these approaches the private sector will provide the up-front financing for the project in return for a guaranteed stream of payments over a number of years from the public 

entity sponsoring the project. 

While I am open to exploring additional private sector participation in transportation projects, I am concerned about possible 

‘‘sweetheart’’ deals for private companies. In particular, it is very 

important to make sure that decisions made by State and local governments regarding long-term lease agreements are made with the 

public good firmly at the forefront. We need to make sure that not 

all the money is paid up front so that governors and taxpayers 

many years down the road are left holding the bag. 

I am particularly interested in hearing from Governor Rendell 

about how his proposal to lease the Pennsylvania Turnpike will ensure that the public interest is protected with these concerns in 

mind. 

Mr. Chairman, that concludes my statement. I ask unanimous 

consent that the Record be held open for 30 days for the submission of written statements or follow-up questions to the witnesses. 

Thank you. 

Mr. DEFAZIO. I thank the Ranking Member. I now turn to the 

Full Committee Ranking Member, Mr. Mica. 

Mr. MICA. Thank you. I appreciate Mr. DeFazio and Mr. Duncan 

holding this important hearing in a series of hearings. I try not to 

interfere in the work of the Subcommittees in my position as the 

Ranking Republican. But I think this is a very important hearing 

to participate in as you begin your panels and discussions today. 

I think Mr. Oberstar would be here, too. I know his keen interest 

in this issue. I was saddened to learn, I think he lost one of his 

uncles and had to depart Washington for the funeral. So our 

thoughts are with him. But I know he would be here, too, because 

he also believes this is a very important topic. 

The whole question of public-private partnerships has been a 

hotly debated issue during the past couple of years. In my home 

State, we have used a host of innovative financing techniques to 

fund transportation projects. I come from central Florida. Just in 

the area around Orlando we have over 170 miles of toll roads, and 

we also have a State turnpike which has been running through the 

heart of central Florida for many years. 

I had hoped that our new Secretary of Transportation Stephanie 

Kopelousos could be here and testify today. Unfortunately, she had 

some critical issues in Tallahassee and will not be with us. Maybe 

3

we can make a statement from her or from the Florida Department 

of Transportation a part of the record at a later date. 

I believe that public-private partnerships, specifically private sector financing, will be an absolute key component and must play a 

role in solving our impending transportation funding crisis. However, by the same token, I do not think that should be the only solution that we pursue. I think, first of all, the Federal Government 

does not really know what we want our national infrastructure to 

look like, starting with highways. We passed our interstate-initiating legislation back in the 1950s, we have passed some intermodal requirements along the way, but no one can tell you what 

the Interstate is going to look like 20 to 50 years from now and 

who will be responsible for what. 

With a lack of Federal policy and the creation of this vacuum, 

States are beginning to initiate actions dealing with trying to meet 

the congestion and transportation requirements of each of their entities. Last night I read Governor Rendell’s statement. Read and 

hear Governor Rendell’s statement, and what Pennsylvania faces 

the other 49 States also face—a crisis not only in construction of 

new highways, roads, but the statement on bridges is just like a 

statement across the Nation. 

So, first of all, we lack a Federal policy as to what we want our 

infrastructure to look like. Secondly, we do not know what the Federal Government’s responsibility is going to be, and we do not know 

how we are going to finance that. We have created a vacuum and 

States will be moving forward to take some action if we do not take 

some action. 

However, I do want to say that I have to express some concern 

about the letter that was sent by Chairman Oberstar and Subcommittee Chair DeFazio to the Governors, the State DOTs, some 

of the State legislators on May 10th. They wrote to strongly discourage States from entering into public-private partnership agreements that are not in the long-term interest of our national transportation plan. 

Well, somebody tell me what our long-term national transportation plan is. Again, I think they are trying to fill that void. I will 

give my colleagues on the other side of the aisle the benefit of the 

doubt that we do not want anyone to enter into any agreements 

that are not in the public interest. But, again, they are filling a 

void caused by a lack of Federal policy. These hearings I know are 

being conducted to develop that policy. 

I believe that in the future we in the United States absolutely 

will have to rely on leveraging with the private sector dollars for 

funding transportation projects. Europeans and Australians have 

been doing this for over 40 years. I think we can look at other models and create our own that fits our unique requirements in the 

United States and optimize the dollars and financing that is available to move these important infrastructure projects to the benefit 

of the public. 

There is one particular sentence in the Oberstar and DeFazio letter that I do disagree with, and this caused quite an uproar in the 

Transportation Committee. The letter states that the Committee 

‘‘will work to undo any agreements that do not fully protect the 

public interest and the integrity of the national system.’’ Now, 

4

again, if they do not protect the public interest, I do have concerns 

and would concur with that statement. 

But the States are operating in a void of public policy and I defy 

anyone to tell us what our national system is today and what it 

will look like in 20 or 50 years from now. And I also sympathize 

with the governors and other State legislators and officials trying 

to deal with what has turned into a national parking lot as far as 

highway transportation is concerned. 

I look forward to working with Members of the Committee as we 

hopefully resolve some of these issues and learn from these witnesses and others how we can best move forward. Sorry to take a 

little bit extra time, but I do feel this is important. I think Mr. 

Oberstar would do the same if he were able to be here. Thank you. 

I yield back. 

Mr. DEFAZIO. I thank the Ranking Republican Member. 

The Committee is attempting, we are doing it on two tracks here. 

One is to look at potential funding resources to deal with national 

infrastructure needs. The other is to develop a vision and fully assess the national infrastructure needs. We are only in the fourth 

or fifth month of assessing that. 

I would agree with the gentleman in terms of we need a new vision. We have been living off of past capital for basically a half a 

century that was provided by Dwight David Eisenhower as President and the National Interstate System and we have just only incrementally changed that. We need to look at a transportation policy for the 21st century. 

But I would also state that the existing system is the Interstate 

system and we have concerns about fragmentation and/or segmentation where critical parts of the designated Interstate system 

charge extortionate rents or tolls because of poorly drafted and entered into private-public partnerships. That is what we are referring to in that letter. 

With that, unless there are other Members who urgently have an 

opening statement, I want to turn to the witnesses and move 

ahead. Thank you. 

The order on the agenda would be the Honorable Alan 

Lowenthal, Chair of the California State Senate Transportation 

and Housing Committee. Senator Lowenthal. 

TESTIMONY OF THE HONORABLE ALAN LOWENTHAL, CHAIR, 

CALIFORNIA SENATE TRANSPORTATION AND HOUSING 

COMMITTEE, SACRAMENTO, CALIFORNIA; THE HONORABLE 

TERRI J. AUSTIN, CHAIR, INDIANA HOUSE ROADS AND 

TRANSPORTATION COMMITTEE, INDIANAPOLIS, INDIANA 

Mr. LOWENTHAL. Thank you Mr. Chair and Members. Thank you 

for inviting me here today to discuss California’s experience with 

public-private partnerships and to share my thoughts concerning 

an appropriate State policy on public-private partnerships given 

our current understanding of the opportunities and challenges of 

this financing tool. 

When it comes to transportation funding, California is in the 

midst of the same struggle as is the Federal Government. California has not raised its gas tax since 1994, and the value of the 

tax has eroded substantially due to inflation and rising construcVerDate 0ct 09 2002 17:27 Apr 08, 2008 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 P:\DOCS\35928 HTRANS1 PsN: JASON
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tion costs. At the same time, the State expects tremendous population growth, with the number of vehicle miles traveled growing 

at an even faster rate. As a result, the State has been in the uncomfortable position of under-investing in its transportation infrastructure. And today we have some of the worst congestion in the 

Nation. 

Public-private partnerships have been increasingly presented to 

policymakers as a tool to finance much-needed transportation facilities. In California, the debate has focused solely on using publicprivate partnerships for the design, build, finance, and operation of 

a new transportation facility. As a State, we are not considering 

the lease of any existing infrastructure, as has been done in the 

City of Chicago or the State of Indiana. 

Public-private partnerships are not new to California. I have submitted to the Committee a report that details California’s experience with public-private partnerships. To summarize, in 1989 the 

legislature passed legislation allowing for the construction of four 

public-private partnerships. Two projects were initiated before legislation was passed in 2002 limiting the number of public-private 

partnerships to two. 

The first project included a ‘‘non-compete clause’’ which prevented the State from making needed improvements to the facility. 

Due to the limitations imposed by the non-compete clause, a public 

agency purchased the concession rights to the toll lane in 2002, 

making California’s first operational private toll project a public facility. 

California’s second and only other public-private partnership, 

which is financed by Macquarie Infrastructure Group, has experienced significant cost overruns and project delays. Who bears responsibility for these increased costs—the public or the private 

partner—is subject to dispute between the two parties. This facility 

is not yet in service and already the legislature has extended the 

length of time that tolls may be charged in order to facilitate the 

resolution of this dispute. 

California’s experience with public-private partnerships lends 

support to the following concerns about these arrangements: 

One, concession agreements may limit the ability of a public 

agency to adapt to the changing transportation needs of a region; 

and two, working with a private entity may be a contentious and 

litigious endeavor for public agencies because private companies 

may work to protect their investment over the public interest. 

While public-private partnerships have had a troubled history in 

California, the State nonetheless recognizes that development concessions may offer certain opportunities a way forward. 

One arena in transportation that I believe is ripe for public-private partnerships is in goods movement. Last year, the California 

Legislature passed legislation to authorize four public-private partnerships to facilitate the development of infrastructure that is primarily designed to support the movement of freight. Forty-five percent of the Nation’s seaborne cargo enters the State by the Ports 

of Los Angeles and Long Beach, the majority of which is simply 

passing through our State to other parts of the country. The trade 

activity is expected to double by 2020. Southern California is experiencing a public health crisis due to air quality that has been deVerDate 0ct 09 2002 17:27 Apr 08, 2008 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 P:\DOCS\35928 HTRANS1 PsN: JASON
6

graded by emissions from goods movement activity. The State’s infrastructure can barely handle existing trade, let alone accommodate this overwhelming coming growth. 

Under the current system of transportation funding, retailers 

and manufacturers who ship goods to the United States are profiting from the use of California’s transportation infrastructure. At 

the same time, communities near our seaports and along our trade 

corridors are subsidizing the cost of consumer goods with poor 

health and a diminished quality of life. 

Public-private partnerships have the potential to provide needed 

goods movement-related facilities. Concession agreements could 

and should include specified performance standards regarding the 

mobility of goods and the environmental and community impacts of 

transportation facilities. In this way, public-private partnerships 

may help to improve not only the transportation infrastructure, but 

also community health and well-being. Perhaps more importantly, 

public-private partnerships in the realm of goods movement may 

foster the development and demonstration of new technologies to 

support the movement of freight in a manner that produces zero 

emissions. 

The primary users and beneficiaries of goods movement facilities 

would be private entities such as retailers and manufacturers as 

well as the trucking and railroad companies employed to move 

their cargo. Focusing public-private partnerships on goods movement, where a private company charges other private companies, 

such as retailers, manufacturers, trucking companies, for the use 

of that facility, evens the playing field, so to speak, between those 

who control the facility and those who pay to use it. Cargo owners 

have a greater ability to pay for their use of the facility and/or pass 

on their costs and they have a greater ability to choose different 

facilities, such as other ports, if the price of doing business using 

that facility becomes too high. 

As I close, I would like to suggest a series of intermediate steps 

that States may take to address infrastructure dilemmas and take 

advantage of private sector efficiency and innovation. First, States 

could develop more publicly operated toll facilities, which also invite private capital into infrastructure development through the 

sale of tax-exempt bonds. States could also allow a greater role for 

the private sector in the operation of facilities. Finally, regardless 

of whether a facility is public or private, Federal and State Government should do more to encourage demand management strategies 

in order to achieve higher performance from our existing facilities. 

Thank you. I welcome any questions by the Subcommittee. 

Mr. DEFAZIO. Thank you, Senator. 

With that, I now turn to the Honorable Terri J. Austin, Chair of 

the Indiana House Roads and Transportation Committee. Welcome. 

Ms. AUSTIN. Thank you, Mr. Chairman and Members of the Committee, for the opportunity to testify here today about Indiana’s experiences. 

In March 2006, the Indiana General Assembly enacted legislation for the first time that gives our State’s executive branch the 

authority to enter into public-private partnership agreements for 

the financing and development of limited access facilities, tollways, 

roads and bridges, and other infrastructure assets. And I might 

7

add that this past session we added passenger and freight rail to 

the definition of P3 agreements. 

This same legislation, which is also known as House Bill 1008, 

also allowed a quasi-state agency called the Indiana Finance Authority to enter into an agreement with a private consortium to 

lease the Indiana Toll Road. And as you may know, the Indiana 

Toll Road is about 157 mile stretch that hits the Ohio Turnpike on 

our eastern border and the Chicago Skyway on our western border 

and also includes Federal Interstates I-80 and I-90. The lease 

agreement, which was finalized with the multinational firm 

Macquarie-Cintra, was a concessions model that gave up tolling 

revenue and rights to the road for a period of 75 years in exchange 

for a one time up-front payment of $3.8 billion. 

The Indiana Toll Road Concession and Lease Agreement gave 

the exclusive franchise and license to not only operate, manage, 

maintain, rehabilitate and toll this thoroughfare, but it also included the rights to all revenues that are generated by the agreements with vendors and concessionaire that provide goods and 

services along the toll road. 

What I would like to do today with my testimony is to offer what 

I think are four principles that any legislative body, and I especially hope this particular body will consider as you look at the possibility of public-private partnerships, and this also goes for State 

legislators, as we wrestle with what are the appropriate tools for 

our infrastructure development toolbox, and how do we protect and 

safeguard the public interest. 

First and foremost, I would suggest that adequate public debate 

regarding P3s should be one of the priorities. Elected officials 

should debate whether or not public-private partnerships based 

upon agreements that last two, three, and four generations really 

represent good public policy and good transportation policy. 

For this to happen, and for the public and their duly elected representatives to be able to adequately examine these types of agreements, we need more than a few short weeks to build a working 

knowledge about P3s, examine prospectus agreements and reports, 

and understand the unprecedented amounts of information that accompany projects of this nature. This also includes an opportunity 

to examine various P3 models and to weigh the pros and cons of 

such agreements so that legislators and the public can participate 

in meaningful discussions. 

Indiana, as you know, has a part-time legislature. The eight 

weeks of the 2006 legislative session did not afford enough time to 

consider such a complex and far-reaching proposal before we were 

asked to cast a vote that would effectively tie the hands of both the 

executive branch and the legislative branch for decades to come. 

Ultimately, the public should have some level of discomfort with 

elected officials who serve two, four, and six year terms when they 

propose to enter into 75 or 99 year contractual obligations. As legislators, we know that laws can be amended and even repealed. 

However, there are simply very good reasons that long-term leases 

of public assets deserve extra time and extra scrutiny. 

Citizens deserve the right to change their mind about public policy and the course that their leaders have charted. Even if it reduces the windfall from a long-term P3 agreement, government 

8

needs to make certain that the agreements are not too difficult to 

extract themselves from. 

Additionally, we need to make sure that we are not pursing P3 

agreements solely to avoid other policy options that may be even 

more complex or perhaps more politically difficult. There are difficult questions that should be pursued at the same time we examine P3 agreements. But most importantly, there should be a diverse strategy for keeping our Nation’s infrastructure strong. We 

should not put all of our eggs in one basket simply because private 

equity firms are flush with cash and they are looking for roads to 

lease. 

Secondly, I would suggest that there has to be a verified project 

need and support for the project. Projects that are being promoted 

for P3 financing should be part of an established comprehensive, 

long-range plan for transportation infrastructure. The decision to 

undertake any new project should not be about following the money 

or taking advantage of a newly found ‘‘cash cow.’’ There should be 

an identified need for the project that is substantiated by feasibility 

studies and verifiable data. 

When vetting a project and an agreement, there should be strong 

support from local elected officials and residents, and a thorough 

examination and understanding of both the consequences and implementation of such an agreement. I believe it would be desirable 

to have local involvement and support throughout the entire scope 

of the project, including both the conceptualization, design, implementation, and evaluation of the proposal. Especially for projects 

that involve Federal transportation assets, there should also be 

substantial involvement and partnership communication between 

Federal officials, transportation officials, and elected officials, and 

locals, and at the state level. 

The third principle I would suggest is transparency, due diligence, and independent monitoring. In the case of Indiana’s P3 

agreement for the lease of the toll road, it was essentially a fait 

accompli. An RFP for the project had already been developed, disseminated, and responses were received prior to any legislative 

knowledge or involvement. Although requests for information were 

submitted by both legislators and the public, sometimes there was 

a reluctance to bring forward the details and information regarding 

the agreement and anything that had any of the financials that it 

had been based upon. But there were virtual, I would say, ‘‘bedrooms’’ created that allowed prospective bidders to go in and take 

a look at all this data. And it was difficult for legislators to actually 

have access to some of that same information. 

I would say that the reluctance on the part of any administration 

or anybody to disclose that type of information does little to foster 

public confidence that these long-term agreements are actually in 

the best interest of the public. 

Fourth, I would simply suggest that asset realization and distribution should follow the appropriate legislatively bodies and authorities. Cash-strapped States and local governments seem to be 

choosing to receive the funds up front. I know that is what Representative Duncan expressed some concern about. When this occurs, I believe that the legislative branch is the appropriate authority to take a look at how those funds should be distributed. I will 

9

simply say that in Indiana’s case, we still have over $2 billion in 

local road, street, and bridge projects that have not been addressed 

by the General Assembly and we need to take a look at how we 

distribute the proceeds from any type of agreement where we get 

such an up-front windfall. 

I would simply add, and this is not in my written testimony, 

however, that the funds for the Indiana Toll Road, which is also 

known as Major Moves, is being reinvested in transportation infrastructure. However, it is scheduled to run out after 15 years. And 

what do we do when a lease is 75 years, we have given away the 

rights to our revenue, especially even the development revenue 

along the toll road and the rights to future development, to a private entity. 

In summary, I want to be perfectly clear that I do not think that 

all public-private partnership agreements are bad, nor should they 

be rejected out of hand. However, based upon what I have witnessed in Indiana and as reported in other States, the asset monetization and the long-term lease of transportation infrastructure 

deserves far more public discussion and debate than it has received. 

We are all aware of the challenges that you face in terms of the 

Highway Trust Fund and how it is going to impact revenues that 

are available to State and local governments. I would simply say 

that our own reluctance as a General Assembly to raise the fees 

for the last 20 years, the Indiana Toll Road fees, and your reluctance to raise the Federal gas tax have contributed to our current 

dilemma. I am not convinced that more taxes are the answer, nor 

do I believe that we can build our way out of congestion. I believe 

and hope that public mass transit deserves to be a part of State 

and Federal discussions and funding considerations. 

I look forward to working in partnership with my Federal officials to make this happen. 

Mr. DEFAZIO. Thank you for your excellent testimony. 

With that, we will proceed to a round of questions. 

Senator Lowenthal, I just wanted to follow up. We have had 

varying opinions on the efficacy or efficiencies that are absolutely 

inherent in public-private partnerships in terms of private construction of the roads. I guess I would ask, State Route 125, as I 

understand it, is being built by the Macquarie Infrastructure 

Group. Is that correct? 

Mr. LOWENTHAL. Yes, it is. 

Mr. DEFAZIO. That is the same company involved in the Indiana 

and the Chicago Skyway. Now you said, ‘‘It has experienced significant cost overruns and project delays.’’ Could you give us a little 

insight into why, since we have told that this is the panacea to 

publicly constructed projects? 

Mr. LOWENTHAL. I think part of it is who is going to assume the 

risk for permitting and delays that have taken place in the construction of, or in the planning and permitting for State Route 125, 

which is, incidentally, just a short, I think, nine and a half mile 

route that we are talking about tolling. There have been considerable difficulties over the environmental permitting, some of the 

issues around easements, and land acquisition. 

10

And the question has come up as to who is responsible for all of 

those. Is it the private sector, or is it the public sector. So those 

are the kinds of issues that really have to be clearly delineated, 

were not as clearly delineated, and therefore have led to tremendous disagreements between the public agencies, and that is in San 

Diego County, and Macquarie Bank in terms of who is responsible 

for these cost overruns. 

The legislature stepped into that by permitting the addition of 10 

more years of tolling, I believe from 35 to 45 years, for that lease 

to meet the costs if the private sector would pick up those costs to 

try to resolve this dispute, which still has not been totally resolved 

between the two. So a lot of it, as we have learned, has to do with 

the details in terms of the risk that is taken. If the private sector 

receives benefits, do they also have to take on some of the risks for 

the environmental permitting and others. And in this case, that 

was not real clear and we are kind of caught in that dispute. 

Mr. DEFAZIO. As I understood it, perhaps you can correct me, the 

environmental review was completed way back in 2001 and 

Macquarie began the financing in 2003. Were there construction 

delays, or was it just all back to the environmental review issue? 

Mr. LOWENTHAL. Well, there were alignment issues. Originally, 

the alignment went over granite and it was too difficult to build 

and too hard to realign. 

Mr. DEFAZIO. So it had to do with actually unanticipated——

Mr. LOWENTHAL. Right. Things came up. And the private company negotiated community benefits that were more expensive 

than anticipated, also. So there was realignment, and even though 

the environmental permitting was completed, when they actually 

began the construction they found they had to realign the project. 

Mr. DEFAZIO. And in this agreement, Macquarie feels that, even 

though one of the great benefits we hear of public-private partnerships is that in ‘‘greenfields’’ the private entity assumes the risk, 

in this case they are saying, no, they should not have to. 

Mr. LOWENTHAL. That is right. With having found this out that 

they had to realign, that there were these issues, and there was 

disagreement between the public agency then and the private agency, the State legislature stepped in to try to resolve that, but realizing this was not what we had intended when we started. 

Mr. DEFAZIO. Right. And what is the value of ten additional 

years of tolling? Do you have a number? 

Mr. LOWENTHAL. That I do not know. That I do not know. But 

we can get that information. It is significant. Quite significant. 

Mr. DEFAZIO. Yes. Okay. 

Mr. LOWENTHAL. That is almost one-quarter of the amount of 

time they have. We have increased it by approximately 25 percent. 

Mr. DEFAZIO. Right. And just the goods movement, I am very intrigued by the focus on a public-private where you have a commercial entity using the public-private road. How far along are you 

with that concept? 

Mr. LOWENTHAL. Well, we have not had any projects come forward. But we have begun to identify a number of possible projects. 

What we are finding, and this is not just true for California ports 

but for the Nation’s goods movement, is that we tend to have our 

ports of entry in urban areas. And so now with the tremendous 

11

change in goods movement with the tremendous importation of 

goods, and with the large retailers in this Nation wanting to send 

these goods to distribution centers, deconsolidate the goods, and 

then reconsolidate them and send them on to the rest of the Nation, we have trade corridors now of 100 to 125 miles from the 

ports to these large distribution centers that are going through 

some of the most congested areas. 

So whether we are talking about truck toll lanes, whether we are 

talking about new kinds of rail infrastructure, because we also 

have issues of pollution that take place, we are going to be looking 

at magnetic levitation projects potentially, we are going to be looking at all sorts of technologies that not only move goods through 

urban areas for periods and connect to our rail lines and truck 

lines, but also those that produce limited, if not zero, pollution. 

Those are the ones that we are going to have to engage the private 

sector. And that is really what we are looking at now. 

Mr. DEFAZIO. I would be very interested as you move forward 

with that. 

Mr. LOWENTHAL. Those are going to be the most fascinating 

projects we believe. And those are projects that the State would not 

be able to undertake without some kind of private investment. 

Mr. DEFAZIO. Excellent. 

Representative Austin, I do not know, have you seen the model 

legislation, so-called, provided by the Administration on PPPs? 

Ms. AUSTIN. I have, and I attended the February 9th briefing. 

Mr. DEFAZIO. So I would assume then from your testimony 

where you talk about the amount of time and sort of the 

compartmentalization of the information that the legislature felt 

they needed to make a decision, you would probably disagree with 

some of their points about the proprietary nature, the exemption 

from public disclosure. Do you think those are areas where—I 

think you are saying we need a lot more transparency in these 

agreements. Is that right? 

Ms. AUSTIN. I do believe that we need more transparency. These 

are public assets. And in the case of the toll road, it was built with 

both Federal and State taxpayer dollars. To basically lease away—

and in the terms of our agreement, there was conflicting language 

because at one point it is referred to as a sale for tax purposes, and 

then in the rest of the agreement it is referred to as a lease. So 

our concern is that years down the road if there is a lawsuit that 

arises regarding anything in the developmental, the environmental, 

how is the court going to interpret that. So I really believe not only 

transparency, but the clarity in the language of the agreement 

itself is also crucial. 

This is a new concept here in the United States. And although 

it has taken place in limited projects for the last 20 years, I think 

that you really need to give legislators an opportunity to build 

what I would say is a working knowledge base about what these 

agreements are before you ask them to vote on something that is 

going to effectively sign away an asset or take someone’s land for 

two, three, and four generations. 

I do not know if you followed the Indiana General Assembly this 

past session, I am sure you were busy with your own things here, 

but there were two other proposals that were put forward by the 

12

administration—the Illiana Expressway, which would have been a 

new route up in the northern part of Indiana, would have run 

somewhat parallel to the toll road that we leased away; and also 

the Indiana Commerce Connector, which would have gone through 

five counties in central Indiana, which basically would have been 

a beltway outside of Interstate 465 connecting Interstate 70 and 

Interstate 69. One of the things that we did—this was a new 

project, it was not on the books, it was not anything that there had 

been any real feasibility studies done to support—we took field 

hearings out to people in those counties. And the overwhelming 

public sentiment was that they appreciated the opportunity to 

speak out about this project and ask questions, because they really 

felt as if they had not been given that opportunity in previous instances. 

Mr. DEFAZIO. That is excellent. I think it also underlines a point 

you made earlier; which is, if these projects are outside the State 

Transportation Improvement Plan, it makes them even more problematic and the need greater for, as you did, which I congratulate 

you on, going out to the public and saying, well, we have never discussed this before, is there a need, do you support it. Excellent. 

Thank you very much. 

I now turn to the Ranking Member, Mr. Duncan. 

Mr. DUNCAN. Thank you very much, Mr. Chairman. And thank 

you Senator Lowenthal and Representative Austin for being with 

us. 

Between 1995 and 2001, I had the privilege of chairing the Aviation Subcommittee. I always remember the hearing in which we 

had the head of the Atlanta Airport who told us that the main 

newest runway at the Atlanta Airport took 14 years from conception to completion, but it took only 99 days of construction, and 

they did those in 33 days. But they were so relieved to finally get 

approval that they did 24-hour construction days. Almost all of the 

delays were environmental rules and regulations and red tape. 

So I read with interest, Senator Lowenthal, about this project on 

State Route 125. It says this project was begun in 1991, but the 

project approval process proved to be lengthy and environmental 

clearance was not finally granted until 2001. We hear and read 

about, and some of us have been there, some of these other countries, China and Japan and so forth, and they approve and complete these major highway and airport projects in two or three 

years, even in areas as populous as California. 

I am just wondering, I do not know if you know what the original 

cost estimate was in 1991 compared to what it finally ended up 

being. But when we delay these projects all these years, the costs 

go way up, people end up getting killed when roads are not improved. We have got some environmental streamlining in the latest 

highway bill. 

I guess I have a couple of questions. How much are you talking 

about when you say there have been cost overruns? I just wonder 

how much those were. And you say delays, what kind of delays are 

you talking about? It says in your testimony 12.5 mile project. You 

said a minute ago 9.5 miles. 

Mr. LOWENTHAL. I meant 12.5 miles. 

13

Mr. DUNCAN. Okay. That is not a lengthy road. I am wondering 

how much in cost overruns we are talking about, and how much 

of a delay we are talking about, and how much more of a delay is 

there expected to be at this point? And secondly, has the State considered trying to some way hopefully speed up the approval processes? 

Mr. LOWENTHAL. All those questions. Let me clarify first the first 

part. SR-125 has two parts, they are connector roads really between freeways, there is the public part and the private part. The 

private part is the 9.5 mile part that is tolled, then there is a public part that is another additional 3 miles, and that is where we 

get to the 12.5 miles. So we are not talking about the public part 

now. We are talking just about the part that Macquarie has——

Mr. DUNCAN. The 9.5 mile private part. 

Mr. LOWENTHAL. Right. And we have also, you know, it is a double-edged sword, California has the California Environmental Quality Act which we are very proud of. And on one had, it has provided 

for a tremendous amount of environmental protection; on the other 

hand, we also would like to see when needed some streamlining 

also. And so we are very appreciative when we can speed up the 

process. Earlier, some of the process, as I pointed out, slowed down 

because of the environmental permitting. There were protected species that were not early identified. That took some time to identify. 

Macquarie was not in this process early on. It was not until later 

on in the process that Macquarie got involved into the process. And 

the real slowing down really did not occur, as I pointed out, because of the environmental process, but because they did not anticipate when they began this finding so much granite underneath and 

having to realign the road. So some of it was, as the Chair pointed 

out, an unintended consequence that would have occurred anyway. 

The question was, who is going to be responsible for that delay? 

Mr. DUNCAN. How much of a cost overrun are you talking about? 

Mr. LOWENTHAL. We are talking about between I think the origi- nal cost was $400 million which was allocated, then it grew to $682 

million with the realignment and the slowing down. 

Mr. DUNCAN. And in 1991 when this project was first approved, 

when was it supposed to have been completed? And when are you 

talking about completing it now? 

Mr. LOWENTHAL. I think it is going to be completed this year. I 

think it was supposed to be completed around—I do not think we 

really had a time. It was not anticipated to be completed for a 

number of years. I am just not sure how much the environmental 

part—what the legislature was told when we got involved was that 

it was a two and a half years delay. 

Mr. DUNCAN. But it is not completed now, though; is that correct? 

Mr. LOWENTHAL. It is just about to be completed. It will be open 

this year. It is a two and a half year delay, and that had to do with 

the construction. 

Mr. DUNCAN. It seems really sad to me that we would talk about 

a 12.5 mile project that we started in 1991 and in 2007 it is still 

not quite completed. That is just getting almost to the point of 

being ridiculous. 

Mr. LOWENTHAL. It is. 

14

Mr. DUNCAN. Let me ask you another question. The Department 

of Transportation recently came out with a report saying that we 

are spending roughly $75 billion a year from all sources, Federal, 

State, and local, on our highways each year and that we need to 

be spending, they estimate, $131.5 billion a year. So you are talking about a shortfall according to the DOT of $56.5 billion a year. 

In 10 years’ time or 20 years’ time, that would really mount up to 

some huge money. What I am wondering about, you talked about 

you have not had a gas tax increase since I think you said 1994; 

is that correct? 

Mr. LOWENTHAL. Yes. 

Mr. DUNCAN. As angry and upset as people are about gas prices 

all over the country today, we certainly could not come in with a 

gas tax increase I do not suppose. It would be very difficult at this 

point. But how do we make up this shortfall, or hopefully part of 

it, if we do not go more to public-private partnerships? What is the 

solution? 

Mr. LOWENTHAL. Well, there are a number of solutions that can 

be done. One of the solutions is that the California voters this year 

passed a $40 billion bond package on infrastructure, of which $19.9 

billion was for transportation related infrastructure, $4.5 billion for 

public transit, $4.5 billion to increase corridor mobility, $2 billion 

for goods movement infrastructure, trade corridors. So the first 

thing is that the public, the government, as representative of the 

people of California, decided themselves to give a down payment to 

invest in their infrastructure. I believe it is the largest infrastructure package that any State has ever proposed and the people have 

passed. So that is one way. 

Another way is to look at what kinds of projects come forward. 

Right now, our priority in California, in terms of inviting the private sector to join with the public sector, is in the logistics and the 

movement of goods. We see that vital for both the Nation’s and for 

the State’s economy, and for the economic well-being of the State. 

So we are going to be serious about looking at goods movement 

projects, trade corridor projects for public-private partnerships. 

That is going to be our focus in the State. 

Mr. DUNCAN. I will say this——

Mr. LOWENTHAL. And we are going to need also to look at public 

tolls. We do not believe that tolling has to necessarily be from the 

lease agreements. We have been doing tolling in California through 

public tolls for a number of years. We have our bridge authorities, 

the Golden Gate Bridge, the Bay Bridge. And we will continue to 

look at public tolling also. So we are going to look at all of those 

ventures. And as I say, we have already done two public-private 

partnerships on new ventures. What we are not going to be looking 

at as a State is existing assets. 

Mr. DUNCAN. All right. Let me move to Representative Austin. 

You did mention, and I have expressed a concern, that if we go into 

these long-term leases by the States and these private companies, 

if we have governors who take all this money up front—and I understand that Indiana was paid $3 billion up front and nothing in 

future years. 

Ms. AUSTIN. It was $3.8 billion. And I can tell you that the majority of that was allocated to a 10-year transportation plan of exVerDate 0ct 09 2002 17:27 Apr 08, 2008 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 P:\DOCS\35928 HTRANS1 PsN: JASON
15

isting projects. Also, what I did not say but is in my written testimony, there was $150 million that was allocated to 85 of Indiana’s 

92 counties for, basically, here, we will give some dollars to locals 

to help them do some street projects. But more importantly, $360 

million was allocated among 7 counties along the tollway. The concern that was expressed and one of the criticisms is that the funds 

were actually not distributed in a way that met local needs and in 

a fair and equitable manner, but based on already established priorities and population statistics. Also, I would say that we took $500 million out—the legislation called for $500 million of that $3.8 billion to be put in what is 

called a Next Generation Trust Fund. The money actually is supposed to sit there and then they scoop the interest out every five 

years and put it into what is called the Major Moves Construction 

Fund, which is where the bulk of the revenue went. That is to help 

extend the life of the agreement. But, essentially, the funding 

mechanism does run out after 10 years. And the question is going 

to be what do we do then, because we have given away the cow, 

so to speak. 

Mr. DUNCAN. I know from a public policy perspective, we have 

had widespread private investment in utilities and telecommunications networks and in other areas. We do need to look at this 

from a transportation standpoint. I also know that people for many 

years have been moving from the high tax states to the low tax 

states. So you have to take that into consideration as well. 

But on some of these situations, if States are going to do some 

of these things, it seems to me they should make provision for payments to be made in some way for money to come into the States 

for the entire term of the lease, even with inflation factors to be 

included, so that more money is coming in with each year instead 

of taking everything on the front-end and leaving future governors 

and future taxpayers to hold the bag in later years. And I also wonder what provisions are made if one of these companies goes bankrupt. What happens then if, say, you have got a 75 year situation? 

That seems to be a potential problem there, too. 

At any rate, thank you very much for your testimony. 

Mr. DEFAZIO. Thank you, Mr. Duncan. I am going to turn to Mr. 

Nadler in just a moment, but just one quick question to Senator 

Lowenthal on this geological assessment. Back to the issue that 

private-public partnerships are good because the risk is shifted to 

the private sector. Would you not think that part of their determining they are going to do a project when they are given a specified route would be they would go out and do geological assessments before they bid and know what it was going to cost, and 

therefore that would be their problem? 

Mr. LOWENTHAL. I agree. 

Mr. DEFAZIO. Thanks. Okay, Mr. Nadler. 

Mr. NADLER. Thank you. Let me first thank Congresswoman 

Hirono for agreeing to let me precede her, since I have to leave for 

an 11:00 meeting that I am already late for. 

Let me ask both witnesses, some people say that the way publicprivate partnerships bring revenue into infrastructure projects is 

simply by enabling tolls to be raised faster or higher than the public process would permit, and/or enabling high priced unionized 

16

public employees to be replaced by cheaper people who are paid 

much less as toll booth attendants or whatever. My question is the 

following. Aside from that, how can private-public partnership 

bring more revenue into infrastructure projects than would be the 

case, for example, if the State to were monetize the net present 

value of future tolls by bonding against the revenue which came 

from future tolls? In other words, how does this entire mechanism 

work, aside from the two things that I mentioned, to bring more 

revenue into the whole situation? How does it bring more revenue, 

not more revenue, more resources for infrastructure maintenance 

or construction than would otherwise be available? 

Ms. AUSTIN. I think in our case it was the fact that it created 

an up-front flush of cash. The $3.8 million was certainly very 

tempting to many legislators and——

Mr. NADLER. It brought it up front. 

Ms. AUSTIN. Yes, $3.8 billion. 

Mr. NADLER. But why could not the State, if it wanted to, have 

simply bonded against the future revenue stream tolls and gotten 

the same up-front money? 

Ms. AUSTIN. That was an alternative that was proposed and defeated. 

Mr. NADLER. Because? 

Ms. AUSTIN. I can say it went down along party line vote. It was 

not part of the proposal. 

Mr. NADLER. What were the arguments? 

Ms. AUSTIN. Well, one of the criticisms of bonding is that then 

you have to pay all this interest for a number of years that you 

would not normally have to pay. However, in the case of bonding, 

a more limited or shortened agreement might not have brought 

quite so much cash, say we cut it down from 75 to 25 years and 

then created options to renew, might have cut it by a third, and 

then that money could then have been turned around and used for 

Garvey bonds and other such things. 

Mr. NADLER. All right. Step away for a moment from getting the 

revenue up front. If you were faced with having to raise $5 billion 

for a major new project, how would private-public partnership 

bring some new source of revenue to help realize this? 

Ms. AUSTIN. The investors are willing to take that risk to build 

a new project. The Commerce Connector was a perfect proposal of 

that. 

Mr. NADLER. Say again? 

Ms. AUSTIN. The Indiana Commerce Connector. It is a project 

that was newly presented, newly conceived, in many cases local 

communities had no idea that someone had even conceptualized it. 

The Administration came out with the proposal a few days after 

the election and folks immediately began to say where is the data 

for this project, where is the need. One of the rationales for the 

project was to help move freight traffic off of Indiana 465, which 

is a beltway, and also Indiana 70, which runs through Ohio and 

into Missouri. 

Mr. NADLER. But regardless of the debate, let us assume it is a 

needed project, let us assume it is a needed, essential project, what 

you are saying in effect is that private investors bring in money. 

Ms. AUSTIN. Well, yes. 

17

Mr. NADLER. All right. Yes. And they bring in more money than 

the State could get. I assume they expect a return on their investment, and their return is going to be from charging tolls. Correct? 

Ms. AUSTIN. Not only charging tolls, but what other revenue 

mechanisms are included in the agreement. And in the case of the 

Indiana Toll Road agreement, all of the concessionaires and vendors who pay a fee to position themselves along the toll road also 

are part of the revenue. 

Mr. NADLER. Okay. So it is going to be concessionaires, vendors, 

and tolls. And is that a larger amount of money, or is it likely to 

be a larger amount of money, or possibly going to be a larger 

amount of money than the State could get by bonding out against 

the same things? 

Ms. AUSTIN. Not necessarily. 

Mr. NADLER. So what is the advantage? Or is there an advantage? 

Ms. AUSTIN. I think the money that you would get through bonding actually goes out over a longer period of time, is spread out 

over a longer period of time, versus the one time, up-front $3.8 billion that we received. Money in the bank. 

Mr. NADLER. Okay. Thank you. 

Mr. DEFAZIO. We need to move along quickly with this round because Governor Rendell is waiting and he has to get a train back. 

So, Mr. Coble. 

Mr. COBLE. Mr. Chairman, I will be brief. And I apologize, I have 

had two other meetings, so I have been playing jack-in-the-box. 

Good to have you all with us. 

Let me put this question to either of you. There are a number 

of new technologies that exist which are purported to make publicprivate partnerships more efficient and effective for both the public 

and the administrators of the partnership. Speak to me, if you will, 

about the technologies and how they may affect commerce. For example, if a number of contiguous states or regional areas were to 

develop and implement public-private partnerships but used varying technology, what impact, if any, would this have on the movement of goods that depend upon our highway infrastructure? For 

example, if Virginia had a SmartCard pass, for example, and North 

Carolina conversely would not have the same card that would permit easy flow through the toll. Talk to me about that. 

Mr. LOWENTHAL. I am not sure. We have not confronted that 

issue in California. But the question is, if you had a card that 

worked for registering in, let us say, Virginia but was different 

than the one in North Carolina, the question is would that impede 

the flow of goods through there. 

Mr. COBLE. What impact, if any? It may have no impact. 

Mr. LOWENTHAL. I do not think it would have any impact at all 

potentially. The issue, maybe I am missing the question, I think 

that you are right, in the sense that it would mean that one would 

have to have multiple kinds of abilities to go through multiple 

states, and that might be an inconvenience but I do not think it 

is something that could not be overcome. 

Mr. COBLE. Ms. Austin, do you want to weigh in on this? 

Ms. AUSTIN. I would. Thank you, Representative Coble. I can tell 

you that is becoming a problem in Indiana along the toll road. One 

18

of the provisions of the agreement, in order to gain legislative support for the legislation, was to freeze the tolls for 10 years and to 

subsidize back to the private consortium, I believe that amount 

comes to around $260 million, because citizens were in such an uproar about their tolls, the authority to raise the tolls being given 

to a private entity for a 75-year period of time. 

So what the agreement called for was that if folks who lived and 

worked and resided in those areas would buy something called the 

Easy Pass transponder, they could go through the tolls between Illinois and Indiana and those are the ones who would have their 

tolls frozen, they would not have to pay the increased tolls, but 

those who could not afford to buy the transponder or chose not to 

buy it for their car had to pay the increased tolls. But more importantly, what we are finding as they have rolled this out just recently is the folks who travel into Illinois into the Illinois toll road 

that connects with ours, the transponders are not working. And so 

the technologies have got to be compatible. 

Mr. COBLE. Well I am not searching for a problem, Mr. Chairman, but I can see that this would be a potential problem. I thank 

you, Mr. Chairman. I yield back. 

Mr. DEFAZIO. Thank you. Ms. Hirono. 

Ms. HIRONO. Thank you, Mr. Chairman. Senator Lowenthal, I 

can certainly understand why California and other States would 

want to look for different revenue sources. The long-term leases 

that you talked about fraught with peril and many questions. So 

I can see why charging user fees for the movement of goods 

through your ports would seem like a much simpler way to raise 

the needed revenues. However, I am sure you are aware that for 

a State like Hawaii, which is almost 100 percent dependent on ship 

goods, this kind of a user fee would have a tremendous, tremendous impact. 

I note in your testimony as you talked about this approach, you 

say the Federal Government is nowhere in sight. So that says to 

me you believe that this should be a much more nationally oriented 

issue that speaks to a national solution. 

Mr. LOWENTHAL. Right. Right. 

Ms. HIRONO. So do you have any suggestions along those lines? 

Mr. LOWENTHAL. I will just tell you, as I pointed out before, the 

State, in terms of just talking about goods movement, has put up 

both in terms of air quality money and infrastructure just for goods 

movement approximately $3 billion. We are confronting both an infrastructure crisis and a public health crisis. We now estimate that 

we have about 5,400 premature deaths a year due to goods movement in the State of California, and about $200 billion of costs over 

the next 15 years in terms of health care costs due to particulates 

related to the movement of goods through our State, primarily 

through our seaborne ports. We have the highest asthma rates in 

the country and the highest cancer rates around our ports due to 

diesel particulates. 

The State can play a role in that, the private sector, but the public sector also. When we are moving 45 percent of the Nation’s 

goods, we are actually, by our health and our infrastructure, subsidizing the rest of the Nation. So we have to look at all options 

to protect our citizens. We are in a crisis situation. 

19

Ms. HIRONO. My question was, what can the Federal Government do? Because I agree with you that California citizens 

should——

Mr. LOWENTHAL. We can have a national policy on goods movement and understand that the States, the ability to move goods to 

the rest of the Nation, with the change and becoming part of an 

international global economy, that we are going to need national 

investment in our infrastructure, or else we are going to have to 

do it ourselves because we cannot afford any longer just to be basically the tailpipe of the Nation. 

Ms. HIRONO. Thank you. I agree. 

Mr. DEFAZIO. I thank the gentlelady. 

With that, I would thank the panel for their testimony. It was 

very helpful and we look forward to an ongoing dialogue. Thank 

you. We appreciate it. 

Mr. LOWENTHAL. Thank you. 

Ms. AUSTIN. Thank you for having us. 

Mr. DEFAZIO. Governor Rendell will be in momentarily and he 

would be the next witness. 

With that, I call on Mr. Altmire for any statement he may wish 

to make. 

Mr. ALTMIRE. Thank you, Mr. Chairman. I want to thank you, 

Governor Rendell, for testifying before us today on your efforts to 

generate additional revenue for the unmet transportation needs of 

the Commonwealth. You have always shown a willingness to offer 

innovative solutions to the serious challenges that confront our 

State. I commend you for your leadership on these issues. 

Under Chairman DeFazio’s leadership, this Committee has had 

the opportunity to examine how public-private partnerships are entered, as well as the impact of recent lease agreements for the operation and maintenance of the Chicago Skyway and Indiana Toll 

Road. Other examples include the Pocahontas Parkway in Virginia, 

the Southern Connector in South Carolina, SR-125 in California, 

and the Trans-Texas Corridor. Each of these agreements between 

States and the private sector provides us with guidance on how 

similar deals should or should not be structured in the future in 

order to ensure the public interest is protected. 

As Governor Rendell is fully aware, substantial investment in 

Pennsylvania’s highways, bridges, and public transit is required to 

meet our Commonwealth’s future transportation needs. According 

to the 2006 report of the Transportation Funding and Reform Commission, one and three-quarter billion dollars in highway and transit funding will be needed per year for the foreseeable future. It is 

critical that we provide the necessary resources to meet our growing transportation needs, including repair of existing aged infrastructure and proper planning for the future. 

While I do have some reservations about this issue, I look forward to learning more about Governor Rendell’s proposal. 

I want to thank the Chairman again for calling this hearing, and 

thank the Governor for appearing before us today. Thank you. 

Mr. DEFAZIO. All right. With that, I thank the Governor for 

being here. Please proceed with your testimony, Governor. 

20

TESTIMONY OF THE HONORABLE EDWARD G. RENDELL, 

GOVERNOR, COMMONWEALTH OF PENNSYLVANIA 

Governor RENDELL. Mr. Chairman, good morning. I thank Congressman Altmire for those fine words. We were all proud of his 

stirring election victory and he has done a great job in the short 

time he has been here. Let me echo what Congressman Altmire 

said. I came to this issue with concerns as well. It is fair to say 

that I am not totally without concerns as we proceed down the 

road. 

Let me begin by telling you, and I will try to be as brief as I can, 

the problem in Pennsylvania that has caused us to consider entering into a public-private partnership to lease the Pennsylvania 

Turnpike. 

Pennsylvania, as Congressman Altmire knows but probably few 

others do, is a pass-through State. If you want to go from the Atlantic corridor to the midwest, you go through Pennsylvania. And 

most of the people who go through Pennsylvania go through on the 

Pennsylvania Turnpike. 

But to give you an example of just how much of a pass-through 

State we are, the State maintains more miles of roads than the 

States of New York and New Jersey do combined, even though 

Pennsylvania’s population is exactly half of what New York and 

New Jersey’s population would be totalled together. And the state 

of our roads, highways, and bridges is not good, notwithstanding an 

unprecedented level of spending that has occurred during my first 

four years as Governor. 

Take Pennsylvania’s bridges. We have 25,000 State maintained 

bridges. That is the third highest number of any State in the 

Union. But we lead the Nation in number of bridges that are 75 

years old or better. When I became Governor, in the previous year 

the State spent $259 million on bridge repair and maintenance. We 

have upped that, Mr. Chairman, to $558 million in the last year 

of my first term. Yet we still have 5,900 structurally deficient 

bridges. The highest number in the Nation. The cost estimate to repair those 5,900 bridges, to put them in safe working condition, is 

$8 billion alone—$8 billion dollars alone. 

Pennsylvania has 8,500 miles of State maintained roads that 

have been designated as in poor condition. That is 20 percent of the 

over 40,000 roads we have and that we maintain. This is despite 

the fact that we have spent $8 billion in the last four years. The 

highest level of spending ever maintaining our highways and roads. 

And as the Committee is well aware, these problems are all exacerbated by the tremendous up-tick in road construction costs. In the 

last two years in Pennsylvania, and I think this is fairly consistent 

around the Nation, road construction costs have increased by 36 

percent in the last two years. 

So what are we going to do? Clearly, the welfare of the citizens 

of the Commonwealth of Pennsylvania is very much dependent on 

finding a way to significantly cut into that repair backlog. Right 

now, we are spending 19 percent of all dollars on just maintaining 

the roads and bridges we have, and we are not even getting close 

to doing that. And a lot of new needed construction—and I am looking at Congressman Altmire, you know about the MonFayette ExVerDate 0ct 09 2002 17:27 Apr 08, 2008 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 P:\DOCS\35928 HTRANS1 PsN: JASON
21

pressway—we have no dollars to even begin going down the road 

to construct the remaining portions of the Monfayette Expressway. 

So what are we going to do? 

Well, like you, I studied what went on in Indiana under the leadership of a conservative Republican governor, and in Chicago under 

the leadership of a liberal progressive Democratic mayor, and I 

concluded that was an option that Pennsylvania had to look at. To 

help us down the road to this option, we hired Morgan Stanley as 

our financial advisor. And in December of last year, we put out requests for interest to find out who was interested in potentially 

leasing, and I stress leasing, not buying, the Pennsylvania Turnpike. We asked them to give us a rough estimate of how much they 

would be willing to bid for a 99-year lease. We came back with 48 

responses. And of those 48 responses, the potential dollars went 

from $800 million to $30 billion, that was the potential range. 

We have asked Morgan Stanley to do a lot more research since 

that time. And Morgan Stanley has come to the conclusion that we 

have three options. The first option is to enter into that type of 

lease. Morgan Stanley estimates we would get $12 to $18 billion 

up-front for that type of lease. What my intention would be is to 

annuitize that money and, let us take a middle figure, $15 billion, 

if we got $15 billion, that would produce about $1.4 billion a year 

in annuity. As you heard Congressman Altmire say, the Transportation Reform Commission says we need $1.7 billion of additional 

annual spending for roads, bridges, and highways, and, Mr. Chairman, for mass transit. The Transportation Reform Commission recommended $1 billion a year in additional spending for Pennsylvania’s roads, bridges, and highways, and $700 million a year for 

mass transit, above and beyond what they are receiving today. 

So assuming we got the middle of Morgan Stanley’s estimate, that would be $15 billion, it would annuitize $1.4 billion and put 

us close to the goal of being able to meet the funding needs for 

roads and highways and for mass transit. 

But Morgan Stanley gave us two other options. Option two would 

be to turn the Turnpike over to a new public corporation and refinance the road. It would not be private, it would be a public corporation. They believe the refinancing could net us somewhere between an annuity of $900 million to $1.4 billion a year. It is not 

quite as potentially lucrative as the private leasing because you do 

not get the private tax advantages that people do on the private 

side for investing in this type of deal. But it still could be extremely 

lucrative. 

And lastly, the Pennsylvania Turnpike Commission itself, as 

Congressman Altmire knows, has advanced their own proposal that 

they would continue to control the turnpike, and by using a series 

of fees and new tolls and some refinancing, they could produce approximately $900 million a year. 

Now, it is clear to me that we have to go down the road and look 

at all of these options. What I have asked the legislature to do is 

give us the ability to go out to auction on this lease. Without doing 

that, it is going to be impossible for us to make a judgement. When 

you put your house up for sale there is a certain figure you will 

sell your house at, but if the bids come in lower than that you are 

not going to sell your house. So, for example, if we go down this 

22

PPP road and the bids come back let us say at $8 billion a year, 

that would give us an annuity of $720 million a year. That is insufficient. We will not enter into a lease for that. But the only way 

we are going to be able to find out is to test the market. If that 

is the case, then clearly turning it over to a new public corporation 

and refinancing which could produce more than $700 million a year 

is preferable. The Turnpike’s proposal might be preferable if that 

is all we get. 

But let us assume for the moment that the auction is taken and 

we come back with a $20 billion bid. Not out of the question. A $20 

billion bid would produce about $1.9 billion in yearly annuity. That 

would take care of the transportation concerns of the people of 

Pennsylvania for the next 30 years. 

I want to close, Mr. Chairman, after giving you those examples, 

by not pointing the finger at the Federal Government. The Federal 

Government has been very good to Pennsylvania in highway funding, certainly during the time of Congressman Bud Shuster, and 

you continue to help us in every way you can. But the Federal Government realistically, doing the things you do right now, can never 

give to Pennsylvania, or to any older State that has these types of 

built-up transportation needs, you will never come close to being 

able to give us the amount of money that we need to bridge this 

gap. 

There is only one alternative, and I have recommended this for 

years since I was Mayor of the City of Philadelphia. I testified before President Clinton’s Commission on a Federal Capital Budget 

which, as you may recall, was then chaired by John Corzine, head 

of Goldman-Sachs, and Kathleen Brown, then treasurer of the 

State of California. If you do not want us to go down these roads, 

my suggestion, and it is a sincere and legitimate one, one that I 

have been pushing for 10 years, is the Federal Government should 

join every other political subdivision in this country and adopt a 

capital budget. Every one of the G-7 nations has had trillion dollarplus infrastructure repair programs in the last decade, but not 

America. And it is not just roads, bridges, and highways. It is 

water, sewer, ports, airports. 

If we are really serious about doing something about the infrastructure of this country and we want to stay away from these 

types of deals, we should move as quickly as we can to adopt a Federal capital budget and go on a real serious infrastructure program. 

Not an infrastructure program with a lot of earmarks and a lot of 

pork, but with an infrastructure program saying this much for 

roads and highways, this much for mass transportation, this much 

for water and sewer. That can be the solution to this problem. 

But absent Federal action to adopt a capital budget and go on 

a real infrastructure repair program, absent that, there is no way 

that the Federal Government out of its existing yearly operating 

budget is going to be able to help the Pennsylvanians, the Michigans, the Illinois, the States like that that have these types of old 

transportation infrastructure. There is no way that we are going to 

be able to go down that road and meet the public interest without 

looking at some of these options. 

Mr. DEFAZIO. Thank you, Governor. I would agree on the capital 

budget part. I have long supported the idea of capital budgets and, 

23

in fact, two year budget cycles. But we run into something called 

the Appropriations Committee when we talk about reasonable 

things like that. But hopefully we will get there some day. 

There is Morgan Stanley, there is sort of a disturbing shall we 

say consistency in these sorts of evaluations that are done for 

states. One that I find here in particular is they say ‘‘tolls allowed 

to rise at nominal GDP per capita inflation or 2 percent a year, 

whichever is greater.’’ Governor Daniels and I had an exchange 

over that. Would you call that a floor or a ceiling? 

Governor RENDELL. Neither. Because those are Morgan Stanley’s 

recommendations. 

Mr. DEFAZIO. Right. But they were adopted both by Chicago and 

by Indiana. 

Governor RENDELL. Well I do not think you will find that Pennsylvania, either myself or the legislature, stands ready to just 

adopt——

Mr. DEFAZIO. Okay. But here is the problem with that. The assumption of these massive payments are predicated on that formula. Because every one of these deals, they do not make the 

money on volume. Macquarie is very up front about it: ‘‘We do not 

make money on efficiency. We do not make money on volume. We 

make money on toll increases.’’

So if you are not going to follow that model, and you would have 

to tell Morgan Stanley that, they would have to recompute all these 

values, and I think you would find much lower up-front payment 

if you are not going to allow a floor. And just again, I exchanged 

this with Mr. Daniels just to edify him, if that floor had been applied to the Holland Tunnel, the current per car one-way toll, given 

the Great Depression and everything else that has happened, it 

would be $185.13. Now the answer of Macquarie is well, my God, 

we would not do that because we would drive traffic away. 

Do you envision non-compete agreements, because they also are 

what helps drive the value of these. You have a non-compete agreement. Indiana has a very stringent non-compete agreement. 

Governor RENDELL. Well, first of all, all these problems, and you 

are right that there is a balance. Where you set the bar, how frequently, and at what degree tolls can be raised impacts the amount 

of money you are going to get. But it is our intention to set the bar 

at what we think is a reasonable figure to protect Pennsylvania 

drivers. And what harm is there under your scenario for us going 

to market? If we set the bar at a lower rate than Morgan Stanley 

recommends and we get a bid of $7 billion, we will not enter into 

an agreement. But if we set the bar——

Mr. DEFAZIO. Right. But the key is the assumptions that go into 

it and the protections to the public. We had previous testimony 

from the chair of the Indiana State Transportation Committee, 

Representative Austin, who does not agree with the deal they entered into. She said the greatest problem they had there, which is 

also mirrored in the model legislation of the Bush Administration, 

and it has been repeated in a number of these deals, is the public 

does not know what the deal is, nor does the legislature, until it 

is done. So are you talking about a totally transparent process? If 

you get bids, those bids will be available, no proprietary information, it will be out there to be compared by the legislature and the 

24

public and all the assumptions will be known. Is that the kind of 

legislation you are asking for? 

Governor RENDELL. Absolutely. In fact, it is our goal to have the 

legislature agree to the toll schedule that we would put into the 

final auction. That is number one. 

Number two, remember, you are addressing these problems, and, 

look, I give the Committee great credit for looking at this, this is 

the right time to look at it, but you are addressing these problems 

in a vacuum. You are not going to give me a Federal capital budget 

in the next couple of years, correct? 

Mr. DEFAZIO. It is not a vacuum, Governor. The point is the 

Committee is in the midst of a number of hearings about how we 

are going to enhance Federal revenues and assess the need. 

Governor RENDELL. Right. But it is unlikely that we are going 

to see a Federal capital budget in the next couple of years. 

Mr. DEFAZIO. Well the question becomes, we had testimony from 

a fellow from Northwest Financial who said, in the case of Indiana, 

they could have bonded more money as a State entity, retained 

control of the Toll Road, not had non-competing agreements and 

everything else, and had more money up front for capital investment. We want to protect the public interest. And I admit, you 

have needs and you have got to address them. But the question becomes whether you do it through one of these privatized agreements, or the State itself, as in your option two, might do it. But 

what is key——

Governor RENDELL. And again, we know what we will get in option two. We roughly know what we will get in option two. We are 

going to take a look at option one, and we are going to go to market 

with the type of controls we think is necessary. 

But let me go back. If we are not going to do any of these things, 

and you are not going to give us a Federal capital budget, and remember, mass transit is in the state it is today because all of you 

down here removed operating funding for mass transit back in the 

late 1990s, if you are not going to do anything to help, and I am 

not saying that you should, then the alternative——

Mr. DEFAZIO. I think your State probably does receive very substantial funds on an annual basis in the public transportation from 

the FTA. 

Governor RENDELL. Absolutely. But we also have 30 cents a gallon in gasoline taxes—30 cents a gallon, which places us in the top 

10. To come close to just the $1 billion that we need, according to 

the Transportation Reform Commission, we would have to raise our 

gas tax 12.5 cents a gallon. So I would ask you to get your calculator out. You talk about what tolls would go up under this scheme, 

get your calculator out and over the course of time figure out who 

would pay more, the citizens of Pennsylvania paying 12.5 cents additional on every gallon, or a sizeable toll increase. You cannot look 

at it in a vacuum. Something has to be done. 

Mr. DEFAZIO. I am not going to choose your options for you. But 

the concern here, what I am expressing to you and you are telling 

us you will absolutely address, is it will be a totally transparent 

process, you are not going to allow non-compete agreements, you 

are not going to put a floor under toll increases, and all of this will 

be established by the legislature and then you will go out to bid 

25

with other conditions, and all of the bids will be available to the 

public and to the legislature so they can fully understand the bids. 

If you do it that way, it will be an interesting exercise. 

And if you do not adopt the assumptions of Morgan Stanley, I expect you are going to find your option two is going to be a much 

more attractive way to finance your needs than option one, because 

the private sector, unless they can extract excessive rents in a monopoly situation, is not going to pay a bunch of money for it. That 

is what has happened in these other agreement—99 year lease for 

Chicago, floor under the toll increases, non-compete agreements; 

Indiana, non-compete agreements, floor under the toll increases. 

And there are some bad examples of what happens with noncompete agreements. We had one in California, SR-91. They entered into an agreement for a toll road and there was a non-compete agreement. The State determined they were having a lot of accidents at one point, they had to change an intersection, and the 

company said, oh, no, you cannot have safety improvements because of the non-compete agreement. They got into litigation, they 

had to buy out the project for twice what it cost. 

Governor RENDELL. Sure. There are a lot of pitfalls to this. 

Mr. DEFAZIO. I am pleased to hear the approach you are going 

to take. It will be interesting to see the results. 

Governor RENDELL. Absolutely. And there are a lot of pitfalls. 

Nobody says there are not pitfalls and nobody says there are not 

red flags that we should watch. But let me be clear. Where we are, 

and the Federal Government’s refusal to adopt a capital budget has 

left us—we pay 30 cents tax on a gallon of gas. That is far more 

than Federal——

Mr. DEFAZIO. That is a tax assessed at the pump? 

Governor RENDELL. Thirty cents a gallon. 

Mr. DEFAZIO. Right. That is the consumer, or I think you also 

have a producer tax. 

Governor RENDELL. Well that is putting them together because 

the producer tax is passed on to the consumer. 

Mr. DEFAZIO. Well, could it not come out of the producer’s profits? 

Governor RENDELL. I have suggested doing that for mass transit, 

and my legislature tells me there is no way we could adequately——

Mr. DEFAZIO. Let me just ask, what does regular cost per gallon 

in Pennsylvania today? 

Governor RENDELL. Today? About $3.12. 

Mr. DEFAZIO. Okay. We are at $3.48 in Oregon and we have a 

lower gas tax than you. So something else might be going on other 

than the tax in terms of the pricing. 

Governor RENDELL. Oh, there is no question. If you want suggestions from me, you are giving me suggestions, if you want suggestions from me, let us do what we ought to have done a long time 

ago. The profits that are being made by the oil companies are astounding. There is no rhyme or reason that gasoline has gone up 

a dollar in the last five or six months. We should do an excess profit tax and give the excess profit tax back to the States for transportation money. That would make a lot of sense. 

26

I know there are some proposals here to give it back to the individual drivers. You give it back to the individual drivers and it is 

a small stipend and it does not do much. Give it back to the States 

and then I would not have to do any of these things. The taxes that 

our oil companies pay in Pennsylvania are pitiful, pitiful compared 

to the profits that they make. 

Mr. DEFAZIO. Okay. We have substantial grounds for agreement 

there. I do have a windfall profits tax proposal, I do not dedicate 

it back to the States, but I will take a look at that. Thank you. 

Mr. Duncan. 

Mr. DUNCAN. Thank you, Mr. Chairman. And thank you, Governor. I do appreciate your testimony. I believe that there is an important place for public-private partnerships and they can be good 

things. We do them, as I pointed out to the last panel, in many 

other areas. Sometimes they have been very good. Sometimes they 

have not been. Particularly in the defense area, some have become 

rip-off sweetheart-type deals, and I am concerned about that. A 

former big city mayor once testified before another congressional 

committee that the problem with government is that it does not 

work. There is no incentive for people to work hard, so many do 

not. There is no incentive to save money, so much of it is squandered. That is the problem. So, generally, things are done more economically and more efficiently in the private sector. 

But I am concerned, and I have expressed this earlier in both my 

opening statement and with the last panel, I have a concern about 

governors, mayors taking money on the front-end, seeing dollar 

signs, not providing for the future and leaving governors and taxpayers 25, 50, or 75 years down the road holding the bag. So I am 

pleased, if I understand it correctly, that what you are talking 

about doing is investing this money that you get. 

Governor RENDELL. Taking annuitized payment. 

Mr. DUNCAN. Right. And that is what I think should be done. Expenses and costs for States are going to grow in future years because of inflation and other facts and all of those things need to 

be taken into consideration. So really, in these agreements, it 

should be figured in that more money is going to be needed in future years. 

Secondly, I am pleased that you had such interest in your request for proposals that you sent out. I think you said 48 responses. 

Governor RENDELL. Yes, 48 responses. But that was request for 

expression of interest. 

Mr. DUNCAN. Expressions of interest. 

Governor RENDELL. We do not anticipate that many bidders if we 

go to auction. 

Mr. DUNCAN. Right. Right. Well, so far, we have had the 

Macquarie Company out of Australia, and I met with them a few 

years ago on a codel to Australia led by Chairman Rodgers, and 

also we have this Spanish company Cintra. But I noticed one article that said the New Jersey Pension Fund has $190 million invested in those two companies. I am sure there are other American 

investors in those companies. But we have been sort of slow I think 

in getting a lot of interest by American companies and investors to 

27

invest in these types of things. So I am pleased that you are seeing 

that kind of interest. 

Governor RENDELL. Let me say two things. Number one, the 

Macquarie bid here includes six union pension funds, including the 

major part of the Macquarie bid is the National Carpenters Union 

Pension Fund. And number two, the reason we are seeing such 

high level of interest, my guess, is the Pennsylvania Turnpike is 

close to being the granddaddy of all toll roads. 

So it is different than a little stretch of Indiana or the Chicago 

Skyway. The Chairman said that volume is not of importance, and 

I agree it is not of paramount importance, but it is always volume 

times rate. My taxpayers, I always have to remind them that we 

have to spread the base and grow the base on taxes because it is 

tax rate times tax base. And volume does matter, because if volume 

falls, it does not matter what you charge. So that is why I think 

there is so much interest in our turnpike. 

And I would agree with you, Congressman. When I was Mayor of the City of Philadelphia, I took over facing a $250 million deficit, 

about a 12 percent deficit based on our operating budget. One of 

the ways we removed that deficit was that over the course of time 

and with public employee unions allowed to bid, we privatized 25 

functions and those 25 functions saved us about $70 million a year 

in operating costs. And in each and every one of those, there was 

no diminution of service. Well, I take that back, maybe one out of 

25, and in the other 24 the service level stayed the same or actually improved. 

So I think there is a place for the private sector in aiding government in reaching its mission. I absolutely accept that. It has to be 

one of the alternatives that we look at. Look, you know the antitax fever that affects Washington. It affects Harrisburg as well. We 

have to be as creative as we can to find ways to do the same or 

even better at less cost. That is why we went down this road. If 

we were not in this condition, we would not be here. We simply 

would not be here. I would not be a witness. We would not have 

gone down this road. 

But those figures, the figures that Congressman Altmire cited, 

are staggering. By the way, the 12.5 cents gas tax, that only takes 

care of the $1 billion needed for bridges, roads, and highways. That 

would not provide, and under the Pennsylvania Constitution could 

not provide, one dime for our mass transit needs. So this is a huge 

problem. And the public interest demands that we deal with the 

problem. We are going to do exactly what the Chairman said. We 

are going to look at option one, hopefully go to market and see 

what the price is in the marketplace, and compare it to the other 

options. 

Mr. DUNCAN. I appreciate your testimony. I agree with it. And 

all the things you mentioned earlier, the airports, the sewers, the 

highways, these are all things we deal with and talk about all the 

time in this Committee. And I appreciate you mentioning Chairman Shuster, because he led this Committee with great effectiveness, both for Pennsylvania and the Nation. 

Governor RENDELL. No question. 

Mr. DUNCAN. Do you think there is some way in these agreements, if we get more into them in the future, and I think we are 

28

going to have to, but if we do, do you think there is some way to 

limit these increases in these tolls so we avoid the situation that 

Chairman DeFazio mentioned, where you would have to pay $185 

toll to get through the Holland Tunnel? 

Governor RENDELL. Sure. The answer is the FA recommends 

what will produce the most money. The government officials, who 

in the end can maintain control, they have to decide what is an appropriate level of increase. It is easy to say, and the Chairman 

quoted that figure, but what would be the increase in the Pennsylvania Turnpike tolls, what would be the increase if we just increased our tolls over that same period? It may not be quite as 

much, but it gets up there too. So you have to strike the appropriate balance. That is why government should never lose control. 

Remember, we are not selling the house. If you sell your house, the 

new owner can paint it chartreuse and you might hate that. If you 

rent your house, they cannot paint it at all. And we are not selling 

this road. We are leasing it and we will maintain the ultimate control. That will be a judgement made by government officials. And 

if the Chairman is right, and I hope he is not, but if he is right 

and we will not net the type of money that we are looking for, then 

we will look at other avenues. I think it is just as plain and simple 

as that. It is a basic economic decision balanced against the interest of the public. 

Mr. DUNCAN. Thank you very much. I have far exceeded my 

time. I do want to tell you that the big city mayor that I quoted 

earlier was Mayor Rendell of Philadelphia. 

[Laughter.] 

Governor RENDELL. There you go. 

Mr. DUNCAN. I also remember when we had Mayor Wilson Good, 

one of your predecessors in Philadelphia, and when he testified, I 

remember it was a Tuesday, I said, ‘‘Mayor Good, I was in Philadelphia Sunday night.’’ He said, ‘‘You were?’’ And I said, ‘‘Yes. 

Philadelphia, Tennessee, population 400, in my district.’’

[Laughter.] 

Mr. DUNCAN. But congratulations on your big reelection victory. 

Thank you for being here with us. 

Governor RENDELL. Thank you, Congressman. 

Mr. DEFAZIO. I now turn to Mr. Altmire. 

Mr. ALTMIRE. Governor, as you talked about, the Pennsylvania 

Turnpike runs from one end of the State to the other. It crosses 

the whole State. 

Governor RENDELL. And north-south. 

Mr. ALTMIRE. That is right. That is right. And in my district, as 

you know, I have six counties and the turnpike runs right through 

the heart of it, connects to the Ohio Turnpike along the Ohio line. 

This really is different than what any other State has done. We can 

certainly use them as examples, but this is much bigger in scope, 

as you pointed out, than what anyone else has ever done. 

But aside from the money part, the financial benefit of being able 

to fix the roads and make up that deficit that you have talked 

about, what are the people who live in my district or the people 

who use the turnpike, the drivers, going to see from a positive and 

a negative perspective? What are the downsides that you are trying 

29

to avoid? But more importantly, what are the good things they are 

going to see take place if this happens? 

Governor RENDELL. Well, number one, hopefully we will have a 

controllable toll structure. Now as you know, politicians are always 

reluctant to raise anything, tolls included. But you recall when I 

became Governor, we had not had a toll increase on the Pennsylvania Turnpike since 1988. I authorized the Turnpike Commission 

to seek an inflation increase. Tolls went up 42 percent. But because 

we pledged all that money back to repair, we got very few negative 

calls or letters about the increase in tolls. 

Under this plan, the toll increases will be more regular. They 

will not be 16 years apart. They will be more regular but they will 

be lower obviously than 42 percent at a time. That is the first thing 

that they will see. Hopefully, if we do it right and we draw the balance the right way, the toll increases will be moderate. 

Secondly, I think they will see as good or even enhanced maintenance. Because remember, and you know this better than anyone 

on the panel, there are a lot of non-toll options to get across Pennsylvania. A lot of truckers today take advantage of those non-toll 

options. So the people who run this—again, regardless of what the 

Chairman said, volume times rate is crucial—the people who run 

this are going to want volume. The only way they are going to get 

volume is to maintain a good road in good working order. And I 

think you will see that happen. I know in Indiana, the company 

put up-front money into maintenance far above and beyond what 

the State could have done. And I think you will see that because 

of the competition versus non-toll roads. 

Mr. ALTMIRE. Do you have a concern, you obviously know what 

is happening with the public transit system in southwestern Pennsylvania, do you have a concern, with gas prices and everything 

else, that what you are proposing may impact disproportionately 

low-income people who are using the turnpike to get to work? And 

with the regular increase in tolls, is there some sort of stop——

Governor RENDELL. It will be infinitely less of an impact than a 

12.5 cents a gallon gas tax hike. 

Mr. ALTMIRE. Right. Last question. What other States have you 

looked at? You talked about Indiana and Chicago. Have you looked 

at some of the smaller States for upside? 

Governor RENDELL. No. We have talked to Governor Perry in 

Texas a little bit, but basically I have had long discussions with 

Governor Daniels and with Mayor Daley. It is pretty instructive 

that one of the most progressive liberal Democrats in the country 

has also gone down this road. And he is a disciple. In fact, he has 

offered to come in and talk to the Pennsylvania legislature about 

this issue. 

Mr. ALTMIRE. Thank you, Governor. Thank you, Mr. Chairman. 

Mr. DEFAZIO. Well, I would caution the Governor, if he is going 

to use Mayor Daley as a model, he may be a progressive Democrat, 

but in fact the agreement there is definitely the model of about the 

worst possible agreement. The money is not even dedicated to 

transportation. It is a 99-year lease. It does not have recapture. It 

has automatic increases. But mostly, they are getting away with it 

because they are extorting a lot of money from people who do not 

30

live in his jurisdiction, so he is not going to have to be accountable 

at the polls. 

Mr. Dent. 

Mr. DENT. Thank you, Mr. Chairman. Good morning, Governor. 

Governor RENDELL. Congressman. 

Mr. DENT. I just wanted to say, first of all, it is a pleasure working with your Secretary Allen Biehler. A good professional and I 

have enjoyed working with him on a number of projects. I am glad 

to see that the PennDOT office has moved into downtown Allentown and appreciate your assistance in helping to facilitate that 

move of about a mile or so. It is very beneficial to the city. And 

I do appreciate all their help on various regional projects, transportation projects we have been working on together. 

As you know, we are facing a lot of challenges in mass transit 

and on highways in Pennsylvania. I know you mentioned a little 

earlier, and I apologize for not getting here sooner, but you were 

talking about some of the challenges with roads and bridge funding. Could you comment a little bit on how the Federal highway 

allocation that Pennsylvania receives is being flexed. I know a couple of years ago in 2005 you used some of that money, a few hundred million, $300 million or so, to support the capital program of 

some of the mass transit systems, including Septa, Pat, and others. 

Governor RENDELL. Right. 

Mr. DENT. Because I do have some concerns about the extent to 

which we have flexed. I understand the need for the flexibility and 

I understand the constraint you are under with the motor license 

fund and the State Constitution that prohibits you using any of the 

State highways collections, the taxes and the license funds, for the 

mass transit. So if you could just comment on the flexing and how 

that has impacted this. 

Governor RENDELL. Sure. First of all, all a governor can do is 

recommend to the MPOs. The MPOs are the ones that decide 

whether flexing occurs or not. We were very fortunate in 2004 

when we flexed, we flexed $420 million to mass transit, but we 

were also able to flex $580 million to roads, bridges, and highways. 

The reason was, number one, PennDOT, under Secretary Biehler’s 

leadership, had instituted some cost savings that freed up a couple 

hundred million dollars. And secondly, because ISTEA or NEXTEA 

or BESTEA, whatever it was——

Mr. DENT. SAFETEA-LU. 

Governor RENDELL. Right. Because that was not reauthorized immediately, Pennsylvania got money at the old level which was 

higher than we had been planning for. We knew under the new 

level our percentage would go down. But because it took a couple 

of years for the reauthorization, we had a windfall and that enabled us to do that. I have told everybody to not look at flexing as 

a way to solve this problem for any length of time. We might flex 

for a few months but with the understanding that once the State 

revenue source kicked in, the flexed money would be repaid. So we 

are not going to look towards flexing as a solution here, just maybe 

as a stopgap. 

Mr. DENT. I think you pointed out something else that is interesting, and that is, the fact that the highway bill was delayed actually helped Pennsylvania because the formula was——

31

Governor RENDELL. The previous formula was very generous to 

us. 

Mr. DENT. And the new formula is still pretty good. 

Governor RENDELL. Still pretty good. 

Mr. DENT. Not as good as the old formula, but it is still good. 

Governor RENDELL. I would say we are no longer on the Shuster 

formula. We are on a fair formula but it is not the Shuster. 

Mr. DENT. We have a new Shuster here now. But I guess my other comment on the flexing, you took about $420 million for mass 

transit. 

Governor RENDELL. For mass transit, right. 

Mr. DENT. Was that just a one-year allocation? 

Governor RENDELL. No. That was for two years. And during 

those two years, that is why I formed the Transportation Reform 

Funding Commission, they are to come back and say that after 

these two years are up, we have to bite the bullet and we have to 

do what we have to do. We have to do something. As I have said 

to the legislature, and the Chairman reflected that, the only thing 

that Pennsylvania cannot do is nothing. That is the only thing that 

we cannot do. If we are going to meet the needs of our people, that 

is the only option that is not an option. 

Mr. DENT. Did I understand you correctly that the monies that 

have been flexed were monies before SAFETEA-LU, previous monies? 

Governor RENDELL. Yes. 

Mr. DENT. Thank you for that clarification. Thank you. I have no 

further comments. Good to see you, Governor. 

Governor RENDELL. Thank you, Congressman. 

Mr. DEFAZIO. I will take the Democratic round and then we will 

go to Ms. Fallin. 

Governor, first, I am concerned when you refer to Governor Daniels and Mayor Daley, again, I think we have already visited that 

ground, they have non-compete agreements, they have floors on the 

tolls, and they entered into these agreements without any transparency. We just had testimony from the chair of the State House 

Transportation Committee in Indiana that they were rushed into 

doing something they did not understand and, basically, they 

would undo it if they could. But it is committed now for three generations and they are very concerned about those terms. So I would 

hope that unless you want to bring them in as examples of what 

not to do, I would suggest that is not going to be particularly instructive. 

But let us just revisit, because, again, I think it is a fairly critical 

point, you are telling us that you have such extraordinarily high 

gas tax. But the Department of Revenue has a web site and they 

say the gas tax is 12 cents a gallon. The other part of the web site, 

they say the franchise rate is 153.5 mils for liquid fuels, gasoline, 

208.5 for fuels, diesel, on a cents per gallon basis. It says 57 mils, 

more than a third of the tax, are deposited as unrestricted motor 

license fund revenues, and I will ask you what that means, the remaining monies are deposited to various restricted accounts within 

the fund, for example, revenues received from 55 mils of levy on 

fuels are deposited in the highway/bridge restricted account. So of 

all this money that you are collecting in a franchise which may or 

32

may not get passed through directly to the consumer, so I think it 

is hard to say you are assessing 30 cents at the pump, is all of that 

money currently going into transportation, all of that franchise fee? 

Governor RENDELL. Yes. Some of it goes to restricted areas of 

transportation but it all goes into non-mass transit, by the State 

Constitution. It is 30 cents. And you can bring in any oil company 

or any franchise or distributor and they will tell you they pass it 

on. 

Mr. DEFAZIO. Because it is not a competitive business, as you 

pointed out, and we agreed on that already about their pricing 

structure. 

I am curious, you have a State pension fund, I assume. 

Governor RENDELL. Yes. 

Mr. DEFAZIO. What is your annualized rate of return on investment, do you know? 

Governor RENDELL. We have two funds; one for the teachers, and 

one for the public employees. I think it varies from year to year. 

The teachers fund has done better I think. They have been in the 

last three years about 12 or 13 percent. The public employees fund 

not nearly as well. 

Mr. DEFAZIO. Okay. Hopefully, you will model, if you do go down 

this route, the teachers fund. Because the assumptions on the revenues you are talking about are basically, according to Morgan 

Stanley, to come close to your goal, you would have to lease the 

highway for 99 years and you would have to get a 9 percent 

annualized rate of return for those 99 years to get to $1.62 billion, 

which is just shy of where you want to be at $1.725 billion. 

Governor RENDELL. Right. 

Mr. DEFAZIO. Anyway, I think we have kind of exhausted that 

topic. But I just wanted to ask that question. 

Ms. Fallin. 

Mr. FALLIN. Thank you, Mr. Chairman. Governor, thank you for 

coming today. I had the opportunity in my State to serve as Lieutenant Governor to Governor Keating for eight years and then Governor Henry for four. So I have been around this trying to finance 

our roads and bridges. I came in late to your presentation, but I 

just wanted to ask you about some of the innovative solutions that 

the governors are thinking about, and of course your proposal for 

public-private partnerships on the turnpikes, as we have thought 

about those things before in various States. But how do we protect 

the public interest, and what are you doing to protect the public 

interest as a Governor when it comes to developing these partnerships with other innovative solutions on the roads? 

Governor RENDELL. What I told the Chairman in response to his 

question, we are going to control the rate of increase in tolls, with 

the understanding that the more controls we put in place, the less 

money we would get to annuitize off of, and we are going to control 

maintenance and repair schedules. That is going to be part of the 

lease that we enact. And that will be transparent. In fact, I am 

going to ask the legislature to join with us in setting the appropriate limits. 

But I also want to say one thing, because there is a lot of talk 

in the Committee, in the letter the Committee sent out, about protecting the public interest. Well, Madam Congressman, protecting 

33

the public interest is making sure that in Altoona, Pennsylvania, 

where the transit agency just announced the end of night time and 

weekend service—meaning, if you do not have a car in Blair County and you are a nurse and work Saturdays and Sundays, you cannot get to work any more; meaning, if you are a senior citizen and 

you depend on that bus to get you into see your doctor on Saturdays, you cannot get in there any more. That is the public interest 

I have to protect as well. I have to protect the safety. You did not 

hear that we have 5,900 unsafe, structurally deficient bridges in 

Pennsylvania. I have to protect the public interest by repairing as 

many of them as quickly as I can. 

So when we talk about protecting the public interest, let us remember that there are all sorts of charges to protect the public interest. It is not just protecting the public interest in the deal we 

fashion, but how do I protect the public interest if I cannot generate these type of dollars? 

Mr. FALLIN. That is a good point. I appreciate that. What about 

the liability issue? How do you structure that in a proposal with 

a partnership on the turnpikes as far as who assumes liability if 

there is a huge accident on the road? 

Governor RENDELL. That is currently being worked out right now 

by our general counsel’s office and the financial advisor. I do not 

have an answer for you yet, but I will be happy to get you an answer on that. 

Mr. FALLIN. I was just curious how you would work that out. You 

said on the maintenance that the partnership will assume maintenance of the roads? 

Governor RENDELL. Right. But there will be a required maintenance schedule that we build into the lease itself. 

Mr. FALLIN. My experience has been that when you have a contract with a private entity they many times will come back with 

an addendum or amendment to the contract because they have cost 

overruns. And if you get into that situation with the maintenance, 

have you thought about how you are going to handle those issues? 

Governor RENDELL. If I am still around, I am going to tell them 

tough luck. You contracted for it, you bargained for it, it is on you, 

go back to your investors. 

Mr. FALLIN. And then on your percentage of your people who use 

the toll roads, our experience has been that the majority of the people who would use our toll roads are out of State people. Do you 

find that is a large percentage of the people who will be paying this 

ticket item, per se? 

Governor RENDELL. Well, if you took truckers out of it, with 

truckers that is absolutely correct, maybe 65 to 70 percent of the 

trucks are pass-through. For citizens themselves, I would say it is 

probably slightly more Pennsylvanians than non-Pennsylvanians. 

But if you live in New York City and you are going to Chicago, you 

are going to go through the Pennsylvania Turnpike. But it is pretty 

close. But for trucks, clearly a significant majority of them are nonPennsylvania based. 

Mr. FALLIN. I had a meeting, Mr. Chairman, this morning with 

the American Trucking Associations and they were expressing 

some concern about the level of increases in the toll roads and, of 

course, their increased costs, because they have got high fuel costs 

34

right now. They were concerned about partnerships and how we 

control the level of increase of the tolls. So that is always something we have to keep in mind when we are looking at these partnerships. 

Governor RENDELL. And I discussed this with Congressman 

Altmire when he was here. For Pennsylvania, you can pass East 

to West through the turnpike, that is probably the easiest, but 

there are two or three other alternate fairly good highways that 

you can pass through right now for free, and many truckers take 

that option. If the private lessee were to let maintenance go down, 

for example, then in fact those truckers might take the other option. 

So I think it is important to have that competitive structure in 

place. But I love the truckers. They always complain about the conditions of our roads, the way PennDOT or the Turnpike Commission keeps them, and now they are complaining about the potential 

condition of the roads under private management. 

Mr. FALLIN. Can I just say one last thing I heard this morning. 

They were talking about two States that had privatized their toll 

roads and the tolls had gone up really high. So the truckers were 

not going on the toll roads, they would take subsidiary highway——

Governor RENDELL. Right. Which they could do in Pennsylvania. 

Mr. FALLIN. Which cause some problems, too, because then the 

tolls fell because they were not collecting those tolls off the truckers, which is a big portion of their revenues, but it also caused a 

lot of damage on the side roads. So I do not know how we balance 

that yet, but it is just an issue we need to think about. 

Governor RENDELL. We would not have damage to our side 

streets. We have a lot of good pass-through alternative highways. 

So we would not have backups or damage on the side streets at all. 

But again, the goal is to keep these things within balance so that 

people can continue to use them. I think we can reach that goal. 

But as I said to the Chairman, if we put in the proper controls and 

we go to market and find that we are not going to yield as much 

in a yearly annuity as we suspect or hope, then we will not do this. 

Plain and simple. 

This is in many ways a financial decision governed by the need 

to protect that part of the public interest. I understand that we 

have a fiduciary responsibility to protect that very significant public interest. But I also have a fiduciary responsibility to do something about those 5,900 deficient bridges, to do something about 

mass transit’s cuts that are unbelievable. I am going up from here 

to a meeting of the Southeastern Pennsylvania Transit Authority, 

that is Philadelphia and its suburbs. The cuts that they are about 

to enact today at their board meeting because we do not have any 

funding, that is more dangerous to the public interest than anything we could contemplate here. We have to stop those. 

One of the things I advocated to the Chairman, and I hope that 

you would take a look at it, too, I do not believe America will ever 

cure its infrastructure problems, and I am not just talking about 

transportation—water and sewer, ports, airports, et cetera—until 

we have a Federal capital budget and that Federal capital budget 

is devoted to a significant infrastructure repair program, as every 

35

one of the G-7 nations has undertaken in the last decade. President 

Clinton had a commission on the Federal capital budget. I do not 

know if you remember, Mr. Chairman, what the conclusion of that 

commission was, but it made no recommendation. It made no recommendation. 

The time has come to get serious everywhere. These are serious 

issues for us. If I could have avoided going down this road, I would 

have. But these are serious issues and they are borne out of the 

fact of necessity. Someone has to come up with an answer to that 

necessity. 

Mr. FALLIN. Thank you, Mr. Chairman. I appreciate the time. 

And I want to commend you, Governor, for finding innovative ways 

to do things. 

Mr. DEFAZIO. Governor, thank you for your time. I had forgotten 

to convey Chairman Oberstar’s regrets. He had a death in the family and could not be here. 

Governor RENDELL. I understand. 

Mr. DEFAZIO. I also want to thank you for coming to what you 

knew might not be the most receptive session. We have invited 

Governor Daniels and he has demurred. So I have got to say you 

are a good sport. I also wish California had said what you said to 

that contractor when they came to unanticipated geological conditions and wanted a huge increase. Tough luck would have been a 

good answer. But that may have had something to do with the 

agreement. So you have to be very, very careful in these agreements. 

Governor RENDELL. And the warnings you have given are absolutely accurate. And I will make sure the Committee, if the legislature does go down the road and allows us to go to auction, I will 

send the Committee a copy of the lease. I think you will find that 

we are not just seeking to maximize revenues. We balance the need 

to maximize revenues with the public concerns that you have 

raised. 

Mr. DEFAZIO. All right. And on Ms. Fallin’s questions, I think 

she was getting at the issue of non-compete agreements. Again, 

there are a number of things that will drive up the value but which 

have a great detriment to the public. And since you earlier agreed 

that those are not going to be part of whatever RFP you put out, 

we will look forward to seeing how you proceed. 

Governor RENDELL. Absolutely. 

Mr. DEFAZIO. Thank you, Governor. 

We welcome the third panel today. There is a series of votes coming up. We want to hear your testimony as quickly as possible. 

I would first recognize the Honorable Bill Graves, President and 

CEO of American Trucking Associations, former Governor of the 

great State of Kansas. 

Mr. Graves. 

36

TESTIMONY OF BILL GRAVES, PRESIDENT AND CEO, AMERICAN TRUCKING ASSOCIATIONS, ALEXANDRIA, VIRGINIA; 

TODD SPENCER, EXECUTIVE VICE PRESIDENT, OWNER-OPERATOR INDEPENDENT DRIVERS ASSOCIATION, GRAIN VALLEY, MISSOURI; GREG COHEN, PRESIDENT, AMERICAN 

HIGHWAY USERS ALLIANCE, WASHINGTON, D.C.; MICHAEL 

REPLOGLE, TRANSPORTATION DIRECTOR, ENVIRONMENTAL 

DEFENSE, WASHINGTON, DC. 

Mr. GRAVES. Mr. Chairman, Congressman Duncan, Members of 

the Subcommittee, thanks for the opportunity to testify on this important and timely subject. The trucking industry, as you know, is 

essential to the Nation’s economy. A safe, reliable, and national 

network of highways is essential to the delivery of the Nation’s 

freight. 

Mr. Chairman, our industry faces growing challenges. Significant 

portions of the highways in this country are gridlocked for longer 

and longer periods of time every day. This makes it difficult for our 

members to meet their customers’ schedules at a cost that allows 

these customers, that is U.S. businesses, to remain competitive in 

an increasingly global economic environment. Clearly, additional 

highway investment on a very large scale is required if we are to 

have the transportation and logistics system that we need to deliver the goods today and meet the ever-greater challenges projected for the future. 

The trucking industry is willing to invest in an expanded Federal 

highway program. We have two caveats, however. First, the money 

should be spent on those projects that make the most sense from 

a broad national economic standpoint. This means primarily fixing 

bottlenecks on heavily travelled Interstate freight routes. Over the 

long term, we need to consider whether it makes sense from a safety and an economic standpoint to invest in a national network of 

truck-only highways. Our second caveat is that the financing mechanism must make sense from an economic standpoint primarily, 

but also in terms of the effects on highway safety, the environment, 

and energy use. How these projects are financed is just as important as how the funds are spent. 

ATA believes highway user fees should be reasonably uniform 

among various classes of vehicles; they should be based chiefly on 

highway use; they should not be easily avoided; they should be inexpensive and easy to comply with and enforce; and they should 

not create impediments to interstate commerce. 

Mr. Chairman, we already have a system of taxation in place 

which meets all of those criteria. It is the fuel tax. Unfortunately, 

some people seem to want to write the fuel tax’s obituary and replace it with private financing. And while private financing may 

have its place and could play a very limited role in highway funding, the reality is that the fuel tax is, from our perspective, as close 

to ideal as we have or are likely to have at our disposal within the 

foreseeable future and should be enhanced, not abandoned or minimized. Private financing is a poor substitute for the fuel tax in 

nearly all cases. Ultimately, whether they are paying a fuel tax or 

a toll, highway users pay the price for infrastructure improvements. However, when using toll financing, those users pay a 20 

to 30 percent premium over the fuel tax to pay for collection cost. 

37

Furthermore, tolls, especially when they are imposed on existing 

roads, push traffic onto secondary roads that are likely to be less 

safe and were not built for heavy traffic. 

ATA is particularly concerned about long-term concessions on toll 

roads. Under these deals, not only do the users of these facilities 

pay the normal toll road premium, but they also finance the cost 

of the up-front concession fee, and they fund a considerable profit 

that is paid to concessionaires, management, and shareholders. 

Pawning off critical highway assets to the highest bidders and 

carving up the highway system is not in the best long-term interest 

of the Nation. We urge Congress to monitor these deals closely and 

take action if appropriate. 

Mr. Chairman, I would like to thank you and Chairman Oberstar 

for the letter that was sent to the States last week urging them to 

make sure that private financing of highways is always done with 

the best interest of the public in mind. Too often safety, mobility, 

and the larger economic purposes served by a national transportation system of highways are overlooked. These financing proposals should not force highway users to contribute disproportionately to solving public financial challenges that are not of their 

making. 

Mr. Chairman, ATA looks forward to working with you, with Mr. 

Duncan, the other Members of the Subcommittee to come up with 

solutions to the transportation crisis that serves the best interests 

of highway users and the U.S. economy. 

Thank you, Mr. Chairman. 

Mr. DEFAZIO. Thank you for that very direct testimony. 

We now turn to Mr. Todd Spencer, Executive Vice President, 

Owner-Operator Independent Drivers Association. Mr. Spencer. 

Mr. SPENCER. Good morning, Mr. Chairman, Ranking Member 

Duncan. I am pleased to be here today to talk on this very important issue. 

OOIDA has been engaged in the debate regarding public-private 

partnerships for quite some time now, including actively opposing 

the Chicago Skyway deal and the Indiana Toll Road. Our membership is small business truckers that would be very negatively impacted by ever-increasing tolls, as what will clearly be laid out in 

both of these situations. 

Given the Nation’s infrastructure needs, we are not of the impression that all public-private partnerships are necessarily bad. 

There may be situations where it makes sense for public entities 

to team up with the private sector on infrastructure projects and 

where private sector money can help to jump start projects that 

would add capacity to the Nation’s roadways. However, every 

transportation deal should be entered into cautiously with all factors being weighed and with total confidence that the overall net 

benefits clearly side with the public. All public-private partnerships 

should be done transparently and with full input from the public 

and, most importantly, highway users. 

We do not see any such caution about benefitting the public in 

the discussions now taking place in many States. Before Governor 

Mitch Daniels signed away the Indiana Toll Road, he claimed there 

was no political will in his State for increasing tolls on the route. 

But just like magic and over the objections of two-thirds of the 

38

State’s citizens, the political will appeared as he singlehandedly 

doubled the toll rates on that toll road to make it more attractive 

to investors. 

Imposing significant tolls on interstate highways without corresponding tax abatement will force truckers and other highway 

users to use alternative routes such as local roads and State highways that were never intended for the type of traffic that will be 

on those roads. The decision of truck drivers to use these less suitable roads is not based on an attempt to maximize their profits; 

rather it is an exercise in survival because they can neither offset 

or absorb those increased costs. As has been seen in States where 

toll rates have been raised, traffic congestion will increase significantly on alternative routes, adjacent communities will be disrupted, and safety on these roads will be dramatically reduced. 

It is laughable that officials at the U.S. Department of Transportation have tried to use the emotional hot button issue of traffic 

congestion to sell the public on deals such as those in Chicago and 

Indiana. Yes, congestion is a major problem in many of our Nation’s urban centers. However, the companies tossing around billions of dollars to invest in U.S. roads are out to make the maximum profit they can. The principal way they make profit is by producing that congestion. You would be hard pressed to find a company willing to ink a deal without the contract including non-compete clauses in some form or fashion that restrict the State’s ability 

to expand or improve roads that compete with the toll road being 

sold. 

We are not against every form of public-private partnership. But 

I should point out our Nation’s highway system was built with 

dedicated highway-user fees paid principally by truckers and other 

highway users. The typical one truck member of our organization 

right now will pay $16,000 every year in Federal and State highway user fees—just highway user fees. We paid for the highways 

that we use; we continue to pay for the highways we use. 

We have heard nothing from any of the governors or any of these 

proposals that talk about addressing the contributions that we 

made and we continue to make. We think we can do a whole lot 

better than the system that they have of patchwork highways, 

charge what the absolute market will bear, no competition from 

other routes. I really resent the term ‘‘free routes’’ because, again, 

$16,000 a year our members pay to use the roads we run on. That 

is 36 percent of the total of the Federal Highway Trust Fund plus 

the State fees on top of that. 

In my concluding comments, I just want to thank you, Chairman 

DeFazio, and also Chairman Oberstar for the direction, the guidance that you provided to State lawmakers, who I have witnessed 

first-hand when these issues come up do not have the needed perspective, understanding, and awareness of what a 75 or a 99-year 

commitment can do to their States. Again, thank you for providing 

that guidance. 

I look forward to working with the Committee. I am happy to answer any questions you may have. 

Mr. DEFAZIO. Thank you, Mr. Spencer. And again thanks for 

very direct testimony 

Mr. Greg Cohen, President, American Highway Users Alliance. 

39

Mr. COHEN. Chairman DeFazio, Ranking Member Duncan, and 

Members of the Subcommittee, I appreciate this opportunity to discuss public-private partnerships on behalf of The Highway Users. 

As you know, The Highway Users Alliance brings together the interests of users of all the highway modes that contribute to the 

trust fund. The two gentlemen to my right are members of our 

board. 

But The Highway Users is not just simply a freight-type organization. Our roster includes numerous AAA clubs from coast to 

coast, bus companies, motorcyclists, RV enthusiasts, and hundreds 

of other businesses that require safe, reliable, efficient roads to facilitate the movement of their employees, customers, and products. 

Some may argue that PPPs are not a Federal issue and that 

Congress should not get involved. The Highway Users disagrees for 

two reasons. One, Governor Rendell just spoke about, and that is 

PPP agreements involve tolls on major commerce routes often carrying traffic from out of State, they carry interstate motorists, 

truckers, and tourists primarily, and if the tolls are not invested 

directly for the benefits of the motorists, they are really highway 

corridor taxes. 

They impact interstate commerce which makes them a Federal 

issue under the Constitution. U.S. DOT’s oversight is a legitimate 

role for T&I Committee as well. Many are concerned that DOT’s 

promotion of PPPs may be intended to undercut future potential 

funding decisions that would come from this Committee and that 

would prevent the Federal highway program from growing and 

strengthening the national highway network. 

I would like to make it clear that The Highway Users support 

some PPP agreements; we have in the past and we probably will 

in the future, particularly those that are negotiated to build new 

roads and new highway lanes. Traditional Government funding is 

often not available for new roads and new lanes. We do have aging 

infrastructure, we do have tremendous maintenance needs, and we 

are not building roads in this country like in some of the other 

countries around the world. Private companies may be able to raise 

the capital to build roads that would not be otherwise built by government agencies. 

So that is one positive opportunity. Another opportunity is in 

forceful performance standards that States may be able to enforce. 

And there are a couple of other opportunities, including perhaps 

faster project development and innovation in materials. 

But I would also like to talk to you about some threats that our 

policy committee has listed. We are particularly concerned about 

PPP agreements in which long-term leases or concession agreements involving existing toll roads already built with highway user 

fees. In general, public toll roads built in the United States were 

designed to provide a high quality ride for the lowest possible toll. 

This is the mission of most turnpike authorities. Under private operation, the mission has to change. You are not maximizing the 

public benefits; instead, you are maximizing net revenue. 

Lease agreements typically involve a large up-front payment, 

whether it be received immediately or annuitized, it is an up-front 

payment in which private investors give money to the State or local 

government, and then the private investor received the future toll 

40

revenues. Behind closed doors, the two parties to the agreement 

may have the financial incentive to execute a deal which puts the 

monied interests above those of the road users. 

Let us talk about other threats. Number one is the diversion of 

funds, as the Chair mentioned, in the case of Chicago. Highway 

users are deeply concerned about the windfall revenue acquired by 

State or local government being used for non-highway projects. 

Non-compete clauses. As the name suggests, non-compete clauses 

are designed to prevent market competition and would prevent new 

roads and new capacity being added to nearby roads. 

Unfair tolling practices or toll increases. High tolls could lead to 

safety consequences on local streets if there is large decision to 

avoid these roads. Toll increases should be limited to levels far 

below inflation under a PPP, as they are in France. In the case of 

Indiana, you mentioned that the toll increases are floored at GDP 

or 2 percent. But in France, they are limited to only 70 percent of 

CPI inflation. Obviously, they are looking out to make sure the toll 

increases are below inflation. We are not doing that here. 

Longevity of agreements. Extremely long leases without profit 

caps generate much larger up-front payments but cannot be revisited for three or four generations. 

Also, disruption of Interstate or National Highway System continuity. 

And double taxation. On privately-operated roads, highway users 

may still be expected to pay fuel taxes. They should be refunded 

since the user fees were paid while driving on non-publicly maintained roads. 

In conclusion, considering both the opportunities that I mentioned and the risks, we would consider support for PPP agreements that: 

Are executed primarily for the construction of new roads; 

Involve substantially streamlined construction; 

Do not restrict vehicular access to free parallel roads; 

If the premium lanes are tolled and the general lanes are not 

tolled, all vehicles should have the choice to use either the premium or general lanes; 

Have high safety, mobility, payment, and performance standards; 

Direct all government-acquired lease revenue to highway 

projects; 

Do not have non-compete clauses; 

Protect highway users from excessive toll increases; and, I think 

most importantly, 

Have highway users participate in the negotiations involving the 

monied interests. 

Thank you for considering our perspectives on public-private 

partnerships. We think PPPs provide some innovative opportunities to build new lanes and roads. With public funding in short supply, it is something that should be considered but we have to watch 

out for the pitfalls. 

We look forward to working with the Subcommittee and Full 

Committee to support your actions to ensure that highway-related 

PPPs serve the highway users’ interests. We also are committed to 

strengthening the trust in the Highway Trust Fund and supporting 

41

continued strong Federal involvement to support our national highway network. Thank you. 

Mr. DEFAZIO. Thank you. 

Next, Mr. Michael Replogle, Transportation Director, Environmental Defense, Washington, DC. 

Mr. REPLOGLE. Thank you, Mr. Chairman, Ranking Member 

Duncan, and Members of the Subcommittee. I am transportation 

director for Environmental Defense. We are a nonprofit group and 

our half million members use America’s roads and transit systems 

on a daily basis. I am here to thank you for your efforts to ensure 

that those systems are operated and developed not only to improve 

mobility, but also to better protect public health and the environment. 

We all breath air that is affected by air pollution. We and future 

generations face unprecedented problems related to global climate 

change which is still growing due to our expanding dependence on 

fossil-fueled transportation. To achieve the needed 80 percent reduction in CO2 emissions over the next half century, we must 

adopt an economy-wide cap and trade system, cut carbon fuel content, boost vehicle fuel economy, and meet our mobility needs with 

less motor traffic. 

Growing congestion and transportation funding problems threaten our economic competitiveness. But new information and communication technologies could help us to manage transportation systems much more effectively. Public-Private partnerships and tolls 

could play a vital role in accelerating this innovation, promoting air 

quality, public health, and greenhouse gas reductions, if these public-private partnerships are structured right and with good public 

oversight. But these strategies will gain broad public support only 

if they deliver improved performance and expanded travel choices, 

and if PPP contracts are designed not merely to meet today’s weak 

environmental and system standards, but to ensure superior user 

system and environmental performance. My written testimony offers more details on these ideas. 

Many construction and finance interests support PPP financing 

and tolls to build and expand their business opportunities. Many 

highway user groups, like those you have just heard, oppose a lot 

of PPPs and tolls. People do not often like being asked to pay more 

especially if they are not sure what they are going to get for their 

money. 

Environmental Defense, my organization, has no vested interest 

in PPPs and tolls, but we do believe that these tools, if properly 

used, could help reduce environment and public health burdens associated with increasing mobility. If used just to build more roads 

faster or to relieve short-term fiscal problems, PPPs and tolls could 

increase congestion on existing roads and spur pollution, fuel use, 

and emissions for years to come. Indeed, we are seeing the backlash to PPPs and tolls in some States like Texas, due in part to 

failure to consider alternatives that could reduce these burdens together with top-down secretive deal-making. Such issues should be 

addressed through stronger Federal law, regulation, and enforcement of existing environmental and planning laws. 

But if this Committee is serious about doing something about climate change, it should encourage tolls and PPPs to spur better sysVerDate 0ct 09 2002 17:27 Apr 08, 2008 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 P:\DOCS\35928 HTRANS1 PsN: JASON
42

tem management and performance-based pricing on both new and 

existing roads, and use PPPs to spur innovative travel to land 

management and better public transportation. It should ensure 

that such efforts are designed to expand access to jobs and public 

facilities for all without undue time and cost burdens. It should foster reforms in how we fund and price transportation, correcting 

perverse incentives that now lead consumers and decision makers 

to make choices that actually worsen our problems. 

States like Oregon are pioneering approaches such as VMT fees 

that could lay a foundation for future transition to more effective 

system management. Other areas are encouraging pay-as-you-drive 

car insurance and car sharing opportunities that boost mobility 

while saving money for consumers who drive less. New York City 

is launching a strategy like London to charge motorists to enter the 

core to fund better transit. And the public in cities like London and 

Stockholm have really come around when they have seen the benefits from congestion pricing. We could use these approaches and 

things like emission-based tolls to help better manage our Interstate highway system and do this as part of lease deals or public 

financing. 

With your leadership, we can better align how we fund and price 

transportation with our broader system management goals. I appreciate and applaud your concern for the protection of the public 

interest in these deals, but urge you to strengthen the framework 

to spur more effective private engagement, not to stifle it, and to 

ensure that investment is consistent with our State and metro 

transportation plans and goals. We look forward to working with 

you on this. Thank you. 

Mr. DEFAZIO. Thank you for your testimony. 

I guess I would ask each panel member, given I think the widespread acknowledgement that the current level of infrastructure investment, whether your goal is to mitigate congestion, facilitate 

movement, or you have other goals in mind, is that we are not investing enough. So what is your preferred alternative to get more 

Federal investment? Mr. Graves? 

Mr. GRAVES. As I said in my testimony, and I think it has been 

stated before I think in the presentation of Mr. Duncan from Federal Express some time ago, we continue to favor the fuel tax as 

the traditional source of funding for highway infrastructure investment. The ATA intends to be fully engaged in a conversation about 

the willingness to pay more fuel tax in exchange for a more robust 

reauthorization proposal. We feel very strongly about a strong national role in highways. 

Mr. DEFAZIO. Okay. Thank you. Mr. Spencer? 

Mr. SPENCER. Our organization is on record too as supporting the 

fuel tax as the principal means of most efficiently addressing highway user issues historically. We are certainly willing to come to the 

table to discuss those issues, whatever the appropriate level. 

I can also tell you that our members feel very, very strongly 

about how highway user revenues are used for things other than 

highways. One of the things that was striking from Governor 

Rendell was he talked about safety priorities for how they spend 

transportation dollars and routing transportation dollars to transit 

43

in Philadelphia. Well, he also mentioned they had 1,500 deficient 

bridges that he implied were somehow about to fall down. Well, the $420 million came from the money that was supposed 

to be used for those highways and bridges. So that is really, really 

important to our members. We think that is in the interest of fairness. That is not to say that other transportation things should not 

be funded. But our highways cannot be the cash cow for everything, nor can our members as truckers be the cash cows. Small 

business truckers are the majority of the industry and their pockets are not very deep. 

Mr. DEFAZIO. Thank you, Mr. Spencer. Mr. Cohen? 

Mr. COHEN. I would agree with that sentiment. Also, you asked 

about Federal funding, we would like it to continue to be funded 

by the highway user fees and through a Federal Highway Trust 

Fund. We are also concerned about the diversion. In reality, we all 

know the highway user fees need to be increased. 

And the goal—I think it is commendable that the Committee is 

taking this slow, taking time before reauthorization to make the 

case to the American public that this program will really serve 

them—that we take the time, we establish the mission of this program, we reconsider exactly what the purpose of this thing is, and 

then groups like The Highway Users Alliance and I think a lot of 

others will be willing to go out and charge out to the media, the 

editorial boards, our own members and our grassroots supporters 

to defend paying more for that program. 

Mr. DEFAZIO. Mr. Replogle? 

Mr. REPLOGLE. Environmental Defense has not taken a formal 

position on a gas tax increase. But our key concern is that whatever revenue mechanisms are used to enhance transportation funding, that they come along with better accountability for performance to make sure that the revenues are spent in ways that help 

deliver more mobility improvements and support for economic development with fewer emissions and less fuel use. 

We need to be making sure that we are making progress on managing traffic growth and its contribution to greenhouse gas emissions. Fuel taxes could play a role in helping to foster more efficiency in vehicle choices and in travel decisions. But direct user 

fees like congestion pricing, VMT fees, and things like that also deserve a lot of consideration as you deliberate about these matters. 

Mr. DEFAZIO. Since you raised congestion pricing, it seems many 

times to be sort of accepted as a benign thing. The problem I have 

with congestion pricing, and I will use the example of Portland, 

where I do not live, Portland, Oregon, housing in the city is extraordinarily expensive and a lot of people are priced out of the 

city. The system does not necessarily accommodate them in any 

other way than by automobile to get to work in the city or on the 

other side of the city, which is virtually impossible to get to with 

any combination of transit from where they live. They do not 

choose when they go to work. 

So, to me, if you are going to have congestion pricing, a person 

has to have a viable alternative that is comparable or even better 

in terms of their time commitment and affordable before you can 

begin to apply congestion pricing. Would you agree with that principle? 

44

Mr. REPLOGLE. I would agree that we need to give people a guaranteed better performance and increased travel choices. I do not 

know that we can give everyone completely equivalent travel choice 

to what we get from our deeply subsidized system of sprawl and 

car dependence. We have a lot of people who made rational and intelligent decisions on the basis of very cheap gasoline, on the basis 

of roads that have been subsidized out of general revenues, and on 

the basis of car insurance designed so that once bought, it is essentially a fixed cost. 

So that the actual marginal cost of driving a mile is only about 

15 percent for the user of what the real total cost to society is. So 

we are in a situation where our transportation system often breaks 

down because the users do not perceive the costs that ultimately 

each decision to make a trip imposes on the rest of the system. 

When you subsidize any good, people tend to consume more of it. 

So we end up paying for it by being stuck in queues in traffic congestion. 

There is some recent work that has been done, the Transportation Research Board did a competition about how congestion pricing can actually help produce higher efficiency on our highways. I 

think it is a telling thing. If you take a pound bag of rice, pour it 

through a glass funnel and let it back up in the funnel and time 

how long it takes to go through, it might take 30 seconds with that 

backup. If you take that same rice and you meter the flow through 

the funnel and pour it at about the rate it comes out the bottom, 

it will go through about a third faster because it does not have the 

friction of the backup. 

So if we use a whole set of tools in our toolbox of congestion management, and road pricing is one of them, then we can actually get 

the system to deliver more through-put without building more——

Mr. DEFAZIO. Right. I understand that. And I am sure the $40 

round trip here in Washington, D.C. will allow those people in the 

chauffeur-driven limousines to get in and out of the city very quickly. That is a very great use of a public asset. 

I will have to turn to Mr. Duncan. I think we have some disagreement over that. 

Mr. DUNCAN. Thank you, Mr. Chairman. I want to thank all of 

the witnesses for very helpful and very informative testimony. 

Governor Graves, I was sitting here thinking this is my 19th 

year on the Committee and we have had many governors testify 

but I only remember one former governor. I remember Governor 

Baliles of Virginia who headed up an aviation commission. But we 

are pleased to have you here. I do remember seeing the Johnny 

Carson Show many years ago that Governor Pat Brown was on and 

he said a week after he left the governor’s office he was stopped 

by a California Highway Patrolman, and he said to the patrolman 

you must not recognize me, I am Governor Brown, and he said the 

patrolman said you mean ex-Governor Brown and wrote him a ticket. And you have a very important position now. 

I do appreciate, Mr. Spencer, both yours and Governor Graves’ 

groups. The trucking companies and truckers in this country do so 

much for this Nation and we take you so much for granted how 

much you mean to us. 

45

Governor Graves, I am told by the staff that your group supported the Indiana Toll Road leasing. Is that correct? 

Mr. GRAVES. We have sort of a colored past. We are a federation. 

We have 50 State associations and we tend to respect the positions 

of our States. The State association was engaged in and discussed 

with Governor Daniels the creation of the arrangement in Indiana. 

I think it would be fair to say that when the other 49 States, again, 

most of whom are companies engaged in interstate commerce, were 

able to see the details when it was finally revealed as to what all 

the implications might be for the industry as a whole, there was 

a certain push back. 

ATA has taken, and I think that was the catalyst, ATA has 

taken a very strong position in opposition. Not in all instances. In 

fact, I discussed with Governor Daniels in his proposal on that 

commerce corridor around the south part of town, it was capacity 

that otherwise might not have been built. That could have been an 

example of where we might have not had the great concerns. But 

nonetheless we are a little conflicted in the original beginnings of 

that Indiana deal. 

Mr. DUNCAN. We had Governor Daniels here I think last year 

and he testified about it. As a former governor, you had the responsibility of maintaining the State’s highways and so forth. Would 

your testimony have been different if you had been here as a governor? 

Mr. GRAVES. During my two terms we raised the fuel tax twice 

in support of a fairly large, at least by Kansas measures, a fairly 

large multimodal transportation plan. I think it was the right thing 

to do then and, as you can tell from my testimony, I still think it 

is the right thing to do. 

And if you would allow me to opine one subject that has not been 

brought up this morning that continues to concern me now as a 

former governor. 

Mr. DUNCAN. Sure. 

Mr. GRAVES. That is, if the States who can do these things, if 

there are ways that you can be successful, and let us use Governor 

Rendell’s example, if he can in fact create that huge pot of money 

that addresses many of the infrastructure problems in Pennsylvania, my concern would be that as you all go forward in your difficult and important work, what does that mean in terms of the 

willingness of Members of the Pennsylvania delegation in that case 

to want to join with others who are looking for a national solution 

to transportation finance. 

Do we create a scenario where we have haves and have-nots and 

the haves lose even further interest in casting some tough votes 

that perhaps support a national system of transportation? Again, 

we support very strongly seeing that increased strong Federal role 

occur. 

Mr. DUNCAN. Thank you. 

Mr. Spencer, we had a nice visit in my office several months ago 

and I appreciated that and also your giving me an opportunity to 

write an article for your magazine. But I notice in your testimony 

you say that the truck operators pay 36 percent of the cost on the 

highways now. Do you think your members are paying more than 

their fair share? 

46

Mr. SPENCER. You know, Congressman Duncan, that is a really, 

really dicey issue. Trucks make up something on the order of 3 percent of all the vehicles that use the roads, and of course we only 

use a very small percentage. The 36 percent represents the total 

amount that trucking pays into the Highway Trust Fund. We think 

that is a tremendous amount of money. 

There will be plenty of people who will argue whether or not it 

is a fair share or not. But it certainly is a significant sum. As you 

know well, sir, most of trucking is small business that struggles to 

offset those costs. You are keenly aware of those in your State of 

Tennessee, and I was somewhat surprised that Governor Rendell 

did not seem to be especially aware of all the small business truckers in Pennsylvania because there are thousands there. 

Mr. DUNCAN. I will tell you what I have always said. I think we 

ought to pin a medal on anybody who survives in small business 

today because every industry seems to be geared so much towards 

the big giants. But we have run out of time. We have to go for the 

votes now. Thank you very much for being here. I will turn it back 

to the Chairman to close. 

Mr. DEFAZIO. I want to thank the panel for their time. I want 

to thank the Ranking Member for his active participation. And 

with that, the Committee is adjourned. 

[Whereupon, at 12:42 p.m., the Committee was adjourned.]

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