U.S. GOVERNMENT PUBLISHING OFFICE

31–282 PDF WASHINGTON : 2018

S. HRG. 115–319 

THE LONG-TERM VALUE TO U.S. TAXPAYERS 

OF LOW-COST FEDERAL INFRASTRUCTURE LOANS 

HEARING 

BEFORE THE

COMMITTEE ON 

ENVIRONMENT AND PUBLIC WORKS 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

JULY 11, 2018 

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

( 

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

(II) 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

JOHN BARRASSO, Wyoming, Chairman 

JAMES M. INHOFE, Oklahoma 

SHELLEY MOORE CAPITO, West Virginia 

JOHN BOOZMAN, Arkansas 

ROGER WICKER, Mississippi 

DEB FISCHER, Nebraska 

JERRY MORAN, Kansas 

MIKE ROUNDS, South Dakota 

JONI ERNST, Iowa 

DAN SULLIVAN, Alaska 

RICHARD SHELBY, Alabama 

THOMAS R. CARPER, Delaware, 

Ranking Member 

BENJAMIN L. CARDIN, Maryland 

BERNARD SANDERS, Vermont 

SHELDON WHITEHOUSE, Rhode Island 

JEFF MERKLEY, Oregon 

KIRSTEN GILLIBRAND, New York 

CORY A. BOOKER, New Jersey 

EDWARD J. MARKEY, Massachusetts 

TAMMY DUCKWORTH, Illinois 

CHRIS VAN HOLLEN, Maryland 

RICHARD M. RUSSELL, Majority Staff Director 

MARY FRANCES REPKO, Minority Staff Director 

(III) 

C O N T E N T S 

Page 

JULY 11, 2018 

OPENING STATEMENTS 

Barrasso, Hon. John, U.S. Senator from the State of Wyoming .......................... 1 

Carper, Hon. Thomas R., U.S. Senator from the State of Delaware ................... 2 

WITNESSES 

Holtz-Eakin, Doug, President, American Action Forum ...................................... 5 

Prepared statement .......................................................................................... 7 

Sarmiento, Vicente, Director, Orange County Water District ............................. 14 

Prepared statement .......................................................................................... 16 

Motyl, Brian, Assistant Director of Finance, DelDOT .......................................... 31 

Prepared statement .......................................................................................... 34 

ADDITIONAL MATERIAL 

Statement of the Council of Infrastructure Financing Authorities, July 11, 

2018 ....................................................................................................................... 59 

(1) 

THE LONG-TERM VALUE TO U.S. TAXPAYERS 

OF LOW-COST FEDERAL INFRASTRUCTURE 

LOANS 

WEDNESDAY, JULY 11, 2018 

U.S. SENATE, 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:07 a.m. in room 

406, Dirksen Senate Office Building, Hon. John Barrasso (Chairman of the Committee) presiding. 

Present: Senators Barrasso, Carper, Inhofe, Boozman, Wicker, 

Fischer, Rounds, Ernst, Sullivan, Cardin, Gillibrand, Booker, Markey, Duckworth, and Van Hollen. 

OPENING STATEMENT OF HON. JOHN BARRASSO, 

U.S. SENATOR FROM THE STATE OF WYOMING 

Senator BARRASSO. Good morning. I call this hearing to order. 

Today the Committee will examine the benefits of Federal infrastructure leveraging programs to American taxpayer dollars. 

This is the seventh hearing our Committee has held this year on 

improving our Nation’s highways, bridges, and water projects. 

These hearings have shown infrastructure is critical to our Nation’s 

prosperity. 

As America’s population and economy have grown, our infrastructure has not kept pace. Maintenance shortfalls and project 

backlogs have left many key elements of our infrastructure in 

transportation in need of major repair and replacement in transportation, as well as water. As a result, major infrastructure improvements are needed across the country to build, to maintain, 

and to replace these vital systems. 

Timely decisions and timely construction are keys to success. The 

sooner a project is built, the sooner it can have a positive impact 

on the lives of the people in those communities and those affected. 

Loan and loan guaranty programs often allow expensive projects 

to be delivered in a timely fashion and at a reduced cost. These 

programs are the Transportation Infrastructure Finance and Innovation Act, referred to as TIFIA; the Water Infrastructure Finance 

and Innovation Act, called WIFIA; and the new Securing Required 

Funding for Water Infrastructure Now Act, the SRF WIN Act. 

TIFIA loans have been used very successfully for the construction of critical transportation infrastructure, and we expect to see 

similar success through WIFIA and SRF WIN. These programs enable State and local project sponsors to borrow money at lower 

2 

long-term cost and to complete construction years sooner than if 

funding were secured through other means. 

As we have heard in past hearings, leveraging Federal funding 

to maximize investment is a tool that the Trump administration 

strongly supports. Two of these leveraging programs are key components of America’s Water Infrastructure Act, the bipartisan legislation that we passed unanimously through this Committee last 

month. 

Based on our water infrastructure bill, the Congressional Budget 

Office, or the CBO, has estimated that the WIFIA program and the 

SRF WIN program would receive appropriations of $400 million 

over 2 years. That expenditure would then be leveraged by State 

borrowing to generate $12 billion in new water infrastructure 

spending. 

Converting $400 million in Federal resources into $12 billion in 

new infrastructure spending is exactly the kind of leveraging that 

President Trump has been calling for. 

This is particularly true for the SRF WIN program, which is designed to help rural States. Such leveraging seems good for Federal 

taxpayers as well as States, alike. Congressional rules dictate that 

all bills be scored by the CBO to assess the amount of taxpayer dollars that are going to be spent, but also by the Joint Committee 

on Taxation—the JCT—to judge if any Federal revenue will be lost. 

When States use tax-free bonds for infrastructure projects, JCT 

assumes that the Federal Treasury will lose tax revenue when 

States borrow, so under their theory the $12 billion in increased 

State infrastructure spending is presumed to cost the Federal 

Treasury $2.6 billion. 

The Committee has addressed this scoring issue by cutting back 

the size of the SRF WIN program. These changes will be reflected 

in the version of the American Water Infrastructure Act that will 

soon be brought to the Senate floor. 

Now, I believe that leveraging programs such as WIFIA and 

TIFIA and SRF WIN are good for Federal taxpayers since they enable States to address more of their infrastructure backlog. If 

States aren’t able to finance their infrastructure needs, then Federal taxpayers will inevitably be on the hook to directly fund more 

projects in the future. 

So, today, former CBO Director and American Action Forum 

President Doug Holtz-Eakin is going to share his observations on 

how leveraging programs can generate economic growth and demonstrate benefits to the taxpayer far beyond any loss of Federal 

revenue. We will also hear about successful projects using these 

programs in Delaware and in Santa Ana, California. 

Before we introduce our witnesses today, I would like to turn to 

Ranking Member Carper for his remarks. 

OPENING STATEMENT OF HON. THOMAS R. CARPER, 

U.S. SENATOR FROM THE STATE OF DELAWARE 

Senator CARPER. Thanks, Mr. Chairman. 

Great to be with all of our colleagues and to see some familiar 

faces, and to actually see a couple of new ones, too. Thank you all 

for coming, for joining us today. 

3 

Mr. Chairman, thanks for the holding the hearing. We are here, 

as you said, to discuss several innovative low-cost Federal loan programs and the value that they provide for the development of our 

transportation infrastructure, as well as for the people who use 

that infrastructure and for the American people. 

Congress created the Transportation Infrastructure Finance and 

Innovation Act, known as TIFIA, back in 1998. I was a Governor 

then, and I recall the National Governors Association working with 

the Administration on this initiative. But we did it in order to fill 

a gap in our infrastructure investments. 

Public funding is critical for the majority of transportation 

projects; however, at times, lack of sufficient funding makes it difficult for agencies to build high cost projects, despite the many benefits that these projects might yield. 

In 1998 Congress found that ‘‘a Federal credit program for 

projects of national significance can complement existing funding 

resources by filling market gaps.’’ That is what we were thinking 

about 20 years ago. 

There is a project underway in Maryland, transportation project, 

that flows right of Delaware. Some of you know there is a road 

called Route 301 that flows off of—if you take 50 East out of here 

and pick up on the other side of the Chesapeake Bay, pick up 301. 

It is really a beautiful drive. 

Senator CARDIN. What State is that in? 

Senator CARPER. That is in your State, in the State of Maryland, 

which is well represented here today. And when you get to Delaware, a beautiful four-lane highway becomes a two-lane road, you 

slow down, and it goes through a more developed area. For years, 

for decades, we wanted to do something about it, but what we do, 

we pick up 301, we turned it into a four-lane limited access highway. 

And the 301 project in Delaware I think is a really good example 

of a project where traditional funding mechanisms just were not 

sufficient. The improvement to Route 301 in my State had been 

needed for a long time, but the project cost was more than 3 times 

higher than the total Federal funding Delaware receives in a single 

year, so building it with public funding alone just was not feasible. 

The TIFIA loan that we have obtained enabled the US 301 

project to move forward, improving safety and regional mobility, 

and providing the State with a convenient alternative to the commercial traffic bottleneck on I–95. Actually, it is a bottleneck that 

goes through Middletown and a bunch of other areas, Odessa, before you get to I–95. But the project is expected to generate about 

15,000 jobs, and it will contribute to the long-term economic vitality of our region, and I think it will be good for our neighboring 

State, Maryland. 

Building on the success of the TIFIA program for transportation 

in 2014, Congress made low-cost financing available for a lot of infrastructure as well, by authorizing the Water Infrastructure Finance Innovation Act, or WIFIA. Through WIFIA the Environmental Protection Agency can now provide credit assistance in the 

form of secured or direct loans, or loan guarantees, for a wide 

range of drinking water or wastewater projects. 

4 

EPA is now reviewing letters of interest for WIFIA loans and has 

begun providing loans to help complete water infrastructure 

projects. These projects have the potential to increase the availability of drinkable water, to replenish groundwater, improve water 

quality, reduce pollutants, and improve the resilience of water facilities. 

The U.S. Army Corps of Engineers was also authorized to provide similar assistance for water resource projects, such as flood 

control or hurricane and storm damage reduction; however, Congress has not yet appropriated funds, nor has the Trump administration requested funds, for the Army Corps to use this authority. 

Innovative finance programs such as WIFIA and TIFIA offer loan 

terms that make them a good value for borrowers, such as low 

fixed interest rate, longer payment schedule, and an option to defer 

payment. Of course, the loan programs are not a replacement for 

public funding, nor should they be. The TIFIA program has now 

been authorized for 20 years, during which time just 67 loans have 

been made. 

The 301 project I have been talking about in Delaware was our 

State’s very first TIFIA loan. Many projects are not well suited for 

loans because they lack a revenue stream to enable the repayment 

of that loan. 

As we consider calls to expand these innovative finance programs, we should keep in mind that in 2015 we reduced the size 

of the TIFIA program because it was not being used. There is still 

significant unused credit assistance available in the TIFIA program. As a result, expanding the program will not necessarily increase the level of infrastructure investments. 

Last week the Federal Transit Administration changed their policy to consider USDOT loans such as TIFIA as Federal funding 

rather than as the local match. However, the TIFIA statute is quite 

clear that these loans count toward the non-Federal share of a 

project when they are repaid with local funds. This policy change 

could lead to many prospective projects not applying for TIFIA programs at all, which could exacerbate the problem of unused loan 

authority. 

Congress and the Administration should be working together to 

make it easier for State and local agencies to access these loans 

and invest in our infrastructure, not more difficult. Our goal should 

be to provide a portfolio of options for infrastructure investment, 

including direct Federal grants and loans, so that State and local 

project sponsors may identify the best techniques to improve their 

community’s water, their mobility, and their quality of life. 

We look forward to hearing from our witnesses today to figure 

out how we can best achieve that goal and again we thank you all 

for joining us. 

Mr. Chairman, thank you for holding this hearing. 

Senator BARRASSO. Thank you very much, Senator Carper. 

We will now hear from our witnesses. We have Doug HoltzEakin, who is the President of the American Action Forum; we 

have Vicente Sarmiento, the Executive Director of the Riverside 

County Transportation Commission; and Brian Motyl, who is the 

Assistant Director of Finance at Delaware Department of Transportation. 

5 

I would like to remind the witnesses that your full testimony will 

be made part of the official hearing today, so please keep your 

statements to 5 minutes so that we may have time for questions. 

I look forward to hearing the testimony of each of you, beginning 

with Mr. Holtz-Eakin. 

STATEMENT OF DOUG HOLTZ-EAKIN, 

PRESIDENT, AMERICAN ACTION FORUM 

Mr. HOLTZ-EAKIN. Thank you, Chairman Barrasso, Ranking 

Member Carper, and members of the Committee, for the privilege 

of being here today. I will be brief, and I look forward to answering 

your questions. 

The design of infrastructure finance programs centers on their 

unique feature, which is that infrastructure, once it is provided to 

one individual, is available to all, and this collective benefit aspect 

of it is an important thing to think about when designing the financing of infrastructure projects. 

Those benefits can take a variety of forms; they can take the 

form of better productivity. So, if we have a better road network, 

we can see improved business productivity, higher wages, increased 

standard of living. They can also take the form of non-marketed 

benefits. If we have a better road network, I can get from home to 

work faster, so I can leave later and see my family more; I can get 

home more quickly after doing the same amount of work in my office, so my measure of productivity is the same, but my life is better. So those kinds of benefits figure into the returns of infrastructure projects. 

They also typically do not accrue to just one jurisdiction; there 

are spillovers and benefits. As you just mentioned, between Delaware and Maryland, in wastewater, streams flow across different 

jurisdictions so there is a natural Federal role in making sure that 

adequate infrastructure is provided that recognizes the benefits to 

all, including the spillovers to other jurisdictions. 

So the programs we are discussing today, WIFIA and SRF WIN, 

have exactly those characteristics, and I think that is important to 

be noted. They rely heavily on project selection by the State and 

local authorities who are most familiar with the benefits that will 

accrue to their affected stakeholders, and that project selection is 

an important part of thinking about the economics of infrastructure. Is the return to money in the public sector in an infrastructure project the same or greater than using that capital in a private investment and getting a market rate of return? That is the 

core economic question. They are best positioned to answer that 

through a variety of means. 

Second thing they do is because stakeholders have money invested in these projects, it ensures not just good project selection, 

but efficient project operation. There is no interest in wasting their 

own money, and thus, the Federal taxpayers’ money is well protected as well. 

And then the third is the fact that the Federal Government does 

actually have a stake in this that enhances the scale and the scope 

of these projects, and it does provide the leveraging aspect that the 

Chairman mentioned, that a large amount of infrastructure can be 

supported through a relatively modest Federal investment. 

6 

The thing I would note about all of that is that that very framework for thinking about good infrastructure projects and good infrastructure finance bears essentially zero relation to the CBO 

score that you will get on your bill, or any other bill. CBO scores 

are costs. They do not in fact attempt to measure benefits; they do 

not reflect the productivity that infrastructure can provide; they 

don’t reflect the non-marketed benefits that the population enjoys; 

they reflect only the costs, and indeed, they reflect only the Federal 

budget costs. 

So the right way to think about the score on a WIFIA or SRF 

WIN program is it is a good measure of the budgetary resources 

that will not be available for other priorities from the Senate or the 

House because of the funding of WIFIA or SRF WIN. That includes 

the subsidy costs that you have to cover and the Joint Committee’s 

estimate of taxes not collected as a result of the program. 

So there is nothing wrong with the scoring; it just answers a very 

narrow question: What budgetary resources does this program 

make unavailable to other priorities? It doesn’t answer the core 

question: Is this a good idea? And that is something that the Congress and the Committee must consider when going forward with 

these projects. 

So, I am delighted to be here today, and I look forward to answering your questions. 

[The prepared statement of Mr. Holtz-Eakin follows:] 

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Douglas Holtz-Eakin 

President of the American Action Forum 

Washington, D.C. 

Doug Holtz-Eakin has a distinguished record as an academic, policy 

adviser, and strategist. Currently he is the President of the American 

Action Forum. 

Since 200 I, he has served in a variety of important policy positions. 

During 2001-2002, he was the Chief Economist of the President's 

Council of Economic Advisers (CEA) (where he had also served 

during 1989-1990 as a Senior Staff Economist). At CEA he helped to 

formulate policies addressing the 2000-200 I recession and the aftermath of the terrorist attacks 

of September II, 2001. From 2003-2005 he was the 6th Director of the non-partisan 

Congressional Budget Office (CBO), which provides budgetary and policy analysis to the U.S. 

Congress. During his tenure, CBO assisted Congress as they addressed numerous policies --

notably the 2003 tax cuts (JGTRRA), the Medicare prescription drug bill (MMA), and Social 

Security reform. 

During 2007 and 2008 he was Director of Domestic and Economic Policy for the John McCain 

presidential campaign. Since then he has been a Commissioner on the Congressionally-chartered 

Financial Crisis Inquiry Commission. 

Dr. Holtz-Eakin built an international reputation as a scholar doing research in areas of applied 

economic policy, econometric methods, and entrepreneurship. He began his career at Columbia 

University in 1985 and moved to Syracuse University from 1990 to 200 I. At Syracuse, he 

became Trustee Professor of Economics at the Maxwell School, Chairman of the Department of 

Economics and Associate Director of the Center for Policy Research. 
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31282.002

The Economic and Budgetary Effects 

ofWIFIA and SRF-WIN 

Douglas Holtz-Eakin 

President, American Action Forum' 

july 11, 2018 

'The views expressed here are mine alone and do not represent the position of the 

American Action Forum. I thank Gordon Gray for his assistance. 
9 


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Chairman Barrasso, Ranking Member Carper and members of the committee. Thank 

you for the privilege of appearing today to discuss the economic and budgetary 

impacts of the Water Infrastructure Finance and Innovation Act (WIFIA) and 

Securing Required Funding for Water Infrastructure Now Act (SRF-WIN) programs. 

In what follows, I hope to make three basic points: 

The WIFIA and SRF-WIN programs allow relatively few federal dollars to 

support a very large base of water infrastructure investments. 

The economics of infrastructure investment are conceptually straightforward 

and are a natural function of the public sector. 

The federal budgetary treatment of these programs correctly identifies the 

budgetary resources made unavailable for other purposes, but sheds no light 

on the basic investment decisions supported by the programs. 

Let me take these in turn. 

Overview ofWIFJAl 

The Water Infrastructure and Finance and Innovation Act (WIFIA) is a federal credit 

program administered by the Environmental Protection Agency (EPA) for eligible 

water and wastewater infrastructure projects. The WIFIA program works 

separately from, but in coordination with, the State Revolving Fund (SRF) programs 

to provide subsidized financing for water infrastructure for projects. The program 

was established by the ~ ; 

(WRRDA) and authorizes the EPA to provide federal credit assistance- in the 

form of capital loans to a range of drinking water and wastewater projects. The 

WIFIA program can provide up to 49 percent of the anticipated eligible project 

costs, however, total federal assistance may not exceed 80 percent of a project's 

eligible costs. 

Eligible borrowers ofWIFIA loans include local, state, and federal government 

entities, partnerships and joint ventures, corporations and trusts, and Clean Water 

and Drinking State Revolving Fund programs. The WIFIA program funds for 

development and implementation activities- pre-construction activities, 

construction, reconstruction, rehabilitation, and replacement activities, and 

acquisition of real property- for eligible projects. 

Eligibility is also contingent on project costs, public support, and creditworthiness. 

The project's eligible costs must be at least $20 million. However, the threshold is 

lower for projects serving rural areas. Projects serving a population of 25,000 or 

less must have costs of at least $5 million. Projects that are carried out by private 

entities must demonstrate that the community has been consulted and that the 

project has the support of affected state, local, or tribal government in which the 

project is located. In addition, projects applying for WIFlA credit assistance must be 

creditworthy and must have a dedicated revenue source. If a projected is selected to 
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receive WIFIA assistance it must abide by National Environmental Policy Act, DavisBacon, Buy America, and all federal cross-cutter provisions. 

Benefits ofWIFIA Credit Assistance 

The volume of credit assistance offered through WIFIA is contingent on the size of 

congressional appropriations the subsidy rate of the eligible program. The EPA can 

use congressional appropriations for administrative purposes and loan subsidy 

costs- the estimated cost of default. Since the EPA is required to cover only the loan 

subsidy costs, a greater size ofWIFIA credit assistance can be generated from the 

congressional appropriations. The Administration's Office of Management and 

Budget (OMB) estimated an average 1.55 percent subsidy rate for WIFIA projects in 

FY2018. OMB's estimated subsidy rate for WIFIA suggests that every $1 ofWIFIA 

contract authority, on average, will enable the EPA to issue $102 in WIFIA loans 

(1:102 direct loan leverage ratio). Since WIFIA can cover up to 49 percent of project 

total costs, WIFIA appropriations could yield a total water infrastructure investment 

ratio of 1:208, on average. 

Borrowers benefit from the low interest rates ofWIFIA assistance and repayment 

schedule. The interest rate of the loan will be equal or greater to the U.S. Treasury 

rate of a similar maturity, thus lowering the cost of capital for borrowers beyond the 

cost of traditional tax-exempt municipal bond. Additionally, repayment on WIFIA 

loans may be deferred for a maximum of five years after the substantial completion 

of the project. However, the final maturity date of the WIFIA credit assistance shall 

be no later than 35 years after the date of substantial completion. 

In FY 2015 and FY 2016, Congress appropriated $2.2 million to the EPA to design 

and staff the WIFIA program. Enactment of the '· 

· ' provided the first appropriation of funds to 

cover the subsidy costs of loans issued under the program. The Act appropriated 

$20 million to the EPA to begin subsidizing gross obligations for the principal 

amount of loans and allows the agency to use $3 million of the total for 

administrative costs. The Consolidated Appropriations Act of 2017 appropriated an 

additional $8 million for credit subsidies raising WIFIA's total appropriations to $25 

million. For FY 2017, the WIFIA program selected 12 projects to apply for $2.3 

billion in WIFIA loans, which, in addition to private capital and other funding 

resources, will help to finance $5.1 billion in water infrastructure investment. 

For FY2018, the Consolidated Appropriations Act, 2018 (P.L. 115-141), provided 

$63 million for the WIFIA program (including $8 million for administrative costs}. 

EPA estimated that its budget authority ($55 million) would provide approximately 

$5.5 billion in credit assistance, which could support an estimated $11 billion in 

water infrastructure. 

Overview ofSRF·WIN 
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The SRF-WIN Act amends WIFIA to provide to State infrastructure financing 

authorities additional opportunities to receive loans to support drinking water and 

clean water State revolving funds. It combines aspects of both WIFIA and State 

Revolving Funds (SRFs), building upon the leveraging concept in WIFIA to provide 

new funds for State Infrastructure Financing Authorities to utilize. 

The Economics of Infrastructure Investment 

The economics of public infrastructure are straightforward. Clean water, to take a 

concrete example, benefits everyone simultaneously. Once it is clean for one 

resident, it will be clean for all. For this reason, conventional private market 

methods work poorly in providing infrastructure and the public sector becomes 

involved. 

That does not change the fact that the infrastructure is valuable and provides 

benefits to the population. If a $100 infrastructure investment provides $Bon 

average annually in benefits to the population over its lifetime, the social rate of 

return on investments is $B /100 orb per year. 

The resources to the make this investment must be drawn from the private sector 

via taxes or borrowing. This reduces the funds available for private investment by a 

corresponding $100, which eliminates a potential investment. 

If the rate of return on the private sector investment is r, then the economics of 

infrastructure investment can be reduced to the canonical question: are the benefits 

greater than the costs. In this instance, is b bigger than r? If so, it makes sense for 

public policy to engender infrastructure investment. 

The Federal Budgetary Treatment of Infrastructure Investment 

The federal budgetary presentation bears essentially no resemblance to the core 

economic question in play for three reasons. 

First, the budget process focuses on identifying f_OJ>J§ of programmatic activities. It 

makes no attempt to quantify benefits or to systemically investigate the benefit-cost 

question. It simply addresses a different question. 

Second, the focus is on federal budget cost. It is not attempting to measure the social 

cost of an infrastructure investment (r in the example above). Nor is it attempting to 

measure the costs borne by municipal governments, state governments, private 

sector investors, or any other participant in the infrastructure investment. 

Third, it is focused on the costs of fi!l_C!D_cjng the investment. In the case ofWIFIA and 

SRF-WIN the budget costs take two forms: (a) the subsidy cost that covers the 

probability of less-than-100 percent recovery of the initial infrastructure 

investment, and (b) the revenue forgone on taxing the return on private sector 

investments. In the federal budget context, this is entirely appropriate as these are 
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measures of the budgetary resources made unavailable for other uses by funding 

WIFIA and SRF-WIN projects. 

Thank you and I'd be happy to answer your questions. 
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Notes 

1 This section relies heavily on the WIFIA primer written for AAF by Brianna 

Fernandez. 
14 

Senator BARRASSO. Well, thank you so much for your testimony. 

Mr. Sarmiento, let me first apologize. I think I introduced you 

from the wrong location. In fact, I understand you are the Orange 

County Water District representative. If you could clarify things as 

you open, but we are delighted that you are here to share your experience with us today. Thank you for being here. 

STATEMENT OF VICENTE SARMIENTO, 

DIRECTOR, ORANGE COUNTY WATER DISTRICT 

Mr. SARMIENTO. Thank you. Good morning, Chairman Barrasso 

and Ranking Member Carper and members of the Committee. It is 

my honor and privilege to be with you and address the Committee 

on the need to support Federal financing of our Nation’s public 

water infrastructure projects. 

My name is Vicente Sarmiento, and I am a Director with the Orange County Water District, as well as a Councilmember from the 

city of Santa Ana, California. 

The Orange County Water District is an internationally recognized leader in the water industry, and we are presently celebrating our 85th anniversary. We are proud to provide clean and 

safe drinking water to 2.5 million people that live and work in Orange County, California, and our primary responsibility is to be 

stewards of the Orange County Groundwater Basin, which is a 

large underground aquifer that provides 75 percent of the county’s 

water. 

One of our most important assets is to recharge that basin with 

the Groundwater Replenishment System, or GWRS. It takes treated wastewater that would otherwise be sent to the Pacific Ocean 

and applies an advanced purification process that produces high 

quality water that meets or exceeds Federal and State drinking 

water standards. It is the world’s largest advanced purification 

project of its kind. Some have called it toilet to tap. We like to refer 

to it as showers to flowers. 

GWRS is a collaborative effort with the Orange County Sanitation District. Presently we generate about 100 million gallons a day 

of safe water for our folks in Orange County, and that is for about 

850,000 folks. With our final expansion, we will be generating 130 

million gallons a day for 1 million residents in Orange County. 

The GWRS final expansion will cost approximately $270 million 

and is estimated to create about 700 new jobs during the design 

and construction phase. With this final expansion, the Orange 

County Water District and Sanitation District will be recycling 100 

percent of recyclable water within their service area. 

To finance the final expansion, the Orange County Water District 

applied for a WIFIA loan for 49 percent of its project, or $135 million. Of the 47 applications submitted, we were advised that our 

loan will be approved at the end of the month, which makes us 

very happy. 

The borrowing rate of the assistance is approximately 3 percent. 

Our AAA rated agency could have issued tax exempt bonds at 3.8 

percent, which is nearly a percent higher, but that would have cost 

our ratepayers approximately $18 million more had we gone to the 

private bond market. 

15 

In addition to the cost savings, the WIFIA loan program allows 

for repayment flexibility, subordination of other projected debt, and 

other opportunities to leverage the assistance, such as the State 

Revolving Fund, or SRF, for the remaining 51 percent. 

It is fair to say that the WIFIA assistance is an essential tool in 

our toolbox to use to finance critically important water infrastructure projects. If not for the WIFIA loan, we would have had to have 

sought funding from the SRF. Unfortunately for us, the SRF is currently oversubscribed in California. Incidentally, the Orange County Water District does not want to see the SRF reduced, replaced, 

or dismantled at the expense of the new WIFIA program. Both programs are very vital to realizing important water projects. 

As a director and councilmember that represents many working 

families, I applaud your support of WIFIA, which provides access 

to funding for smaller agencies in low income communities. 

In closing, the Orange County Water District was able to realize 

its landmark project, the GWRS, with reduced cost to our ratepayers and without significant delays because of the WIFIA program. 

Finally, I want to thank you for allowing me to appear before you 

and your efforts to provide support for the water infrastructure 

projects that know no political or geographic boundaries, no 

socioeconomics of the end user, or any other differences among us. 

Water is genuinely a resource that benefits and is vital to us all. 

I would be happy to answer any questions you or any of the 

other Committee members have. Thank you. 

[The prepared statement of Mr. Sarmiento follows:] 

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Vicente Sarmiento 

Director, Orange County Water District 

Santa Ana, California 

Reappointed by the Santa Ana City Council to represent OCWD's 

Division 8 (Santa Ana) in December 2016, Vicente Sarmiento 

previously served as a District board member from January 2013 to 

February 2015. During that time, he was the 1st Vice President of the 

board. He is currently a member of several OCWD committees 

including Administration and Finance Issues, Communication and 

Issues, and Property Management. 

In January 2007, Director Sarmiento was appointed to the Santa Ana City Council to represent 

Ward I. He was formally elected in November 2008, November 2012, and November 2016 and 

is currently serving his third term. He also served as Mayor Pro Tempore from 2014 to 2016. In 

addition, he is the chairman of the Oversight Board of the Successor Agency to the former 

Redevelopment Agency for the city of Santa Ana. The Oversight Board has the fiduciary 

responsibility of handling the dissolution of the city's former Redevelopment Agency. Director 

Sarmiento also chairs the city's Development and Transportation, and Legislation committees; 

and he is also a member of the Finance, Economic Development and Technology Committee. 

Director Sarmiento was recently invited to become a board member for the Joint Center for 

Political and Economic Studies based out of George Washington University. He was selected as 

one of 14leaders from across the country to join the NewDEAL, a national network that is 

committed to highlighting innovative ideas from state and local elected leaders who are progrowth progressives. Director Sarmiento is also a member of the board of directors of the 

National Association of Latino Elected and Appointed Officials (NALEO). 

Vicente Sarmiento graduated from the University of California, Berkeley with a Bachelor of Arts 

degree in Economics. He received his Juris Doctorate from the University of California, Los 

Angeles School of Law. More recently, he attended the Kennedy School of Government at 

Harvard University and successfully completed the Certificate Program for Senior Executives in 

State and Local Government. 

Director Sarmiento and his family have lived in and around Santa Ana since 1965. Presently, he 

and his wife Eva, also an attorney, are the principal owners of a law practice in Santa Ana. They 

have three children ages 17, 14 and 11. 
17 


31282.009

PHil.lP l. ANTHONY 

DENIS R. BilODEAU, P.E. 

SHAWN DEWANE 

CATHY GREEN 

DINA L. NGUYEN, ESQ. 

VICENTE SARMIENTO, ESQ. 

STEPHEN R. SHELDON 

JAMES VANDERBILT 

BRUCE WHITAKER 

ROGER C. YOH, P.E. 

TESTIMONY OF 

VICENTE SARMIENTO 

DIRECTOR 

BOARD OF DIRECTORS 

ORANGE COUNTY WATER DISTRICT 

ORANGE COUNTY, CALIFORNIA 

AND 

COUNCIL MEMBER 

CITY OF SANTA ANA CALIFORNIA 

PRESENTED TO 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS 

UNITED STATES SENATE 

WASHINGTON, D.C. 

ON 

THE LONG-TERM VALUE TO U.S. TAXPAYERS OF LOW-COST FEDERAL 

INFRASTRUCTURE LOANS 

July 11, 2018 

President 

DENIS R. BilODEAU, P.E. 

FirstVkePre$ident 

PHILIP L. ANTHONY 

Second Vice President 

SHAWN DEWANE 

Genera! Manager 

MICHAEl R. MARKUS, P.E., D.WRE 
18 


31282.010

Good morning Chairman Barrasso, Ranking Member Carper and members of the committee. It 

is a pleasure and an honor to appear before the committee to address a vital federal 

responsibility, the need to support the financing of our nation's public water infrastructure. 

I am Vicente Sarmiento. I appear before you today on behalf of the Orange County Water 

District, otherwise known as OCWD, as a Director of OCWD. I am also an elected official, 

serving on the City Council of Santa Ana, California. By way of background, OCWD is an 

internationally-recognized leader in the water industry and its international reach is growing. 

OCWD takes the limited water supply found in nature and supplements it to provide water for 

more than the 2.5 million citizens that live and work in Orange County, California. OCWD was 

created in 1933 by the California Legislature. Since that time, OCWD has been entrusted to 

guard our precious and limited water resources and specifically the groundwater basin that 

serves as the crucial source of water supply for our region. OCWD not only manages the basin, 

we have led the way on water supply and demand innovation; most prominently with the 

Groundwater Replenishment System or GWRS that has been internationally acclaimed, 

receiving the Stockholm Water Prize and Lee Kwan Yew Prize, among other international and 

domestic recognitions. I enclose, as part of my testimony, information on the GWRS and its 

contribution to meeting the water sustainability needs of our region. 

OCWD manages Orange County's Groundwater Basin, which is a large underground aquifer that 

through OCWD's careful management, supplies approximately seventy-five percent of the 

water supply for north and central Orange County. To replace the groundwater that is pumped 

2 
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31282.011

out, OCWD has a proactive program to refill and protect the basin to ensure a reliable water 

supply. 

As early as 1975, OCWD recognized the importance of finding new and sustainable water 

supplies and developed Water Factory 21 to take wastewater, treat it, and inject high-quality 

water into the groundwater basin to guard against advancing seawater intrusion. From this 

initial project, our efforts have evolved into the Groundwater Replenishment System that will 

ultimately produce 130 million gallons of water per day upon completion of the Final 

Expansion. 

The GWRS takes treated wastewater that otherwise would be sent to the Pacific Ocean and 

purifies it using a three-step advanced process to produce high-quality water that meets or 

exceeds all state and federal drinking water standards. 

The GWRS is the result of a collaborative effort between OCWD and the Orange County 

Sanitation District or OCSD. Operational since 2008, the GWRS initially produced 70 million 

gallons of high-purity water and was expanded in 2015 to produce a total of 100 million gallons 

per day or enough water for 850,000 people. The ultimate capacity will be 130 million gallons 

per day with the Final Expansion, which is enough water for one million residents. At a cost of 

$270 million and with completion set for in 2023, the GWRS Final Expansion project will create 

700 jobs during the design and construction. 

3 
20 


31282.012

With this Final Expansion project, OCSD and OCWD together will be recycling 100 percent of the 

recyclable water within their service area. 

At the outset, let me express OCWD' s appreciation of the role that Congress and this 

committee has played (as well as the United States Environmental Protection Agency and 

United States Bureau of Reclamation) in making the GWRS a reality. 

Our work and successes are not limited to Orange County. Rather, the research and project 

development have served as models for other communities across the nation and the world. 

We share our technical specifications, data and analyses that can lead to sustainable water 

supply practices in other communities. In any given year, we host thousands of visitors and 

dignitaries to learn how the most valuable resource-water-can be conserved without 

jeopardizing economic growth, and recreational activities and ensure a high quality of life. 

As background, allow me to provide an overview of OCWD, and specifically the GWRS, and the 

role that a productive collaboration with the federal government has served in making the 

GWRS a reality. From this overview, I will then turn to the needs of the future and the 

approaches that the committee has put forth as embodied in America's Water Infrastructure 

Act or S. 2800. 

OCWD manages, replenishes and protects the Orange County Groundwater Basin. This basin is 

the largest source of drinking water for Orange County. For purposes of conceptualizing this 

4 
21 


31282.013

basin, consider that it is an underground reservoir for our almost three million citizens. It is a 

270 square-mile basin providing seventy-five percent of our water supply. We serve nineteen 

cities and water agencies including the communities of Santa Ana, Garden Grove, Anaheim 

(home of Disneyland), Irvine, Huntington Beach, Fullerton, Yorba linda, Newport Beach, 

Fountain Valley, Stanton, Westminster, Orange, Villa Park, Tustin, Buena Park, La Palma, 

Placentia, Cypress, Seal Beach, Los Alamitos, and Costa Mesa. OCWD is governed by a ten 

member Board of Directors drawn from these communities. 

OCWD pioneered the development oft he world's largest water purification system for indirect 

potable reuse with our sister agency, OCSD that provides the feedstock for our water projecthighly treated wastewater that is purified by our project. This collaboration has the added 

benefit of helping to realize the Clean Water Act's goals and objectives of zero discharge as we 

anticipate that OCSD will, upon completion of the Final Wxpansion of the GWRS, dedicate its 

entire flow of reclaimable wastewater for purification. 

As we like to say: GWRS-New water you can count on. This is increasingly the point as we in 

California have come to the realization that water scarcity is a way of life and we need to 

manage our resources wisely, efficiently and effectively. This is a priority. We are a semi-arid 

region that receives on average 14 inches of rain per year. This water year, we received a paltry 

4. 7 inches. Given that GWRS currently provides enough water for 850,000 citizens and will 

increase to a million citizens with the completion of the Final Expansion in 2023, you can begin 

to recognize the invaluable role the GWRS serves. 

5 
22 


31282.014

The GWRS is a major piece in the sustainable water supply puzzle. The GWRS is not 

inexpensive, but the alternative reality of unreliable water supplies is even more expensive. 

OCWD, in partnership with the state and federal governments, constructed the GWRS and 

today our purification process is helping to drought-proof the region, decrease reliance on 

imported water supplies and offer up water conservation that is protective of the environment 

and helps maintain the economic health of our region. 

In order to make the GWRS work, wastewater flows from residential, commercial and industrial 

sources along 396 miles of pipelines to one of two OCSD treatment plants. 

The cost to construct the GWRS was substantial. We may well have developed the project, but 

the collaboration of the federal government through the U.S. Bureau of Reclamation's Title XVI 

Program and the U.S. Environmental Protection Agency's State Revolving Loan Fund Program 

provided critical assistance to the project. It served in securing public support for the project's 

development. Specifically, the Title XVI program provided us with $20 million in grant 

assistance. The SRF program loaned $13S million to support the first phase of the project. 

When we embarked upon the design and construction of the final phase, we considered the 

costs and benefits of the proposed project, recognizing the value of developing a long-term 

sustainable water supply within the context of the avoided cost of alternative water supply 

options. 

6 
23 


31282.015

Our experiences with the GWRS original phase demonstrate that it is vital to bring the costs of 

the water in line with existing sources of potable water supplies and to drought-proof water 

deliveries. The absence of these goals would subject project approval to constant questions 

from ratepayers on the value of the project. OCWD carries one of the highest bond ratings a 

public agency can secure-AAA Bond Rating. 

Fortunately, OCWD was able to leverage federal, state and local policies and programs to 

ensure public acceptance of the costs of the project. I want to emphasize that this financial 

assistance was critical to the GWRS timely construction and its operation today. Without the 

assistance, it is highly likely that the project would have been delayed in the best case scenario. 

OCWD was able to combine multiple sources of assistance. This included: $194 million from 

our local partner the Orange County Sanitation District, $20 million from the U.S. Bureau of 

Reclamation's Title XVI Program, $135 from the Clean Water Act's State Revolving loan Fund, 

$37 from California's water bonds, and, of course, the backing of our rate structure made 

possible by the support of ratepayers in Orange County. As you can begin to recognize, the 

GWRS represented a carefully-balanced financing strategy that could reduce burdens on 

ratepayers and expedite project construction. 

Today, we are in the process of expanding the GWRS to deliver 130 million gallons per day of 

highly-purified water that will meet the needs of more than one million people. In order to 

achieve this goal, we must address both technical and financial challenges. 

7 
24 


31282.016

On the technical matter of wringing out the final volume of water from the remaining 

wastewater flow is challenging. We are partially meeting this challenge because of Congress 

and the U.S. Bureau of Reclamation's commitment to support the advancement of our 

knowledge on how to develop treatment solutions. Specifically, OCWD and OCSD received 

financial assistance through the Water Infrastructure Improvements for the Nation Act. This 

committee is to be congratulated for its foresight in providing federal support to agencies, like 

OCWD and OCSD, that meet the challenges-financial and technical-that can lead to 

sustainable water supplies that are resilient, cost-effective and protect public health. While the 

assistance provided was limited (approximately $1.1 million), the federal involvement helped us 

to move forward and commit the resources that will allow us to capture the remaining flow of 

water and make it available to the GWRS. 

The ability of our nation to meet the ever increasing demand to modernize our infrastructure is 

clear. We are now changing to managing our water resources infrastructure from a use once 

mentality to an almost closed loop system that can recycle water to stretch the supply. 

These and other demands are vividly illustrated by USEPA surveys. The Safe Drinking Water 

Act's Sixth Drinking Water Infrastructure Needs Survey and Assessment documents that over 

the next twenty years $472 billion is required, of which $83 billion is required to meet the 

treatment needs of water agencies. Similarly, the Clean Water Act's most recent Watershed 

Needs Survey identifies $271 billion in financial needs. From a state level, according to the 

American Society of Civil Engineers' 20171nfrastructure Report Card, California has $26 billion 

8 
25 


31282.017

in wastewater infrastructure needs and $44 billion in drinking water needs over the next 

twenty years. These numbers are mirrored throughout the nation. We expect that without a 

cogent response from the federal government to renew a financial partnership commitment to 

agencies, like OCWD, we will witness a continued degrading of our water infrastructure's 

integrity that, in turn, will impact our economic growth and public health. 

Fortunately, this committee has taken up the challenge of charting a course to address the 

financial needs of agencies like OCWD. I refer to the pending legislation, the America's Water 

Infrastructure Act (S. 2800). This legislation, if enacted, would build on the lessons learned 

from the implementation of Water Infrastructure Finance and Innovation Act (WIFIA) that the 

committee wisely developed as part of WRDA 2014. 

OCWD was one oftwelve original applicants selected to seek WIFIA assistance. We submitted a 

WI FA application, because it provided us with the ability to reduce the overall costs of financing 

the final phase of the GWRS, estimated approximately $270 million. OCWD expects that we will 

close on the WIFIA assistance within the month of July. We are excited with this prospect. 

Our WIFIA loan will provide up to 49% or approximately $135 million of the project's cost. As of 

the end of June, the borrowing rate on this assistance is approximately 3%. By comparison, our 

highly rated agency could issue tax-exempt bonds at around 3.8%, almost a full percentage 

point higher. The real life translation of this is a net cost savings of as much as $18 million. But 

you need to factor in the extended repayment terms of up to 35 years, the ability to repay at 

9 
26 


31282.018

any time, the subordination of the assistance to other OCWD issued debt (with a bankruptcy 

exception), funding flexibility in the use of the loan, and the opportunity to use the loan with 

other assistance like the SRF for the remaining 51% of the project's cost. Each of these 

elements enhanced the project's viability. It is fair to say that WIFIA's savings made it much 

easier to paint a financial picture to proceed with the project. If WIFIA had not been available, 

it is unclear how we would have proceeded with the project's financing given the 

oversubscription of California's SRF. It is highly likely we would have proceeded, but the costs 

of the project would have grown, putting pressures on the ratepayers. 

In short, WIFIA is creating a savings for the ratepayers and the federal government is receiving a 

return on its investment through loan repayment and the dividends created in the 

development of a sustainable water supply that will support robust economic growth and 

improved public health. 

We have always maintained that WIFIA is a tool in the proverbial toolbox. OCWD is firmly 

committed to the preservation and expansion of the Clean Water and Safe Drinking Water Act's 

SRF program. While not within the committee's jurisdiction, we appreciate the committee's 

actions in WIIN that brought about the first real update in more than two decades to the U.S. 

Bureau of Reclamation's program that supports water recycling projects. The submission of 

project requests under the WIIN competitive grants program illustrates how vital it is to 

continue the federal partnership with local agencies through multiple programs. 

10 
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31282.019

The committee recently approved, unanimously, the America's Water Infrastructure Act (S. 

2800). This bill represents an important statement on how to respond to our nation's 

escalating water infrastructure needs. 

Since the inception of the SRF program, Congress has provided billions of dollars in 

capitalization grants to the states to establish and maintain state water infrastructure 

assistance to communities. OCWD, along with other public stakeholders, has consistently 

urged Congress to increase funding to the SRF. These calls have resulted in incremental 

increases in annual appropriations; however, the funding levels do not approach the levels seen 

in the 1970s and early 1980s, despite the fact that the current needs far exceed those of past 

decades. In addition, the allocation formula that determines how much SRF assistance is 

allocated to each state has not been updated since the 1980s. So we are faced with the 

challenges of insufficient SRF funding levels compounded by the fact that the mechanism 

guiding resources to each state inadequately addresses the needs of each state. 

We recognize that under current budgetary constraints, the reality of justifiable increases in the 

SRF is a difficult goal, but not impossible, to realize. At the same time, the notion of updating 

the allocation formula to better account for state needs is a zero sum game that for now 

appears unlikely to be addressed. However, we do continue to call upon Congress to reassess 

the formula to ensure that resources are equitably provided to the states. 

11 
28 


31282.020

This leaves us with one overriding question: How can Congress continue to ensure a 

meaningful federal partnership to improve our vital water infrastructure and avoid delays in 

constructing such projects? 

One approach, embodied inS. 2800, represents an important step in responding to this need. 

Under S. 2800, a guiding principle is to preserve the SRF and its funding as the key to meet our 

immediate and long-term needs. We support this mandate. However, the reality of 

overwhelming demands placed on SRFs, as illustrated in California's instance with billions in 

project needs identified, does lend credence to the demand for supplemental approaches if we 

are unable to return to an era of billions in grants assistance. WIFIA clearly put in place one 

tool that has proven valuable to a select number of projects, including OCWD. The priority for 

going forward is how can we build upon the lessons learned. 

S. 2800 would establish a new program of assistance to support the individual states' SRF 

programs. Under this program, a state could work with US EPA to secure leveraged financial 

assistance at WIFIA-Iike rates that the state could then use to support the backlog of priority 

projects on Intended Use Plan or Priority list. We believe that this approach is the catalyst that 

states can use to deliver projects that otherwise cannot be met by the current SRF program. 

For those that have concern over the impact of annual funding of the traditional SRF, S. 2800's 

mandate to fund the SRF at fiscal year 2018 levels prior to any funding of the new SRF-WIN. As 

we noted, every tool in the toolbox needs to be available to support public agencies' needs, but 

the primacy of the SRF must be preserved in any given year. The mandate to preclude funding 

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29 


31282.021

is an appropriate approach to ensure the long-term viability. And we would urge the 

committee that as the bill proceeds through Congress that this commitment be re-enforced to 

ensure that no "wiggle" room exists that might, in later years, undermine the SRF. 

Some have questioned how enhanced subsidization using below-market interest rates would 

work within an SRF-WIN approach and whether it is too costly. We believe that if a community 

is unable to secure assistance under the traditional SRF program or WIFIA because of its ability 

to pay, then there must be a mechanism in place to assist a community to comply with federal, 

state and local environmental and public health mandates. These are the real costs of not 

providing a mechanism to help such communities. Short of providing distressed communities 

with direct, targeted grants assistance in meaningful amounts, we believe that the SRF-WIN 

approach is an appropriate means to address unmet needs that otherwise might not be 

financed. SRF-WIN would impose a reasonable contribution from such a community without 

imposing undue burdens. And in the case of communities that have the ability to meet the 

financial conditions to borrow under an SRF-WIN Treasury rated security, the program could 

serve as a bridge to help reduce the project backlog that continues to increase annually. 

Mr. Chairman, OCWD commends the approach of S. 2800. It protects the core SRF program. It 

offers a supplemental financing approach that offers another tool in the toolbox. It establishes 

a means to address project backlogs. It offers affordable financing to financially disadvantaged 

communities. It serves as a means to advance promising innovative water supply projects such 

as OCWD's GWRS. And lastly, it ensures that the federal commitments made under the Clean 

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31282.022

Water Act in the 1970s and subsequent reauthorizations and the Safe Drinking Water Act to 

support the development of improved water infrastructure to protect human health and the 

environment is preserved. 

In closing, allow me to restate one simple fact. OCWD was able to move its landmark water 

project to construction because of the multiple federal programs of assistance that helped to 

reduce costs and delays associated with the project. The ongoing Final Expansion would not 

have proceeded as smoothly absent WIFIA and other federal assistance. 

Again, thank you for allowing OCWD to appear before you. I would be happy to answer any 

questions you or the other committee members may have. 

14 
31 

Senator BARRASSO. Well, thank you. We are glad that you are 

here to testify today and share your experience. 

Senator Carper. 

Senator CARPER. I just want to say a word about Brian for a moment. 

Brian, why do you pronounce your name ‘‘motel’’? 

Mr. MOTYL. Just the way I was told. 

[Laughter.] 

Senator CARPER. Have you ever told your parents that they were 

mispronouncing your name? 

Mr. MOTYL. No, I have not. 

Senator CARPER. Where do you come from? You didn’t grow up 

in Delaware. Are you from New York? Where are you from? 

Mr. MOTYL. From New York. Upstate New York. 

Senator CARPER. And what brought you to Delaware? What 

brought you—was it to work with the Department of Natural Resources? 

Mr. MOTYL. High taxes in New York, bad schools, crime rate, 

better Governor in Delaware. 

Senator BARRASSO. Who was the Governor at the time? 

Mr. MOTYL. Mr. Carper. 

Senator CARPER. I have no further questions. 

[Laughter.] 

Senator CARPER. We are glad you are here. Thanks for all your 

work at the Department of Natural Resources and at DelDOT. God 

bless. Thanks. Welcome. 

Senator BARRASSO. Mr. Motyl, welcome. Please share your testimony. 

STATEMENT OF BRIAN MOTYL, 

ASSISTANT DIRECTOR OF FINANCE, DELDOT 

Mr. MOTYL. Thank you very much for inviting me to talk about 

this very valuable financing tool. As Senator Carper said, for many 

years Delaware has been working on this US 301 project. It has 

been a priority. But unfortunately, with all the available resources 

we have, we just couldn’t make it financially feasible to complete 

this much needed project. 

Delaware has basically four sources of funds for capital programs, and none of the four, even in combination, could totally 

fund this project. Plus, we need to save our available resources for 

ongoing infrastructure needs of the State. 

Delaware receives a Federal highway allocation of approximately $175 million annually, and the cost of this project was over $635 

million, so Federal funding alone would not do the job. We do have 

normal senior revenue bonds, which we do use for infrastructure financing; however, these bonds are paid back through pledged revenues from DMV fees, motor fuel tax, and toll revenues. So all the 

State residents are paying back these bonds, so the theory on the 

bonds is we are going to use the money for projects that everyone 

in the State can benefit from. So, to use a revenue bond for the 301 

project really wasn’t a good option, and from a cost perspective it 

wouldn’t have worked well, anyway. 

We do have just regular State resources, which are defined as 

revenues minus debt services, minus transportation operating exVerDate Aug 31 2005 12:13 Sep 11, 2018 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 S:\_EPW\DOCS\31282.TXT SONYA
32 

penses. State resources average about $270 million a year, so you 

could see that the $270 million is inadequate to cover all of our 

normal infrastructure needs and then try and finance a project of 

this size. 

The other option we had—and we did take advantage of—was a 

dedicated toll revenue bond for US 301, but the toll revenue bond 

is a higher interest rate, and the debt service coverage on that revenue bond did not allow us to fully finance the program. Just to 

simplify that, the revenue generated from the roadway would not 

be sufficient to pay the debt service, should we use the dedicated 

301 toll revenue bonds, so we did use that in conjunction with the 

TIFIA loan to get the project done. 

In December 2015 DelDOT was successful, and we did close the 

TIFIA loan, and the project finally became a reality. 

Overall, the program is great. There are a couple of areas where 

it could be improved upon. For one, the time from the submission 

of the letter of intent to apply to the date of the loan closing was 

almost 3 years. The complete process was time consuming, and 

substantial documentation was provided. However, without the 

loan, the program could not have been done, so we are grateful for 

the loan. 

Preparation of the application was considerably involved and 

time consuming. We spent many hours on conference calls with 

TIFIA personnel discussing the project financial plan and proposed 

loan terms. The loan negotiation and final documentation was exceptionally good. All terms and conditions were adequately detailed 

in loan documents, and the loan terms were both positive for Delaware and for TIFIA, making the project possible. 

Some of the terms of the loan that are incredibly important that 

need to be talked about is the below market interest rate, which 

was over 1.3 times lower than our toll revenue bond interest rate. 

The other good factor about TIFIA that saved us a lot of money and 

made the project more financially feasible was that interest accrues 

only on the draws, as the TIFIA money is drawn. When we take 

out a revenue bond, we pay interest from day 1 on the full amount 

of the loan, so that is a huge feature that made the project more 

financially sound. 

Another key feature was the 10-year principal deferral, which 

was necessary to keep the debt service down at the beginning 

phases of the project in the early years. We were able to establish 

a toll stabilization fund, which is very beneficial to both DelDOT 

and TIFIA, should there be an economic downturn and revenues 

aren’t quite sufficient to pay debt service. There is also a revenue 

sharing provision, which allows us to use some of the money to pay 

down the TIFIA loan. 

As far as reimbursement of funds, the required submission documentation is very easy to compile and not burdensome on the agency at all. Reimbursements have been received promptly and as 

scheduled, with no problems. 

I am running out of time, so I will go right to the summary. 

Several financing scenarios were run over almost 40 years as we 

attempted to find a fiscally sound financing plan for the US 301 

project. The project could not have moved forward without the 

TIFIA loan. The Delaware Department of Transportation is grateVerDate Aug 31 2005 12:13 Sep 11, 2018 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 S:\_EPW\DOCS\31282.TXT SONYA
33 

ful for this valuable program and maintains a great working relationship with our TIFIA partners. 

The loan process was at times cumbersome, and the loan terms 

and negotiating were time consuming; however, the benefits of the 

TIFIA loan far outweigh the at times lengthy required processes involved with the program. 

Thank you. 

[The prepared statement of Mr. Motyl follows:] 

34 


31282.023

Brian Motyl 

Assistant Director of Finance and Transportation Trust Fund 

Delaware Department of Transportation (DciDOT) 

Brian Motyl joined the Delaware Department of Transportation in May 2006. Prior to coming to 

the Department, Mr. Motyl was a Fiscal Management Analyst with the Department of Natural 

Resources and Environmental Control where he was responsible for the financial management of 

the Water Pollution Control State Revolving Fund, the Wastewater Management Account and 

various loan/grant portfolios. He has experience working on and managing several of the 

Authority's issuances of senior revenue bonds. Build America Bonds. GAR VEE bonds. TIFIA 

financing and Toll Revenue Bonds. 

Mr. Motyl holds a Bachelor of Science degree in Business/Public Management from the State 

University of New York. College of Technology at Utica/Rome. 
35 


31282.024

Delaware Department of Transportation (DeiDOT)- TIFIA loan 

For many years, the US 301 project was a priority for Delaware DOT. The new US 301 roadway was 

much needed to remove the "neck in the bottle" of the regional highway network and increase safety in 

the region. The existing US 301 from the Maryland/Delaware state line to 1-95 and its 2-lane sections (1 

lane in each direction), 29 at-grade intersections (18 signalized) and numerous driveways with direct 

access to existing US 301. 

DeiDOT knew that the new US 301 would improve safety, manage truck traffic, and reduce congestion; 

support approved and proposed economic development in southern New Castle County (a key Delaware 

growth area); enhance the region's ability to compete for economic development; create needed 

construction jobs; improve local access to the Northeast Corridor Rail (Amtrak), commuter rail (SEPTA) 

and bus (DART) services; improve livability in the region; and reduce fuel consumption and greenhouse 

gas emissions. 

For almost forty years prior to authorizing and advancing the project, the department had been looking 

for a fiscally sound option to finance the US301 Project while still meeting the annual infrastructure 

needs of our State. 

Over the years, all available financing options were looked at and a fiscally sound scenario could not be 

found with existing State and Federal allocations. The TIFIA loan program became the only financing 

option that ultimately allowed the project to move forward. 

Delaware is one of the smallest states and receives a Federal Highway Allocation of approximately 

$175M annually, the estimated total cost of the US 301 project was approximately $63SM. To attempt 

to construct this new alignment with allocated Federal Funding alone was not financially feasible. 

In December 2015, Del DOT successful closed a TIFIA loan for $211.3SM and a Toll Revenue Bond for 

$212.5M. These funds in conjunction with a previous GARVEE Loan, Federal Highway Administration 

Funds and State Funds, made the $635M US301 project a reality. 

Discussion of the TIFIA loan and process is broken down into four parts; Loan Process, Loan terms, 

reimbursements and post issuance compliance. 

There were also political barriers to overcome with the complex financing proposal. Upon the 

understanding that the only option for moving this very important project forward was to utilize the 

newly available TIFIA funding mechanism the barriers were easily overcome. 

loan Process/Timeline 

The time from the submission of the Letter of Intent to apply to the loan closing was almost three years. 

The complete process was time consuming and substantial documentation had to be provided. 

December 21, 2012 DeiDOT submits LOI to USDOT 

April16, 2013 USDOT accepts DeiDOT's submission and approves moving to the next step 
36 


31282.025

{During this period, Del DOT meets with rating agencies to receive indicative rating, submits credit 

worthiness report and completes oral presentation to USDOT. DeiDOT responds to two lists of questions 

and provides additional information to USDOT) 

April 27, 2015 USDOT approves creditworthiness and invites DeiDOT to apply 

May 15, 20115 Application submitted 

August 14, 2015 Loan Approved 

December 3, 2015 TIFf A Loan Closed 

Preparation of the application is considerably involved and time consuming. 

Department staff spent many hours on conference calls with TIFIA personnel discussing the project, 

financial plan and proposed loan terms. 

Loan Terms 

The final loan documents were negotiated by both parties, all agreed upon terms and conditions were 

accurately detailed in the loan documents. 

The loan terms were positive for both Del DOT and TIFIA, and as stated earlier, securing the TIFIA Loan 

was vital to the financial plan enabling the project to move ahead. 

The TIFIA loan provided the following financing benefits; 

Below market interest rate (30 year US Treasury at closing) Our rate was 2.94% our Toll Revenue 

bond closed at the same time has an interest rate of 4.27%. 

Debt-service savings of over $25M compared to borrowing all funds with a toll revenue bond. 

35-year maturity from construction completion. 

Ability to pay loan of prior to maturity. 

Interest accrual only when funds are drawn. With normal bond financing the total loan amount 

starts accruing interest at closing. 

10-year principal deferral. 

Establishment of a toll stabilization fund. 

Revenue sharing should the roadway outperform the financial plan. Deposits into toll 

stabilization fund up to the cap then 50:50 split between Del DOT and TIFIA (Loan Pay-down). 
37 


31282.026

DeiDOT has no concerns with the terms and finds all terms to be completely acceptable, and crucial to 

the viability of the financing plan. 

Reimbursements/Drawing funds 

The required submission documentation is easy to compile and has not been burdensome for our 

agency. The reimbursement process has been positive; to date Delaware has submitted and received 

payment for 12 monthly draws. All reimbursement funds have been received promptly as scheduled 

with no problems. 

The reimbursement process was fully disclosed and agreed upon when signing the loan agreement. One 

item of note, the time period between the initial expenditure and (reimbursement) receipt of funds has 

potential to be burdensome to our agency due to the length of time it takes for expenditures to be 

reimbursed. 

Unlike FHWA grant funding, which is reimbursed weekly, the TIFIA funding is reimbursed monthly. 

To summarize the process, a draft disbursement request is submitted on the 15th of each month, this 

covers reimbursable expenditures from the 16th of the prior month to the 15th of the current month. 

The pre-approved disbursement request is then sent to TIFIA on the first of the month for disbursement 

to the State on the 15th of that month. 

As a result, reimbursement occurs for expenditures that are between 30 and 60 days old. 

(EX. Draft request for Jan 16 to Feb 15 expenditures is sent for pre-approval on Feb 15. The official 

submission to TIFIA is on March 1'1

• Reimbursement occurs on March 15) 

Oversight/Post Issuance Compliance 

Similar to a Bond Issuance, TIFIA requires periodic disclosures and updates during the loan period. 

(Audits, Financial data, coverage analysis reports, rating changes) The information requested is 

reasonable and submission time-frames give the borrower ample time to comply. 

Several financing scenarios were explored over almost forty years as we attempted to find a fiscally 

sound financing plan for US301. The US301 project could not have moved forward without TIFIA 

financing. 
38 


31282.027

The Delaware Department of Transportation is grateful for this valuable program and maintains a great 

working relationship with our TIFIA partners. 

There may be opportunity to streamline the pre-closing phases of the program which could be beneficial 

to future borrowers of the TIFIA program. The loan process was at times cumbersome and loan term 

negotiations were time consuming. However, the benefits of the TIFIA Loan far outweighed the at times 

lengthy processes required with this program. 

Brian Motyl 

Transportation Trust Fund Administrator 

Delaware Department of Transportation 

800 Bay Road, PO Box 778 

Dover, DE 19903 

(302) 760-2692 
39 

Senator BARRASSO. Well, thank you very much for the testimony 

from all of you. I will start with a round of questioning and will 

start with Mr. Holtz-Eakin. 

The Congressional Budget Office found that the authorization for 

WIFIA and the SRF WIN in America’s Water Infrastructure Act 

would generate about $12 billion in State funded investment. In 

your experience, would $12 billion in new State funding for needed 

infrastructure be positive or negative for the economy, and how 

about for U.S. taxpayers? The bottom line is is this going to be better or worse in the long run? 

Mr. HOLTZ-EAKIN. I would expect it to be better. If you listen to 

the care with which these projects were vetted at the local level, 

these are projects that you are funding which are passing the 

threshold of things which add enough productivity and benefits to 

the population that they are worth doing, so $12 billion of that activity is a benefit to the population. 

Senator BARRASSO. And to the taxpayers and to the communities 

in which they live? 

Mr. HOLTZ-EAKIN. Absolutely. If the economy is better off, they 

are going to get more tax revenue. If people can receive these benefits through the infrastructure projects, they are not going to have 

to pay for them in other ways. Even environmental and health benefits have economic ramifications in that way. 

Senator BARRASSO. Mr. Motyl, according to the 2016 U.S. Department of Transportation Report, TIFIA accelerates the delivery of 

significant transportation projects by an average of 13 years. What 

was Delaware’s Department of Transportation’s experience with 

TIFIA as it relates to accelerated project delivery, and then how 

does that help in terms of decisionmaking and ultimately benefit 

the taxpayers in your home State of Delaware? 

Mr. MOTYL. Well, I will tell you in our case we have been working on the 301 project for over 40 years, and it just could not be 

done with any of the available programs or resources, so it accelerated the project in that there would be no project without the 

TIFIA loan. So, it is a valuable tool for those large projects that 

States just can’t do on their own without the help. 

Senator BARRASSO. Mr. Holtz-Eakin, we have heard what you 

have said and what he had said in terms of how much benefit it 

is to the communities and locales, but the Joint Committee on Taxation determined that if States borrowed the $12 billion to fund 

new infrastructure projects, then the Federal Government would 

lose about $2.6 billion in tax revenue. The calculation is based on 

looking solely at the loss of revenue from tax exempt bonds. 

If you were to look at all the economic impacts of $12 billion in 

State investment and infrastructure, which is why I asked the first 

question, would you expect the benefits to the taxpayers to far outweigh this revenue loss? 

Mr. HOLTZ-EAKIN. Yes, I would. As I mentioned in my opening, 

I don’t think there is anything wrong with what the Joint Committee does or the CBO’s score; it is simply a very narrow question. 

It is focused solely on the Federal budget costs; it does not look at 

the benefits to anyone in the economy and to the population as a 

whole. 

40 

Senator BARRASSO. Mr. Sarmiento, what aspects of the WIFIA 

program made it attractive for the Orange County Water District 

to use this tool? 

Mr. SARMIENTO. Well, I think the benefit that we have is to be 

able to provide a project on an accelerated basis to our ratepayers. 

Also, the fact that we could use that to leverage some of the other 

moneys that are available to us. Unfortunately, in California, because the SRF is oversubscribed, it would have delayed project delivery for some of our ratepayers. We have a backlog of projects 

that we need to address, but this is certainly one source that was 

valuable to us, and our experience has been very positive with it. 

Senator BARRASSO. So, without the tool, the detrimental impacts 

would have been significant and felt by people living in your communities? 

Mr. SARMIENTO. It would have, and we see that, when project delivery is delayed, we have folks that will not remain in the communities; sometimes they will leave; they won’t invest in projects that 

we need that are ancillary to the water project. But we certainly 

see that we do need all levels of funding and all different types of 

programs that are available to our ratepayers. 

Senator BARRASSO. Thank you. 

Mr. Motyl, could you talk about some of the aspects of the TIFIA 

program that made it attractive for the Delaware Department of 

Transportation to use the program, how important it was to have 

TIFIA available for you to pursue? 

Mr. MOTYL. Yes. Probably the top four reasons would be the 

principal deferral. We have 10-year principal deferral, which keeps 

our debt service down during the early years of the project as the 

roadway matures and traffic builds. Without the principal deferral, 

the debt service would have been unmanageable in the first couple 

years of the project, so that is crucial. 

The below market interest rate also very helpful. 

The fact that interest accrues as the money is drawn allows us 

to use our other funds first that we are paying on from day 1, and 

just pay interest on the TIFIA as we use it, which saves us millions 

of dollars in interest expense. 

And the ability to prepay the loan. If the roadway out-performs, 

which we hope it will, we could prepay this loan and get rid of our 

debt service a lot quicker. 

Senator BARRASSO. Well, thank you very much. 

Before turning to Senator Carper, I am submitting for the record 

and ask unanimous consent to enter into the record letters of support signed by the American Public Works Association and the 

Water Infrastructure Network, which is a coalition including the 

U.S. Chamber, the American Society of Civil Engineers, and numerous other leading infrastructure groups, highlighting the benefits of TIFIA, WIFIA, and SRF WIN. 

Without objection, they are submitted to the record. 

[The referenced information was not received at time of print.] 

Senator BARRASSO. Senator Carper. 

Senator CARPER. Thank you. I want to telegraph my pitch. One 

of the things that Brian mentioned, we are very grateful in Delaware for the program and the ability. This money actually enables 

us to build this road. We wanted to build this road forever. 

41 

You mentioned a couple things that could be done maybe to 

make this program better, so I would just ask you to be thinking 

about that. Telegraphing my pitch. Before I finish, I am going to 

come back and ask each of you is there any way we can make this 

program better, more effective, better for taxpayers, maybe better 

for our local communities, so think about that. 

Brian, you mentioned toll revenue bond rate versus TIFIA loan 

rate. I heard you say 1.3 percent. Not 1.3 percent; you said 1.3 

times. Would you just use actual rate numbers? 

Mr. MOTYL. Yes. It was 1.33 percent lower. The TIFIA rate was, 

at the time—— 

Senator CARPER. I am just trying to get at the toll rate versus 

the TIFIA rate. 

Mr. MOTYL. This is the rate of the borrowing. The toll revenue 

bond was 4.27 percent. 

Senator CARPER. Versus? 

Mr. MOTYL. The TIFIA loan was 2.94, so it was 1.33 lower. If we 

were to borrow the whole loan amount at the 4.27, it would have 

been over $26 million more, plus the other savings with the interest accrual. So, it is many millions of dollars we benefited from the 

TIFIA loan. 

Senator CARPER. And was deferral actually an attractive aspect 

as well, that comes with the TIFIA loan? 

Mr. MOTYL. Absolutely, because the bondholders and the TIFIA 

lender worry about the debt service coverage, and the revenues at 

the beginning period, when the roadway is open, provided very low 

coverage factor for the repayment of the debt service. So, allowing 

us to defer the principal payment made our debt service much 

smaller during the first 10 years of the project, which made our 

coverage much higher, gave us a better interest rate, and allowed 

us to have a really fiscally sound program. 

Senator CARPER. All right, good. 

My colleagues, I know the projects in each of our States that you 

have a special interest in that you see maybe as you travel around 

your State, every day that I go down State on State Route 1, which 

goes from I–95 down passed the Dover Air Force Base, I see this 

project coming to a conclusion. I am going to actually clip the ribbon I think probably in November, and it will be all done. But it 

is just really exciting to see what is actually happening and to be 

able to know that we are going to enjoy it very, very soon. 

A follow up question, if I could, for Brian, deals with transit policy change. Last week, the Federal Transit Administration released 

a guidance document that seems to suggest that Federal loans such 

as TIFIA should be considered part of the Federal funding, rather 

than as local match. Since DelDOT will repay the TIFIA loan, plus 

interest, through local toll revenues, do you consider that loan to 

be Federal funding or local funding? And in your opinion, if policy 

changed to require transit projects to use TIFIA and Federal grants 

for no more than, say, 50 percent of the total project cost, would 

that make TIFIA less attractive to project sponsors? 

Mr. MOTYL. It absolutely would make it less attractive. A lot of 

projects probably won’t move forward if they can’t use TIFIA as the 

match. TIFIA, I don’t see how it could possibly be considered nonFederal. FHWA funding is grant funding; that is money that the 

42 

Federal Government gives us. That is Federal funding. TIFIA is repaid by State dollars; it is all our money that is paying it, so it is 

ultimately our money. It has to be considered as a State resource. 

And by not doing that, I think it is going to drastically hurt the 

amount of applications for the transit program. 

Senator CARPER. All right, thank you. 

Now for my pitch well telegraphed. One of the things my colleagues hear me say a lot is everything I do I know I can do better. 

I think it is true of all of us; probably true for all Federal programs. How might we do this program better? 

Doug, do you want to lead us off? Any improvements that you 

can think of that we should make? 

Mr. HOLTZ-EAKIN. I don’t have a laundry list of issues with either TIFIA or WIFIA. I think these are programs that are essentially pretty new, and probably the best thing you could do is to 

build in some evaluation of their effectiveness into their operation. 

Senator CARPER. All right, thank you. 

Mr. Sarmiento. 

Mr. SARMIENTO. Well, again, I think that—— 

Senator CARPER. Would you just tell us one more time that really 

funny line you used? 

Mr. SARMIENTO. Right. 

Senator CARPER. Go ahead, one more time. 

Mr. SARMIENTO. One more time, OK. So, we took a long time trying to message that this is clean, safe water, so people kept calling 

it toilet to tap. But when we said showers to flowers, for whatever 

reason, they started finally drinking and taking a little risk. 

[Laughter.] 

Mr. SARMIENTO. And they actually enjoyed it, and it tastes better 

than some of our tap water. 

Senator CARPER. Some of my colleagues missed. I just thought it 

was worth repeating. 

[Laughter.] 

Mr. SARMIENTO. Well, when you come to Orange County, we will 

make sure we have some bottled water for you. I think we may 

even have some in our offices here in DC, so we will make sure we 

deliver some. 

Senator CARPER. A reminder that branding is important. 

Any other change you would recommend with respect—— 

Mr. SARMIENTO. More than anything, I think, obviously, the options of having the programs available is very important because 

they work complementary to one another. But with the SRF WIN, 

not requiring the application fee is something that obviously benefits and reduces the obstacle maybe for some of these smaller agencies, some of the smaller communities. And as we know, and myself 

representing a community that has many working families and low 

income families, those agencies that do work under our larger 

agency as retailers and producers have a difficult time, so to the 

extent any barriers could be removed for them to access some of 

the credit lines is a good thing. 

Senator CARPER. Thank you, sir. 

Brian, just very briefly. You mentioned a couple things that we 

might do to make it better. If you want to reiterate those, that 

would be fine. 

43 

Mr. MOTYL. Sure. The application process is very time consuming. You work with TIFIA staff, you work with their consultants, you work with their legal team. They are requiring a lot of 

back and forth questions and all. But overall, you know, it is worth 

doing the extra work to save that kind of money, so that is minor, 

but I wanted to bring up everything. 

Probably the biggest thing that could be fixed is the reimbursement process. For example, if we are using FHWA funds, we run 

a report Monday morning for the expenditures the prior week, and 

FHWA reimburses us the full amount a week later. 

With TIFIA, expenditures are getting reimbursed 30 to 60 days 

after the initial expenditure, so it can be a little burdensome on the 

State. In Delaware’s case, the General Fund pays all of our bills, 

so they are on the hook for all that money until we get the TIFIA 

money to repay them. 

So the monthly reimbursement process and the time between the 

approval hopefully could be streamlined so that we could get our 

money a little quicker. 

Senator CARPER. Thanks. 

Our thanks to each of you. 

Thanks so much. 

Senator BARRASSO. Thank you, Senator Carper. 

Senator Inhofe. 

Senator INHOFE. Thank you, Mr. Chairman. 

Mr. Sarmiento, in June 2018 the Association of Metropolitan 

Water Agencies wrote an article on the benefits of the WIFIA program, and I am going to quote from the article. It says that ‘‘Perhaps, most importantly, WIFIA is designed to leverage modest Federal appropriation into a significant pot of available funds. To put 

it simply, WIFIA offers a tremendous bang for the buck in today’s 

tight budget time.’’ 

Now, I fully agree with that and feel that that leveraging is 

working. Of course, WIFIA is fairly new, but we have been using 

TIFIA for quite a while, and it has been very successful. 

My question would be—as you know, Senator Boozman’s SRF 

WIN Act is within the WIFIA program. That being said, do you believe the programs like WIFIA and the SRF WIN Act offer a longterm value to the taxpayers? 

You have actually answered that, worded a little bit differently, 

in your previous statement, but could you answer that for the 

record? 

Mr. SARMIENTO. And I want to thank Senator Boozman for working with my Senator, Feinstein, in California and co-authorizing 

that, because, for us, SRF is a valuable tool that we have as an opportunity to fund some of these vital programs. The unfortunate 

part about it in California is that the program is oversubscribed. 

So, to the extent that we have other options and other alternatives 

and other tools in our toolbox, it is always a good thing. 

So, we certainly believe that having more opportunities, having 

the ability to access, especially for some of our smaller agencies 

and for those that don’t have the capacity, we are blessed in the 

Orange County Water District. We are a very large agency, but we 

do have retailers and producers that work with us that don’t have 

44 

as much capacity and have trouble bundling projects together, so 

we certainly see the value with that. 

Senator INHOFE. Well, in fact, when I chaired this Committee, 

and Senator Boxer was the ranking member, she talked about the 

same thing you are talking about, except it was TIFIA. You have 

to have access to make it into a large program. That is good. 

Now, some have raised the concerns that the SRF WIN Act could 

cannibalize SRFs, as well as the WIFIA program, and I have to 

admit I have this hard for me to believe, considering we have multiple supporters of both the WIFIA and the SRFs, and I am one of 

those. In fact, the SRF WIN Act has clear language that the program will not be funded until the SRF and the WIFIA program are 

funded at the 2018 levels. I can say, as an original cosponsor of the 

Boozman legislation, that our intention is to provide base funding 

for those programs in addition to SRF WIN Act funding to attack 

the $600 billion investment we need for water infrastructure. 

The Orange County Water District is a WIFIA applicant, as well 

as a supporter of the SRF WIN Act, so what are your concerns 

about the accusations on cannibalizing the Act? 

Mr. SARMIENTO. Well, I think that obviously there is value with 

the SRF program. There is obviously value with the WIFIA, but 

WIFIA is intended for larger projects, so I think the SRF WIN obviously addresses those smaller projects that some agencies may 

not be eligible for SRF or WIFIA. So, I think it is one more element 

that allows agencies of all levels and all sizes, and again, because 

we are a larger agency, we can’t qualify for the WIFIA program, 

and as I said, the SRF is so oversubscribed in California that we 

do need that augmented or ancillary support for those smaller 

agencies. 

Senator INHOFE. And you believe that helps. 

All right; Mr. Holtz-Eakin, I was interested in your explanation 

on scoring. It was fascinating that you ended that up by saying is 

this a good idea. That was your question. 

Well, let me be the only one who is responding. I think no is a 

better response because of the way that it is calculated. When you 

talk about the loss of revenue from the tax exempt bonds as being 

the source of the negative scoring that has taken place, is there a 

better idea? Have you thought about this? You are the expert in 

this area. 

Mr. HOLTZ-EAKIN. So, to be clear, that question was is doing the 

infrastructure project a good idea, and I think the answer would 

be yes, even if you get the negative score, just to be clear. 

Senator INHOFE. OK. That is not how I interpreted the methodology of the scoring. 

Mr. HOLTZ-EAKIN. There are an enormous number of things that 

cost Federal money and they are worth doing, and this is an example of one where you have a score that says it costs money, but we 

have localities across the country who are willing to put their own 

money; they are willing to have private entities pay tolls and 

things like that to make these projects go. Clearly, they are in the 

interests of the population. 

Senator INHOFE. OK, my time has expired, but I am going to ask 

questions for the record, send you something so we can pursue this 

45 

a little further, because I think it would be worthwhile. Thank you 

very much. 

Thank you, Mr. Chairman. 

Senator BARRASSO. Thank you, Senator Inhofe. 

Senator Cardin. 

Senator CARDIN. Thank you, Mr. Chairman. 

I thank all of our witnesses. 

Let me start by just underscoring the point of the Chairman and 

the Ranking Member as to the need for greater infrastructure investment here in America. Our infrastructure, whether it is water 

infrastructure or transportation infrastructure, is not where it 

needs to be; it is hurting our economic growth, and it is certainly 

affecting quality of life. So, I usually look forward to the summers 

because I commute between Baltimore and Washington every day, 

and usually the summer is a lot easier because the schools aren’t 

in and people are on vacation. The summer commute should take 

me a little over an hour. This morning was about an hour and 45 

minutes, so even in the summertime our infrastructure is stressed. 

I appreciate my colleague from Delaware talking about 301. As 

we crossed the Bay Bridge and head north into Delaware, the 

needs. If you were to head south, Senator Carper, and tried to get 

into Virginia, you have to go across the Nice Bridge, Harry Nice 

Bridge. I just checked Waze, and there is a tremendous backup 

there right now, and this is 11 o’clock on a weekday. That bridge 

needs to be replaced. 

I just mention that because we have significant projects in which 

TIFIA is helpful in trying to put together, because of the size, that 

can be done, but there is still not enough money. 

And I do appreciate the scoring issues you are talking about because one of the things President Trump tried to do is leverage 

more of the Federal funds by asking the States and local governments to come up with more of their funds. I am not sure that is 

a good idea, and it will be interesting to see how that gets scored 

by Joint Tax Committee, because that would increase the States’ 

use of tax exempt funding, which would have a score, I assume. 

And I see a nod from Dr. Holtz-Eakin. 

So, I guess my question to all three of you; I am one who believes, as I think the majority of this Committee believes, we 

should be having a more robust Federal infrastructure program 

with Federal funds, that we should have a bigger program, but 

what can we do to better leverage the funds that we have? 

Certainly, TIFIA and WIFIA were programs that do that, but are 

there better ways to leverage the Federal share without requiring 

larger local government shares, because we are all the same taxpayers, whether it is Federal or State? But are there better ways 

of leveraging to be able to keep interest costs down or to get a 

greater leverage from the governmental shares, whether they be 

Federal, State, or local? 

Mr. HOLTZ-EAKIN. So, in the end, this is Casablanca, you round 

up the usual suspects. You have the Federal Government, you have 

the State governments, you have the localities and special districts, 

things like that; and if you want to keep their shares down, you 

have to attract private capital. So, the difficulty is, to attract private capital, you are going to have to have some cash flows that 

46 

you can give to them that offer a rate of return that is commensurate to what they could get elsewhere, and that becomes the core 

sticking point in trying to have enormous private participation in 

infrastructure projects. There just, in my view, aren’t enough 

places where you can or are willing to toll a bridge, pay a fee for 

wastewater, whatever it may be, to generate the cash flows that 

will attract that much private capital. 

So, I believe, as much as you can get is a good thing, but the core 

framework should be are these projects that are worth it for the 

country. If they are, get as much private capital as you can, but 

the rest will have to come from taxpayers, one way or another. But 

they have benefits as well, so you should do it. 

Senator CARDIN. I agree with your assessment. You need the 

money. And yes, TIFIA has been able to reduce some interest costs. 

TIFIA has been able to get more predictable funding, which is an 

extremely important thing to get projects moving, so that is a really positive program. Strongly support that. But at the end of the 

day, if you are trying to attract more capital, you have to have a 

revenue flow in order to deal with it, whether it is taxpayer revenue flow or whether it is a special revenue flow. 

Any other ideas from our panelists as to how we can better use 

the Federal participation today to increase the infrastructure in 

this country? 

Mr. SARMIENTO. Well, Senator Cardin, I think I would agree with 

you as well, the more low barrier ability to access funding for these 

projects, since there is such a deferred maintenance on those and 

deferred investment in our infrastructure, is better, but ideally, 

that would be the best scenario, to have grants and maybe funding 

available that is easy to access. But given where we are, I think 

these low interest loans and credit assistance to agencies is probably the next best thing, and that is something that we need to 

continue to protect, continue to improve on the approvals so we accelerate some of that delivery on that investment. So, to the extent 

that agencies like ours benefits from a more rapid, more quick approval so we can deliver those services and deliver those projects 

to our ratepayers is a benefit that is very, very valuable to them. 

Senator CARDIN. Thank you. 

Thank you, Mr. Chairman. 

Senator BARRASSO. Thank you, Senator Cardin. 

Senator Fischer. 

Senator FISCHER. Thank you, Mr. Chairman. 

Mr. Motyl, the FAST Act created the Build America Bureau, 

which now manages TIFIA and other transportation financing programs. The purpose of the Bureau is to be a one stop shop for Federal transportation funding, such as TIFIA, grants, and private activity bonds. Has the Bureau been effective in managing these programs, do you think? 

Mr. MOTYL. Yes, they have. Our working relationship with the 

Bureau is exceptional. I, luckily, don’t have to deal with them a lot 

right now because I don’t have problems. Things are happening as 

they are supposed to with the loan program, so I don’t deal with 

them a lot now. I did during loan process, but I found that they 

are always knowledgeable and very helpful. I have nothing negative to say about the Bureau. 

47 

Senator FISCHER. OK. And when the Build America Bureau receives a TIFIA application, it doesn’t scale the review to the project 

based on size. For example, a $20 million project must meet all of 

the same requirements as a $400 million project. 

Should the Build America Bureau scale projects based on size, do 

you think? 

Mr. MOTYL. I think they probably should. Any time you can 

streamline the program would be beneficial. In our case, we needed 

it to do the roadway, but if I am to go to TIFIA for a low-cost loan, 

I may go elsewhere if it is really small, if I have to go through a 

lot of application process, and it becomes burdensome. I might get 

the funds elsewhere. Of course, there is still that savings, but it is 

not going to be very significant if it is a very small program. They 

could probably speed up delivery and have more applications if 

they did. 

Senator FISCHER. I am from the State of Nebraska, and we are 

viewed as a rural State. And though 10 percent of the loans provided by TIFIA must go to rural projects, TIFIA loans are still perceived as going mostly to urban areas. In fact, rural is defined as 

areas outside an urban population with more than 150,000 people, 

and rural projects must cost at least $10 million. 

Right now, there have been 84 projects in 22 States that have 

utilized the TIFIA program. Texas and California alone account for 

26 of those projects. Six States account for about two-thirds of all 

of TIFIA projects, and nine States account for over 80 percent of 

all TIFIA projects. 

What do you think can be done so that we can broaden the use 

of TIFIA to benefit all States? 

Mr. MOTYL. I am not sure. I don’t know why the other States 

wouldn’t be applying for and using the funding; it is going to provide the lowest cost of financing in most cases. I don’t know why 

they would not apply. 

Senator FISCHER. Do you think we need to look at what is all involved in the application process and maybe try to make changes 

to that so it can be more broadly used? I mean, in my State, it is 

difficult to find an urban area with 150,000 people and then say, 

outside of that area, well, that is going to be the rural area, when 

the State itself, outside of a metro area and the Lincoln area, is 

a rural area. 

Mr. MOTYL. Maybe it goes back to some of the necessary terms. 

We used it for the 301 project because we had a dedicated revenue 

source, but for small projects we don’t have a dedicated revenue 

source; all of our revenue is pledged to our senior revenue bonds, 

so TIFIA won’t work for a majority of our projects, so we want to 

use it for those projects. So maybe if the smaller loan amounts, 

they still need to be secured, but maybe have a subordinate pledge 

of existing revenues or something, because not all these small 

projects are going to have the revenue stream that TIFIA requires 

for repayment. 

Senator FISCHER. Right. 

Mr. MOTYL. That might be a big issue why they are not getting 

the applications. 

Senator FISCHER. Thank you very much. 

Mr. MOTYL. You are welcome. 

48 

Senator FISCHER. Thank you, Mr. Chair. 

Senator BARRASSO. Thank you, Senator Fischer. 

Senator Duckworth. 

Senator CARPER. Senator Duckworth, would you yield to me for 

a minute? Am I mistaken or is the first full week you have been 

back with us full-time since the birth of Miley? 

Senator DUCKWORTH. It is. 

Senator CARPER. We are glad you are back. It was nice to see her 

on the floor this week. 

Senator DUCKWORTH. Thank you so much. Pretty bipartisan. It 

is good to be back. 

Thank you, Mr. Chairman. 

I am so happy that we are discussing the importance of safe, reliable infrastructure to hardworking families, small businesses, and 

communities both in my home State of Illinois and around the Nation. I want to thank the witnesses for participating in today’s 

hearing, and I do agree with my colleagues that more must be done 

to ensure that State and local governments have the tools that they 

need to move infrastructure projects forward. 

My first question is for Mr. Motyl. Would you agree that while 

financing mechanisms are attractive for advancing large infrastructure projects, what is important is robust funding programs, because they are absolutely crucial to ensuring safe and reliable 

transportation systems? I am trying to get at the difference between the funding and financing. 

Mr. MOTYL. Right. Well, there has to be a good mix between 

funding and financing. Our transportation trust fund is probably 

similar to any other transportation trust fund in the country. Our 

State resources is our revenues minus our debt service minus operating, so if you are relying totally on debt financing, you are taking 

away from the State resources; you are taking away from the infrastructure of the State. 

So, yes, long programs are nice and necessary, but all the infrastructure needs can’t be met with just loan programs alone. You 

really need some grant funding and other mechanisms. 

Senator DUCKWORTH. Thank you. And mechanisms like TIFIA 

and WIFIA were designed to help State and local governments pursue major infrastructure projects that otherwise would be too expensive to advance through traditional means. With an impressive 

leverage of 42 to 1 for TIFIA and 102 to 1 for WIFIA, it is easy 

to understand why Congress is really enamored with these tools. 

However, securing a loan, as you have said, isn’t always easy. 

They are limited to certain types of projects with high cost thresholds, and they are limited to a portion of total project cost. 

Assuming that a project’s underlying fundamentals are financially sound, that is to say, the non-Federal sponsor enjoys appropriate bond ratings, private instruments have been identified, et 

cetera, would you agree—following up on your answer to the first 

question—that TIFIA and WIFIA could benefit other major infrastructure projects such as building or modernizing airports, for example? 

Mr. MOTYL. Absolutely. As long as there is a dedicated revenue 

stream, I don’t know about airports, but I would assume it would 

49 

work the same way. It is going to provide a lower cost to financing, 

so ultimately it would be a great way to finance a project. 

Senator DUCKWORTH. Thank you. I am glad to hear you say that. 

I am actually going to be introducing legislation in the coming 

weeks that would responsibly expand TIFIA eligibility for major 

airport projects such as those that are already underway in Chicago, Salt Lake City, Philadelphia, Miami, and elsewhere. 

Would the greater Delaware region benefit from a proposal to expand these financing instruments to help modernize and improve 

our aging airport infrastructure? 

Mr. MOTYL. That is totally out of my realm. I would assume yes, 

but I can’t really say anything. 

Senator DUCKWORTH. No, that is fine. 

My next question is for Mr. Sarmiento. It is my understanding 

that the Orange County Water District is receiving WIFIA assistance for a water recycling project to benefit your 2.4 million customers, and that is fantastic. However, success stories like those 

we have heard about today must not allow us to ignore the significant limitations of WIFIA and TIFIA. They often fail to help rural 

communities where infrastructure projects are unlikely to provide 

a rate of return that lures private investments or the tax base is 

not adequate to repay a substantial Federal loan. 

Would you agree, then, that clean drinking water and safe roads 

are just as important to small rural and disadvantaged communities as they are to major metropolitan areas? 

Mr. SARMIENTO. Thank you for that question, Senator. Yes, I do 

agree. I think because we are blessed as a large agency, I think we 

could leverage the private bond market obviously at a higher cost 

for our ratepayers. We do have some smaller agencies that are part 

of our network of producers, so we realize that they also have a difficult time being able to be eligible for some of this funding. 

So, to the extent rural communities, disadvantaged communities, 

we see issues going on in Flint, Michigan, Compton, California, 

West Virginia, all over the country that have these issues, and 

sometimes accessing funding is difficult because of their capacity 

and their ability to go ahead and apply and leverage some of those 

private dollars. So, for us, we are completely supportive of what 

this Committee and what these bills are trying to do to make sure 

that all agencies are able to deliver clean, safe drinking water, because we know communities of color, low income communities are 

the ones who especially suffer when there isn’t funding like this 

available. 

Senator DUCKWORTH. Thank you for your answer. 

I yield back, Mr. Chairman. 

Senator BARRASSO. Thank you. 

Senator Boozman. 

Senator BOOZMAN. Thank you, Mr. Chairman, and thank you for 

you and our Ranking Member for holding the hearing on such an 

important subject. 

Senator Booker and I have worked really hard to secure broad 

bipartisan support and endorsements from over 30 of the Nation’s 

leading organizations representing construction, engineering, municipalities, conservation, public works, labor for the SRF WIN Act. 

50 

Thanks to the hard work by the EPW majority and minority staff, 

SRF WIN no longer scores. 

Despite all this, SRF WIN does have some detractors. The main 

argument I hear is that the legislation is a solution in search of 

the problem, with which I am totally confused. According to the 

EPA’s most recent drinking water infrastructure needs survey and 

assessment, released earlier this year, $472.6 billion is needed to 

maintain and improve the Nation’s drinking water infrastructure 

over the next 20 years. That is just the drinking water; that doesn’t 

have anything to do with wastewater infrastructure. 

One of the other problems that I am seeing is that municipalities, because they are struggling financially, tend to push things 

down. You know, you deal with it, the EPA comes in, eventually 

the DOJ because it has been pushed down, and all of a sudden you 

are under a court order with a fine, and again, subsequently massive rate increases. So, this is just an attempt to again put some 

more tools in the toolbox. 

Can you tell us again, Mr. Sarmiento, if you feel like that this 

would be a good tool in the toolbox to help you in dealing with the 

many problems that we have? And let me congratulate you, also, 

on the fact that you all do a great job, and you have a huge problem, a huge population with, like everyone else, limited resources, 

but also in a climate that makes it very, very difficult. 

Mr. SARMIENTO. Thank you, Senator. And you are right, I think 

for us our challenge is hydrology is difficult to predict, so we have, 

unfortunately, suffered the last four out of five seasons with very, 

very dry seasons. We normally average 14 inches of rain a year. 

Last year we received less than 5 inches of rain, so it is a problem 

that just becomes very difficult for us to address. Programs like 

this, programs such as WIFIA, the SRF, the SRF WIN are vital to 

us because they make it available for us to be able to choose from, 

again, different resources for us to tap into. 

We could finance our final expansion of our groundwater replenishment system, but it would be going out to the private sector and 

bringing things back at a much costlier rate to our ratepayers. We 

would suffer delays. So, the fact that these programs are available 

to us, we can deliver much quicker, we can make sure that folks— 

because I think there are some tangible benefits that we are talking about, but there are also some intangible benefits that we don’t 

discuss sometimes. Not knowing whether or not we are going to 

have to go into a drought crisis, we are going to have to start rationing, we are going to have to deal with heavy, heavy conservation, makes folks unsettled. It hurts our economic development in 

our town, in our region just because people don’t like uncertainty. 

And when you see that, it makes it very difficult for us to be able 

to attract folks, and there is a multiplier effect to the money that 

is invested and the money that is made available for these improvements. 

So, we certainly applaud the efforts, Senator, that you are doing, 

along with Senator Booker and this Committee, because it does 

make that uncertainty a little bit less difficult for us to overcome. 

Senator BOOZMAN. Very good. 

Mr. Holtz-Eakin, affordability is a major concern in Arkansas, 

with many families having trouble affording to pay the utility bills 

51 

every month. When a community invests in their infrastructure, 

ratepayers generally see rate spikes. 

Can you explain how leveraging programs like WIFIA and TIFIA 

and SRF WIN help communities plan ahead to ensure their ratepayers won’t see massive rate spikes in the future? 

Mr. HOLTZ-EAKIN. As a way to augment the ability to do debt finance investments, which is the core of these programs, it allows 

you to smooth the rate increases over a longer period of time. If you 

had to finance on a year by year basis big capital construction 

projects, you would be getting enormous rate spikes, and that is 

just not desirable. 

Senator BOOZMAN. And that goes along with what you just said, 

Mr. Sarmiento, about having the predictability, the reliability. 

Thank you all very much. We appreciate you being here. 

Senator BARRASSO. Thanks. 

Now we turn to the man celebrating his birthday today. 

Senator MARKEY. Thank you, Mr. Chairman. 

Senator BARRASSO. Happy Birthday, Senator Markey. 

Senator MARKEY. Thank you, Mr. Chairman. 

Senator CARPER. Senator Markey, I just note for the record each 

of the witnesses modified their testimonies to begin their testimonies by extolling you, saying how they wish each of their Senators was as accomplished. 

Senator MARKEY. And hopefully it will also be reflected in their 

answers to my questions. The answer is yes, if I can just give you 

a hint going forward. 7/11 is a good day, so I have always felt fortunate. 

Senator BARRASSO. So, when they sing, ‘‘Oh, thank heaven for 7- 

Eleven,’’ you think it is about you? 

[Laughter.] 

Senator MARKEY. My favorite chain. 

Low-cost Federal loan programs are one important tool in our infrastructure toolbox that can help us modernize our Nation’s roads 

and rail and water infrastructure. 

In 2018 Massachusetts closed on a $162 million TIFIA loan to 

implement positive train control technologies, which are safety features that can trigger a train to stop or slow down during an emergency, so that is a good use of a loan program, and Massachusetts 

took advantage of it. 

But earlier, Senator Duckworth mentioned that many of our 

small and disadvantaged communities may not be able to use these 

low-cost Federal loan programs because they cannot afford to repay 

the loan, and that is why, yesterday, I introduced the Clear Drinking Water Act, which would authorize more than $1 billion in Federal grants to help small and disadvantaged communities replace 

contaminated water infrastructure to comply with the Safe Drinking Water Act requirements. And I am proud that 11 of my colleagues have joined me in cosponsoring this bill as it has been introduced. 

We must take swift action to eradicate the environmental contaminants of the 20th century and invest in infrastructure for the 

21st century, and for every community in the country that can afford to replace their old facilities, there is a poorer community 

nearby that cannot. 

52 

Mr. Sarmiento, do you believe that Congress should provide targeted Federal investments to small and disadvantaged communities that do not have the means to use low-cost Federal loan programs? 

Mr. SARMIENTO. Thank you, Senator, and let me begin by saying 

Happy Birthday. 

Senator MARKEY. Thank you, sir. 

Mr. SARMIENTO. I am also a fan of 7-Eleven. 

Absolutely. And I want to thank you for thinking about those 

communities, because I represent one of those communities that is 

a disadvantaged community in a wealthy county, albeit our average median income is very, very low relative to our neighbors 

throughout the county. We do feel that there is a huge benefit in 

making agencies in cities like ours eligible for those low interest 

loans, because we do have some heavily deferred maintenance on 

our infrastructure that we need to address, so, to the extent that 

additional funds are available, it certainly is a welcomed supply. 

Senator MARKEY. So, for every Palo Alto there is an East Palo 

Alto. 

Mr. SARMIENTO. Right. 

Senator MARKEY. For every Boston there is a Chelsea. So, we 

just have to deal with the complexity of it that not everyone can 

comply with the requirements if they are required to pay it back 

dollar for dollar. Just very, very difficult. 

So, if we want to modernize America’s infrastructure, we have to 

be committed to making those investments. But the Trump administration’s infrastructure proposal, $200 billion of Federal funding 

that would presumably come from budget cuts, even possibly to 

older transportation and infrastructure programs, fails to deliver 

on the President’s promise to invest $1.5 trillion in our Nation’s infrastructure, and the reason why is simple: $200 billion simply is 

not $1.5 trillion. 

The Administration assumes that as a condition for receiving 

Federal assistance, cash strapped States and local governments 

will have to work with private investors to cover the other $1.3 trillion by using credit programs such as the Transportation Infrastructure Finance and Innovation Act. But many infrastructure 

projects are not well suited to attract private investment, and State 

and local governments are already struggling to find the funds to 

simply fill in potholes and maintain healthy drinking water. 

Dr. Holtz-Eakin, in a blog post you wrote that ‘‘It is a tall order 

for the Administration’s infrastructure plan to generate $1.5 trillion of investment.’’ Do you think the Administration erred in assuming State and local governments, in partnership with private 

investors, can generate $1.3 trillion in infrastructure investment? 

Mr. HOLTZ-EAKIN. I think it was extremely optimistic. I mean, to 

get the private sector involved, you have to have some cash flows 

on the table for them, and at least in my judgment, it didn’t look 

like there would be sufficient opportunities to do that, to generate 

that kind of participation. I also don’t think that $1.5 trillion is the 

right way to think about any problem. The question is is an infrastructure project valuable? If it is, do it; and if it is not, stop, and 

you will either get to a $1.5 trillion or you won’t. I don’t see the 

magic of going for that number. 

53 

Senator MARKEY. Except that it is a magical number that they 

have created, huh? The magic asterisk. 

Mr. HOLTZ-EAKIN. My profession has been spent with magical 

numbers, and most of them are really magical. 

[Laughter.] 

Senator MARKEY. I remember when David Stockman, one of your 

predecessors, he talked about a magic asterisk in the 1981 Reagan 

budget to make up for all of the funding they actually couldn’t account for; they just put a magic asterisk next to it, and I think that 

is where they are with this $1.3 trillion. 

I think this is the Committee that should be realistic, that we 

should be practical. That is really what the history of the Committee is, and that we should just try to come back and put something together that has real numbers, realistic numbers that we 

are working on so that we can really have the infrastructure upgrade that we need. 

So, I thank you all very much, and thank you, Mr. Chairman. 

Senator BARRASSO. Senator Wicker. 

Senator WICKER. Doug, I have known you for 20 years. You have 

been in and out of government; you have been on TV. How do you 

pronounce your last name? 

Mr. HOLTZ-EAKIN. The correct pronunciation is Holts-Akin. 

Senator WICKER. Holts-Akin. OK. 

Mr. HOLTZ-EAKIN. I long ago settled on Holts-Eakin because it is 

just not worth it. 

Senator WICKER. OK. 

[Laughter.] 

Senator WICKER. And Brian, help me with your last name. 

Mr. MOTYL. Motel. Motel. 

Senator WICKER. Motel. 

Mr. MOTYL. But Senator Carper pointed out that was wrong. 

Senator WICKER. Like the one at 7-Eleven there. 

[Laughter.] 

Senator WICKER. Well, Dr. Holtz-Eakin, you were very gentle in 

saying it is optimistic, overly optimistic. In a nutshell, what suggestion do you have for us, other than the one you made, to find 

out what the needs are and figure out how much the cost is, rather 

than start with 1.5? What would you do to make the financing 

more realistic, more doable, more workable? 

Mr. HOLTZ-EAKIN. So, beginning narrowly, as I said in my opening statement, I think the design of WIFIA, TIFIA, SRF WIN is 

consistent with good infrastructure projects. You have people on 

the ground vetting them; there is local stakeholder financing, so 

they have a reason to both choose and operate them effectively; 

there is a role for the Federal Government in terms of a debt finance augmenting that; and that program will be designed and will 

generate some projects, and it might not get to $1.5 trillion, but 

they will be beneficial projects. So that makes sense to me. 

I think what you are seeing in the bigger picture, if you step 

back, and the Committee is well aware of this, is this is one way 

to use general revenues to finance infrastructure projects, and that 

is a reflection of the fact that there is not a stable financing mechanism that satisfies the Highway Trust Fund’s needs. So, you have 

a bigger problem, which is what will be the way to commit to stable 

54 

funding of transportation infrastructure from the Federal Government? And that question has been unresolved for quite a long time, 

and I know why. 

Senator WICKER. OK. But do you see Senator Boozman’s point 

and my point, coming from smaller States that have never used 

TIFIA, never used WIFIA, because we don’t have the revenue 

stream, that we need this other little program to maybe help us to 

bundle up some small funds and get eligible for this kind of nifty 

financing? 

Mr. HOLTZ-EAKIN. I absolutely do. Remember, I am, first and 

foremost, a trained economist, and the core economic question is is 

the rate of return on this infrastructure project, albeit it a small 

one in a rural locality, greater than the market rate of return? And 

if the answer is yes, it should be done. The public will be better 

off doing that. 

There are things that get in the way of that: inefficiencies in 

bond and other markets, overhead costs in running Federal programs. To the extent that you can bypass those things, you are 

doing a better job of financing infrastructure. 

Senator WICKER. Mr. Motyl, we don’t have a robust revenue 

stream in States like Mississippi and Arkansas, so do you have any 

ideas regarding small communities’ being able to leverage private 

sector investment to fund transportation infrastructure projects, 

since TIFIA doesn’t work for us? 

Mr. MOTYL. I don’t really have any experience on the private sector partnerships. I will say that TIFIA worked for us, and it is a 

tool that we have, but it is not fair that we can use it and so many 

other States can’t. There have to be programs developed that everybody can take advantage of, and I don’t know what those programs 

are; maybe grant funding for the lower income communities or 

whatever. But we can afford the loan; we are happy to pay it, but 

a lot of people can’t, so there have to be programs for those other 

States. 

Senator WICKER. Well, I think it is worth mentioning, also, in response to Senator Markey’s statement and question, that there is 

proposed in the Trump program a carve out for rural areas that 

just can’t afford to do this. 

Mr. Sarmiento, do you want to comment on this issue? 

Mr. SARMIENTO. Yes. I think because we are in a more urban 

area, we realize that there is a need for other States and other 

areas to be eligible for the same amount of funding and be able to 

access it. I know that the SRF WIN is trying to address maybe that 

gap that is there for those smaller agencies and smaller cities. So, 

we certainly believe that, as we go through this, the more options, 

the more tools in that toolbox that you are trying to create for our 

Nation is an important step forward. 

Senator WICKER. Well, it is a tool that is in our bill right now, 

and I appreciate the leadership and the Committee in trying to 

keep it there. 

Thank you, gentlemen. 

Senator BARRASSO. Thank you, Senator Wicker. 

Senator Gillibrand. 

Senator GILLIBRAND. Thank you, Mr. Chairman. 

55 

I would like to build on the concerns raised earlier in the hearing 

by Senator Carper regarding the Federal Transit Administration’s 

guidance to count Federal loans, including TIFIA loans, as Federal 

funding when evaluating a project for a capital investment grant. 

I am very dismayed that in a letter dated June 29th of this year, 

the Acting Administrator of the FTA, Jane Williams, wrote that 

‘‘FTA considers U.S. Department of Transportation loans in the 

context of all Federal funding, and not separate from the Federal 

funding sources.’’ 

This ignores the distinction between grant funding and loan financing, and does not take into account whether the loan is actually repaid using non-Federal funds. 

The FTA’s interpretation is not consistent with the law, which 

states that the proceeds of secured loan under the TIFIA program 

may be used for any non-Federal share of project costs required for 

a Federal highway or transit project if the loan is repayable from 

non-Federal funds. 

I am very concerned that this Administration is intentionally trying to make it more difficult for States and localities to use low interest Federal loans for major transit projects, and instead, push 

more private financing for public infrastructure projects. 

And just as our colleagues pointed out, private financing is not 

going to be available for non-economic projects, which may well account for a great deal of the rural projects that were mentioned by 

our colleagues from rural States. 

Just don’t take my word for it. Acting Administration Williams’ 

letter says, ‘‘The FTA strongly encourages project sponsors to consider innovative financing and funding approaches, including value 

capture and private contributions.’’ 

Now, value capture obviously means there is an economic stream 

that you take from it. A rural road in Mississippi is not going to 

have enough of an economic stream. That is also the same for upstate New York. 

I think we can all agree that local project sponsors should be utilizing an element of non-Federal funding so that we can leverage 

our Federal resources with other funding sources. However, limiting the ability of a project sponsor to utilize the full suite of Federal grants and loan assistance to put together a financing plan for 

major projects is not the answer. This approach makes it more difficult to build major transit projects and could end up making those 

projects more expensive. 

First, Mr. Motyl, how do low interest Federal loans like TIFIA 

differ from other financing that you would get if you had to rely 

more heavily on other sources, including the private market? 

Mr. MOTYL. Low interest loans like TIFIA have much greater 

flexibility than other financing options. We do a lot of bond financing; we have senior revenue bonds; we have dedicated toll revenue 

bonds. The flexibility with the amortization schedule on TIFIA 

gives you a lot of benefits; deferred principal payment. 

Senator GILLIBRAND. Are there any other benefits to local taxpayers of utilizing Federal financing? 

Mr. MOTYL. Any savings to the Department is a savings to the 

taxpayers. 

56 

Senator GILLIBRAND. Dr. Holtz-Eakin, you mentioned that a benefit of Federal loan programs is that project sponsors have an interest in not wasting money because they are repaying it. Would you 

agree that Federal loan programs like TIFIA require local project 

sponsors to have skin in the game? 

Mr. HOLTZ-EAKIN. Absolutely, yes. 

Senator GILLIBRAND. And would you agree that there is a distinction between Federal grant funding that does not require repayment and credit assistance and loan financing that is repaid with 

non-Federal funding? 

Mr. HOLTZ-EAKIN. Certainly seems so to me. I did not know 

about this guidance until today, but I am going to take a look at 

it. 

Senator GILLIBRAND. I would be grateful if you could submit a 

letter to the Committee of your thoughts on this guidance and what 

the negative or unforeseen effects of it will be. 

Mr. HOLTZ-EAKIN. I would be happy to do that. 

Senator GILLIBRAND. Thank you, Mr. Chairman. 

Senator BARRASSO. Thank you so much. 

Senator Carper. 

Senator CARPER. I want to thank Senator Gillibrand for following 

up on this issue. I think you raised an important point, and I 

thank you for your comments. 

In reference to the concerns that Senator Fischer raised earlier 

about small projects, I would just like to note for the record that 

small projects—I believe those are ones that are under $75 million 

in project costs, but they do face easier requirements. For example, 

only one investment grade rating is needed, I believe, on these 

projects. So, requirements are not exactly the same, regardless of 

the size. 

However, I agree that there may be more to do to expand access 

to TIFIA loans to all of our communities, and we have been talking 

about those ideas here today. 

A couple of my colleagues, Senator Markey and others, Dr. HoltzEakin alluded to this as well, we have a huge demand and a need 

for infrastructure investments, all kinds. Not just roads, highways, 

bridges; not just airports, railroads; not just ports, not just 

broadband deployment; all kinds of needs. What we don’t have is 

the will to pay for them. 

Some of us believe that there is value in the three Ps, public-private partnerships. I think that could be part of the solution, but 

I think the last, I don’t know, 30 years or so, we have maybe 60 

of them, something like that. That doesn’t really solve the problem, 

although it is helpful. TIFIA is helpful, and you have given us 

some good ideas on how to make it even more helpful. 

Historically, we have used user fees to pay for infrastructure 

projects, especially with respect to roads, highways, bridges. The 

user fee that we use hasn’t been changed in about 25 years, it is 

worth about half of what it was when it was adopted, so there are 

some of us who suggested we consider restoring the purchasing 

power of the user fees. Not everybody is crazy about doing that, although Senator Barrasso and I were in a meeting with the President, you were sitting right beside him, I was sitting right in front 

of him when he stated very boldly his strong support for raising— 

57 

even more than some of us had suggested—the user fees, the ones 

that we traditionally use. 

In the meantime, people ask me how do we fund roads, highways, bridges in the long term. I think in the long term we move 

to a vehicle miles traveled approach. I think that is the way to go. 

We have a pilot project underway now. There are a number of 

States, especially on the East Coast, that are involved in that. 

Delaware is one of them. My 2001 Chrysler Town and Country 

minivan is one of several hundred vehicles that are even used in 

that project. They wanted a relic to be able to include with the 

really snazzy new cars and trucks to be part of it. 

Dr. Holtz-Eakin, would you just opine for us for a little bit about 

vehicle miles traveled? My sense is that is where we are going ultimately, because we are seeing more and more battery powered vehicles, electric powered vehicles, more and more fuel cell powered 

vehicles, and people like driving them. They are easier to maintain, 

better environmentally. 

Your thoughts about vehicle miles traveled? 

Mr. HOLTZ-EAKIN. I am a big supporter of that switch. In the 

end, the damage to roadways comes from weight, axles, and miles 

driven, and you can adjust for all three of those things using a vehicle miles tax. It will, thus, be a more genuinely targeted user fee 

that will create the right incentives for the amount of driving that 

people do, the vehicles they select, and also the funding to both 

build and maintain roadways. So, I think that would be a big step 

in the right direction. 

Senator CARPER. All right, thank you. 

Does either witness have any thoughts on this? You may or may 

not. If you do, please, go ahead, but if not, that is OK. 

Mr. MOTYL. It is a great idea, and it makes sense. We will see 

how the pilot goes, but there is a lot of potential there. 

Senator CARPER. All right, thank you. 

I think we will just hold it there. This has been a good hearing. 

We appreciate very much you all being here. Thanks so much for 

just helping us pronounce your names correctly and for helping us 

with some good advice on branding from California. I wrote that 

down. Maybe I will find a way to use that in Delaware. I will not 

give you the credit; I will just take it myself. 

Mr. SARMIENTO. Thank you, Senator. 

Senator BARRASSO. He never did that as Governor, did he? 

[Laughter.] 

Senator BARRASSO. Senator Boozman. 

Senator BOOZMAN. Well, we are not quite done, so we still have 

the opportunity to mess up names, pronunciations or whatever. 

Let me just ask one final thing, Mr. Sarmiento. One of the major 

criticisms with the WIFIA program is the lack of opportunity for 

small and medium projects in non-metropolitan rural areas, which 

is so important. Certainly, Senator Barrasso, Senator Carper, 

again, we have a few cities of size, but most of it is small and medium. 

You are a guy that runs a huge district and does it very, very 

well, but you are constantly aware, constantly in contact with the 

small and medium. Do you think a program like SRF WIN, that 

allows States to bundle their smaller projects into one application 

58 

so they may qualify for the WIFIA program, would be helpful for 

the small and rural communities? 

Mr. SARMIENTO. Yes, Senator. Thank you. And by the way, I 

never thought I would have the easy name to pronounce, so next 

to these two gentlemen I think I am in good company. 

But thank you for that question. I do think, as a representative 

of a larger agency, I think that we believe that there is a huge benefit to having the SRF WIN make itself available for those smaller 

agencies and smaller communities that don’t have the capacity that 

may—— 

Senator BOOZMAN. So bundling would be a—— 

Mr. SARMIENTO. So the funding is critical because that is a way 

for eligibility. Obviously, we know the threshold for WIFIA is higher, so it does make sense to have easier accessible ability for these 

low interest loans. 

Senator BOOZMAN. Well, thank all of you all for being here. We 

appreciate your testimony; it was very helpful. Again, we hear a lot 

up here about all of the situations of folks not getting along and 

trying to get things done, but this is not a Republican or Democrat 

issue; this is something that truly is affecting big city infrastructure, medium, small, and it truly is a crisis. So, we appreciate your 

efforts in helping us come up with better solutions. Thank you. 

Senator BARRASSO. Thank you, Senator Boozman. 

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

The record is going to be open for another 2 weeks. Members 

may submit written questions, and I hope you will be able to respond quickly. I want to thank all of you for your time and your 

testimony today. 

The hearing is adjourned. 

[Whereupon, at 11:35 a.m. the Committee was adjourned.] 

[Additional material submitted for the record follows:] 

59 


31282.028

Council of Infrastructure Financing Authorities 

316 Pennsylvania Avenue, S.E. • Suite 201 • Washington, D.C. 20003 

Council of Infrastructure Financing Authorities 

Statement for the Record 

"The Long-term Value to U.S. Taxpayers of Low-cost Federal Infrastructure Loans" 

U.S. Senate Committee on Public Works and the Environment 

July 11, 2018 

The Council of Infrastructure Financing Authorities is pleased to submit this statement 

for the record for a hearing by the U.S. Senate Committee on Public Works and the 

Environment on "TI1e Long-term Value to U.S. Taxpayers of Low-cost Federal 

Infrastructure Loans" on July 11, 2018. 

TI1e Council of Infrastructure Financing Authorities supports S. 2800, America's Water 

Infrastructure Act of 2018, which was amended to include "Securing Required Funding 

for Water Infrastructure Now Act" (SRF WIN) by a unanimous vote of the U.S. Senate's 

Subcommittee on Transportation and Infrastructure on May 22, 2018. The SRF WIN 

provisions provide a valuable new financing tool for states that will increase investment 

in water infrastructure across the nation. 

For more than 30 years, the federal government has partnered with states to fund water 

infrastructure through the Clean Water and Drinking Water State Revolving Funds. 

TI1ese proven, successful programs, which receive annual funding from both federal 

and state governments and provide low interest loans and other assistance to 

communities to build critical water infrastructure that protect public health and the 

environment. 

Over the last three decades, these programs, combined, have generated an investment 

of more than $150 billion in our nation's water infrastructure. Because of the revolving 

nature of the programs - loan repayments fund new projects - these programs ensure a 

long-term, sustainable supply of capital to address future needs. 
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The SRF WIN provisions provide a streamlined path for State Revolving Funds to 

access low-interest funding offered through the Water Inhastructure Finance and 

Innovation Act (WIFIA). These provisions provide all states with an efficient and 

economically-attractive alternative to the private bond market that will allow the SRFs 

to fund more projects. 

Providing State Revolving Funds with a more efficient process for securing loans 

backed by the U.S. Treasury enhances the fundamental financial stability and 

effectiveness of these state-federal partnerships. Additionally, the SRF WIN 

streamlining provisions eliminate fees, reduce red-tape and avoid needless duplication 

which can drive up the cost of water infrastructure projects. 

Greater investment in water infrastructure benefits the public, the economy and the 

environment. Projects funded by the State Revolving Funds have provided tens of 

millions of Americans, particularly those in low income and underserved communities, 

with access to safe, reliable drinking water and have increased protection for America's 

sensitive water resources which are the foundation for healthy and vibrant wildlife 

habitats. 

The Council of Infrastructure Financing Authorities (CIFA) is a national association 

dedicated to representing the interests of state agencies that are responsible for 

implementing and managing the Clean Water and Drinking Water State Revolving 

Funds. Our members include state health departments, environmental protection 

agencies, and infrastructure finance authorities. Although diverse, these agencies share 

a common mission- to implement financially sound policies and strategies that provide 

ongoing and sustainable investment in critical water infrastructure that protects public 

health and conserves our sensitive natural resources for generations to come. Our 

members are grateful to the leadership of the Committee and the U.S. Senate for their 

unwavering commitment to investment in our nation's water infrastructure.