Senate Appropriations Transportation Subcommittee hearing on funding infrastructure
Senate Appropriations Committee / Transportation Subcommittee
“Investing in America: Funding our Nation’s Transportation Infrastructure Needs”
Wednesday, March 8, 2017
Key Topics & Takeaways
Public Infrastructure Financing: During the hearing, witnesses repeatedly and strongly endorsed the use of direct federal spending to fund infrastructure projects around the country. Witnesses endorsed the formula used in the Fixing America’s Surface Transportation (FAST) Act of 2015 as an equitable method of distributing federal financing. Witnesses also highlighted the importance of direct federal spending to support infrastructure projects in small and rural states, where private capital is unavailable to finance surface transportation projects.
Private Infrastructure Financing: While all witnesses and many Senators discussed the importance of direct federal financing for surface transportation infrastructure, there was support for using private financing option to help fund infrastructure projects. Witnesses said that public-private partnerships could provide valuable funding options in some parts of the country. Additionally, several witnesses supported the continued use of Transportation Infrastructure Finance and Innovation Act (TIFIA) credit assistance, as well as private-activity bonds, to finance infrastructure projects.
Witnesses
David Bernhardt, Commissioner, Maine Department of Transportation; President, American Association of State Highway Transportation Officials (AASHTO)
Jim Tymon, Chief Operating Officer and Director of Policy Management, American Association of State Highway Transportation Officials (AASHTO)
Todd Hauptli, President and CEO, American Associations of Airport Executives
Edward Mortimer, Executive Director for Transportation Infrastructure, US Chamber of Commerce
Beth Osborne, Senior Policy Advisor, Transportation for America
Opening Statements
In her opening statement, Chairman Susan Collins (R-Maine) noted that President Trump’s call for $1 trillion in infrastructure spending over the next ten years, and discussed the current state of America’s infrastructure. She noted that the American Society of Civil Engineers has given American roads a “D grade” for their current health in 2016. She also highlighted a Department of Transportation (DOT) performance report that identified over $800 billion in unmet maintenance needs for America’ surface transportation infrastructure, and the especially poor condition of rural roads. Collins said that the main question is “how do you pay for this much-needed investment?” and that this is the “biggest task” before Congress related to infrastructure. She called on Congress to find money for transportation without relying on short-term budget “gimmicks”, and noted the Highway Trust Fund (HTF) has been dependent on general fund transfers since 2008. She talked specifically about state-level experimentation with vehicle-mile based user fees, the FAST Act’s funding formula, public-private partnerships (P3s), the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, and private-activity bonds, as possible revenue sources that have been insufficiently explored by DOT. She closed by asking witnesses to provide their thoughts on how to “cut red tape” to encourage private financing.
In his opening statement, Senator Jack Reed (D-R.I.) said that now is an “opportune time” for Congress to begin grappling with how to finance infrastructure development, and that there is broad bipartisan support for a legislative infrastructure package. Reed deplored the current state of federal and state funding programs, and said he hopes that the administration does not rely on “cheap” infrastructure funding mechanisms, such as tax credits, to pay for its infrastructure package. Reed repeatedly discussed the importance of direct federal funding to meet infrastructure needs, and criticized the Office of Management and Budget (OMB) Director Mick Mulvaney’s proposal to cut non-defense discretionary spending. Reed cited the massive maintenance backlog identified by DOT as a key reason to embrace direct federal funding.
Testimony
David Bernhardt, Commissioner, Maine Department of Transportation; President, American Association of State Highway Transportation Officials (AASHTO)
In his testimony, Bernhardt discussed four main points Congress should use to guide its work on infrastructure. These were: 1) stabilize the funding for the Highway Trust Fund; 2) take timely action on annual transportation appropriations; 3) aid states in creating multimodal transportation solutions; and 4) ensure that any infrastructure package is comprehensive in scope. Bernhardt described the HTF as the “backbone” of U.S. infrastructure spending, and lamented that it has required 7 general fund transfers since 2008 to make up for funding shortfalls. Bernhardt also called on Congress to honor the current FAST Act funding levels in its annual appropriations, as appropriations are still required to pay for the authorized FAST Act spending. Bernhardt noted that for many states, especially those with short construction windows, delays in accessing FAST Act-authorized funds due to appropriations delays can lead to severe project disruptions. Bernhardt supported the FAST Act’s funding formula for distributing infrastructure money to the states, and said any new infrastructure package should use that formula. Bernhardt expressed skepticism in the ability of P3s to meet the infrastructure needs of rural areas.
Jim Tymon, Chief Operating Officer and Director of Policy Management, American Association of State Highway Transportation Officials
In his testimony, Tymon praised the FAST Act for providing predictability in federal through its formula system, but argued that predictability is jeopardized in the absence of timely transportation appropriations. Tymon also said that while the FAST Act provided a welcome funding increase, the increase was not sufficient to cut down on the backlog of needed maintenance for the nation’s surface transportation infrastructure. Tymon also testified that state-level transportation authorities supported the FAST Act funding formula. Tymon criticized the HTF’s repeated funding problems, and said that the main source of revenue for the Fund – federal gasoline and diesel taxes – is under strain due to a more efficient vehicle fleet, a decrease in the number of vehicle-miles Americans travel each year, and a loss in purchasing power due to the gas tax not being indexed to inflation. Tymon closed by saying that P3s and other private financing options (namely private-activity bonds TIFIA credits) should be considered in any infrastructure package, but that private capital was no replacement for direct federal spending.
Todd Hauptli, President and CEO, American Associations of Airport Executives
In his testimony, Hauptli focused on the maintenance needs of the nation’s airports. Hauptli said that Congress has chronically underinvested in infrastructure generally, and in airport infrastructure specifically. Hauptli also said that the Airport Improvement Program (AIP) could be doubled in size from its current level of $3 billion, and still not be large enough to meet the needs of U.S. airports. Hauptli argued for removing the cap on the Passenger Facility Charge (PFC) a tax levied by airports on originating passengers, to allow local aviation authorities to tailor their PFC’s to meet local maintenance and expansion needs. Hauptli described the PFC as “the worst option, except for all the others” for funding airport maintenance, as airports have uneven access to private capital markets.
Ed Mortimer, Executive Director for Transportation Infrastructure, US Chamber of Commerce
In his testimony, Mortimer said the US Chamber of Commerce was excited by the prospect of a major infrastructure package being enacted in this Congress. Mortimer said that any infrastructure package should focus on projects that will provide long-term economic benefits, and not on projects that can be quickly launched, as the American Recovery and Reinvestment Act (ARRA) of 2009 did. He also called on Congress to use the full array of public and private funding mechanisms to pay for infrastructure spending and ensure the solvency of the HTF. He specifically endorsed raising the federal gas tax, the continued use of TIFIA, and lifting the cap on private-activity bonds to fund surface transportation projects. Mortimer said that any new infrastructure package should be accompanied by new performance requirements and project analysis to maximize gains from infrastructure. Mortimer closed by calling on the committee to fully fund the FAST Act in appropriations this year.
Beth Osborne, Senior Policy Advisor, Transportation for America
In her testimony, Osborne provided an overview of her organization, Transportation for America, and called on Congress to provide sustainable infrastructure funding to encourage long-term state level project planning. She emphasized the need for programs that promote innovation and public-private collaborations. She praised the Transportation Investment Generating Economic Recovery (TIGER) grant program, saying the competition for grants encouraged localities to develop better surface transportation infrastructure projects that improve connectivity and decrease congestion.
Question & Answer
Public InfrastructureFinancing
Collins and Reed both asked the witnesses for ideas on how to ensure the solvency of the HTF. Witnesses all expressed support for the gas tax, arguing that it was a good method for collecting revenue that was well tied the user base of highways. Mortimer praised the gas tax for its low administrative costs, as well as the “political courage” of state legislatures that have already raised their gas taxes to fund road maintenance. Osborne said the legibility of the gas tax to voters could improve its political durability.
Throughout the hearing, witnesses expressed support for the FAST Act’s funding formula, and Tymon and Bernhardt specifically praised it as an equitable way to distribute federal infrastructure funds to all states.
Collins asked Osborne how the TIGER grant program complemented other direct federal spending on infrastructure. Osborne said that while the FAST Act formula provided “predictable” funding, TIGER grants encouraged experimentation and innovation in a way the formula could not. Osborne said many projects eligible for TIGER grants may not have received formula funding due to their uniqueness.
Private InfrastructureFinancing
John Boozman (R-Ark.) and Reed both asked witnesses about the ability of P3s to fund infrastructure projects. Bernhardt said that for many states, P3s were not a viable source of infrastructure funding, and that many localities can get better financing options from bond markets. Bernhardt also testified that many projects will not be profitable enough, or large enough, to provide the return on capital required by private capital.
Mortimer said that private financing is “an important tool in the tool kit” and should be encouraged as part of an infrastructure package, but also argued that Congress should use ensure that all direct federal financing authorized by the FAST Act is distributed to states as part of appropriations.
Move America Program
John Hoeven (R-N.D.) asked witnesses to weigh in on the bill that he and Senator Ron Wyden (D-Ore.) sponsored in the 114th Congress called the Move America Act. Hoeven told witnesses the bill provides tax credits and tax exempt financing to encourage private investment in infrastructure, as well as direct federal allotments for each state for surface transportation infrastructure. All the witnesses supported the bill’s mix of public and private funding mechanisms for infrastructure.
For more information on this hearing, please click here.
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Senate Appropriations Committee / Transportation Subcommittee
“Investing in America: Funding our Nation’s Transportation Infrastructure Needs”
Wednesday, March 8, 2017
Key Topics & Takeaways
Public Infrastructure Financing: During the hearing, witnesses repeatedly and strongly endorsed the use of direct federal spending to fund infrastructure projects around the country. Witnesses endorsed the formula used in the Fixing America’s Surface Transportation (FAST) Act of 2015 as an equitable method of distributing federal financing. Witnesses also highlighted the importance of direct federal spending to support infrastructure projects in small and rural states, where private capital is unavailable to finance surface transportation projects.
Private Infrastructure Financing: While all witnesses and many Senators discussed the importance of direct federal financing for surface transportation infrastructure, there was support for using private financing option to help fund infrastructure projects. Witnesses said that public-private partnerships could provide valuable funding options in some parts of the country. Additionally, several witnesses supported the continued use of Transportation Infrastructure Finance and Innovation Act (TIFIA) credit assistance, as well as private-activity bonds, to finance infrastructure projects.
Witnesses
David Bernhardt, Commissioner, Maine Department of Transportation; President, American Association of State Highway Transportation Officials (AASHTO)
Jim Tymon, Chief Operating Officer and Director of Policy Management, American Association of State Highway Transportation Officials (AASHTO)
Todd Hauptli, President and CEO, American Associations of Airport Executives
Edward Mortimer, Executive Director for Transportation Infrastructure, US Chamber of Commerce
Beth Osborne, Senior Policy Advisor, Transportation for America
Opening Statements
In her opening statement, Chairman Susan Collins (R-Maine) noted that President Trump’s call for $1 trillion in infrastructure spending over the next ten years, and discussed the current state of America’s infrastructure. She noted that the American Society of Civil Engineers has given American roads a “D grade” for their current health in 2016. She also highlighted a Department of Transportation (DOT) performance report that identified over $800 billion in unmet maintenance needs for America’ surface transportation infrastructure, and the especially poor condition of rural roads. Collins said that the main question is “how do you pay for this much-needed investment?” and that this is the “biggest task” before Congress related to infrastructure. She called on Congress to find money for transportation without relying on short-term budget “gimmicks”, and noted the Highway Trust Fund (HTF) has been dependent on general fund transfers since 2008. She talked specifically about state-level experimentation with vehicle-mile based user fees, the FAST Act’s funding formula, public-private partnerships (P3s), the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, and private-activity bonds, as possible revenue sources that have been insufficiently explored by DOT. She closed by asking witnesses to provide their thoughts on how to “cut red tape” to encourage private financing.
In his opening statement, Senator Jack Reed (D-R.I.) said that now is an “opportune time” for Congress to begin grappling with how to finance infrastructure development, and that there is broad bipartisan support for a legislative infrastructure package. Reed deplored the current state of federal and state funding programs, and said he hopes that the administration does not rely on “cheap” infrastructure funding mechanisms, such as tax credits, to pay for its infrastructure package. Reed repeatedly discussed the importance of direct federal funding to meet infrastructure needs, and criticized the Office of Management and Budget (OMB) Director Mick Mulvaney’s proposal to cut non-defense discretionary spending. Reed cited the massive maintenance backlog identified by DOT as a key reason to embrace direct federal funding.
Testimony
David Bernhardt, Commissioner, Maine Department of Transportation; President, American Association of State Highway Transportation Officials (AASHTO)
In his testimony, Bernhardt discussed four main points Congress should use to guide its work on infrastructure. These were: 1) stabilize the funding for the Highway Trust Fund; 2) take timely action on annual transportation appropriations; 3) aid states in creating multimodal transportation solutions; and 4) ensure that any infrastructure package is comprehensive in scope. Bernhardt described the HTF as the “backbone” of U.S. infrastructure spending, and lamented that it has required 7 general fund transfers since 2008 to make up for funding shortfalls. Bernhardt also called on Congress to honor the current FAST Act funding levels in its annual appropriations, as appropriations are still required to pay for the authorized FAST Act spending. Bernhardt noted that for many states, especially those with short construction windows, delays in accessing FAST Act-authorized funds due to appropriations delays can lead to severe project disruptions. Bernhardt supported the FAST Act’s funding formula for distributing infrastructure money to the states, and said any new infrastructure package should use that formula. Bernhardt expressed skepticism in the ability of P3s to meet the infrastructure needs of rural areas.
Jim Tymon, Chief Operating Officer and Director of Policy Management, American Association of State Highway Transportation Officials
In his testimony, Tymon praised the FAST Act for providing predictability in federal through its formula system, but argued that predictability is jeopardized in the absence of timely transportation appropriations. Tymon also said that while the FAST Act provided a welcome funding increase, the increase was not sufficient to cut down on the backlog of needed maintenance for the nation’s surface transportation infrastructure. Tymon also testified that state-level transportation authorities supported the FAST Act funding formula. Tymon criticized the HTF’s repeated funding problems, and said that the main source of revenue for the Fund – federal gasoline and diesel taxes – is under strain due to a more efficient vehicle fleet, a decrease in the number of vehicle-miles Americans travel each year, and a loss in purchasing power due to the gas tax not being indexed to inflation. Tymon closed by saying that P3s and other private financing options (namely private-activity bonds TIFIA credits) should be considered in any infrastructure package, but that private capital was no replacement for direct federal spending.
Todd Hauptli, President and CEO, American Associations of Airport Executives
In his testimony, Hauptli focused on the maintenance needs of the nation’s airports. Hauptli said that Congress has chronically underinvested in infrastructure generally, and in airport infrastructure specifically. Hauptli also said that the Airport Improvement Program (AIP) could be doubled in size from its current level of $3 billion, and still not be large enough to meet the needs of U.S. airports. Hauptli argued for removing the cap on the Passenger Facility Charge (PFC) a tax levied by airports on originating passengers, to allow local aviation authorities to tailor their PFC’s to meet local maintenance and expansion needs. Hauptli described the PFC as “the worst option, except for all the others” for funding airport maintenance, as airports have uneven access to private capital markets.
Ed Mortimer, Executive Director for Transportation Infrastructure, US Chamber of Commerce
In his testimony, Mortimer said the US Chamber of Commerce was excited by the prospect of a major infrastructure package being enacted in this Congress. Mortimer said that any infrastructure package should focus on projects that will provide long-term economic benefits, and not on projects that can be quickly launched, as the American Recovery and Reinvestment Act (ARRA) of 2009 did. He also called on Congress to use the full array of public and private funding mechanisms to pay for infrastructure spending and ensure the solvency of the HTF. He specifically endorsed raising the federal gas tax, the continued use of TIFIA, and lifting the cap on private-activity bonds to fund surface transportation projects. Mortimer said that any new infrastructure package should be accompanied by new performance requirements and project analysis to maximize gains from infrastructure. Mortimer closed by calling on the committee to fully fund the FAST Act in appropriations this year.
Beth Osborne, Senior Policy Advisor, Transportation for America
In her testimony, Osborne provided an overview of her organization, Transportation for America, and called on Congress to provide sustainable infrastructure funding to encourage long-term state level project planning. She emphasized the need for programs that promote innovation and public-private collaborations. She praised the Transportation Investment Generating Economic Recovery (TIGER) grant program, saying the competition for grants encouraged localities to develop better surface transportation infrastructure projects that improve connectivity and decrease congestion.
Question & Answer
Public InfrastructureFinancing
Collins and Reed both asked the witnesses for ideas on how to ensure the solvency of the HTF. Witnesses all expressed support for the gas tax, arguing that it was a good method for collecting revenue that was well tied the user base of highways. Mortimer praised the gas tax for its low administrative costs, as well as the “political courage” of state legislatures that have already raised their gas taxes to fund road maintenance. Osborne said the legibility of the gas tax to voters could improve its political durability.
Throughout the hearing, witnesses expressed support for the FAST Act’s funding formula, and Tymon and Bernhardt specifically praised it as an equitable way to distribute federal infrastructure funds to all states.
Collins asked Osborne how the TIGER grant program complemented other direct federal spending on infrastructure. Osborne said that while the FAST Act formula provided “predictable” funding, TIGER grants encouraged experimentation and innovation in a way the formula could not. Osborne said many projects eligible for TIGER grants may not have received formula funding due to their uniqueness.
Private InfrastructureFinancing
John Boozman (R-Ark.) and Reed both asked witnesses about the ability of P3s to fund infrastructure projects. Bernhardt said that for many states, P3s were not a viable source of infrastructure funding, and that many localities can get better financing options from bond markets. Bernhardt also testified that many projects will not be profitable enough, or large enough, to provide the return on capital required by private capital.
Mortimer said that private financing is “an important tool in the tool kit” and should be encouraged as part of an infrastructure package, but also argued that Congress should use ensure that all direct federal financing authorized by the FAST Act is distributed to states as part of appropriations.
Move America Program
John Hoeven (R-N.D.) asked witnesses to weigh in on the bill that he and Senator Ron Wyden (D-Ore.) sponsored in the 114th Congress called the Move America Act. Hoeven told witnesses the bill provides tax credits and tax exempt financing to encourage private investment in infrastructure, as well as direct federal allotments for each state for surface transportation infrastructure. All the witnesses supported the bill’s mix of public and private funding mechanisms for infrastructure.
For more information on this hearing, please click here.