Senate Commerce Committee Hearing on Infrastructure

Senate Commerce Committee

“Connecting America: Improving Access to Infrastructure

for Communities Across the Country”

Wednesday, March 1, 2017

Key Topics & Takeaways

Funding Mechanisms:   During the hearing, witnesses and members of the committee discussed financing mechanisms for infrastructure. Several Senators expressed support for using block grants and other forms of direct federal financing to encourage infrastructure development. Witnesses also described the difficulties rural states face in attracting private capital, and endorsed the use of the FAST Act’s formula to determine each state’s share of infrastructure revenue.

Permitting and Regulatory Reform: Numerous witnesses expressed frustration with regulatory impediments to local infrastructure development. Several Republican Senators asked witnesses for ideas to improve the permitting process for infrastructure projects, and witnesses described different ways their states and localities have dealt with the regulatory requirements of infrastructure projects.

Municipal Bonds: There was no discussion of the municipal bond tax exemption, municipal bond issuance, or the municipal bond market during the hearing.

Witnesses

The Honorable Dennis Daugaard, Governor of South Dakota

The Honorable Philip Levine, Mayor of Miami Beach

The Honorable Carlos Braceras, Executive Director, Utah Department of Transportation

Ms. Shirley Bloomfield, Chief Executive Officer, NTCA-The Rural Broadband Association

Opening Statements

In his opening statement, Chairman John Thune (R-S.D.) began by discussing the Fixing America’s Surface Transportation (FAST) Act which provided $305 billion over five-years to improve the nation’s infrastructure and enhance economic growth. Thune said that even with the FAST Act, the nation’s infrastructure is falling behind the rest of the world, and is unable to keep pace with the growing demands of the economy. Thune discussed the FAST Act’s use of formulas to allocate federal funding to different states, noting that the FAST Act enjoyed broad bipartisan support and passed the Senate by a vote of 83-16. Thune mentioned alternative sources of financing infrastructure included bonds, tax credits, credit assistance programs, and public-private partnerships (P3’s). Turning to broadband issues, the Chairman discussed the millions of Americans who lack reliable internet access, most of whom live in rural areas. He continued that despite large amounts of private capital going to broadband deployment in the last twenty years, a “digital divide” has sprung up between Americans in urban and rural areas. Thune closed by calling on legislators to reduce the regulatory burdens that slow down infrastructure development.

In his opening statement, Ranking Member Bill Nelson (D-Fla.) noted that in his address to Congress, President Trump called for $1 trillion in new infrastructure spending, as well as a previously introduced Democratic proposal for expanded infrastructure spending. Nelson also discussed the state of Florida’s infrastructure, noting an increase in flooding and the state’s 200 “structurally deficient bridges” (as well as the fact that the country currently has 56,000 bridges in need of maintenance). Nelson also said that “direct federal investment” is crucial to developing infrastructure in the U.S., and that the country could not “toll [its] way out of [its] infrastructure problems” or rely exclusively on P3s to fund projects. Nelson also urged any infrastructure program to include upgrades to the nation’s 9-1-1 infrastructure.

Testimony

The Honorable Dennis Daugaard, Governor of South DakotaIn his testimony, Daugaard offered a rural perspective on rural surface transportation infrastructure. Daugaard stressed that rural transportation infrastructure benefits the whole country and that interior states act as “bridges” between populous, urban areas. Daugaard also said that transportation in rural states is critical for moving agricultural and energy products to market, as those states originate large amounts of those products. He continued that rural surface transportation also “enables tens of thousands of people to reach tourist destinations” within the U.S., especially national parks. Daugaard’s second main point was that P3s are not a viable source of funding for rural surface transportation, and that Rural highways do not provide the return on capital demanded by private sector as the traffic and volume of rural roads is too low for tolls to recoup an investment. Daugaard said that Congress should account for this funding challenge that is unique to rural states in any infrastructure bill. He closed by arguing that any infrastructure package should use a formula for funding infrastructure (such as the FAST Act formula) to distribute money across the country.

The Honorable Philip Levine, Mayor of Miami Beach

In his testimony, Levine discussed three challenges faced by local governments with infrastructure needs. First, cities and towns need to build infrastructure that is resilient and that can provide multi-generational benefits.  Second, coordinating infrastructure projects across political jurisdictions is critical economic growth but this coordination can be costly. Third, local governments often struggle to navigate the complex federal regulatory requirements surrounding infrastructure projects. Levine said that the federal government should work with towns to aid the construction of infrastructure that improves connectivity, as this connectivity will create economic opportunity for residents. He also discussed the threat of climate change and rising sea levels to Florida’s infrastructure. 

The Honorable Carlos Braceras, Executive Director, Utah Department of Transportation

In his testimony, Braceras discussed Utah’s unique infrastructure needs, as the state blends a largely rural environment with a high-density urban corridor centered on Salt Lake City.  Braceras also discussed the importance of surface transportation to both economic growth and corporate supply chains. Braceras recommended two principles for any infrastructure initiative launched by Congress – first, use formula-based funding structures to allocate federal money to infrastructure projects, as this mechanism will distribute more money to rural areas. Second, Congress should lighten the regulatory burden for projects.  Braceras also discussed the emergence of connected and autonomous vehicles to enhance public safety and mobility, but stressed the necessity of structuring regulations to encourage innovation.  

Shirley Bloomfield, Chief Executive Officer, NTCA-The Rural Broadband Association

In her testimony, Bloomfield discussed the importance of broadband deployment in rural areas and the struggle of delivering affordable services to consumers in those areas. She testified that rural broadband deployment accrues benefits to both rural and urban areas, and improves the viability of teleworking and telemedicine in low-density areas.  Bloomfield thanked the more than 100 members of Congress who signed a letter urging President Trump to include broadband in any new infrastructure initiative. 

Question & Answer

FAST Act Funding Formula

Thune opened the questioning by asking about the benefits of the FAST Act’s formula for sharing federal money with states for infrastructure projects. Daugaard said the FAST Act formula balanced urban and rural needs, and isthe preferred mechanism for distributing federal funding for rural states. Daugaard described interior states as “bridges” for pass-through shipping and transportation. Daugaard also said that the formula method allows states to set their own infrastructure priorities and disperse funds across the state without having to acquire federal funds explicitly for smaller projects. Finally, Daugaard said that the formula mechanism allows states to move quicker through the regulatory approval process for new infrastructure projects. Daugaard repeatedly pointed out that while P3’s can be a source of project financing, rural states have fewer infrastructure projects that can attract private capital. He noted the low amounts of traffic on rural surface transportation relative to urbanized states were stumbling blocks for attracting private capital. Daugaard and Braceras spoke in favor of the FAST Act formula throughout the hearing.

Sen. Roy Blunt (R-Mo.) asked about obstacles in the way of local infrastructure development. Daugaard said that a major impediment is that some FAST Act funding is still out of reach for states. Daugaard also listed short-term planning and short time horizons to past federal highway bills as obstacles to states’ long-term infrastructure planning.

Alternative Funding Mechanisms

Sen. Ed Markey (D-Mass.) asked if it was difficult for localities to acquire federal grant money for infrastructure projects. Levine said that many towns are unable to navigate the various regulatory requirements to receive federal funding and simply raise funds on their own.

Sen. Shelley Moore Capito (R-W. Va.) also asked witnesses about possible funding mechanisms for infrastructure, and said she was open to using block grants to allow states to direct infrastructure money as they saw fit.

Sen. Ron Johnson (R-Wis.) asked all witnesses about accountability in federal transportation programs, noting that in the 2009 American Recovery and Reinvestment Act numerous projects failed to meet their goals, with some projects never even starting. Johnson asked specifically for ways to ensure that any future infrastructure spending avoids those pitfalls. Daugaard advocated the use of block grants to states, with wide deference given to state governments to select projects.

Sen. Todd Young (R-Ind.) asked about tying infrastructure funding to a base of users. Braceras noted that 11 western states are developing a program to charge road users based on miles travelled in order to distribute surface transportation infrastructure costs among users. Braceras stressed that long-term sustainable funding sources is important, especially as the Highway Trust Fund faces a funding shortfall over the next ten years.  

Regulations and Permitting

Blunt asked the panel about the impact of permitting on state and local transportation planning. Levine said that the approval timeline for projects requiring federal approval is so long that many local governments do not attempt infrastructure projects they might otherwise build.

Sen. Jim Inhofe (R-Okla.) asked the panel about the Endangered Species Act, and how it slows the approval process for infrastructure projects. Braceras noted that delisting animals from the Endangered Species List is time consuming, and recommended that Congress help states navigate environmental regulations. Braceras noted that such regulators are “well-intentioned” but often stymie infrastructure projects. 

Sen. Dan Sullivan (R-Alaska) provided witnesses with several high-profile examples of permitting delaying projects, noting that in one instance it took SeaTac International Airport nearly 15 years to acquire the requisite federal permits for a new runway. Sullivan asked the witnesses for ideas on speeding federal approval for infrastructure projects, saying any infrastructure project that lacks accompanying permit reform is “just wasting money.” Daugaard suggested having permitting dollar thresholds, so that the least costly projects can be exempted from regulatory requirements that could hurt project viability. Braceras argued that federal regulators need a “culture change” and that they lack the incentive to “say yes” during the permitting process.

Sen. Ted Cruz (R-Texas) said that he spoke with Transportation Secretary Elaine Chao about an infrastructure package, and that she agreed that regulatory reform would be necessary to ensure any such package would effective.

Rural Broadband

Numerous Senators asked witnesses about the mechanics of deploying broadband to rural and underserved areas, and others voiced their approval for including rural broadband in any infrastructure package. Sen. Amy Klobuchar (D-Minn.) noted that Commerce Secretary Wilbur Ross said in his confirmation hearing that broadband should be included in any infrastructure package.

Sens. Maggie Hassan (D-N.H.) and Catherine Cortez Masto (D-Nev.) asked witnesses about the “digital divide” between urban and rural areas, and how that divide might be bridged. Bloomfield emphasized the role of the Federal Communications Commission (FCC) in bridging this gap, saying that various FCC programs could ameliorate the disparity in internet access.

Sens. Deb Fischer (D-N.D.) and Tammy Duckworth (D-Ill.) asked about specific FCC programs to fund rural broadband, such as the Connect America Fund (which allows eligible carriers to recover some of their costs from the federal Universal Service Fund if they offer consumers in rural areas access to modern telecommunications networks). While Bloomfield stated that her association, NTCA, does not believe these funds have enough government money, she did express optimism about the new FCC Chairman Ajit Pai and his willingness to improve these programs

Capito asked Bloomfield about the benefits that broadband brings to rural areas. Bloomfield discussed the ability of telemedicine to improve health care in rural areas, as it increases Americans access to mental health resources, such as counseling. Bloomfield also noted in low density areas, the ability for people to communicate with doctors over the internet could lead to quicker diagnoses.

Connected Vehicles

Sen. Mike Lee (R-Uah) asked Braceras how Congress can prepare for widespread autonomous and connected vehicle deployment. Braceras said Congress could best help the spread of these vehicles by changing the mindset of regulators. Braceras said that regulators are “very good at punishing wrongdoers, but not at rewarding improvers.” He continued that connected cars have major safety advantages, as they can communicate with each other and receive information about road conditions, but it is easier for regulators to “say no” to new technologies than encourage their development. Braceras stressed that connected vehicles can also improve mobility, especially in areas like Utah’s Wasatch Front, where expanding road width is not possible due to environmental factors.

Braceras also repeatedly asked Congress to create a dedicated spectrum band for connected cars and connected roadways, as interference-free spectrum is a critical component of any connected surface transportation network.

For more information on this hearing, please click here.