Transcripts For CSPAN2 Hearing Focuses On Infrastructure Federal Funding 20170517

The hearing will come to order. First of all we want to thank all of you for being here today. I want to thank my friend, Ranking Member card and his staff for the possibility with the scheduling of todays hearing. Its interesting because been card and i i maybe three of the last remaining of the class of 1987. We have smith in a couple of more. Its funny, were on opposite sides and a lot of issues but we are always together in friendship as well as in infrastructure. Et is this weeks infrastructure week its a great opportunity to highlight the critical needs in this country. Tomorrow the committee will have a chance to question secretary chad on the administrations priorities and i hope todaysin hearing will be a productive lead into her visits. Last congress the Pediatric Committee led the charge to pass the past act a six highway reauthorization bill that i personally worked on. This was the largest since 1998. Nobody believed we could get it done and others that would only get an 18 month bill. Senator boxer not in the Ranking Member insisted on five years and it shows that people of different philosophies can get along and make wonderful things happen. Er the current investment is not enough to address our maintenance and the new capacity needs. Ve yea the faster authorization isst about 305 but according to the United States dot reportfr from this year the backlog of highway and bridge work in thess United States is close to 836 billion. As administration considers a potential chilling dollar per structure package we need to keep in mind the package will include more than just roads and bridges, our waterways, airports and energy needs as well. While the federal government will and should continue to be a leading partner maintaining and building out the infrastructure the current proposed investment will not meet her needs. Whatever action we take onon infrastructure or state local partners has to be a part of the solution and prioritize transportation. Some states and local are doing this. Unfortunately this weekend my state of oklahoma i learned about the effect of budget cutsa to the department of transportation. In my state of oklahoma did not properly prioritize the need for transportation. Oklahoma and other states have to meet their modest match. Were talking about matches either ten and nine dear 20 and 80. It occurred to me that i was not aware they were not prioritizing that. I just took my plane and went around to all the construction sites that if we dont do a portion of the match morgan i have stoppings construction. F and i think you know what happens that happens. So additional to states and locals prioritizing the need top find responsible and meaningfule ways to attract and leverage additional private investment to help close the gap. Todays hearing will examine the possibilities and what the federal government can do to help make it easier for partners to leverage the federal investment with otherr opportunities. Though not ideas work everywhere, all options shouldld be on the table and we should incentivize her nonfederal partners to pursue them. I look forward to the hearing. In our witnesses. I think you very much for your leadership in regards to infrastructure in our country. Its a pleasure to be the ranking democrat on the subcommittee to work with you on a bipartisan infrastructure bill. Weve never had a problem with bipartisan infrastructure. Th i expect that to be the same and i look for to working with you figuring out a way to get it done. So let me put on the record why conflict with todays hearing. I commute back and forth from baltimore to washington every day. I know firsthand the problems of traffic and congestion. When i started in 1987 when were both elected, thein roundtrip commute between baltimore and washington took me about two hours. Today, that same commute at thea same time takes three hours and 15 minutes. So, my transportation people ara telling me to expect 1 million more people in maryland the next 25 years. So 25 years from the when were celebrating whatever anniversary that is in congress, that commute will take four hours and 15 minutes. We have to do something. Mayor, ledger here because the congestion in that los angeles is worse than ours. Of the someone i can point to that has a more difficult commute that we do. We need to address this. Our ec congestion is costly to our economy. Its costly to Public Health its a circumstance that the public demands that we modernize our infrastructure. We have neglected it. I agree with the chairman that we can do things more efficiently by more creative ways for partnership. The bottom line is the Public Investment must keep up with the need and we have not kept upd with the knee. Thats over here to figure out how to do. The Washington District has ranked anywhere from one orin fourth or fifth as most congested region of the country. Thats why we work to get people out of cars and the transit programs are important. Which but that has 700,000 writers a day, one third who are federal employees going to work is ann old system. Also needs help. St takes resources to rebuild our station and improve our lines, to deal with the needs of additional lines. Some of this is extremely expensive. We have to figure out a proper way to finance our infrastructure. We also need to deal with flexibility issues. I appreciate the and senator cropper is here Ranking Member of the full committee. Mi im very bold by saying hes ready to pay for paredes very much in the leadership of saintt we have to pay for what we need to find out a way to do it. I appreciate his leadership one of the area we tried to do is give flexibility to local governments. Its very important. Whats more was designed by olmsted. The connected old neighborhoods together through green space. The green space got developed in communities got isolated. And literally people were trapped in their neighborhoods. The only way to get around as if they had a car, some had cars but it put more traffic on the road. Given baltimore the flexibility of using transportation money to reconnect neighborhoods so people can utterly walk and bike between neighborhoods without using their cars which takes them off the roads. Th preserves roads and thats what we did together, given the flexibility in a Transportation Program to local governments can make decisions rather than us trying to dictate how things should be done. I would hope we continue those efforts as we look at tools we give our mayors and local officials so they do good for their community to restored their communities. This is an area should be able to get done. Have a president of the United States they can transportation a top priority. Bipartisan proposals come out of congress on revenues to deal transportation, and this committee is dedicated to Work Together listening to everybe member of this committee, we come from different areas. Av we have different Transportation Needs but we agree we need help. Working together we can get this done. I look for tour hearing. Thank you very much. Let me suggest, were going to make some introductions and i want to get into the record all five important people we have here to testify. Senator harris, you can start off by introducing the mayor. I appreciate that. Im on the Senate Intelligence Committee Meeting at this time. Thank you for that. Like introduce and welcome los angeles me, longstanding friend and great leader in california. He is here to talk about our dishes Transportation Needs. What santos freeways orifice trend infamous. Intersection between the ten in the four oh five is known as the biggest park in modern america. Its not just our roads that are overstretched. In 2015, 45. 5 million visitors traveled to los angeles. 6. 7 million from other countries. The Los Angeles International airport is the second Busiest Airport in the country. L. A. County has the top two biggest container ports in the country. Having quality infrastructure is not just important for those who call home as do i, itse important for the entire country. Los angeles is moving efficiently, its easier for the products, goods and people that we only to move around the country in the world they are able to move in any stairway. The mayor has a front row seat to the transportation challenges and needs. While also running the city thats looking at new ways to address urban mobility and and l challenges and hopefully a city that will also host the olympics. Los angeles is investing a new highway and surface street infrastructure wallets expanding rail transit looking how to impact dedicated bus lanes los angeles residents just approved the measure to the ceremony and infrastructure that keeps the region growing and moving. Its time for the federal government to do its part. Residents are seeing new options to get around their city but they need federal resources to provide businesses and tourists the experience they deserve. City and county has had a history of working with the federal government to build bipartisan support in an efforto to accelerate improvementre projects the work underway to address the upper and mobility challenges requires innovation combined with support fromrn local, state, federal government. I look forward to hearing my mayors testimony today. Welcome mayor garcetti. We will continue within her introductions i would like to ask senator carper if he has any statement to make. Think its much. Ive bee im proud to be a member of the committee. E. Im also recovering governor. So for eight years as governor from 93 until 2000. I cared a lot about these issues as well. I want to thank the leadership of the subcommittee for holding this today. I think all of you for coming and joining us and sharing with us your perspectives on an issue we hope to find bipartisan agreement on make progress. One of the major roles of to sen government is to provide a nurturing environment for job creation and job preservation. I say that several times a day. One of the ways to have a nurturing environment start to have one if you dont have a Good Transportation system. Em you know that from the work youo do. By sport measures to enable public agencies to partner with private investors we want to make sure they can have the support they need to be successful. In delaware we have an interesting use of Publicprivate Partnerships. The state is working on an agreement with a private developer to build mixeduse parking garage in delaware or my family and i live. D to do that to have access to a vibrant Retail District on top if we are successful in this one endeavor it will be the first transportation related p3 for delaware. Although the states bid projects on the partnerships in the past and they were perceived because of lack of investor interest. Because i figured out they couldnt make the kind of intern on investment they wanted to make. Interested but we done apart work to support agencies interested in partnering with firms to transfer projects more quickly. We look at the credit and innovation programs into ant single onestop shop to streamline and improve thepr process for agencies and investors. We reduce the minimum project cost for infrastructure, finance innovation act in order to expand access to loads. Tructure privatesector template Important Role in simile the investment. Sol however, other financing tools are not the complete solution to our funding shortage, even though sometimes we emplace they would be. Need be clear that leveraging public funding with private finances not replacement forprfo public funding. Will not solve either the highway Transportation Fund or the maintenance backlog for our roads, bridges and transit. Se in over three years will face a crisis if the Highway Trust Fund yet again will be facing 115 billion shortfall for the next five transportation bill. Theyll be a crisis for private investors who rely on certainty of public funding from the Highway Trust Fund. In partnering with private investors can helpn public agencies complete large complexe problems more quickly. Nt thats an important value with number of regional projects that need to be completed. Transfo on the other hand, theres only small number of large complex and transformative transportation projects financiers are interested in financing. 2014 in 2014, just for transportation projects were closed with a Publicprivate Partnershipthe wl contract. You are all several hundred Million Dollar projects. For roi they have not been as useful for routine maintenance and critical safety projects. A third of all states do not allow the use of Public Partnerships in texas. A state that has allowed the Legislature Said constituents did not want to pay higher tolls. So a number of questions should be asked about when and where Publicprivate Partnerships are useful tool. To ensure the recognition use of scarce federal dollars. When we i use the analogy usually for when we come to funding transportation across the country. Y. There is no Silver Bullet. Theres a lot of silver bbs, the biggest silver bb is one that calls for people who use roads, highways and bridges and businesses and people should pay for them. Uch. But theres other ways we can use that money. Thank you. Let me introduce the next witness, tim is the executive director of the oklahoma authority. For his current road you were sold from transportation for over 25 years starting as a drafting technician and working his way up to serve as the director of the department. The department of transportatiot his actively welded building project management methodology in their construction workplan which guides the departments projects to Development Delivery strategies. With his new role as executive director of the Turnpike Authority he will oversee and continue development of nearly 900 million driving forward plan which she will be sharing with us. Its good to have you here. Let me just say that we have so many people right now really into this issue. Ive often sometimes say the document no one ever reads anymore skull the constitution. It talks about what were supposed be doing here. H defending america and highways and construction. We have a new president who has made this a commitment a long time ago. People set a trillion dollars is not going to work. Er person but think what happen eight years ago. We had another person elected as the president of the United States and he came out with an 800 plus billiondollar program to stimulate and it didnt stimulate anything. Mulate i remember Barbara Boxer and i tried to put amendments on there for that reason. And also, i was visited this morning by the Business Roundtable and i asked consentdt that their statement of report be made part of the record tod today. Without objection, so ordered. Mayor jihad to leave early . Does this alter your testimony . I do have to leave early. But im ready to go. Let me introduce in the will start off with you. I appreciate your presence you very much. Jeffrey i talked to before and i never did get your name right. Your partner and now llp with los angeles california. Kevin is here. And and opry the secretary of transportation for the commonwealth of virginia. I should explain that i asked my maryland folks would be the best person to testify in regards to our problems in this region. They recommended secretary lane. Its a pleasure to have you here. Virginia maryland, delaware get along very well to get together. Your honor, youre on. Went to try to encourage you folks to limit your statement to five minutes or a little bit more maybe. But your entire statement will be made a part of the record as is always the case. Thank you chairman. What i have to tell you when we meet i had a hard job once. He did. I think we bonded over that i appreciate the perspectives you brought. Thank you for your leadershipd and senators ernst and fisher. Im eric garcetti, the mayor of los angeles. On a give a special thanks my senator for the introduction. Im honored to appear before yoe not only is hono mayor of the gt American City but chairman of task force for mayors on infrastructure. When i hear folks talk about infrastructure, has mayor of the city with the biggest port in america the largest municipalbi utility america, the number one airport in destination, most miles of road, and the worst traffic, i got very excited. Ce h contrary to what you see we dont dance and traffic would just sit there and stoop. Exci in here today to get you excited. D. Dont let this get out. 99 of the coverage tonight is on about how we can along as can be about how we disagree. Needs. But for all of us who are in the minutes appellees and heard the word trillion dollars, and the election in november whenever bidders focused on the national election, threat cities in america 230 billion of Infrastructure Initiatives arera approved by voters. One quarter that down payment happening over a decade. A message for america city is that we can do this. We should be excited to do. I will share lessons about how we did this. Republicans and democrats agree like an independence on the need for this. E we looked at this in los angeles not just as an infrastructure need is a jobson qualityoflife initiative. We got a tram excited about the word infrastructure. People know the billions of dollars the local economy taken from us millions of hours taken away for the traffic that chokes our city. So we started crisscrossing the county with 10 million people. My wing man on this was somebody you may know, a supervisor must conservative member in the county. We cro we crossover to say this is something because in california you need two thirds vote to raise the tax. My story short, we had a 71 vote for 21 billiondollarest ia package. To fix our roads, to repair freeways and give money back to our cities and county for road repairs they need. So it leads to the success . I think we gave up a Little Something of who we were. Ofra as a democrat i came in skeptical as the mayor about Publicprivate Partnerships. Today, convert. The fiscal conservative immediate feel great about the cap accountability. But i see how critical and crucial they are. The days of cities or states coming to the senate or the house of representatives and saying i have an empty hat in hand on a project so please will not. We been coming to you with the filled sinking we have our federal and local tax dollars to make this happen. I spent three days last week with the International Olympic committee members. I want to bring the olympics back home to america. They were blown away by what were doing with infrastructure. 14 billion in the airport. 120 billion in Public Transportation roads. He e. 2. 6 billion that are poor. The jobs piece to make sure these are american jobs. Theres no real cart unitedd manufacturer in the unitedortuni states. Midd what leads to success policy wise . Three things. Were calling this the eye three. Youve heard of p3. This is Infrastructure Initiative. One is leverage, to think about the life of projects of threes innovation and technology. Leverage is clear, came from a discussion with members of the house and Senate Leaders in industry there were talking the same language. B you need to leverage localities and reward those that step up to put out that if you have local money in the better chance of getting federal money. To that between Public Private partnerships knowing the shortcomings p3 sad. We seem us in denver 75 of the time they had the chance at downtown to the airport. Leverage has to be the principle of what we write. I to us to think about for projects. Weve seen this in washington where people were killed yesterday the line shut down but in boston where people kicked out windows of the railcars it was smoking in places like the bay area my state where folks are trying to get on for maintenance. Reward those places that are just thinking about construction but also the maintenance in the long term. The third is innovation and technology. Both in the process and technology. Were looking at changing american tunneling technology. Elon musk is looking at changing boring machines. Its quite exciting. They havent changed in 50chine. Years. As much a thinks he can get spacex engineers to increase the speed they drove as much as ten times. We dont know what we dont know. You need to put funds aside for new, innovative technologies. We could be getting around it in a very different way in 20 years from now. They have leverage the full life of projects and Innovation Technology is over putting for o this i plan to help assist you. I will close with this, i will work my tail off to help you gen republican and democratic mayors from every single time to sit in this nation to get this past. If there is no better thing we could be doing for jobs on the quality of life of americans. Its the one thing that unites all of us. On behalf of americas cities,s, weve stepped up, cant wait for you to join us too. Thank you for your support. Thank you. Tim gets. Thank you mr. Chairman. I thank you for the opportunities come testify this afternoon. My name is tim gets my serve as executive director of the oklahoma Turnpike Authority. I want to emphasize several points, the congressional conditional deficiencies that have underfunded the Transportation System can be resolve by the states alone and will require an increasingly and congressionally influenced federal investment. Combined with a longtermsp National Transportation strategy. The focus investment of resources is necessary but should no way be restricted from use as leverage for financingsep opportunities the private sector partnerships. The advancements in technologies and equipment along with efforts by toyota thirtys Cross Country indicate tolling should bena recognized as a viable longterm Sustainable Transportation revenue mechanism. The oklahoma Turnpike Authority was created in 1937 to construct a modern transportation linkok between Oklahoma City and tulsa. Now more than 270 miles of the turnpikes care the interstate 44 should and are part of a combined network of 605 miles. Rd oklahoma has utilized a balanced and responsible Investment Strategy including tax supported dental supported highways to me the Transportation Needs of our citizens. To be clear, longterm funding remains a vital to improvement projects. States must be able to anticipate the availability of resources to properly plan, design, and construct projects. Recognize and document critical needs in a clear understanding of longterm resource availability factors into her decisionmaking. In 1956, the federal highway act included a general prohibition on tolling. The remains largely in effect with tolling allowed only under very specific circumstances. However Publicprivate Partnerships and others which requiring longterm revenue are encouraged. It is the purest representation of an equitable user fee. Se ands that being said, three piece, innovative financing and tolling options will not work in every case and should not be held as the federal governments best or only solution to stemming the further deterioration and operational deficiency of our national Transportation System. A recognizing the 3p project must have sufficient liquidity to provide an adequate return to investors, we believe carefully vetting potential projects, selecting an appropriate risk sharing model, and preparing a structured Financial Plan is paramount to project success. In oklahoma, the gilchrist expressway was part of the original expressway master plan created more than 50 years ago including the segment to serve west and north tulsa. Some work has progressed over the past years funded with limited federal, state, local Revenue Streams. Completing the 300 milliondollar expressway between interstate 44 and u. S. Ka for 12 with a bridge over thed Arkansas River is vital to providing access to businesses in Economic Activity in the region and provide reliever for growing congested concerns. Homa the oklahoma Turnpike Authority, the city of tulsa, the Indian Nations Council of government, Oklahoma Department of transportation, federal Highway Administration have crafted an innovative partnership. The Turnpike Authority will leverage the investment in work thats been accomplished to construct the segment as a federalized toll facility. Its anticipated that ot will develop a process to solicit interest from potential third credit contractors and investors. The proposed partnership willdsh share only the cost of construction which will bet by e partially offset by divine cash contribution by the ota in the sale of bonds. While many variables. To be solved, its evident a variety of funding methodologies can be combined and leverage to successfully and quickly deliver improvement projects that might not be financially viable otherwise. Innovation to identify the needs and in turn generate a user specific revenue stream to finance or partially finance construction operation and maintenance should be enhanced in the federal program and not necessarily restricted. Seeking in conclusion, any proposed federal Infrastructure Initiative seeking to attract private Sector Investment must be flexible to accurately accommodate projects in all stages of completion and in all types and sizes. Not just megaprojects. Likewise, state National Strategy should be supported an enhance in the future. Thank you again for the opportunity to visit today. T up happy to answer questions you may have. Thank you. I appreciate you all being here today. You are now recognized. Chairman, reiki members and members of the committee, thinkk for invite me to testify. I am a lawyer and partner. My testimony today reflects a long career advising state and regional governments across the country and more than 40 billion of Infrastructure Projects and in my service on the bipartisan congressionally mandated National Service transportation infrastructure financing commission. Faces as the commission reported the nationstate is a crisis. Sp our service Transportation System has deteriorated that are safety economic competitiveness and life i quality of life is at risk. Thanks to your leadership the last two authorization bills represent progress. There is much work to do which is why we are here today. In the collectively determined to seize the opportunity. If we are to remain the leader of the global economy, we must have a significant infrastructure spending. What i want to focus on is the questions of how to spend new funds in the most impactful way possible. By working together, congress and administration can achieve this paradigm shift to the mayor has said his infrastructure incentives initiative, or i3. Ct i3 would extend new resources expressly to serve for outcomes. First, creating significant leverage by incentivizing government infrastructure owners to secure and commit their own revenue measures beyond historic federal funding splits. Te second, ensuring longterm performance of new Capital Improvements by incentivizing owners to achieve lifecycle cost efficiencies and avoiding deferred maintenance. Third, modernizing business to a practice to the better captured the best privatesector capabilities. Finally, incorporating rapidly evolving technology by incentivizing infrastructure owners to design spending programs to maximize innovationm applying these principles would move the government away from selecting what it deems most worthy projects and move it towards spurring its nonfederal partners to achieve betterer longterm infrastructure outcomes and Permanent Program wide enhancements. I3 can be scaled to match whatever size program created. Can be adapted to all infrastructure classes can be designed to benefit rural and urban areas. See and the recent the state gas tax increase in wyoming, iowa, idaho, nebraska, georgia, vermont, tennessee, and indiana stand alongside los angeles proposition one in austin texas and sound transit three in seattle to demonstrate how rule in urban regions can generate billions of selfhelp dollars. These results are entirely replicable around the country with the right federal incentives. Funding is only part of the solution. We need Better Outcomes from longterm maintenance, technology and procurement oor practices. M for maximum so in conclusion, i3 would have her nation be more ambitious for the outcome of its hardfought Infrastructure Investment than just a fund of shiny new projects or add more to highway apportionment. Fr it would expressly urge every state and city with major infrastructure challenges to partner aggressively in exchange for new funding. The partnership would result in outside Program Responses with the cherry around the country selectingom for self what kind f selfhelp leverage to commit, which projects over the of completion and the procurement models to use. The result would be a lasting paradigm shift in the federal, state, local, private infrastructure partnership. Legit thank you for your attention. I stand ready to assist the committee and its legislative efforts. Thank you. Thank you chairman and Ranking Members and members of the committee to invite me to testify. Its an honors to contribute to the work. Transportation infrastructure is essential to economy localer communities. Public investment has not kept pace with overall needs. As a result United States faces a welldocumented infrastructure backlog. Throughout the campaign, donald trump bowed to spend 1 trillion to rebuild americas empty structure. Unfortunately this promise has given way for state local governments to maximize leverage through publicprivateg partnerships or piiis. At the core there an alternative method for procurement. Apparently theyre not a means of closing infrastructure gap. The binding constraints facing state local governments is insufficient tax revenue not a lack of access to financing. Lare instead, the true value piiis is risk transference. Unlike traditional models, piii allows the state to draft a contract that shifts the responsibility from delivering large complex projects on time and on budget to a private an entity. This doesnt come cheaply asni they demand a premium price for assuming risk. Proponents of piii talk about getting capital off the sidelines. This assumes they face capital scarcity. This isut wrong. Is more than 3. 8 trillion and a strong appetite for offerings. Additionally the loan Program Offers flexible lowcost financing to sponsors. Blissful bounds with a aaa rating over 30 years is only 3 . By comparison Equity Investors look for returns between ten and 15 . This raises cost significantly. The financing charge of 100 million at 3 over 30 years is just 90 million. For the same time, hundred million net 15 has a finance charge of 450 million. Factor in the Trump Administrations plan to offer tax credits, additionally piiis have limited applicability. The average cost of highway piiis is 1. 28 billion. Maintenance and Expansion Projects represent the majority of infrastructure across the country. 1600 projects included in the state of ohios Transportation Program, only to have a cost of 1 billion and another 6,200,000,000. The average cost is just 9 million. Outside of urban partnerships they have little value. Infrastructure plan based on tax credits is the same as no plan at all. Is e wall street is eager to see more piiis. A report sums up the attraction. The high barriers to entry in the characteristics mean their Financial Performance should not be a sensitive to the Economic Cycle as many of their assets. Another words highways behave like a utility bill without price regulations. This is often not sufficient. Many firms push for piiint clauses. Their intended to keep the Financial Firm whole. If a state chooses to make improvements to a facility they must provide a payment to compensate the firm for their estimated loss revenue. The provisions are problematic as they are for private firms a degree of profitability that doesnt exist anywhere else in theat marketplace. In recent weeks the Trump Administration has push for asset recycling. A new term for transactions. The typical lease deal they receive it up payment to the firm, have a right to collect over the life of the agreement. There presented as a source of new revenue. In reality there an expensive loan that comes with contract terms harmful to the public. In 2008 the city of chicago leases parking leaders for 75 years in exchange for as. 5 billion or just 20 of its budget. The city is constrained and how it manages roadways including make it more difficult foror transportation services. If they offer municipal debt they would face lower parking face the city would have the opportunity to grow. This deal, like other asset leases was a cash grab under the that the public must live with for years to come. The federal needs to provide direct funding for state local o funds. They should be targeted to those meeting the greatest knee. Thank you for the opportunity to do address the committee. Secretary lame your reckless. Thank you very much. Thank you for the opportunity to testify today. Im a secretary ofork transportation for the commonwealth of virginia. My testimony will focus on my personal experience with Publicprivate Partnership start my career. These have been praised in some circles as a solution to all our problems and condemning others as a corporate giveaway. The truth is more complex and dependent on the nature of the project of the degree to which the government officials understand how the deals work and how to protect taxpayers. Had a 30 year career lurching b rularge business. I began my career as an auditor and finish as a president of large real estate company. A secretary transportation i oversee seven transportation agencies that employ more than 10000 staff and have a combinedn annual budget of over 6 billion. The toughest issue i face are funding projects not engineering or environmental problems. That means i spend most of my time on resource allocation, financing, Risk Assessment and operation. My past experience provides the foundation and knowledge of financing largescale construction deals. Public private partnerships can have significant implications and its important we understand them. I want to be clear that financing whether public or private Health Leverage resources but is not a replacement for sustainable and stable funding. Congress should be addressing the longterm sovereignty of the highway trust program and fund and growth in the program and helping states when Transportation Needs virginia we rely on several Guiding Principles of fiduciary responsibility to the taxpayer. We need the best results for them. Piii is helpful when appropriated and negotiatedd well. Before officials should include all options before making decisions. We must ensure competition throughout the process and wearn must be transparent im an unabashed capitalist and big believer in private industry. This belief is premised on true freemarket competition. Both parties entering the piii must have a full understanding of the issues being negotiated and unfortunately thats not always the case. The commonwealth has been recognized as a leader piiis since 2007 we have close to five concession deals that risk the private sector. Collectively theyre worth more than 9 billion, more than 2. 5 coming from private equity approximately 1 billion in public funds. In addition were negotiating piii contract for 1 billion in improvements right here in i95 quarter. As stated before, these are complex business transactions unlike any transaction estate ut is involved. First piiis are typically long in nature. Countereds contracts expire when construction is done. If necessary officials can make changes. Its not true with the 50 year public partnership. Getting these deals run can because sleep. Ge these deals also could be some of the largest projects wevect heard in previous testimony average contract is less than 3 million for these reason its imperative they understand the responsibility of each party and football. Shareholders and investors, the public sister needs to make sure the interest is protected. The hard part is to see where the interest ally. In 2015 the governor asked me ts evaluate the program and we werent getting the results we wanted. We had tough deals negotiated. Found out these deals were not. Made with transparency and accountability. We started from scratch. Pr the best way to protect taxpayers to make sure private sector has to compete. We dont want to give away anything they need to beat our bottom line. We lay out the Major Business terms of what to accomplish, develop the public option, have a Steering Committee to evaluate, then if it makes sense we invite the public and the private sector to compete along with us. Of the private sector to do that then we enter into a piii process. Its important now we never take that off the table. We just had a 3. 1 billion deal. We ended up doing it with no public subsidy an additional 500 million paid to the state up front. This is not free money. This is how the publics toll funds will be used in this new process ensures a user fee to benefit taxpayers. Says you consider potential infrastructure i would stronglyy urge members to not created unintended consequences through new incentives of piiis. Underu many are providing incentives if only their privately financed. This can undercut the negotiating position. Piii several problems to address certain transportation projects. But theres only 42 projects across the country that involve private financing. Thirtyfive states have never entered into a singlete transaction involving private financing. I would encourage Congress Just two questions if we consider incentives. How will it deliver the best deal for taxpayers and will it create distortions . Public one lasting comment. Si i know you will hear from people saying theres barriers to piiis but i strongly disagree. I think these are the same people said well informed our program that would kill it and it turned out that wasnt true. Thank you for the opportunityd u opportunity to testify. Ary thank you. Lets start off with the director, you didnt say much about the driving for program on the projects that it would cover. And why we have developed this plan in the state of oklahoma. Mr. Chairman, the driving Forward Program is a consists of two parts. Three projects that represent major reinvestment in our existing toll network to make sure that it stays in a good operational condition. One is a six lane project about 22 miles on the east end of the turner turnpike. A area the other in the tulsa area thats an expansion project is what i discussed in my testimony. And that the metropolitan area, in our efforts to continue to manage increasing traffic volumes and making sure we continue to move people, goods, services, we are expanding the turnpike on the southwest side of Oklahoma City and ar introdug a new reliever route between interstate 40 and 44 in eastern oklahoma county. Those Expansion Projects are being predicated on congestion on the metropolitan areas in the increase in accidents we see occurring as a result of that. Ahead. Mr. Yarema you have heard the attacks on p3s. My experience in the conversations that ive had with honor president everything is on the table. Its going to take a lot of imagination. Its going to take hard work, experiencing gifted people but i would hesitate taking anything off the table. After the attack on p3s your feelings about them . Thank you mr. Chairman. I dont know that i would take serious disagreement with what was said. I rewith others and with you that p3s are no more a Silver Bullet to solve the big infrastructure challenges that we have been conventional delivery is. We have problems with any delivery device. They do not produce new funding. That should not be the purpose of p3s. What they do is they are much the narrow and understanding of what that term applies to and the potential value. Theres two types doe those that require Revenue Streams and those that dont. Of those that require Revenue Streams do raise the issue isut about the bill limits on potential activity but the other type known as an availability contract raises none of those issues. It doesnt involve toll roads in fact its the most common type that is not widely appreciated so if i could take a second to explain the performance it offers a different Value Proposition than the conventional delivery withoposio conventional delivery, the Regional Transit agency tellsns the contractor not just what to do but how to do it and compensates for the resulting work on a progress basis and there is no warranty for the outcome. With a performance you compensate the contractor only for the performance over its use of life and it is akin to aaita super warranty. The government makes no payment until the project is complete and then the payments are subject to the extent that it underperforms. S. It ensures those that design and build a project owner on the hook for the performance required to build lifecycle costs. There is a strong competition and rigorous bidding for these kind of contracts and there arer numerous examples of. Orida, t the los angeles contract just as examples, so i suggest they are just as valuable in a rural setting as they would be in the urban contracting environment. Welcome and thank you for the testimony but for the most part is illuminating. We will hold another hearing into the witness wilandthe winne secretary of transportation in elaine chao. I met several weeks ago and one of the questions i asked was what do you think the administration would like to do a and i also believe that the basic underlying concept for building transportation projects as those that help pay for them so where i come from in virgin virginia. But anyway, shes going to be sitting tomorrow where you are. You are here to give her advice on how to find transportation projects and i understand for a number of years if you add them all up to. What advice would you give a . Most important its going tot take a healthy combination of revenue and financing denizens i think with publicprivatepr partnerships we have to explore innovations to begin to allow some of the smaller projects but not the billiondollar projects to potentially take advantage of those opportunities. Its going to take a lot to have thawhile tohave that happen. Not a lot of Silver Bullets. What advice would you give to the secretary for funding . Find the 2 billion allocate that the Service Transportation and then create the Infrastructure Incentive Initiative so you are able to leverage it and find the efficiencies of the lifecycle cost approach to delivery for those that modernize the business practice and the efficiencies technologies give you and you can get a fine for the total infrastructure outcomes. We have a longstanding tradition for most infrastructure sectors that have served us well. It gets harder and harder so we need to look at the sectors whether it is Service Transportation to try to raise the fee to match inflation over the years. The current funding programs in place to because they are a Financing Alternatives and need to understand the differentto bo risks in terms of how to evaluate the financial risk. If you think about equity that is the most significant and costly part of this dream ingn terms of that and quite frankly that is what has enticed many of them to invest so i would encourage the secretary to have some type of programs to help the states gear up for the tools. Certainly i believe the outcome based results are needed to and it is based on outcomes not so much inputs but Outcomes Using the landuse so i found in my professional career at the better way is to use the prioritization along with that would be shortening the environmental work on what is needed to come to fruition. Like many of my colleagues, i believe in the importance of funding the nations infrastructure and it represente critical investment in the safety and commerce. The Highway Trust Fund has served to distribute funds to all states urban and rural and as many of you are aware we are looking at a shortfall of over 100 billion we are going to face in the five years following the when it comes to maintaining the roads and bridges, is there a substitute to that critical funding that we have . There is no substitute for alternative especially for a state like oklahoma. We have to have funding to maintain the system that we have and again it is all predicated on understanding the needs. There will have to be continued investment at the federal level to be able to manage the infrastructure. Y. L. That investment, i like that you used the Term Investment because that is what this is. Its not going to be the stimulus for job creation but it is an investment in the future. When you look at the strategy for that investment, i believe that it needs to take place at the state and local levels so you can have the stakeholders come together and decide what the priorities are that meets the strategy that you areth looking at for your state. Do you agree with that . They are held accountable by those that reside in the state. We are responding to the constituents to be able toe explain the Investment Strategy to make sure it is as operational as it can be. Would these be applied to the publicly funded projects . In the conventional project, the government. They mandate how the project is to be built. They are only paid to the extent that its actually are ric retrospectively secured and in performance between m what we me infrastructure is available and safe and meeting all of its criteria on many other standards set forth. There is a need to have mitigation requirements but they achieve those that are required are speculative if it is in the performance contract is contractually required so that is the difference in the environment as opposed to the conventional contracting. My stt we are in the process of developing a plan. Can you talk about the importance of ensuring we have a strategy to address the growing Movement Across the country. Thank you for the opportunity to respond to that. We received one of the largest grants for the project Team Richmond and virginia. And federal grants that was supported by the 565 million of thprivate investment and those coming from the state ofta virginia to deliver the projects and that was free. We teamed up with our partners very important. It was coming up through the quarter. It was helping of them of transportation taking people off the highway so that also helps the passenger movements. That is important. I thank the gentleman from rhode island for his generosity. I want to thank the witnesses for participating in this conversation. Ic the details are a 1 trillion or Infrastructure Investments aretm still unavailable to anyone outside of the administration however, the budget blueprint reduces Transportation Funding in troubling ways. What little we know suggests that there is no trillion dollag investment rather he will rely on financing gimmicks that limited applicability and mostic of the country. Nt i tend to agree in that review w that the financing mechanisms are mostly limited to the project applications into theur testimony suggests it is a lack of actual dollars and not the financing markets. Would this be a correct assessment of the testimony . One of the disappointing aspects has been the possibilitn of the tax credits which is both a huge addition to the budget deficit if it were enacted and it doesnt deliver thosely deliv communities need. Its not something they areeinvt looking for where theyve said if congress were to move forward on this we would see if would have almost no effect and iter would deliver almost no benefit to the vast majority of thee communities to what we need to do is bring federal dollars tofe the table and there is a certain cycle from that which is when the state and local officials know it is acting as a partner they are more likely to take on the political risk. It is a balanced effort but its not a traditional mechanism it doesnt go from one entity to another however it was to make sure they get a good deal and all of these examples are in the complex of the challenge of the infrastructure. Ities one of the Publicprivate Partnerships that has sort of taken care of as the result canr free up the dollars so its important to be sensitive to the fact that they dont have the same tax base or same ability ts generate fees on the roadways so no matter what plan we have its dissatisfied and recognize their unique needs. Im concerned about the ability to assess and implement complex financing opportunities and also protects taxpayers at the same time. It could have gone down a wrong path and relying on that original analysis would lead to a bad deal for virginia taxpayers. How do we make sure they get the best deal and what can the federal government do to help this effort . Ffice, t the analysis put forth suggested we would need a billion dollars of the public subsidy so it would develop the option if you are going to negotiate with a thirdparty. We said it would take 600 million of the subsidy over 800 million as it turned out, true competition is the otherkee key. The competitor became in charge of the whole market maybe the cost of v. For Big Multinational Companies so the two things we can do to help the space negotiate these deals is have a public option and have true competition and i believe the federal government in helping that could help us on how to go forward. Let me push back on one thing. It still has to be a revenue stream so there is some value for money that is used for Something Else already. That is what i would say to the public option than having the true competition in these deals. Thank you mr. Chair. Republicans and democrats are often at odds over a number of things but when it comes to infrastructure we have bipartisan agreement on the infrastructure and that gives me hope coming up this year the federal government has a role to play in this issue. I believe building and maintaining the infrastructure should be a top priority for the government. For nearly 30 years thank yourn for your service and ignored testimony, you stated until recently no Publicprivate Partnership opportunities made sense for oklahoma and since theres almost 1 million more people than the state of iowa and its largest metro area has more than twice the population of our capital city of des moines. So if you Publicprivate Partnership hasnt worked under what circumstances do you see a Publicprivate Partnership working for the state of iowa . We are trying to find ways togec leverage resources to be able to create an opportunity for a private party to come in and talk with only the construction of a. We are only now to the point we feel like we have an opportunity to move forward with it. Every circumstances very different making sure it is not onesizefitsall. When do we start inhibiting movement of travelers. How do they have the same minimal and rural areas where the tax base is pretty low and every penny in the familys budget discount and then number two forcing people to move to those secondary roads that maybe havent been built for heavy traffic. Most important thing we have to have a careful vetting process to make a decision. It cant be arbitrary. It will go unmet without a resource commitment certainly without, with a lack of traditional Revenue Streams. That is where we had the critical need whether it is accidents, congestion, accidents, issues weve been able to invest and use toll roads to meet those needs and have been pretty successful at doing that. Im optimistii am optimistic ane will get something done. Youve been a great chairman before and we have worked on the terrific bipartisan fashion so we dont always agree on everything but this is a good place to go to get things done. Although it is not onesizefitsall and you have to be able to adapt to different projects, are there certain red flags that we should look out for for people trying to protect taxpayer and if there are those red flags first you never canouc institutionalize risk. Every deal is different for instance in the commonwealth, the risk for extending the new lanes is a lot different then the tunnel so to answer your question if gets down to what risks are in each particular project. E its what most people think. The only way to mitigate that is to understand. To understand those risks when you Start Talking about negotiating those risks, what they may bbutthey may be a valus of the deal you just have to go in and kno note that there is me people on the other side getting money out of taxpayers. Its meant a great deal and that is what we need to understand for the citizens but one red flag of that i found, and this is my first time in the public arena is that when you have the government standing up saying this is the most important project and im going to deliver this project before i leave office that undercuts the ability for the terms of the deal so that would be a red flag thats why its important to keep the public option on the table and im not saying that to be. We see the Sea Level Rise and projections coming from our local scientists, national scientists, Coastal Resources and so forth. Youre seeing this at the naval station and hampton roads. Are you doing anything in particular or should we do anything in particular looking at infrastructure to address that specific problem of the new risks to the coastal infrastructure whether it is wastewater or Coastal Defense of his or military bases. They dont like any of that very much. It takes it all over. Are you focusing on any particular way on that front . The ground in those areas are sinking because of taking the groundwater out of their and compressing it. The answer is yes, but not enough. Particularly on the new project studies one part of the resiliency on the Environmental Impact as we develop newewim projects. But weve also had to devote resources to what we call the state of good repair because we do have significant subject to that raising the roads or whatever we have to in those areas but it is far short of the needed. Now what im seeing his localities are giving much more to assist them like the grant and the federal government and theyve been doing a lot in assisting them that we do not have in our budget the ability to take care of all of theta resiliency. Thank you very much. Senator carter. I found this presentation to be very helpful. Im going to drill down more on the recommendations that came in to change the way that we configure the federal partnership and infrastructure to reward in the place of incentive for leveraging with more local Government Support or private sector. The others i will get to in a moment that deal with technology and maintenance and i think both of those are important issues we should talk about. I was trying to figure out where you come down on this. Dont put any incentives or restrictions at the national level. Let the states figure it out. . I do believe the current tools we have in place, the government programs, there could be things to enhance that. But in terms of the credits were getting a bonus for incentivizing it to be done as a Publicprivate Partnership, that puts the factors in the deal that the other side will know if they are going to figure out a way to make sure they use them how they can benefit from that. What i am pointing out is you may not get a dollar for dollar increase a that the federal government would be spending in the tax credits and incentives so we believe we have seen no problem in attracting the investment in the commonwealth of virginia for those projects that lend themselves. Is there anything in the current authorization and implementation and the Transportation Programs that cause heartburn as it relates tn the private partnerships . I dont think theres anything with respect to the piii. We dont have an aggressive enough metric when it comes to holding the states accountable for how they expand so i agree with the plaintif point of lookt this from the perspective of ths performance of the selectionwe decisions. The outcome of what you look at every day you tend to think of the solution. Even if there are lower costs and environmentally sustainable approaches to provide the transportation options. We supported the flexibility for the local governments and im proud of the role that he played in preserving the programs so that we do have that flexibility under the Current System and we will fight to maintain that. Nt let me go to the other issues. How do we provide the right incentives for advancing technology . I would happy to take a cra crack. The new money would be handled differently. Ld it would be the preserving assets for the effective maintenance. We are not going to build anything new or reconstruct anything unless he make that commitment. Its through and available to the piii subcontract will obligate to achieve. The truth about the federal ande state relationship in transportation at least is that the states and localities are to fund and provide financing and regulate. Hopefully we can add a stronger centive as a federal role. More than half the transportation dollars federal and state put in a new law that requires 45 of the construction money going into the state of td repair and the assets that you cant pay anymore you have to rebuild them that youre not adding capacity. But theres something we can do to encourage states to meet the commitments. Im not enlightened in that by degree. Certainly as we do in the asset commonwealth that is a part of the program are we maintaining assets up to the standardare wem particularly interesting systems and what have you and they make sure just like we do in maintaining those. I would suggest that there be some performance outpaced result of passes on to the states. Ive never known a legislator to request more for maintenanceu and projects. So it is a tough political sell but its our responsibility to make sure that its built into the accountability and in a way that we develop our partnership. We need to see how we can be more effective at preserving our transportation infrastructure in the country. And by the way dealing withhat technology is an emerging area that isnt always given the priority that it needs. Thank you all for your testimony. Its been rewarding because things get bogged down in the political rhetoric and if that isnt the case in the committee we do things. Its the sort of things that we should have done before it is o much surplus in the trust fund. 30 years ago this year. Those that were kind enough to show up i appreciate that very much. We are adjourned. [inaudible conversations] [inaudible conversations] this administration [inaudible] its very ambitious and ima isb optimistic. I was wondering how you thought the regulations are affecting the stimulus bill. They were dramatically changed during the time we weree working together. There may be more streamlining. Ive received more it will include [inaudible] first of all i was disappointed that the one was here. That wasnt quite along the same line ive been involved in these and each one after the surplus we will try to do Something Different [inaudible] take away from the innovative financing. You might remember what could be argued happening with the witness number three person many years now. How do you compare the logistics in the house and senate. Do you have any reaction to the house bill infrastructure . Because of the experience investing i would rather get the senate. [inaudible conversations] announced that Trump Administration would release a 200 billiondollar infrastructure plan in the coming. We will also hear from the aflcio president. This is a halfanhour. I am delighted to welcome you here today. When you have my job you get to be in this room and say that sentence a lot but i mean it today are more than usual. [laughter] not ju