[inaudible conversations] >> the hearing will come to order. first of all i want to thank all of you for being here today and thank ranking member cardin and his staff with the flexibility for the scheduling of today's hearing. it's interesting because ben cardin and i are maybe three of the last remaining of the class of -- 1987. we had lamar smith and a couple more. anyway it's funny we are an opposite sides and a lot of issues but we are artists together in friendship as well as infrastructure. as this week's infrastructure week it's a great opportunity for us to highlight the critical needs we have in this country pay tomorrow the full committee will have the chance to question secretary chao on the administration's priorities and it's my hope that today's hearing will be a productive lead into her visit. last congress the epw committee led the charge to pass the fast act, the highway reauthorization bill that i personally worked on and this was the largest one since 1998. nobody believed that we could get it done and others thought we would only get an 18 month bill that senator boxer and dianne the chairman and the ranking member took five years and shows people of different philosophies can get along and make wonderful things happened however the current investment is not enough to address the maintenance to the fast act authorization is about $305 billion over five years of according to the united states d.o.t. report from this year the backlog of highway and bridge work in the united states stands close to 836 ilion dollars. the administration and congress consider a potential trillion dollar and the structure package we must keep in mind the package will include more than just roads and bridges. it will also, our waterways airports and energy needs as well. while the federal government will and should continue to be a leading partner in maintaining our answer -- infrastructure the current proposed investment will not meet all of our needs. whatever action we take on infrastructure are state and local partners has got to be a part of the solution and prioritize transportation. some states locals are doing this but unfortunately this weekend in my state of oklahoma i learned about the effects proposed budget cuts to the department of transportation in my state of oklahoma did not properly prioritize the need for transportation and oklahoma and other states happened to me there montas match. we are talking about matches of either 10, and an 90 or 20 and 80. occurred to me and i was not aware that they were not prioritizing that. i took my plane and loaded it up with media went to these construction sites. if we don't do our portion of the match we are going to have the stopping of some of the construction i think you know what happens when it does happen. in addition to states and locals prioritizing of a structurally defined responsible in meaningful ways to attract and leverage additional private investment to help close the gap. today's hearing will examine all of these possibilities in what the federal government can do to help make it easier for our partners to leverage the federal investment with other opportunities. all options should be on the table and we shouldn't incentivize our partners to pursue them and i look forward to hearing from our witnesses. senator cardin. >> mr. chairman once again thank you very much for your leadership in regards to leadership in our country. surreal pleasure to be the ranking democrat on the subcommittee to work with you on a bipartisan infrastructure bill. we have had never had a problem with bipartisan infrastructure. i look forward to working with you in figuring out a way to get this done. let me up front but on the record my conflict with today's hearing. i go back and forth from baltimore to washington every day. i know first-hand the problems of traffic and congestion. when i started in 1987 mr. chairman when we were both elected the round-trip commute between baltimore and washington took me about two hours. today that exact same commute at the exact same time of day takes three hours and 15 minutes. my transportation people are telling me to expect 1 million more people in maryland in the next 25 years. 25 years from now if we are so so -- celebrating whatever anniversary that is in congress that commute will take four hours and 15 minutes so we have to do something about it. mayor garcetti i'm glad you were here because the congestion in los angeles is worse than our congestion so someone i can point to that has a more typical commute than we do. we really need to address this. the congestion is very costly to our economy. it's costly to our public health it is a circumstance that the public demands that we modernize our infrastructure and we have neglected it. yes i re-with the chairman we can always do things more efficiently. we can always find more creative ways to partnership at to partnership of the bottom line the public investment must keep up with the need and we haven't kept up with the need. that is why we are here today, to figure out how we can do this. the district has ranked anywhere from one to fourth or fifth in this region of the country. that's why we work to get people out of cars and into transit programs. ramada which has 700,000 riders a day one third of whom are federal employees trying to get to work is an old system. it also needs help and it takes resources to rebuild our stations, to improve our lines, to deal with the needs of additional lines and some of this is extremely expensive. we have to figure out a proper way in order to finance our infrastructure. we also need to deal with the flexibility issues. i appreciate that and senator carper is now here and senator carper is the ranking member on the full committee and a champion on infrastructure. senator carper is very much in the leadership thing we have to pay for what we need and let's find a way to do it and i appreciate his leadership on this. one of the areas we try to do is give flexibility to local governments which i think is very important. baltimore was designed by olmsted in olmstead connected old neighborhoods together through green space. over the years the green space got developed and communities got isolated and literally people were trapped in neighborhoods. the only way they could get around is if they have a car. some had cars and some didn't have cars and that put more traffic on the roads. we gave baltimore a chance to reconnect ever had so people can literally walk and bike between neighborhoods without using their cars which takes cars off the roads and preserve sar roads for a longer period of time in reserves life. that's what can be together given the flexibility or transportation department so the local government can make decisions rather than dictating from washington how things could be done. i hope we continue to look at additional tools that we can give our mayors and local officials so they can do what's best for their community in order to restore their communities. this is an area we should be able to get done mr. chairman. they have a president of venice is making transportation one of his top priorities. we have high partisan proposals coming out of congress on revenues to deal of transportation in this committee is dedicated to working together listening to every member of this committee. we come from different areas. oklahoma and maryland have different transportation needs but we agree we need additional help and working together i think we can get this done. i look forward to her hearing and working with you. >> thank you very much senator cardin. let me suggest, we are going to go ahead and make some introductions here. i want to get into the record all the important people we have here to testify and senator harris why don't you start off by introducing the mayor. >> i appreciate the chairman and as you know i was at the senate intelligence committee at this exact same time. i like to introduce and welcome los angeles mayor eric garcetti a long-standing friend and a great leader and california and he is here to talk about a nation's transportation needs. los angeles freeways are infamous. the intersection between the town and the 405 is known affectionately at the biggest parking lot and america. it's not just the roads that are overstressed. in 2015, 45.5 million visitors traveled to los angeles, 6.7 million arrived from other countries. los angeles international airport is the second busiest airport in the country and l.a. county has the top two biggest container ports in the country. having quality infrastructure in los angeles is not just important for those who call it home as do i, it's important for the entire country. in los angeles is moving efficiently that needs it is easier for the product, goods and people that we all need to move around the country and the world and that they are able to move in an easier way. mayor garcetti has a front row seat to the transportation challenges in the needs of southern california while also running a city that is looking at new ways to address urban mobility and challenges and hopefully a city that will host the olympics. los angeles is investing in new highway and surface infrastructure while it's expanding rail transit and looking at how to impact dedicated bus and bike lanes for los angeles residents just approved a measure to invest their own money in the infrastructure that helped keep los angeles in his region's growing and moving and it's time for the federal government to do its part. residents are steadily seeing new options to get around their city that they need federal resources in order to provide this assistant tourist, the experience that they deserve to the city and county of los angeles that had a history of working with the federal government to build bipartisan support in an effort to accelerate infrastructure improvement projects to address los angeles urban mobility challenges require innovation combined with support from local state and federal government and i look forward to hearing the mayor's testimony today. welcome eric garcetti. stu: thank yous senator harris and heretofore we continued objections i would like to ask senator carper in his statement to make as the ranking member of the full committee. >> thank you so much. welcome one and all. i'm proud to be a member of this committee. i've been on it for 16 years now and i'm also recovering governor so eight years as governor from 93 to 2001 i thought about these issues and thought about them as well. i want to thank the leadership of the sub ready for holding this hearing today in i thank all of you for coming and joining us us and sharing in a nation i hope you can find bipartisan agreement on the make progress because we very much need to. i like to see one of the major roles of government is to pry -- provide a nurturing environment for job creation and job preservation. i say that several times a day. one of my guiding principles in one of the ways, it's hard to have one if you don't have a good transportation system. you folks know that from the work that you do. i support measures to enable partnering with investors and i want to make sure these agencies have the capacity and want to make sure they have the support they need to be successful. in delaware we have a public-private partnerships. we are working with the developer building a mixed-use mixed-use -- where my family and i lived really do that in order to gain access to an increasingly vibrant retail district downtown. if we are successful in this one endeavor it will be the first transportation related -- for delaware and although our projects in the past that never proceeded because of the lack of investment ventures i suspect. [laughter] ventures because the investor could make the return on investment that they wanted to make. it's important work to support agencies that are interested in partnering with firms to transfer project risks and potential projects more quickly. the fact that we were structured department of transportation's innovation finance program into a one-stop shop to streamline and improve process frequencies and investors. also reduce the minimum project cost financing innovation program in order to expand access. i believe the private sector can play an important role in investment in our critical infrastructure however i also note the public right of partnerships and other tools are not the complete solution to our funding shortage even though it's sometimes implied that they would need. we need to be clear that leveraging public funding with private an answer or not replacement for public funding and will not solve the highway of transportation funds for maintenance backlog for our roads, our bridges and transit. in just over three years will see face insolvency crisis where we will be facing $115 billion short of all for the next year transportation bill. the funding crisis will be a crisis for investors who rely on public funding from the highway trust fund. partnering with private investors can help public agencies complete large projects quickly and that's important by a particular the number of transformations we provide that need to be completed today. where i live in francouer outlet. there's only a small number of large complex transformative transportation projects where financiers are interested in investing could for example in 2014 just for transportation projects were closed with the public-private partnership contract in the world several hundred million dollar programs. the truth is public-private harder ships have not been as useful for routine maintenance and critical safety projects. although this was a shock to me moreover a third of our states do not allow the use of public or private harder substring in texas the state has allowed them in the past through the legislature recently voted not to use them because their constituents did not want to pay higher tolls. there are a number of questions that should be asked about whether public-private partnerships are a useful tool and making good use of scarce federal dollars. i use this analogy before. usually when we come to funding transportation across the country there is no silver bullet. there are lots of silver bbs some larger than others my vice of the largest bv is used for businesses and people should pay for them but there are other ways we can use that money and we should do that. thank you so much. >> thank you senator carper. let me introduce the next witness. tim gatz is the executive director of the turnpike authority. he worked for the department of public transportation abrera 25 years starting as a drafting technician and working his way up to the director of the department. the department of transportation he was actively involved in developing the project methodologies as well as their eight-year construction work plan which guides the department's project development and strategies. with his new role as executive director of the turnpike authority he will oversee the continued development and implementation of nearly 900 really in driving plans which he will be sharing with us. it's great to have you here. we have so many people right now really into this issue. i sometimes in these guys have heard me say it but there's a document nobody ever reads them or call constitution and it talks about what we are really supposed to be doing here. we have a new president who has made this the commitment a long time ago. a trillion dollars is not in the dash that's up and think about eight years ago. we had another person elected as the president of the united states. he came out with an 800 plus billion dollar program that was supposed to stimulate and it didn't stimulate and think that i can remember barbara boxer trying to put amendments on to use that for that very reason. i was visited by the business roundtable and i ask unanimous consent that their statement for what we are doing today be made a part of the record. without objection so ordered. mayor garcetti, did he have to leave early? does is alter your testimony? >> i get to leave early but i'm ready to go. >> let me introduce the other semi-will start off with you. i appreciate your presence here very much. geoffrey yarema. yarema? i have talked to you before. he is a partner in the -- los angeles california. kevin sabonis director for center for american progress washington d.c. and aubrey layne secretary of transportation for the commonwealth of virginia. >> i should explain i ask my maryland folks who would be the best person to testify with regard to the provinces rich and they recommend the secretary such a pleasure to have you here secretary. we got along very well together. >> all right. i'm going to try to encourage you folks to limit your statement to five minutes for a little bit more maybe but your entire statement will be based on part of the record which is isaac hayes. civic thank you for your friendship and the times we met in the past. thank you. >> what do i at least tell you when we meet? i had a hard job once being the mayor. >> i think we bonded over that and i crocheted the perspective you brought in senator cardin and senator carper thank you for your leadership as well. i'm eric garcetti the mayor of los angeles and want to give a special thanks to my senators senator harris for the introduction but i'm honored to appear before you not only as mayor of the great american city but also the chair of the task force for conference of mayors on infrastructure. when i heard folks talking about the structure a few months ago in the presidential election as mayor of the city that has the biggest sport in america the largest municipal utility in america the number one airport originating and destination, the most miles on the road and as you stated the worst traffic i got very excited and contrary to what you might have seen in "la la land" we don't dance in the traffic. we just sit there and stew. i'm here today to get you excited. don't let this get out because 99% of the coverage is not going to be about how we are all getting along. about how we disagree but we do have true bipartisanship in agreement on what this country needs. that's the space mayors occupy every single day. for all of us in the municipalities that have heard the word a trillion dollars and the election in november throughout the cities in america $230 billion of infrastructure was approved by voters. a quarter of that people are talking about happening over a decade. my message for american cities is loud and clear, we can do this. we should be excited to do this and i want to share lessons about how to do this. republicans and democrats agree as well as independents on the need for this but we look at this in los angeles not just as an infrastructure need but as a job and quality-of-life initiative. we got excited about the word of the structure of the normal americans want more time with their kids. they know billions of dollars in our local economy, millions of hours taken away from us in the traffic that chokes our city. we started crossing a 4700 square mile county. my wing man was somebody you may know the supervisor mike antonovich. we crossed over to say this is something we have to figure out away. in california we need a two-thirds vote to raise the tax long story short in november we had a 71% over 120 billion-dollar package the largest in american history times two at the level to fix our roads to 15 rapid transit line to give local money back to her cities and counties for roared repairs that they need. i think we each gave up a little something of who we were. as a democrat i came in skeptical as the mayor about public private partnerships in the role of leverage and banks. today i'm a convert. similar to the fiscal conservative than me who didn't feel great about grants coming in with little accountability but i see how critical and crucial player. the days of states coming to the sistine senate or house of representatives saying look i have been empty hat and a project please fill it up is long gone. can we have our federal tax dollars along with local tax dollars to make this happen? i spent three days last week with the international olympic members akin to los angeles. i do want to bring the olympics back to america. they were blown away with what we were doing with them for structure. $14 billion in airport $120 billion in public transportation and roads and $2.6 billion in our ports but these are american jobs. there is no rail car manufacturing in the united states. we have opportunities not just to talk about the needs of infrastructure but the need for middle-class jobs in america. what leads to success policywise and my last member i've laid out three things. we are calling this the high three. this is the infrastructure incentive initiative. one is leverage, to think about the life of projects in three is innovation and technology. leverage i think is clear. scan from a discussion with members of the house and senate and a few of us mayors were talking the same language. you need to leverage localities reward those who step up but put out there if you do have local money you have a better chance of getting federal money. similarly public and private partnerships knowing the advantages that p3's. leverage has to be the central portion. think about the life of projects. we have seen is not just an washington where people were killed or yesterday the line shut down but in boston where people were kicked out of a bell car because of smoking and people trying to get on the ballot. make sure you'd award the place is not just for construction but the maintenance of the long-term. the third is innovation and technology. both in the process as well as the technology itself. we are looking at changing american tunneling technology. elon musk as you know in my city is looking at changing boring machines. boring machines haven't change 50 years and he thinks he can get spacex engineers to increase the speed up the drill by as much as 10 times. we don't know what we don't know but you need to put funds aside for new innovative technologies because we could be getting around a different way and five, 10 or for sure 20 years from now leverage the full life of the projects and innovation technology and with the u.s. conference of mayors is putting forward a plan to assist you. i will close with this. i will work to tail off to help you get republican and democratic mayors from every single town and city in this nation to help get this passed. there is no better than we could be doing for jobs for the quality of life of all americans and the one thing that unites all of us. i will say on behalf of of america we have stepped up and we can't wait for you to join us too and thank you for all your support. >> thank you mayor. tim gatz. >> thank you mr. chairman, ranking member cardin members of the committee for the opportunity to testify this afternoon. my name is tim gatz in the service executive director of the oklahoma turnpike authority but today i want to emphasize several points to the conditional deficiencies of the long underfunded national transportation system cannot be resolved by states alone and will require an increasing and congressionally influenced federal investment combined with the long-term national transportation strategy. the focused investment of federal resources as necessary would which in no way should be restricted as leverage for financing opportunities and private sector partnerships. advancements in towing technologies and equipment along with interoperability efforts by towing authorities across the country indicates that polling should be clearly recognized as a viable long-term and sustainable transportation revenue mechanism. the oklahoma turnpike authority was legislative is created in 1947 to construct a modern transportation link between oklahoma city and tulsa. today more than 270 miles of the aging turnpikes are part of a combined total network of 605 miles. oklahoma has utilized a balanced and responsible investment strategy including tax supported and toll supported highways to meet the transportation needs of our citizens. to be clear long-term consistent federal funding remains vitally important to the development and delivery of transportation improvement projects. states must be able to anticipate the availability of resources in order to properly plan come design and construct projects. recognized and documented critical needs in our clear understanding of long-term resource availability, factors heavily into our investment decision-making. in 1956 the federal highway act included a general prohibition on polling. it remains largely in effect tolling allowed under only very specific circumstances however the public-private partnerships and other financing options requiring long-term revenues are encouraged. simple polling tolling can be a very flexible and effective revenue component in a bold new national transportation strategy and disappears representation of an equitable user fee. that being said through these innovative financing and tolling options will not work in every case and should not be held as the federal government's best or only solution to stemming the further deterioration and operational deficiency of our national transportation system. 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 that gilchrest expressway was part of the tulsa expressway master plan and created more than 50 years ago including a segment to serve west and north tulsa. some development work has progressed over the responded with limited state and local revenue streams. completing this. a million-dollar five-mile leg of the expressway between interstate 44 and u.s. 412 with the bridge over the arkansas river is vital to providing access for businesses and economic activity in the region and to provide a reliever route for congestion concerns for travel into downtown tulsa. after many years of discussion at loma turnpike authority the city of tulsa, tulsa county the indian nations council of governments the oklahoma department of transportation and the federal highway administration have crafted an innovative partnership. the oklahoma turnpike authority will leverage the investment in work that has been accomplished to construct the gil kreis expressway segment as a federalize toll facility. it is anticipated that ota will develop a process to solicit interest from potential third-party contractors and investors and limited public-private partnership or the riposte partnership will share only the cost of construction which will be partially offset by the defined cash contribution from the ot and the sale of bonds. while many variables with the project are yet to be solved it's evident that a variety of funding and financing methodologies can be combined and leverage to successfully and quickly deliver transportation improvement projects that might not be financially viable otherwise. innovation to address certain well-defined transportation system needs and in turn generate a user specific revenue stream in order to finance her partially financed construction operation and maintenance should be enhanced in the federal program and should not be unnecessarily restricted. in conclusion and a proposed federal infrastructure initiative seeking to attract private sector investment must be flexible enough and equitably accommodate potential projects in all stages of completion and in all types and sizes. not just megaprojects. likewise stated national tolling strategy should be supported and enhanced for the future. mr. chairman and members thank you again for the day visit with you today not be happy to try to answer questions you may have create. >> thank you mr. gatz. mr. yarema i appreciate you being here today in you are recognized. use your mic. it's not on yet. there we go. chairman inhofe ranking member cardin ranking member carper thank you for inviting me to testify. my name is jeff yarema and i'm a partner at the osman loughran for my testimony reflects a long career in 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 surface transportation infrastructure commission. as our commission reported the nation faces a crisis. our surface transportation system has deteriorated to such a degree that our safety economic competitiveness and quality of life are at risk. that remains true today. thanks to this committee's action and mr. chairman turley to ship in particular the last two authorization bills represent real progress. there is still much work we need to do however which is why we are here today. collectively determined to seize the opportunity. if we are to remain the leader in the global economy we must have as chairman barrasso has repeatedly called for a significant supplement to existing federal infrastructure spending. what i would like to focus on today is the important questions on any newly secure discretionary funds in the most compatible way possible. by working together congress and administration can achieve this paradigm shift or what mayor garcetti is called the infrastructure incentive initiative. i3 would expend a discretionary resources expressly to serve poor outcomes. first creating significant leverage by incentivizing government of the structure owners to secure and commit there on revenue measures for project revenues beyond historical federal state funding splits. second assuring long-term performance of new capital improvements by incentivizing otters to achieve lifecycle cost efficiencies and avoid any further -- third business practices by incentivizing owners to update procurement policies to better capture the best of private sector capabilities and finally incorporating rapidly evolving technology by incentivizing programs to maximize innovation. applying these principles to the allocation and do federal funds would move the federal government away from selecting what are the most worthy projects and moved it toward spurring its nonfederal partners to achieve better long-term infrastructure outcomes and permanent program enhancements. i3 can be scaled to match whatever size funding program is created can be adapted to all government-owned infrastructure classes and can be designed to benefit rural as well as urban areas. the recent state gas tax increases in wyoming, iowa idaho nebraska georgia vermont tennessee and indiana stand alongside los angeles proposition 1 in austin texas and sound transit three in seattle. to demonstrate how rural in urban regions alike can generate billions of self-help dollars of supplemental investment these results are entirely replicable around the country with the right federal incentives. funding is only part of the solution however. we need better outcomes for him long technology and procurement practices. for maximum -- so in conclusion i3 would have our nation be more ambitious for the outcome of its hard-fought infrastructure investment to justify the federally select basket of shiny new projects or add more to highway up for some it. it would expressly urge every state and city with major of the structure challenges to partner more aggressively in exchange for new funding. that partnership would result in outside program responses from each area around the country selecting for itself what kind of self-help leverage to commit, what projects are worthy of completion and the types of procurement models to be used. the result would need a lasting paradigm shift to the federal state local and private infrastructure partnership. thank you for your attention. i stand ready to assist the committee as it pursues its legislative efforts. >> thank you mr. yarema. mr. degood. >> thank you chairman inhofe ranking member cardin and members of the committee for inviting me here to testify. it is an honor to contribute to this committee's work at a transportation for structures essential to our economy and local communities. unfortunately public investment has not kept pace with overall needs producers of united states faces a well-documented infrastructure back log. throughout the presence of campaign donald trump repeatedly bound to spend $1 billion to build america's infrastructure greater force on his promise is given away for call to state and local governments to maximize leverage their public-private partnerships. at their core public-private partnerships are an alternative method of. portly p3's are not closing the of the structure gap for defining constraints facing state and local governments isn't sufficient tax revenue not a lack of access to financing. that may say that again. the binding constraint facing state and local government is this not in sufficient tax -- instead the true value of p3 is risk transference. unlike traditional procurement models b3 allows the state to draft contracts it shifts responsibility for delivering large projects or private entity. this transference does not come cheaply as they demanded premium price for proponents of p3 talks about private capital off the sidelines. this assumes project sponsor space capital scarcity. this is simply wrong. the municipal bond market is robust with more than $3.8 trillion in outstanding issuances and a strong appetite for new offerings. additionally the loan program offers low-cost financing to project sponsors pay the current industry found the musical braun bonds is only 3%. by comparison and what investors look for annual returns of 10 to 15% for this raises cost significantly. for instance the financing charge a $100 million of meniscal debt is 3% over 30 years as $90 million. 100 million private equity capital in 15% finance charge of $450 million. factoring in the truck demonstrations by goffard's investors equity capital is still vastly more expensive than municipal debt. the present limited applicability. the average cost is $1.28 billion over maintenance incremental expansion projects represent the majority of infrastructures across the country. for example the 1657 highway projects included in the state of ohio's transportation probe them only to have a cost of over $1 billion and another six the cost of $200 billion that the average budget is just $9 million to the lesson is outside megaprojects public or the partnerships have more value for rural community small towns in struggling urban areas. in infrastructure plan based on tax credit is the same as no planet at all paid wall street is eager to see more p3's. 2050 report by ubs sums up the attraction quote the high barriers to entry and the monopoly like characteristics of the typical infrastructure as its main or financial performance should not be a sense of to the economic cycle as many other asset classes. in other words highways behave like a utility but without price regulations. even this is often not sufficient to defend against future competition many private firms push for noncompete clauses. these contractual provisions are intended to keep the firm bracelet hole. not complete clause often includes a list of projects the state may not expand or otherwise improve. if the state chooses to make improvements and must provide a payment to compensate the private firm first made laserna. these divisions are deeply problematic. finally recently the trump administration is pushed brass at recycling. this is a new term of art for -- in a typical lease deal a stable government receives a payment from a private firm. in return the firm has the right to collect revenues over the life of in reality they are an expensive omelette that comes with contract terms. for example in 2008 the city of chicago just 20% of its 2008 budget. as a result the city has substantially constrained in how it manages roadways including make it more difficult to make improvements to public transportation service. city is simply issued municipal debt generate these bonds residence would face lower parking fees and the city would be able to grow without contractual limitations. this deal like other asset leases was a cash grab under the guise of efficient that the public must live with for many decades to come. in closing there are no shortcuts for rebuilding america's infrastructure to the program is to provide direct funding to project sponsors and these bunch of the targeted communities facing the greatest need in the highest level of economic hardship. thank you again for the opportunity to address this committee. >> thank you mr. degood. secretary layne. >> thank you mr. chairman inhofe ranking member cardin and other members of the subcommittee. thank you for the opportunity to testify today. my name is aubrey layne and i'm the secretary of transportation for the commonwealth of virginia. my tests on today will focus on my personal experience with public-private partnerships or p3's or my professional career to these deals have been praised in some circles as a solution to all of our transportation problems and condemned and others as a corporate giveaway. the truth is much more complex and dependent on the nature of the project the degree to which the government officials understand how these deals work and how to protect taxpayers. i've had a 30 or business grill and running operational companies. i have been at degree in accounting a masters business administration. began as the cpn finishes the president of a large real estate company. the secretary of transportation i proceed seven transportation agencies that employ more than 10,000 staff and have the annual budget over six lane dollars. the toughest issues i face to be involved funding projects not engineering or environmental problems. that means i spend most my time on resource allocation financing risk assessment and operations. works only my past experience provides near the foundation for financing large-scale construction deals. public by the partnerships are complex transaction that can have significant implications and it's important that we all understand that. they therefore akin to that i first want to be clear that financing whether public or private helps leverage resources but it is not a replacement for sustainable and stable public funding. a priority for congress should be addressing the long-term solvency of the federal highway trust program funds, growth in the program and helping states fund our transportation needs regardless of mode. in virginia we have relied on several guiding principles regarding public private partnerships. our fiduciary responsibilities to the tax rates through nietzsche deliver the best results for them. p3's are helpful procurement -- procurement tool. government officials should consider all options including public finance before making decisions and we must ensure competition throughout the process and finally we must be transparent and accountable to the public and elected officials. i'm an unabashed capitalist and a big believer in private industry for this belief is premised on true free-market competition they both parties entering a p3 must have a full understanding of the issues they negotiate and unfortunately that's not all. our commonwealth has long been recognized as a leader in p3's presents 20007 we have close five deals and collectively these deals are worth more than $9 billion more than 2.5 billion come from from private equity and approximately -- and their meaning from privately backed debt. we are negotiating a p3 contract for $1 billion improvement here in the i 395 corridor. as i stated before p3's are complex truth business trends -- transactions. first p3's are long contracts. normal transportation contracts expire when construction is done and after a limited number of years. this provides the opportunity of thy weight outcomes and necessary officials to make changes. this is not true with the 50 or 83 concession contract with a private partner. exchanges can result in come conversations the private party and getting these deals run can be costly. these deals also could be some of largest product -- projects for the average p3 deal in virginia's 1.8 billion compared with an average contract value of less than $3 billion. for these reasons impaired at the decision-makers understand that they share responsibility of each party involved. the air the public sector needs make sure the public interest is protected and the hard part is to see where these interests align. in 2015 governor column asked me to evaluating our p3 programs. we were not getting the results we wanted. back we had. tucked deals that were negotiated. we found out these deals were made with transparency and accountability so we decided to start from scratch. what we found the best way to protect the taxpayers to make sure the private sector has to compete. we don't want to give away which means we need to meet our bottom line is what we do as we lay at our major business terms and wetlands accomplish developed the public option. we have a steering committee to help us evaluate this and then and only then if it makes sense to invite the public and the private sector to compete along with us. if the private sector can beat a public option we enter into a p3 process. some pointed out they never take the public option off the table. this is works well in virginia with the deal we did a $3.1 billion deal. we ended up doing it with no public subsidy and an additional $500 million made as a concession payment to the state up front that this is not free money. this is the public's toll funds will be used. this new process considers the users fees benefit taxpayers. as you guys consider and as congress considers potential infrastructure packages i urge members to be careful not to create unintended consequences to renew incentives for p3's. it would provide incentives only available for project finance. this could undercut the public's negotiating position. p3's in closing habre promised to address certain prop transportation products but according to fhwa only 42 transportation projects a country involved private financing is 60% in five states virginia texas florida california and colorado. 35 states never entered into single transaction involving private funding so i encourage congress to ask two questions. how will it help the federal deliver the bus for the taxpayers and whether we'll create distortions that will hurt the public's negotiating position. one last closing comment i know you will hear a lot from people who say there are a lot of barriers to p3's but i strongly disagree. these are the same people who said when we reformed our program we would kill it and it turned out that just wasn't true so thank you so much for the opportunity to testify. >> thank you very much secretary lane. let's start off with mr. degood. he didn't say much about the driving forward program, the project that would cover -- they had the driving forward program really is consists of two parts. there were three projects that represent reinvesting in our toll project to make sure it stays in a good operational condition. one of those is the six lane project is 22 miles on the east end of the turner turnpike there in tulsa. the others in the salsa area that is an expansion project that i discussed in my testimony and in the oklahoma city metropolitan area in our efforts to try to continue to manage increasing traffic volumes and make sure we can continue to move people, goods and services we are expanding the john kilpatrick turnpike on the southwest side of oklahoma city and introducing a new reliever route between interstate 40 and interstate 44 the turner turnpike in eastern oklahoma county and again those expansion projects are really being predicated on developing congestion in the metropolitan areas and the increase in accidents we see occurring as a result of that. that is their effort to stay ahead. >> okay, thank you. mr. yarema you have heard the attacks on p3's. >> my experience in the conversations that i've had with honor president everything is on the table. it's going to take a lot of imagination. it's going to take hard work, experiencing gifted people but i would hesitate taking anything off the table. after the attack on p3's your feelings about them? >> thank you mr. chairman. i don't know that i would take serious disagreement with what was said. i re-with others and with you that p3's 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 p3's. what they do is they are much more than financing devices. they are project delivery mechanisms in the right circumstance but i believe there is a too narrow understanding of what the term applies to in the potential values they offer both the urban and rural areas. there are two main types of p3's. does it require revenue streams and those that don't. most focus on the p3's they require revenue streams like managed lanes and toll roads. these raise issues about ratesetting in noncompete clauses and the limits on potential future activity by the state d.o.t.. the other types of p3 known as and availability contractor performance contract raises none of those issues. it does not involve toll revenues. in fact it's the most common type of p3 in the u.s. in the global market today. it is not widely appreciated itself i could take just a second to explain the performance of p3 it offers a different value proposition than conventional delivery. with conventional delivery a state d.o.t. or regional transit agency tells the contractor not just what to do but how to do it and it compensates for the resulting work on a project basis. there is no warranty generally for the outcome. with the performance p3 come you compensate the contractor only for the infrastructure performance over its use of life. it's akin to a super warranty. government makes generally no payments until the project is complete and then payments over the life of the project are subject to adjustment downward to the infrastructure underperformance. the tool ensures companies that design and build the projects are on the hook for the long-term infrastructure performance, they are required to bid lifecycle costs and they report the contractor for innovative solutions. there is strong competition and rigorous bidding for these kinds of contracts and there are numerous examples in this country the ohio river bridges in indiana, the purple lines in maryland three major projects in florida, the los angeles world airport delivering $4 billion worth of these kinds of contracts today for a major projects just as examples. i respect we suggest the outcomes the availability or performance payment of p3 can produce are just as valuable in a rural setting as an urban contracting environment. c thank you mr. yarema. appreciate that clarification. senator carper. >> thank you mr. chairman. thank you for your testimony which i think for the most part is eliminating and tomorrow we are going to hold another hearing in this room. this will be the secretary of transportation elaine chao. one of the questions i asked, what do you think the administration would like to fund transportation projects? i believe in things that are worth paying for and obviously a concept for welding transportation projects and people and businesses help pay for them. that's where i come from in roanoke virginia mr. secretary. she is going to be sitting tomorrow. the secretary is going to be sitting tomorrow where you are. just lift yourselves out of your chairs and put yourself up here with us and that's tomorrow. you're here to give her advice on how to fund transportation projects. she thinks public private partnerships make a lot of sense. i explained to her for a number of years if you add them all up maybe 40 or 50 there are just not that many of them. what advice would you give her and we begin with her friend from oklahoma tim gatz. what advice would you give her for funding? >> i think the most important thing is to understand there is going to have to be a lot of tools in our infrastructure toolbox. it's going to take a healthy combination of revenue and financing mechanisms. i think with public private partnerships we have got to explore innovation that will begin to allow some of the smaller projects and not the billion dollar projects to potentially take advantage of those opportunities so i think again as has been stated many times here in the committee meeting today, it's going to take a lot of bbs to be able to make that happen. .. and the efficiencies technology give you then you can get a five to seven times multiple and total infrastructure outcomes. >> i think the number one piece of advice i would give you is that we have a long-standing tradition of the user pays model for most infrastructure sectors that have served incredibly well. unfortunately, for a number of political reasons we've drifted away from that and it's made the political left for members to try to find offsets to continue to make it increasingly difficult as the number grows with each round in it gets harder and harder, so i think we need to look at those sectors in the aviation surface transportation where we have the infrastructure in place to try to match inflation over the years that we haven't. >> okay, thank you. >> first of all, i want to keep the current funding programs in place to. i'm a big believer and think you have to understand the different kind of risks and how they need to be negotiated and that is a pretty steep learning curve and some of the states in terms of how to evaluate the alteration. it's the most significant costly part of the stream in terms of that and quite frankly, it's been a attractive because of the low interest public debt programs that are out there. they help the states gear up for those tools to. it would be shortening the. of the input of what's needed in helping the projects come to fruition so that would be my advice to the secretary. >> okay. thanks so much. we will see you tomorrow. >> senator fisher. >> thank you mr. chairman. like many of my colleagues, i believe in the importance of funding the infrastructure and the reliable infrastructure represents the critical investment in advancing the safety and also commerce. the highway trust fund has served to distribute funds to the states as the linchpin of the transportation system and when we look at the shortfall of $100 billion we will face in the five years following the fast act. i have a bill that will handle that but however, can you elaborate on how important it is to have certainty in the formula funding to your states transportation systems and when it comes to maintaining the roads and bridges is there any substitute to the funding that we have? >> in many cases there is no substitute, there is no alternative especially for a statewide oklahoma we would be able to maintain the system that we have, and again it is all predicated on inspection, understanding what the needs are and then having a very carefully crafted investment strategy to meet those needs and that investment strategy is fiscally constrained based on the resources we believe we are going to have available. so again, there will have to be a good investment at the federal level to be able to manage our infrastructure of the future. >> and while i like that you use the term investment because that is what this is, it's not going to be a stimulus, it is and job creation, it's an investment in the future and when you look at the strategy for that investment, i believe it needs to take place at the state and local level so that you can have a stakeholder come together and decide on what the priorities are that meets the strategy that you are looking at for your state. do you agree with that? >> the folks that reside in the states, we are residing and have a responsibility to the constituents to be able to explain the investment strategy and make sure they understand how we are reinvesting in an effort to make sure that it is operationally as good as it can be. >> it's important to involve constituents and involve involve people in our states in the east decisions. you talked about evaluating investments based on the their performance. can you elaborate based out of what look like and do you believe that if they could be publicly funded projects? >> in the availability performance piii, in the conventional project, the government basically comes up with standards and specifications that it applies prospectively and they serve as a proxy for the outcomes they want to achieve. they mandate how a project is to be built, that means in which it is to be built. in a performance space, the contractor is held to contractual requirements of the infrastructure's long-term performance, and they are only paid to those that are rich prospectively secured and by performance, what we mean is that the infrastructure is available, it's safe in the maintenance criteria and many other standards set forth as potentiallthat are setforth as e to apply to the environmental standards. in the federal permits, the projects are -- there's a need d to have medication requirements, but what they achieved in the environmental outcomes that are desired as speculative. if it is applied at performance contract it is contractor will be required so that's the difference as opposed to the conventional contracting requirement. >> the fast act requires the states to develop plans to receive federal funding. in my state and nebraska it's in this inthe process of developiny comprehensive plan. can you talk about the process of ensuring that we have a thorough strategy to address the movement across this country? >> thank you for the opportunity to respond to that. in virginia we just received one of the largest fast lane grants for the project at a billion here between richmond and 95 quarter of two northern virginia. 1.4 billion, $165 million in federal grant supported by $565 million of private investment in 710 million coming from the state to develop their projects. we teamed up with our partners to. very important not only for that freight passenger that the double stack. so it is helping other modes of transportation, taking people off the highway so that also helps the passenger movement. >> and that is very important. >> extremely important, yes. >> thank you mr. chairman. >> thank you commissioner, do you want to go first >> i think the ranking member and the gentleman from rhode island for his generosity. participating in this important conversation, the details of the presidents 1 trillion-dollar infrastructure investments are still unavailable to anybody outside of the administration however the blueprint reduces him very troubling ways. what little we suggested as there is no trillion dollar investment but rather he put a body on financing the gimmicks and most other countries. i tend to agree with the view that they are mostly limited to the urban and megaprojects of vocations. the testimony suggests the constrained with the local government is a lack of actual dollars, not financing dollars with this be a correct assessment of the testimony? >> one of the more disappointing aspect is so much of the conversation from this administration has been around the possibility of tax credits for which i thinwhich i think ie addition to the budget deficit if it were enacted and also doesn't really deliver the benefit that the communities need. we need to get dollars to the hands of the projects. one of the things that is not appreciated is that for the most part, it isn't something investors were looking for in conversations with folks on wall street firms and what they've said repeatedly as people bring money because they want to put in projects. if the congress were to move forward on this, it would have almost no overall construction and deliver no benefits to the majority of the communities out there swinging to bring federal dollars to the table and i think that there is a certain cycle from that which is when state and local officials know that it's acting as a partner they are more likely to take on the political risk to go out and raise their own dollars to. >> it's extremely effective in balancing the effort and it is a logjam in chicago but not a traditional piii mechanism that's just it doesn't shift from one entity to another. however, the parking meter highlights how difficult it can be to evaluate the assets to make sure taxpayers get a good deal. all of these examples are into complex challenging infrastructure. i'm interested in learning more about the communities. what's more where the private investment is limited? >> one of the potential benefits for the communities in this conversation about the public-private partnerships is that any urban megaproject that is taken care of as the result of the piii has general tax dollars to do smaller projects that just don't fit in with that kind of procurement financing model. so, i think it is important for us to be sensitive to the fact that rural communities in small towns just don't have the same tax base. they also don't have the same ability to generate user fees because there's less on the roadways. so, no matter what plan we come up with, we have to make sure to set aside an appropriate amount of money for the communities to recognize their needs. >> as you noted i'm concerned about the ability of the state and local governments to assess and implement the complex financing opportunities but also protect local taxpayers at the same time. ask your testimony suggests, the expansion project could gone down the wrong path due to an analysis that was flawed and would have led to a bad fuel for the virginia taxpayers. how can the states and municipalities avoid similar circumstances and how can we better prepared to assess complex financial deals to ensure that they get the best deal, and what kind what can the federal government do to help in this effort. >> when we came into office, the analysis that was put forth in the department suggested that we were going to need $1 billion a subsidy and wasn't going to support the areas of additional improvements. so, what we did and what was important to develop the public option if you are going to negotiate with a third party, you need to understand what it is going to cost before you begin to negotiate. so, we have a public auction and said that it would only take $600 million of public subsidy and throw off substantial money over $800 million for multiple improvements. true competition is the other key besides having a public option on the table, true competition is what resulted in the great seal of taxpayers. unless you have the true recovery you can't determine. it may be a little cost of capital. the two things we can do is have a public option and i believe the federal government helps us educate the states and how they go forward. but the pushback on one thing. every piii does have a revenue stream. if we don't pay for a project in the construction period it is considered that. so i do think that the availability payments to help in some areas and that, but they are dedicated a revenue stream that could go somewhere else, so there are some lost opportunities and investments so that is the thing that i would say is the public option in having true competition in the deals. >> republicans and democrats are often at odds over a number of things. on the infrastructure that gives me hope coming up this year the federal government does have an important role to play in this issue. along with ensuring the national defense. you served at the oklahoma turnpike authority for nearly ten years. thank you very much for your service and in your testimony you stated that until recently, no public-private partnership opportunities make sense for oklahoma and a day of more than the state of iowa and its macho area has more than twice the population of the capital city of des moines. so if to this point the public-private partnership hasn't worked under what circumstances do you see a public-private partnership working for the state of iowa? >> as much as we have engaged with a lo love of governmental purpose whether it be the city of tulsa, oklahoma department of transportation calls the county and others we are trying to find ways to leverage resources in a project of some size to create an opportunity to help only the construction of the project and again we think we could create a very competitive environment that would facilitate that investment. it's a little bit unique, and again we have some questions we will have to resolve but as much as i would say iowa has, we have anhaven't got the right projecto accomplish. >> every circumstance is different making sure that it's not one-size-fits-all i think is important and what's interesting than man mere mention of los ans and the counties. you mentioned in the testimony that it should be recognized as a long-term sustainable transportation revenue mechanism and my concerns with tolling of a couple of different planes, number one, how many are we going to school and at what point do we start inhibiting movement for travelers and that is true oklahoma has the same minimal rural areas where the tax base is pretty low and every penny of the budgets count. they haven't been built for heavy traffic. >> most importantly, you have to have a very careful vetting process in place it's going to go unmet without the resources and certainly without a traditional revenue streams. we think that holding is a viable option in oklahoma that's how we use the tolling as critical needs of all the indicators developing with that is the congestion, access issues and to use the forwards to meet those needs and have been pretty successful at doing that. but that cannot be arbitrary. >> it's not a one-size-fits-all approach. so thank you to all of the witnesses mr. chair. we worked in terrific bipartisan passions and so we don't always agree on everything. secretary, although it isn't one-size-fits-all. are there certain red flags we should look out for that should be a warning sign for people trying to protect the taxpayer and which ones would you highlight for us? >> you never can institutionalize risk. in the commonwealth, the risk for extending new lanes on interstate 66 underneath the river for a new tunnel, so you've are only dealing to answer the question that gets down to what risks are in each particular project and they follow the three areas, construction risk or financing and that is where we get into the concessions and what most people think we are transferring to the third parties. the only way that i know to mitigate that is to first of all understand the project is that you want to build. so number one you understand those risks and when you start negotiating them away with maybe a value to the deal for you and put the. >> for the fiduciary responsibility amend a great deal to who i was representing and they need to understand the good citizens have the fiduciary is but one red flag that i found and this is my first flag in the public arena. we have been standing up saying this is the most important project and i'm going to deliver this project before i leave office that undercuts the public's ability to negotiate the terms of the deal. it's allowing us to walk away from a bad deal and that's why it is important to keep the public option under the deal not to walk away from the project. ideal. that is what they are going to do. a state like rhode island and we are seeing very extraordinary infrastructure needs emerging along the coast we are seeing the sea level rise projections coming from the national scientists, coastal resource folks and so forth. you are seeing this down at the marvel naval station getting in all sorts of trouble. are you doing anything in particular or should we do anything in particular looking at the infrastructure to address that specific problem of the risks to the coastal infrastructure whether it is wastewater were the coastal defenses or military bases. they don't like that very much. it takes it all over. are you focusing in any particular way? >> it's taking the groundwater out and compressing it. one part of the scoring is the resiliency or the environmental impact as we develop their projects. we have also had to devote resources to the good repair. it's far short of the needs of. what i've been seeing it as we assist them like this a the citf marvel got a $100 million grant and the been assisting them. we do not have the ability to take care of all of the resiliency and sea level rise ended practice in the state of virginia. >> thank you for the extra 30 seconds mr. chairman. we change the way that we configured the federal partnership and infrastructure. the other two i will get to in a moment of deal with technology and maintenance as i think both of those are very important issues that we should talk about at the national level but let me talk about that in particular the private sector because i thought that you raised a very important point about accountability and private sector participation in the. i was trying to figure out where you came down on this. let the states figure it out and mind reading you correctly? >> yes sir i do believe the correct tools that we have in place a liked the government programs could be things to enhance the and tax credits getting some type of a bonus for incentivizing the project be done as a public-private partnership, that puts the factors in the deal that the other side will know and figure out a way to make sure they use them. not saying that is wrong, but you may not get the dollar for dollar increase that the federal government would be spending particularly in tax credits and the incentives in that. so, yes we believe we have seen no problem attracting the commonwealth of virginia for those projects that lend themselves to the piii. >> let me ask you is there anything in the current federal authorization implementation of the transportation program that causes you heartburn as it relates to private partnerships? spinet i don't think that there is anything in the program that gives me heartburn with respect to the piii. we don't have enough performance metrics when it comes to holding the states accountable and for healthy expand a majority of the money. i agree with the secretary's point that we have to look at this from the perspective of performance and that should influence the decisions. i would also say that we need to push more money down to the metropolitan region. i think that's too much of the decision-making authority rests with the outcome of being the employee when you look at the state highway network you tend to think the solution to the challenge is going to rest with the expansions of the network even if there are other sustainable approaches that provide for transportation options. for the flexibility of the government i'm proud of the role that we played with the help of the committee so that we do have that flexibility under the current system and we will fight to maintain that. let me go to the other two issues and that is technology and maintenance which i strongly support and i think we have neglected maintenance and everybody likes to cut ribbons but not preserve the roads. how do we at the national level provide the right incentives for advancing technology and dealing with the lifecycle maintenance? >> i would be happy to take a crack at that. we start with the proposal that is being kept in place and new money would be handled differently. it is a new way of establishing state, local and private partnerships. one should be preserving assets with the effective maintenance. let's draw a line in the sand and say we are not going to build anything new or reconstruct anything unless we make that commitment. one of the ways making sure that will take place is through the availability payment. so the contract will obligate to achieve lifecycle cost by contract. that is a way of achieving it with certainty. the federal state relationship in transportation at least is the states and localities own the assets of. hopefully what we can do is add incentives, a stronger incentive as a federal role. >> anyone else want to comment on this? >> in virginia, more than half of the dollars go to maintaining the roads and in fact, we just put a new law that requires 45% of the construction money going to what we call th he called a f good repair. those assets that you cannot pave any more you've got to rebuild them but we are not adding capacity. is there something we can do at the national level to encourage the states to meet their commitments and lifecycle >> i am not enlightened or encumbered by that degree, but from the standpoint of the business perspective, certainly how you rate the performance of your current assets as we do in the commonwealth, i believe that should be part of the federal program. are we maintaining assets up to the standard particularly the interstate system and that they make sure were just like we do that we are maintaining those. so, senator i would suggest that there would be some performance outpaced results in the federal states. >> we did have the designated funding in the earmarks and i've never known a legislator to request money for maintenance, but we do request for the new roads and projects because we like to see the project. so it is a tough political sell when you are dealing with maintenance. but it is our responsibility to make sure it is built into the accountability and in the way that we develop our partnership. we will develop the next structural authorization bill to see how we can be more effective in preserving the transportation infrastructure in this country anand by the way also to deal wh technology because i think that is a emerging area that is and d always giving the priority that it needs. thank you all for your testimony. thank you, senator. we started out talking about the success that we've had over the last couple of years and it has been rewarding because people think things could go down in political rhetoric and nothing gets done but that is not the case in this committee. i am optimistic and i've heard it from the administration that we are going to get aggressive and do the things that we shou should. back in the old days i would just problem was too much surplus in the trust fund but those days will never come back. i appreciate very much the expertise. this happens to be the 30th year of the partnership program one that i was involved in 30 years ago this year and we are going to be holding the celebration and this office building in about an hour so i would hope all of you that showed up will leave as quickly as you got here. after [inaudible conversations] [inaudible conversations] [inaudible conversations] there's the health care problems we have sustained but really after it back towards the front of the agenda is ambitious and optimistic. >> [inaudible] >> we will hear something on that tomorrow. >> the act was salient and how you thought it was affecting the stimulus bill [inaudible] during the time senator boxer and i were working together that was a point of contention. let's keep in mind that's how they receive more than any other republic. concerns from your colleagues about private investment. >> the one was here that is able to elaborate although not quite as much [inaudible] >> what is your preference. >> the take away from the any other innovative financing. you might remember a single person in the act was ashlawn [inaudible] to get really specific [inaudible] share for the viewers what is your general thesis that we are looking at and what will we be reading about when you open the pages? spinnaker has been a huge myth that has taken root. there is