Statement of Fred Salvucci, March 19, 2002

Testimony of Frederick P. Salvucci before the United States Senate Committee on Environment and Public Works March 19, 2002

First, let me thank the Committee for the extraordinary opportunity to participate in your consideration of the needs to be addressed in the process of reauthorization of Federal Surface Transportation Funding. Let me share with you my views on some key emerging issues, based on my experience as a City and State transportation official in Boston, Massachusetts, and more recently as an academic researcher at the Massachusetts Institute of Technology.

A. Emerging issues

As we anticipate the reauthorization process for the surface transportation bill, I believe this is a useful time to step back and re-examine the evolution of the Federal program since 1956, and the changing needs of the nation.

The initial impetus of the program, to create a national highway infrastructure, has substantially been accomplished. The mechanism of high Federal matching ratios for capital investment, stable and reliable funding, clear Federal policy guidelines, and implementation decentralized to the State government level, has been very successful at creating an ubiquitous high-quality highway network. As this primary objective has been substantially achieved, the program has evolved to include funding for complementary modes such as transit and the urban system, and to issues of management of operations and maintenance (ITS). These shifts have required more complicated planning and environmental procedures and institutional requirements, with transit authorities, metropolitan areas and cities, and sister agencies with environmental and public health responsibilities, playing important roles, in addition to State highway departments. Persistent issues of congestion, especially in suburban areas, continue to generate intractable problems at the interface of transportation performance, economic growth, land use, and environmental quality. Moreover, as the system ages, deteriorating physical condition of old infrastructure gives rise to the need for reconstruction, or redevelopment of old urban infrastructure in complex urban environments. The Big Dig in Boston is perhaps an extreme example of the cost and complexity of this challenge, and is indicative of challenges ahead in a very large number of urban areas. The need to renew and expand the bridges and tunnels that serve Manhattan, compounded by the tragedy of September 11, is perhaps the most vivid example, but dealing with the earthquake damaged infrastructure in West Coast cities such as Seattle is likely to be similarly challenging. The vulnerability of the air traffic system exposed by the September 11 tragedy was already becoming obvious because of the growing airport congestion, and poses the question of the need for complementary intercity rail services and improved "ground access" to airports.

Finally, the unglamorous question of proper maintenance of the existing highway network is perhaps becoming more important to the national interest than the further expansion of the network.

I believe that our democratic political system will and should translate these emerging problems into a demand to be as innovative and creative with new national initiatives as were the founders of the Interstate system.

My suggestions to anticipate and deal with these emerging issues are these:

(1) Establish a new program to federally fund the cost of operating and maintaining the existing national highway system, with clear Federal guidelines and policies for planning, but a decentralized structure to allow local flexibility for implementation. A pay-as-you-go incentive of 1/3 Federal, 2/3 State funding would, in my judgment, be adequate to create substantially more attention and sophistication to this unglamorous but vital activity.

(2) Develop a new category of funding for the rebuilding and redevelopment of old infrastructure and mega-projects. This will be a very expensive undertaking, but one that is essential to the economic health of the nation. It will require high Federal matching ratios to be affordable at the State and local levels, and will require planning and financial mechanisms similar to those of the Interstate program. Early costs are likely to be modest because of the long lead times often involved, and some national planning will be required to even develop realistic national cost estimates.

(3) Develop a new initiative to prioritize access to airports, particularly for truck movements which are increasingly trapped in congestion, with severe economic consequences. Again, the early costs are likely to be modest because of lead time, but eventual costs will be high, and require high Federal matching ratios.

(4) Develop a new program to provide Federal funding for improved paratransit services. The dramatic growth in the aging population is creating a mobility demand far in excess of the "interim" services for the elderly and disabled provided by transit authorities for systems which are not fully accessible. The growing need extends well beyond the extent of many transit providers, and as transit systems become physically accessible they could theoretically withdraw the current limited services. To deal with this emerging issue at an adequate level requires that it be viewed as a responsibility of the entire transportation system (not just inaccessible public transportation systems) and that it receive reliable Federal funding, not be imposed as an unfunded Federal mandate. A 50-50 Federal share of costs is probably adequate to motivate the level of effort required, but the unserved need is great and growing, so the (Federal and State) funding needs will grow substantially as organizational capacity to serve the need improves.

(5) Understand and anticipate increased funding requirements for complementary systems such as transit, intercity rail, elderly and disabled access, and recognize that aviation funding authorizations will be considered in the same time frame as surface transportation reauthorization.

(B) Implementation Considerations

For all of these emerging needs, an expanded and restructured financial base will be required, and it is important to consider the political and financial context of reauthorization.

The Federal role in transportation has been evolving based on a combination of three factors:

(1) the changing needs of the nation as a whole,

(2) The narrower needs of the transportation public agencies at the State, metropolitan, and local level, and

(3) the needs of the transportation construction industry whose economic viability is strongly affected by Federal transportation authorizations and appropriations.

In many ways the evolution of the Federal program has been shaped by these three forces, particularly in the recent history of the program (1990 to the present), and the challenge facing the re-authorization process of 2003. In order to balance these three considerations, the Congress has periodically increased Federal funding through increases in the gasoline tax so that "new" issues can be addressed without weakening existing programs, but the President appears unlikely to support this approach in 2003.

I believe that the successful balancing of these three considerations in 2003 could best be achieved by reconsidering three major features of the Federal program:

(1) If the pay-as-you-go philosophy, established by Eisenhower, were partially replaced by a capital budget bonding approach, similar to that used by every State government, the existing tax revenue streams could support a major expansion of program to meet changing national needs and allow expansion for all transportation agencies and the transportation construction industry, while deferring the need to increase gasoline taxes. If one-third of the existing revenue streams were to be used for debt service, the program size could expand, so that over the next six years, instead of approximately $145 billion it would be possible to invest approximately $175 billion, approximately a 20% increase. While OMB would oppose this possible change (as it has in the past) it would have major economic benefits to the nation by allowing increased investment now, producing both short-term economic stimulus, and long-term economic growth, within the existing tax constraints.

(2) If the State and local matching ratios were increased beyond the 20% ratio now favored, national program size would increase, and State and local accountability would grow, easing the burden on Federal oversight somewhat. Traditional thinking has favored very low State and local matching ratios based on the precedent of the 90/10 ratios of the Interstate highway program and the strength and popularity of that program, and the very simple political task of building State and local political will to raise 10¢ to attract 90¢. But it is still a bargain to raise 33¢ at the local and State level and get 67¢ from the Feds, and you "leverage" a somewhat larger program, with more fiscal discipline at the State and local level.

(3) If the focus of the Federal role were shifted from capital investment to include a larger component for operation and maintenance, the effectiveness and efficiency of the overall program would increase. An extremely large and extensive highway network has now been created, but the operation and maintenance of that system is often inadequate and inefficient. The "new" capital needs are increasingly to rebuild older parts of the system which have deteriorated from decades of inadequate attention to operation and maintenance.

Modification of any one of these three features alone is very difficult, but a combination of the three could make it possible to deal with both pressing "new" initiatives such as elderly and disabled needs, environmental concerns, very expensive reinvestment and renewal needs, and increased levels of funding for operation and maintenance as well as continuing existing programs, allowing all major players to "win" without a tax increase during the near-term future.

The current situation, with gasoline tax revenue estimates low, has created multiple political problems. Highway appropriations have been cut, and the beginning point for the reauthorization is lower. In a policy area with increasing claims, a "growing pie" is essential to accommodate new interests without damage to long-standing constituencies. A "shrinking pie" is a disaster. This political problem could produce the political will to partially shift to a capital budget approach, which could produce growth rather than shrinkage, and allow the Congress to better deal with emerging issues.

ISTEA began a process of introducing operation and maintenance themes into the program through its management reporting systems and "flexibility", but these have not been fully embraced by the states because the management reporting requirements were often treated as perfunctory paperwork, and flexibility requires shifting money away from some traditional activities. This proposed new combination would allow introduction of funded operation and maintenance activities (perhaps at "low" 30% match) that would produce the carrot for real operation and maintenance reform, without sacrifice of capital investment, and could really continue, deepen and consolidate the new initiatives of ISTEA while respecting the continuing need for new investment (and the economic and political importance of the construction industry). It could also prepare the capacity to deal with major national infrastructure rebuild issues such as Manhattan Post-9/11 and (to extrapolate to the aviation re-authorization process) large reinvestment projects like the proposed restructuring of O'Hare Airport.

Let me provide a little more explanation of the new program initiatives I proposed earlier.

(1) Operations and/or Maintenance Funding

Such an extensive highway and transit system has now been built that the use of what we have, and its proper maintenance, is more important to performance of the overall system than the addition of a new link. Yet in spite of the importance of maintenance and operations, and the system management requirements of ISTEA, maintenance and operations continue to be treated as afterthoughts, with sporadic attention and funding. Most State transportation systems continue to focus on facilities, not the operation of the system, and new construction continues to be the most visible activity. This is partly institutional; these agencies tend to be dominated and led by civil engineers (like myself) who like to build things, especially new things. New construction is exciting, highly visible, expensive, and Federally funded, so there is a lot of attention to doing the job right (and less attention to asking if we are doing the right job). In these organizations there is often high capacity to design and manage the construction of new facilities coexisting with under-funded and poorly managed maintenance, so that facilities require reconstruction because of deferred maintenance. Traffic operations is often viewed as less exciting, or important, and is reactive. Very little attention is given to protecting existing capacity and safety through acquisition of development rights, so we see sprawl development eroding highway capacity, as well as environmental quality. In order to transform this institutional landscape into one where improved mobility and accessibility are the primary objectives, and sophisticated management of facility maintenance is available to serve the accessibility mission (while retaining capacity for excellence in the design and construction of new facilities or the redevelopment of obsolete facilities), it is necessary for Federal leadership to adequately fund maintenance and operations activities and provide support for research and management improvement. Steady reliable Federal funding, even at modest ratios such as 30%, will serve to protect O&M budgets from the vagaries of local budget fluctuation, and allow this transformation to occur.

(2) Rebuilding, redevelopment of old infrastructure and mega-projects.

I believe that there is a large backlog of aging infrastructure in most metropolitan areas which badly need to be renewed, replaced, redeveloped, or augmented, but which are systematically under prioritized in the planning and procurement systems in metropolitan areas. Often these facilities are seen as lower priority because they already exist. In addition, they are often intensively utilized, creating dramatic problems of maintenance of traffic during construction, so agencies may tend to postpone projects that will be very difficult to manage and politically unpopular. The environmental processing of redeveloping and/or replacing old, heavily-used facilities can be complex and time-consuming, and the high cost and "lumpiness" of these can be very difficult to deal with in an MPO process, because they often require a large share of available funds on one project in a small geographic areas over multiple years. The combination of competition for resources from other projects, the difficulty and potential political unpopularity, and large funding requirements make these difficult to achieve, yet they are crucial to the future viability of many of our major metropolitan areas.

I believe that some protection from competition, through dedication of Federal funds at high Federal ratios, is essential to mitigate a tendency to avoid these challenges, with long-term destructive impact on accessibility and economic performance.

There are often suggestions that simplification of environmental procedures would expedite these and other "mega-projects." I believe this is a dramatically mistaken view. First of all, the complexity of the environmental process is a reflection of the real impacts that redeveloping our infrastructure will have, on both traffic and the environment. Moreover, old infrastructure problems are often seen as the occasion to reconceptualize the facility and its relationship to the environment, not simply "rebuild" it. Indeed, if we do not want our regions to become a form of "petrified wood," locked into hundred-year-old patterns, reconceptualization is an appropriate and essential activity. Developing public understanding and participation in this process is desirable and necessary, and I believe the environmental process is a useful way to organize this essential participation. Given the political importance of the environmentalists rather than picking a fight, I propose that we should strengthen the enforceability of environmental commitments. More fundamentally, the real delays in implementation do not come from legitimate environmental process so much as from lack of available funding, "predatory" competition for funds, and agency reluctance to implement these difficult projects. Attempting to reduce environmental process is likely to simply increase the political unpopularity of these projects and exacerbate the real problem, which is competition for limited funds. Creating an adequately-funded, high Federal matching ratio, dedicated funds for these "mega-projects" would deal directly with the real problem which inhibits dealing with this category of issues. In addition, increased Federal capacity for technical support and oversight of these projects is needed. I believe that the FTA Project Management Oversight program which uses expert consultants responsible to FTA to help oversee these unique projects is a good model. New York's West Side Highway collapsing without real replacement, and the redevelopment of Boston's Central Artery as a depressed highway, at very high cost, are good examples of the range of possibilities, and the importance of this issue.

(3) Airport Access

This represents another category of accessibility likely to be very important to the economy, but underprioritized in the metropolitan area process. Airports and the aviation industry zealously oppose any idea of responsibility to deal with landside access. Additionally, port authorities tend to make money from parking and rent-a-car revenues, leading to a lack of advocacy or even support for improved public transportation access to airports. Truck access to airports, presumably very important for high-value goods, generally receives no particular attention. In the competition for scarce funds at the metropolitan area level, airport and other intermodal access is often a bit of an orphan (similar to rebuild and mega-projects). Again, a separate high Federal matching ratio dedicated fund for airport and intermodal facilities could help ensure adequate attention to this important area. Since the reauthorization of aviation funding is under consideration by Congress at the same time as the surface transportation authorization, it should be possible to introduce symmetrical provisions in the aviation reauthorization to create some responsibility and funding to prioritize landside access. If some matching share from the airport proprietor were required to access dedicated surface transportation funds for airport and inter-terminal access, an incentive could be created to encourage a more proactive attitude by airport operators.

(4) Elderly and disabled paratransit services.

Currently, most paratransit services for the elderly and/or disabled population are provided by public transportation providers whose fixed-route services have not yet achieved full ADA accessibility. There are several problems inherent in this situation:

a) Funding the paratransit service competes directly with funds to operate fixed-route bus and rail services, and weakens fare recovery ratios. (Paratransit fares typically cover only 5-10% of operating costs.)

b) This leads transit providers to consider the paratransit an "unfunded Federal mandate," and provide paratransit service of lower than desirable quality, and (because of budget and fare-recover ratio constraints) reduce fixed-route service.

c) As fixed-route service comes into compliance with ADA, the legal obligation to provide paratransit service is removed, but approximately 50% of the clients cannot really use "accessible" fixed-route service, creating a potential crisis.

d) Outside of fixed-route transit districts, paratransit services are less available.

e) The aging population, some of whom should not drive but still need mobility, is growing dramatically.

For all of these reasons I believe we should recognize that we are dealing with a problem of access to society, not access to fixed-route systems, for growing numbers of people, and that this is a transportation system responsibility, to be funded (at a 50-50 level) by Federal funds with Federal planning and service characteristics, in order to provide reasonable access and mobility to the full population. This could be a building block toward creating institutions focused on mobility and accessibility rather than exclusively on facilities.

(5) Intercity rail and bus services to complement aviation in the aftermath of 9/11.

Partly because of the ongoing fiscal problems of Amtrak, partly because of the increased aviation travel times caused by the increased security in the aftermath of 9/11, intercity rail and bus facilities are likely to be seen as increasingly legitimate claimants for a share of transportation funding. While this will raise complex institutional issues which neither states nor MPOs are perfectly suited to encompass, I believe there is legitimacy to the public claim and that it would be prudent to anticipate a need for a new funding initiative here, at least for capital.

(6) Implementation of reauthorization.

Again, given the combination of legitimate increased public claims for participation, the reduced level of gasoline tax receipts, and the likelihood of great resistance to increasing the gasoline tax before the next election, and that the historic reality has been that the surface transportation act reauthorization require "all winners," I believe that re-opening the question of a capital budget approach to surface transportation is the best hope to create adequate room to go forward with a broad consensus.

To be sure, using part of the current revenue streams for bonding allows increased investment in the short run, but requires either ending some capital investment or increasing the gasoline tax at some point in the future. But either of those outcomes is better than the status quo. Bonding costs are at or lower than the rate of inflation in the construction industry, so dealing with investment needs sooner through bonding does not cost more. On the contrary, it provides both short-term economic stimulus and long-term economic growth, both of which are desirable. It is the way every homeowner in America buys a house, most private investment is financed, and every State and City government invests. If, in six years new investments are curtailed, we're better off to have had the investment early. If, on the other hand a unified constituency successfully lobbies to increase the gasoline tax so investment can continue, that's even better.

In the short term, we need a strategy to incorporate "new" claimants and environmentalists in support of an expanded surface transportation authorization, and I believe these suggestions can help us get there.

Thank you again for the opportunity to testify.