JOINT HEARING OF SENATE FINANCE COMMITTEE AND

SENATE ENVIRONMENT AND PUBLIC WORKS COMMITTEE

WEDNESDAY, SEPTEMBER 25

 

TESTIMONY OF STATE SENATOR BETTY KARNETTE TO BE INCLUDED IN COMMITTEE HEARING RECORD

 

CONTACT:

 

STATE SENATOR BETTY KARNETTE

CALIFORNIA STATE CAPITOL, ROOM 5066

SACRAMENTO, CA 95814

916/445-6447

 

                                    OR

 

JEFF BROWN

CALIFORNIA SENATE OFFICE OF RESEARCH

1020 N STREET, STE. 200

SACRAMENTO, CA 95814

916/445-1727

 

Thank you for having this important hearing to discuss the security and infrastructure needs of trade-based transportation throughout this great country of ours.

 

Clearly, America’s long-term economic growth depends on our ability to move goods safely and efficiently.  Throughout the nation, we see how freight movement brings our trade economy to life.  We can be proud of how we work as a nation to stay competitive in the global economy.

 

However, there are serious obstacles to our nation’s freight security and mobility that could significantly reduce the safe and efficient movement of goods in the immediate future.  Unless we address these problems in an innovative, systematic fashion – without delay – we risk America’s ability to provide the type of transportation infrastructure on which the goods movement industry has come to rely.

 

Before 9/11/01, our freight mobility issues were already challenging enough.  But today, we must also ensure that our nation’s freight movement system is as secure as it is efficient.  Clearly, our present challenge is to insure the security, efficiency and sustainability of the nation’s freight movement system.

 

It is awe-inspiring to see how the various regions of this nation collaborate in manufacturing, selling and moving goods to each other and to our trading partners throughout the world.  For example, nearly $650 billion in domestic and international trade flows between California and other regions of the United States.

 

What would happen if the goods movement between the east coast, west coast and points in between were to collapse? Clearly, our economy – and those who rely on it – would be in serious trouble, and that day may not be far away.  Rail lines and rail yards in California are expected to reach maximum capacity within five to seven years.  Moving a freight container from one side of Chicago to the other can often take up to four days.  

 

There are countless examples of problems just like these that demonstrate the importance of developing a systematic strategy to meet the challenges that confront us.  If we fail to act, our competitors in the global economy will be the only beneficiaries.

 

I would like to focus my testimony on how we can ensure that our nation’s freight transportation network can keep pace with the demands of economic growth.

 

First, we need a comprehensive strategy for increasing capacity and improving the efficiency of goods movement in the United States.  The strategy must be complete and it must include private sector participation.

 

As I have indicated in my attached report, National Freight Security and Infrastructure Bank, we can simultaneously meet the needs of both government and industry by creating an organization that focuses on public/private finance and project selection. A public/private partnership is the only sensible approach we can take. We must make sure that the two major stakeholders of the nation’s freight system – government and industry – have a forum to collaborate and to solve national goods movement problems.

 

Second, as Congress rightfully confronts the issue of freight security, it is essential that any such effort include an innovative and comprehensive financing strategy to address it.  We do not have sufficient financial support from existing federal programs to guarantee the freight security and mobility in the way we would like.  Therefore, I have developed an innovative finance proposal for freight projects.

 

My proposal for a National Freight Security and Infrastructure Bank demonstrates how to develop an innovative funding base and how to deliver freight transportation projects with public/private collaboration, while conforming to transportation programming requirements at the federal, state and local levels.

 

While there may be some concern that user fees may not be the best way to fund freight security and mobility, we simply cannot lose sight of the option.  Security and mobility are key elements of America’s ability to remain competitive in the global economy.

 

These are the same considerations that led President Dwight David Eisenhower to create the Interstate Highway System.  Creation of the Interstate Highway System was primarily driven by security concerns during the Cold War years of the 1950s and 1960s (i.e., the need to quickly, safely and efficiently deploy troops and material).  

 

Today we face similar security concerns that must be addressed as we aggressively pursue goods movement infrastructure development.  Many of our present challenges may seem insurmountable.  But our nation’s history is rich with examples of how Americans can rise above the challenges of the day.

 

The bottom line is that a comprehensive approach will simultaneously enhance America’s economic development and mitigate environmental and safety issues – while at the same time addressing national security.

 

 

National Freight Security and Infrastructure Bank

 

National Freight Security and Infrastructure Bank (NFSIB)

·       Stand-alone federal agency

·       Funded by NFSIB security &  infrastructure fee

·       Administered by U.S. Customs

·       Based on existing duties

·       Creates fees for commodities with no existing duty

·       Adjusted annually by (CPI)

 

U.S. Customs responsible for collecting the NFSIB fee

·       Compensated from NFSIB for administration

·       Fees flow to NFSIB

·       Staff & administrative costs funded by project sponsors application fees

 

NFSIB’s Board of Directors

 

·       15 representatives - public & private sectors

·       Public - U.S. DOT, U.S. Customs & ports

·       Private - steamship lines, shippers, trucking & railroad industries

 

85% of Fund to support project

 

·       Cash, or pledge-able revenue

·       Sponsors could choose direct funding, and/or debt or a combination

 

10% of Fund to U.S. DOT

 

·       Grants for discretionary freight security and infrastructure projects

 

5% to U.S. Customs Service - administration fee

 

NFSIB - Sponsors, Projects, Approvals

 

Project sponsors/applicants may include

·       States, cities, regional & local public agencies, port authorities, JPA’s

·       Joint applicants - public agencies & private transportation firms

 

Eligible projects - address security & transportation needs of imported cargo

 

·       Seaports handling international import cargo

·       Border crossings

·       Inland cargo interchange points

·       Jurisdiction of local MPO

 

Project sponsors & nominated projects

 

·       Projects must be included in RTP adopted by MPO

 

Projects must address one or more of the following

·       Increase national or homeland security

·       Expedite shipments of imported cargo

 

w     Increase capacity

w     Improve communications & information sharing

w     Reduce delays or increasing speed or efficiency of shipment

 

 

·       Relieve traffic congestion

·       Reduce air & noise pollution or mitigate other environmental impacts

 

Board of Directors of NFSIB decides which projects to fund

 

·       Funds flow from NFSIB to project sponsors

·       Project sponsors provide 25% matching funds

·       U.S. DOT may veto any project recommended by NFSIB

 

 

National Freight Security and Infrastructure Bank

 

 

 

The National Freight Security and Infrastructure Bank (NFSIB), a stand-alone federal agency, would be funded by a new uniform NFSIB security and infrastructure fee, administered by U.S. Customs, and based in part upon a percentage of the existing duties on all imported cargo through border crossings and through the nation’s seaports.  The NFSIB would establish security and infrastructure fees for certain commodities, which at present have no existing U.S. Customs duty, but which have security or infrastructure impacts.  The amount of the NFSIB security and infrastructure fee would be adjusted annually based upon the change in the Consumer Price Index (CPI).

 

U.S. Customs would be responsible for collecting the NFSIB security and infrastructure fee.  US Customs would receive compensation from NFSIB for providing this administrative service.  Fees would flow to the National Freight Security and Infrastructure Trust Fund, which would be administered by the NFSIB.  The NFSIB’s staff and administrative costs would be funded by fees paid by project sponsors (from non-NFSIB import cargo fee resources).  The NFSIB’s Board of Directors would consist of 15 representatives from the public and private sectors, including the U.S. Department of Transportation, U.S. Customs, ports, steamship lines, shippers, trucking and railroad industries. 

 

85% of the Trust Fund would be available as cash, or pledgable revenue to support project financings of eligible freight security and infrastructure projects. Project sponsors would be responsible for developing financing plans for individual projects. Project sponsors could choose direct funding, and/or use of leveraging strategies, including issuing debt, or a combination of funding strategies, in which the project sponsor would rely on cash or pledgable revenue provided by the NFSIB.  10% of the Trust Fund would be remanded to the U.S. Department of Transportation for grants for discretionary freight security and infrastructure projects, and 5% would be available to the U.S. Customs Service for administering the collection of fees. 

 

Project sponsors/applicants may include any of the following: States; cities; regional and local public agencies; port authorities; joint powers authorities; and joint applicants involving public agencies and private transportation firms or associations.

 

All eligible projects must address security and transportation needs of imported cargo through seaports located in specified Global Gateway Regions of the United States, or through selected border crossings, or through selected inland cargo interchange points, or through the area of jurisdiction of the local Metropolitan Planning Organization.  Projects nominated for funding must be included in the Regional Transportation Plan adopted by the Metropolitan Planning Organization. Regardless of their distance from the seaport, border crossing, or interchange point, all nominated projects must address one or more of the following goals associated with the movement of imported cargo: 1) increase national or homeland security, 2) expedite shipments of imported cargo by increasing capacity, improving communications and information sharing, reducing delay or increasing speed or efficiency of shipment, and 3) relieve traffic congestion, reduce air and noise pollution or mitigate other environmental impacts.

 

The Board of Directors of the NFSIB will determine which projects will receive funding. Funds will flow directly from the NFSIB to project sponsors. Project sponsors must provide 25% matching funds from any source. The U.S. Department of Transportation shall approve projects recommended for funding by the NFSIB, and shall have veto power over any project funding recommended by the NFSIB.

 

 

Global Gateway Regions shall include:

 

1) Southern California, including ports of Los Angeles, Long Beach, Hueneme and San Diego;

2) Northern California, including the Port of Oakland, Port of Stockton;

3) Pacific Northwest, including the Ports of Portland, Seattle and Tacoma;

4) Gulf Coast, including the Ports of Galveston, Houston, Corpus Christi, New Orleans, Mobile, Tampa;

5) Southeast, including Jacksonville, Miami, Everglades, Palm Beach, Charleston, Charlotte, and Savannah;

6) Northeast and Mid-Atlantic, including the Ports of New York/New Jersey, Philadelphia, Boston, Wilmington, Baltimore and Norfolk;

 

Border Crossings shall include:

 

1) Laredo, TX

2) El Paso, TX

3) Bellingham, WA

4) Portal/Northgate, ND

5) International Falls, ND

6) Sault Ste Marie, MI

7) Detroit/Port Huron, MI

8) Niagara Falls, NY

9) Plattsburg, NY

10) Otay Mesa

11) Calexico

 

 Inland interchange points shall include:

 

1) Chicago, IL

2) Memphis, TN

3) Kansas City, MO

4) Washington, DC

5) Richmond, VA

6) Charleston, WV

7) Ft Worth, TX

8) Chattanooga, TN

9) Denver, CO

10) Little Rock, AR

11) Minneapolis/St. Paul, MN

12) St. Louis, MO

13) Albany, NY

14) Syracuse, NY

15) Cincinnati, OH

16) Columbus, OH

17) Pittsburgh, PA

18) Hattiesburg, MS

19) Atlanta, GA

20) Lexington, KY

21) Birmingham, AL

22) Nashville, TN

23) Cairo, IL

24) Louisville, KY

25) Indianapolis, IN

26) Charlotte, NC

27) Raleigh/Durham, NC

 

Examples of projects that would be eligible for funding include:

 

1) California Global Gateways

 

Accounting for 40% of all U.S. waterborne commerce, California represents the largest trading complex in the United States. Freight transport capacity, however, has not kept up with demand.  Although the Alameda Corridor opened in April of 2002, serious deficiencies in railroad track and yard capacity and freeway capacity still exist in the L.A. area.  California is facing explosive growth in international trade through its ports and border crossings over the next 20-25 years.  Grade separations and other mitigations are needed to relieve freight-related congestion in local communities.  Examples of specific projects that could apply for NFSIB funding include:

 

● Alameda Corridor-East (extension of the Alameda Corridor through the San Gabriel Valley, Orange County, San Bernardino County, and Riverside County);

● Gerald Desmond Bridge replacement in the Port of Long Beach;

● Oakland Joint Intermodal terminal at the Port of Oakland.

 

2) Florida’s Gateway Project: The Americas Corridor

 

Florida is the fourth largest container handling state in the nation, with the state’s South Florida seaports handling an important share of the international goods flowing through the state to and from global markets.  The goal of the Americas Corridor is to optimize the movement of international cargo and domestic freight among seaports, rail lines and state highways in South Florida. In particular, the 60 linear miles of the intermodal transportation system linking South Florida’s three seaports is of critical concern.  The containers moving across the docks of three South Florida seaports, each of which is also a premier cruise port and located adjacent to a busy downtown center, must traverse the choked streets of urban neighborhoods to access the Interstate highway system, impeding mobility, productivity and compromising the nation’s security.   Double tracking of the rail system between Jacksonville and Miami is another specific project that will be required in the future.

 

3) Chicago Cross Town Highway and Rail Improvements

 

In Chicago six Class I railroads converge at some eighteen major intermodal terminals ringing the city.  1,500 trains per day approach these terminals and 3,500 cross-town container moves occur daily. The stress on the region’s roadways is enormous, and the delay to cargo delivery is increasingly inefficient.  A series of improvements to this fragmented infrastructure would add capacity and velocity to the rail and trucking systems.

 

4) New York/New Jersey Port Access Projects

 

The Port of NY/NJ is the largest port complex on the east coast, and the second largest in the nation.  Significant environmental concerns hamper overall freight investment.  New highway building is constrained by land availability and environmental concerns. 15,000 trucks move in and out of the port area each day, but each truck trip faces an average of 30-50 minutes of delay due to increasing congestion in the area.  The port has devised a series of port access improvements and intermodal connectors needed in the region.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Freight Sent To California

 

 

 

 

Freight Arriving From California

 

 

 

 

Total Freight Trade

 

 

 

 

 

 

Destination

 

Ports'

 

 

Origin

 

Ports'

 

with

Overseas

Ports'

 

 

State

Total

CA

LA/LB Ports

% of Total

 

Total

CA

LA/LB Ports

% of Total

 

California

via LA/LB

Share

 

 

US

$900.3

$869.5

$30.8

3.4%

 

$876.6

$711.0

$165.6

18.9%

 

$1,776.9

$196.4

11.1%

 

 

Alabama

$1.8

$1.5

$0.3

16.7%

 

$3.3

$2.7

$0.6

17.2%

 

$5.1

$0.9

17.0%

 

 

Alaska

$0.0

-$0.0

$0.0

NM

 

$0.8

$0.8

$0.0

0.3%

 

$0.8

$0.0

1.1%

 

 

Arizona

$3.8

$3.6

$0.3

6.7%

 

$22.3

$19.3

$3.0

13.5%

 

$26.2

$3.3

12.5%

 

 

Arkansas

$1.9

$1.6

$0.3

15.1%

 

$4.1

$3.7

$0.4

10.3%

 

$6.0

$0.7

11.8%

 

 

Colorado

$2.2

$1.5

$0.7

30.0%

 

$9.6

$9.0

$0.6

5.9%

 

$11.8

$1.2

10.4%

 

 

Connecticut

$0.7

$0.5

$0.2

23.3%

 

$2.9

$2.2

$0.6

22.5%

 

$3.6

$0.8

22.6%

 

 

Delaware

$0.2

$0.1

$0.1

45.1%

 

$0.8

$0.8

$0.0

3.3%

 

$1.0

$0.1

13.1%

 

 

District of Columbia

$0.0

$0.0

$0.1

NM

 

$0.6

$0.6

$0.0

1.9%

 

$0.6

$0.1

20.1%

 

 

Florida

$0.9

$0.8

$0.2

18.2%

 

$19.4

$17.5

$1.9

9.7%

 

$20.3

$2.1

10.1%

 

 

Georgia

$1.9

$1.1

$0.8

40.0%

 

$11.9

$9.1

$2.8

23.4%

 

$13.8

$3.5

25.7%

 

 

Hawaii

$0.2

$0.2

$0.0

1.3%

 

$4.1

$4.0

$0.0

0.7%

 

$4.2

$0.0

0.7%

 

 

Idaho

$1.2

$1.2

$0.0

1.3%

 

$2.2

$2.2

$0.0

0.4%

 

$3.5

$0.0

0.7%

 

 

Illinois

$4.9

$3.1

$1.8

37.2%

 

$14.3

$4.3

$9.9

69.6%

 

$19.2

$11.7

61.3%

 

 

Indiana

$2.2

$1.5

$0.7

30.4%

 

$4.9

$3.0

$1.9

39.3%

 

$7.1

$2.6

36.6%

 

 

Iowa

$5.3

$5.0

$0.3

5.5%

 

$1.7

$1.7

$0.1

4.3%

 

$7.0

$0.4

5.2%

 

 

Kansas

$3.9

$3.3

$0.6

16.1%

 

$4.0

$3.6

$0.4

8.9%

 

$7.9

$1.0

12.5%

 

 

Kentucky

$1.2

$0.8

$0.4

33.3%

 

$6.5

$5.2

$1.4

21.0%

 

$7.8

$1.8

23.0%

 

 

Louisiana

$3.0

$2.8

$0.2

6.2%

 

$3.1

$2.6

$0.5

16.1%

 

$6.1

$0.7

11.2%

 

 

Maine

$0.2

$0.2

$0.0

15.8%

 

$0.7

$0.6

$0.1

8.3%

 

$0.9

$0.1

10.0%

 

 

Maryland

$0.3

$0.2

$0.2

47.0%

 

$4.8

$4.4

$0.3

7.0%

 

$5.1

$0.5

9.6%

 

 

Massachusetts:

$0.5

$0.3

$0.3

52.4%

 

$9.2

$6.7

$2.5

27.5%

 

$9.7

$2.8

28.9%

 

 

Michigan

$2.2

$0.5

$1.7

77.0%

 

$9.9

$8.0

$1.9

19.5%

 

$12.1

$3.6

29.8%

 

 

Minnesota

$2.5

$1.9

$0.6

23.3%

 

$6.3

$3.7

$2.5

40.2%

 

$8.7

$3.1

35.4%

 

 

Mississippi

$0.9

$0.7

$0.1

16.8%

 

$1.9

$1.6

$0.3

15.8%

 

$2.8

$0.5

16.1%

 

 

Missouri

$2.6

$2.2

$0.4

16.6%

 

$7.9

$5.2

$2.7

33.9%

 

$10.5

$3.1

29.7%

 

 

Montana

$1.2

$1.2

$0.0

0.5%

 

$1.2

$1.2

$0.0

0.2%

 

$2.3

$0.0

0.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: The import percentages are slightly overestimated because of differences in the treatment of import data in the two freight flow databases used to assemble this data. CA totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

will include some freight exported via other California ports.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Freight Sent To California

 

 

 

 

Freight Arriving From California

 

 

 

 

Total Freight Trade

 

 

 

 

 

 

Destination

 

Ports'

 

 

Origin

 

Ports'

 

with

Overseas

Ports'

 

 

State

Total

CA

LA/LB Ports

% of Total

 

Total

CA

LA/LB Ports

% of Total

 

California

via LA/LB

Share

 

 

Nebraska

$5.5

$5.0

$0.5

8.7%

 

$1.4

$1.2

$0.2

15.3%

 

$6.9

$0.7

10.1%

 

 

Nevada

$3.9

$3.8

$0.1

1.5%

 

$18.3

$18.2

$0.1

0.4%

 

$22.1

$0.1

0.6%

 

 

New Hampshire

$0.1

$0.1

$0.0

38.1%

 

$0.0

$0.0

$0.1

NM

 

$0.1

$0.1

77.9%

 

 

New Jersey

$1.6

$0.8

$0.8

49.4%

 

$13.2

$3.2

$10.0

75.6%

 

$14.8

$10.7

72.7%

 

 

New Mexico

$0.7

$0.7

$0.0

0.5%

 

$2.8

$2.8

$0.0

1.0%

 

$3.5

$0.0

0.9%

 

 

New York

$1.7

$0.5

$1.2

71.1%

 

$16.3

$1.6

$14.7

90.4%

 

$18.0

$16.0

88.5%

 

 

North Carolina

$1.5

$1.1

$0.4

27.9%

 

$5.8

$4.6

$1.2

20.3%

 

$7.3

$1.6

21.8%

 

 

North Dakota

$0.0

-$0.0

$0.0

NM

 

$0.2

$0.2

$0.0

0.6%

 

$0.2

$0.0

2.0%

 

 

Ohio

$3.8

$2.6

$1.2

30.6%

 

$10.6

$8.3

$2.3

21.9%

 

$14.4

$3.5

24.2%

 

 

Oklahoma

$1.1

$0.9

$0.2

17.2%

 

$4.6

$4.5

$0.1

2.6%

 

$5.6

$0.3

5.3%

 

 

Oregon

$10.9

$10.9

$0.1

0.6%

 

$14.5

$14.1

$0.4

2.5%

 

$25.4

$0.4

1.7%

 

 

Pennsylvania

$2.1

$1.5

$0.7

30.4%

 

$10.8

$9.5

$1.4

12.6%

 

$13.0

$2.0

15.6%

 

 

Rhode Island

$0.1

$0.0

$0.0

74.8%

 

$0.6

$0.3

$0.2

41.7%

 

$0.6

$0.3

44.4%

 

 

South Carolina

$0.6

$0.4

$0.2

29.9%

 

$3.0

$1.8

$1.2

40.1%

 

$3.6

$1.4

38.3%

 

 

South Dakota

$0.2

$0.2

$0.0

3.7%

 

$0.9

$0.5

$0.4

42.3%

 

$1.1

$0.4

34.8%

 

 

Tennessee

$1.8

$1.0

$0.8

46.2%

 

$4.9

$1.0

$3.8

78.7%

 

$6.7

$4.7

70.1%

 

 

Texas

$14.3

$11.7

$2.6

18.2%

 

$34.3

$25.0

$9.2

26.9%

 

$48.5

$11.8

24.4%

 

 

Utah

$10.5

$10.2

$0.3

2.9%

 

$6.1

$5.9

$0.2

2.9%

 

$16.7

$0.5

2.9%

 

 

Vermont

$0.1

$0.1

$0.0

9.5%

 

$0.6

$0.6

$0.0

1.4%

 

$0.7

$0.0

2.2%

 

 

Virginia

$0.6

$0.2

$0.4

65.9%

 

$6.0

$5.5

$0.5

7.9%

 

$6.5

$0.8

13.0%

 

 

Washington

$10.0

$9.9

$0.1

1.2%

 

$18.1

$16.5

$1.6

9.0%

 

$28.1

$1.7

6.2%

 

 

West Virginia

$0.6

$0.4

$0.2

29.6%

 

$0.5

$0.3

$0.2

34.6%

 

$1.1

$0.3

31.9%

 

 

Wisconsin

$2.7

$2.1

$0.6

23.5%

 

$5.1

$4.2

$0.8

16.6%

 

$7.8

$1.5

19.0%

 

 

Wyoming

$0.8

$0.8

$0.0

0.1%

 

$0.3

$0.2

$0.0

1.8%

 

$1.1

$0.0

0.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: The import percentages are slightly overestimated because of differences in the treatment of import data in the two freight flow databases used to assemble this data. CA totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

will include some freight exported via other California ports.