Statement of Senator Jim Jeffords

Innovative Financing

Beyond the Highway Trust Fund

September 25, 2002

Welcome to this, our thirteenth EPW committee hearing in preparation for renewal of the nation's surface transportation program. I am pleased this morning to join Chairman Baucus and the Finance Committee in sponsoring today's hearing.

Today we will focus on money - a key to the future of America's transportation system. By some accounts, the annual level of investment needed to just maintain our transportation system is nearly $110 billion per year. Our current national program falls well short of that figure.

Over the last fifty years, in our successful campaign to develop the Eisenhower Interstate Highway system, we have used federal grants to states in a pay-as-you-go program to build our national system. Today, that system is essentially complete.

We are in the post-Interstate era. Our federal-aid program is now focused, appropriately, on maintaining, operating and enhancing the highway asset that we have built. But this federal-state partnership is now being overwhelmed by just its asset management responsibility. Unless we adapt, I foresee a continuing deterioration of our transportation system.

We are a nation with unlimited potential and boundless possibility. That spirit has propelled a range of achievements unparalleled anywhere in the world. Our renewal of America's transportation program must reflect this national heritage in meeting the needs of the next generation.

It should be as bold as President Eisenhower's vision was, in its time. Our vision should not be hobbled by artificial constraints or narrow thinking which would permit other nations to gain a competitive advantage over us. To fully compete in world markets, and to offer all American families and businesses the full range of products in international commerce, we need strategic investment in key new facilities, while reinvesting in those already built.

We have explored options to increase revenues to the Highway Trust Fund in previous hearings. I will consider all options for growing the Trust Fund. But today, we will look beyond the Highway Trust Fund, beyond the grant-in-aid program and beyond the federal-state partnership.

We will hear today from two distinguished panels on a topic that has been referred to for the last ten years as "Innovative Financing". We will look at the role of revenue streams, private capital, special-purpose entities and intermodal facilities - in meeting the needs of the next generation.

But this is not innovative or radical or even new. In fact, what we will explore today is really the pre-Interstate approach to financing roads and bridges. It is the standard way that our free enterprise system creates our means of production, through private capital and return on investment.

I am pleased that Councilwoman Hahn from Los Angeles is here to discuss a pioneering effort in modern transportation finance - the Alameda Corridor. This prototype project is intermodal in nature, provides both freight and passenger benefits, draws on new revenues to retire debt and is sponsored by a special-purpose district.

In my home state of Vermont, we have utilized a finance program called a State Infrastructure Bank (SIB). A SIB is a revolving fund mechanism for financing a wide variety of highway and transit projects through loans and credit enhancement. Vermont has taken hundreds of fuel delivery trucks off our roads by financing bulk storage facilities in key rail yards.

Other states have used this mechanism and others to provide earlier project financing. In the state of South Carolina, a variety of finance techniques coupled with public-private partnerships has resulted in the construction of 27 years' worth of projects in a seven-year time span.

On a smaller scale, the state of Delaware has joined with the Norfolk Southern Rail Road to renovate the historic Shellpot Bridge, with the railroad retiring the project's cost over time through fees on its rail cars.

What we discuss today is a complement to our traditional programs, not a replacement. Private capital represents a realistic means to expand our buying capacity. The key is revenue streams. When a project is supported by dedicated revenues - whether it is tied directly to the use of the facility as in the case of Alameda or Shellpot Bridge, or simply earmarked from more general sources such as property rentals or operating revenues - then that project can retire debt.

The freight community in particular will benefit from expanded use of financing. Today, freight interests are frustrated by their inability to compete when projects are ranked at the state and MPO level. Through its capacity to generate revenue, the freight sector can essentially create its own program. This will also reduce demand on the traditional federal-aid grant program.

Let me close by suggesting a vision for transportation finance. In the future, every responsible fund manager, both here and globally, will have a fraction of his or her portfolio invested in US transportation infrastructure. They will do so with confidence in the investment and the bold nation it supports. Over the next few hours, I will listen for ways to make this vision a reality.

Thank you.