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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Suggested Citation:"General Sessions." National Academies of Sciences, Engineering, and Medicine. 2005. Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow. Washington, DC: The National Academies Press. doi: 10.17226/13833.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

General Sessions

1 3 GENERAL SESSION 1 Welcome and Charge to the Conference William D. Ankner, Rhode Island Department of Transportation Frederick (Bud) Wright, Federal Highway Administration Kirk Brown, Illinois Department of Transportation Miguel d’Escoto, City of Chicago Herbert London, Hudson Institute Geoffrey S. Yarema, Nossaman, Guthner, Knox, & Elliott LLP Sharon Greene, Sharon Greene and Associates James T. Taylor II, Bear Stearns & Company, Inc. Joseph M. Giglio, Northeastern University The Third National Conference on TransportationFinance kicked off with a general session thatincluded welcoming remarks from the confer- ence chair, sponsor, and local officials and a keynote address by Herbert London of the Hudson Institute. The four tracks of the conference were introduced by the authors of four resource papers provided to partic- ipants before the conference and included in a separate section of this report. WELCOME AND CHARGE William D. Ankner William D. Ankner, Conference Chair, provided an overview of the structure and objectives of the confer- ence. Ankner charged participants to take ownership of the conference and, through their active participation, to contribute to the success of the sessions and of the conference. Frederick (Bud) Wright Following Ankner’s remarks, Frederick (Bud) Wright, Executive Director of the Federal Highway Administra- tion, noted that highway safety has become a public health epidemic and that the solution is greater invest- ment in transportation. In focusing on highway safety, Wright stressed that what the conference participants are doing matters and that they had an opportunity to work together to craft transportation solutions as part of reau- thorization. He conceded that budgetary constraints will make it more challenging and that innovative finance approaches will have to play a greater role. He pointed out that approaches that were once considered innova- tive have moved to the mainstream and gave examples of Transportation Infrastructure Finance and Innovation Act (TIFIA), Grant Anticipation Revenue Vehicles (GARVEEs), and state infrastructure banks (SIBs). Finally, Wright reflected on the important setting and great opportunity provided in this conference, especially given its timing before the reauthorization of federal surface and aviation transportation programs. Kirk Brown Kirk Brown, Secretary of the Illinois Department of Transportation, noted that the challenge facing the nation was illustrated with the needs and funding challenges of Illinois. Miguel d’Escoto Miguel d’Escoto, Commissioner of Transportation for the City of Chicago, echoed Brown’s comments and provided some context from the city that hosted the conference.

KEYNOTE ADDRESS Herbert London In his keynote address, Herbert London of the Hudson Institute focused on two themes: (a) homeland security and (b) performance-based pricing. He identified three challenges or barriers: (a) political barriers to raising user fees, (b) the unpredictability of revenue streams, and (c) the ability to link user taxes to specific improvements. He noted the lack of a visible link between the gas tax and specific use of the system and commented on the sub- stantial free-rider problem. London called for the deploy- ment of automatic vehicle identification equipment and the use for innovative finance approaches. London emphasized the link between transportation security and investment and noted that security demands would drive both the needs and the solutions. He con- cluded with a famous line, “The future is not what it used to be,” offered as inspiration for the conference. INTRODUCTION OF CONFERENCE TRACKS The conference agenda was buoyed by four resource papers prepared before the conference and updated afterward. The resource paper authors presented their papers as an introduction to the four tracks of the con- ference agenda. These papers in full follow in a later section of this report. Track 1: How to Finance the Next Transportation Program— Reauthorization and Beyond Geoffrey S. Yarema Geoffrey S. Yarema summarized his paper and focused on four issues: 1. What should the goal of reauthorization be? To address this first question, Yarema highlighted the need to improve safety, maintain system conditions, and maintain current performance levels. 2. What has TEA-21 activity achieved? The author noted that even maintaining system performance is a distant reality. He argued that while conditions have been maintained, performance has not. 3. What does future investment need to be to main- tain condition and performance? Referring to Haw’s Conditions and Performance Report and Bottom Line Report (American Association of State Highway and Transportation Officials), Yarema explained that experts varied in their opinions. He continued that unless one assumed a significant reduction in travel, a substantial increase in funding would be needed just to maintain system condition and performance. 4. What are the alternatives? Yarema offered several options, including enhancements to fuel excise taxes, implementation of financing through the tax credit bond approach, and broader use of user tolls and alternative revenue sources. Track 2: Tools and Techniques to Deliver More Projects Faster Sharon Greene Sharon Greene presented the second resource paper, which she wrote with Michael Schneider, and focused on the tools and techniques needed to deliver projects faster. Her presentation concentrated on impediments to proj- ect delivery, including environmental, institutional, political, and jurisdictional barriers. Greene first defined “innovative finance” as “mov- ing the traditional transportation funding process from a single strategy of federal aid through grants to state, regional, and local authorities to a more diversified approach involving increased utilization of capital mar- kets and the private sector.” She then highlighted a number of key accomplishments, including • State infrastructure banks, with 32 participating states and $4.06 billion in loan agreements; • GARVEE bonds, with six states issuing $2.3 billion in bonds; and • TIFIA credit assistance, with 11 projects with agreements in place in nine states, for a total of $15.4 billion in investment. The author described the need for greater certainty about project schedules, costs, and revenue streams when capital market approaches are deployed. She con- trasted this need with the current project development process with its attendant uncertainty in the timing and cost of project delivery. Greene described four attributes of projects that facilitate faster delivery: • Stability, • Predictability, • Continuity, and • Acceptability. She then described common impediments to project delivery, including environmental clearance and statu- tory requirements, institutional issues and stakeholder involvement processes, and political and jurisdictional 1 4 TRANSPORTATION FINANCE

factors. She concluded by explaining that “the full value of innovation in transportation financing will only be realized when paired with companion innovations in the project definition, development, approval, and implementation processes,” including actual streamlin- ing, effective partnering, and interagency coordination and cooperation. Track 3: Structures, Institutions, and Partnerships to Deliver More Projects Faster and Cheaper James T. Taylor II James T. Taylor II explained that the initial focus of innovative finance was on completing projects faster and cheaper but the current focus is on solving prob- lems. He offered mobility as an example of a problem that innovative finance solutions are seeking to address. Taylor noted that professionals are now steeped in innovative finance techniques that have been in use for the past 10 to 15 years. He highlighted the importance of this cultural change to the broader application of innovative finance approaches and noted the importance of continuing development of innovative solutions and new ideas. Track 4: New Transportation Initiatives and Demands on Financing Joseph M. Giglio Joseph M. Giglio described innovative solutions and new initiatives as supplements to traditional funding, not replacements for it. Giglio commented that all studies of investment needs falsely assume that technology, demand, and demand management will remain unchanged. He com- pared the current state of transportation investment to the “tragedy of the commons,” with its overuse of pub- lic goods perceived to be free and the resulting behav- ioral patterns. He called special attention to the need to focus on information technology solutions. 1 5WELCOME AND CHARGE TO THE CONFERENCE

1 6 LUNCHEON SESSION Transportation Challenges to the Nation James Jeffords, U.S. Senator, Vermont Transportation gave rise to the host city, as to somany of our central places in the United States.Chicago is also the birthplace of the modern city planning movement, a school of thought that is central to our national transportation policies. So it is fitting that we meet here to consider the future of the national transportation program. I have traveled extensively over the past few months, lending my voice to the electoral campaigns under way throughout the nation. As you know, I made a signifi- cant personal decision last year to ensure that the per- spective of our government was in balance as we confronted so many vexing problems. If anything, the need for balance has increased in the ensuing months. It is clear from my travels that our economy is in trou- ble. Business investment is down. Unemployment is on the rise. Unemployment in September 2002 stood at 8.1 million Americans, and this does not count those who have given up hunting for work. That is 1 million more unemployed than a year ago. We know that investment in transportation creates jobs and fuels business. In the course of my travels, I have sought out local examples of the transportation challenges that confront the nation. I have seen Mississippi River barge traffic, West Coast ports, Louisiana Gulf Coast highways, Northern and Southern border facilities. I have traveled the Northeast corridor, been moved by the damage at Ground Zero, and gone home to Vermont, where historic villages struggle to accommodate ever-growing trucks and truck traffic. My observations on the road were reinforced by the hearing process that the Environment and Public Works Committee (EPW) has conducted this year. The commit- tee, and the Transportation Subcommittee, under the able leadership of Senator Harry Reid of Nevada, held 11 pub- lic hearings and sponsored three roundtable discussions to prepare for renewal of the nation’s surface transportation program. We heard from more than 100 witnesses from 30 states representing more than 60 organizations. The process generated a hearing record exceeding 1,000 pages. In the course of these hearings, I heard a lot about the technical fine points of our program. And these are important matters. But I am most concerned by out- comes. As we renew this program, I want to stay focused on results—on a strong economy, on a clean environment, and on healthy communities. I want to make a difference for families by generating jobs, improving mobility, and enhancing safety. I want to invest in people and their cities and towns. I want a strong America. So I would say to you in this conference and to us all during reauthoriza- tion as we fine-tune the policy details, let’s keep our eye on the ball. That being said, and on the basis of what I have seen and heard over the past year, let me set out a blueprint for a renewed transportation program. The next bill must be built on a solid foundation. The bill’s many components should be grounded on two fundamental considerations: • First, it must strive for enhanced safety and security. We must reduce fatalities and increase vigilance. • The second fundamental is the environment. In both the natural and built environment, our trans- portation investments should make things better, not merely avoid making them worse.

Once grounded on this foundation, the next bill should feature four pillars: • Asset management is the first pillar. We must maintain and preserve our infrastructure investment. We cannot allow highways and bridges to deteriorate. • Access and mobility is the second pillar. Most Americans now live in metropolitan areas, and most metropolitan areas are congested and worsening. We need to focus on this problem. • The third pillar is freight and trade. The value and tonnage of goods moved in this country is enormous and growing. We need new facilities to accommodate this growth. • And the fourth pillar is rail. To meet our national freight and passenger demands, we need a modern national rail system, comparable to our highway and aviation systems. Capping the bill, and the overarching concern for this conference, is finance. By some accounts, the annual level of investment needed just to maintain our transportation system is nearly $110 billion per year. Our current national program falls well short of that figure. Over the past 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 pro- gram to build our national system. Today that system is essentially complete. We are in the post-Interstate era. Our federal aid pro- gram 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 just by 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 unparalleled achieve- ments. Our renewal of America’s transportation pro- gram must reflect this national heritage in meeting the needs of the next generation. This conference comes at a perfect time to generate ideas for closing our financial gap. And the talent assembled here today is the perfect mix. One of our EPW hearings was on the topic of finance. A number of the witnesses at the hearing are in attendance today. Let me share a few points that they made at our hearing: Phyllis Scheinberg of the U.S. Department of Transportation told us that her department would seek to “expand innovative finance programs to encourage private-sector investment.” David Seltzer told us that “public, corporate and union funds represent some $3.6 trillion dollars in investment assets, yet today there is virtually no U.S. transportation project in their portfolios.” Jayetta Hecker of the General Accounting Office told us that there are limitations in federal and state law. There are “state laws that restrict public–private partnerships” and “federal tax policies on private activ- ity bonds” that limit use of finance in transportation. She went on to say, “These financing tools are absolutely the most critical part of reauthorization.” So the will is there, the resources are there, but we face certain impediments. Jeff Carey of Merrill Lynch talked about new invest- ment vehicles that might make infrastructure invest- ment more attractive. And Los Angeles Commissioner Janice Hahn agreed that a reliable revenue stream is the key to the success of the Alameda Corridor. My request to you, then, is to help me realize a vision for transportation finance. Every responsible fund man- ager, both here and globally, will have a fraction of his or her portfolio invested in U.S. transportation infrastruc- ture. They will do so with confidence in the investment and in the bold nation that it will support. My senior transportation staff is here today and will remain with you to listen for ideas that might help fulfill this vision. In closing, let me address more near-term financial considerations. Today our federal government is oper- ating month to month under a continuing resolution (CR). We do not have a transportation appropriation law for Fiscal Year 2003. This lack creates doubt about the program and uncertainty for the states and private contractors. The CR limits spending for the year to $27.7 billion. I want to see that increased to $31.8 bil- lion, and I want to see an appropriations bill passed to make that fix permanent. Every billion dollars that we spend on roadwork leads to jobs for 42,000 Americans and helps millions more Americans commute safely to and from work every day. More transportation funding means that states will let contracts and contractors will hire more workers. When Congress returns after the elections, it must do something to stimulate the economy and create jobs. The American people demand it, and this proposal will deliver it. On October 18, 2002, the day that Congress recessed, I signed a letter urging the president to include even higher funding levels for highways, transit, and rail in his Fiscal Year 2004 budget. Joining me by signing that let- ter were Senators Reid, Fritz Hollings, and John Breaux of the Commerce Committee and Chairman Paul Sarbanes and Senator Jack Reed of the Banking Committee. They are the chairs of the Senate committees and subcommittees with jurisdiction for transportation. I hope to see this alliance collaborate throughout reautho- rization. My goal is a well-funded bill that promotes a balanced transportation system for the nation. 1 7TRANSPORTATION CHALLENGES TO THE NATION

1 8 GENERAL SESSION 2 Summary of Day 1 Reports on Concurrent Sessions Janet Friedl, American Association of State Highway and Transportation Officials Jennifer Mayer, Federal Highway Administration, Western Finance Center Mary Richards, Massachusetts Organization of State Engineers and Scientists Porter Wheeler and Sasha Page, Infrastructure Management Group, Inc. Following the culmination of the concurrent ses-sions for Day 1, conference participants reassem-bled in a general session to discuss key points, common themes, and areas for further research. A syn- thesizer provided an overview of that day’s sessions for each track, as follows: Track 1. Janet Friedl, American Association of State Highway and Transportation Officials; Track 2. Jennifer Mayer, Federal Highway Administration, Western Finance Center; Track 3. Mary Richards, Massachusetts Organization of State Engineers and Scientists; and Track 4. Porter Wheeler and Sasha Page, Infrastructure Management Group, Inc. Each presenter provided a summary of the sessions comprising the track for which they were responsible, drawing out common themes, key observations, and opportunities for further research. A detailed review of each track is provided in the following section. TRACK 1: HOW TO FINANCE THE NEXT TRANSPORTATION PROGRAM— REAUTHORIZATION AND BEYOND Janet Friedl Friedl provided a summary of the first two sessions of Track 1: How to Finance the Next Transportation Program—Reauthorization and Beyond, focusing on funding options for transportation at the national level. The first session set the stage for consideration of alter- native funding approaches. Speakers addressed the challenges to traditional funding approaches, including the question of whether current funding approaches send the right signals to consumers regarding gas con- sumption relative to environmental protection and energy conservation goals. The second session in Track 1 addressed the range of tax measures currently under consideration as options to leverage the transportation funding pie. Speakers in this session addressed leveraged leasing, tax-exempt financing (including financing for private sponsors) and tax credit bonds, and the related Transportation Finance Corporation (TFC) proposal. Friedl concluded that the presentations that com- posed the first day of Track 1 sessions began to chal- lenge the status quo and to set the stage for rethinking transportation funding in the near and longer term. TRACK 2: TOOLS AND TECHNIQUES TO DELIVER MORE PROJECTS FASTER Jennifer Mayer Mayer summarized the sessions in Track 2: Tools and Techniques to Delivery More Projects Faster, focusing on tools and techniques to expand the number of proj- ects and to advance the timing of project delivery. She described the two sessions as consisting of presentations by individuals from five states and by two additional

practitioners with a common theme of focus on the projects and project elements rather than on only the tools themselves. Tools must be selected on the basis of their link to individual projects and to address specific needs rather than being applied generically to states’ overall funding demands. In Louisiana, for instance, the challenge posed was how to fulfill a decade-old promise to deliver a program of projects. The answer was an innovative public–private partnership for program management coupled with some reality-based financing. For the Massachusetts Bay Transportation Authority, the question was how to restructure the program’s finan- cial management to align with a new revenue and fund- ing approach. The answer was a conscious shift from a debt-based approach with legislative appropriations to a dedicated revenue stream and greater pay-as-you-go funding. In Michigan the question was how to achieve consen- sus among stakeholders regarding project selection and funding. Answering this question was critical to being able to tap alternative cash management techniques. In Ohio the question was how to go beyond simply saying “no” to projects that did not have grant funding and to find a way to help them. The answer was cre- ative use of the state infrastructure bank and nongrant funding tools. TRACK 3: STRUCTURES, INSTITUTIONS, AND PARTNERSHIPS TO DELIVER MORE PROJECTS FASTER AND CHEAPER Mary Richards Richards provided the synopsis of Track 3: Structures, Institutions, and Partnerships to Deliver More Projects Faster and Cheaper, addressing institutional elements of alternative funding and project delivery. She described the well-balanced and diverse set of panelists. She explained that states are starting to see the impacts of lower funding and are rethinking risk sharing among public and private partners. Describing the range of perspectives of the panelists, Richards noted the different view offered by David Kusnet regarding contracting out as contributing to a brain drain from government. The afternoon session consisted of a series of case studies highlighting the application of various funding strategies and the role of institutional relationships in shaping the strategies. TRACK 4: NEW TRANSPORTATION INITIATIVES AND DEMANDS ON FINANCING Porter Wheeler and Sasha Page Providing the synopsis of the final track for the first day, Track 4: New Transportation Initiatives and Demands on Financing, Wheeler and Page drew some conclusions regarding the contributors to successful financing of mul- timodal projects. The reporters noted that success occurs where there are connections (e.g., common bottlenecks) between modes. Summarizing the ideas stemming from the sessions, the reporters focused on • The existence of silos among modes, evidenced by congressional committee structures; • The need to do a better job measuring benefits of intermodal projects; • The need for consistency among tools and better coordination among the modes; and • The need for intermodal research. 1 9SUMMARY OF DAY 1

2 0 LUNCHEON SESSION Roundtable of Transportation Executives William D. Ankner, Rhode Island Department of Transportation Phyllis Scheinberg, U.S. Department of Transportation Frederick (Bud) Wright, Federal Highway Administration Robert Jamison, Federal Transit Administration Aluncheon conference featured a roundtable dis-cussion by a distinguished panel of transporta-tion executives. Roundtable participants included Phyllis Scheinberg, Deputy Assistant Secretary for Bud- get and Programs for the U.S. Department of Trans- portation; Frederick (Bud) Wright, Executive Director of the Federal Highway Administration; and Robert Jami- son, Deputy Administrator of the Federal Transit Admin- istration. The conference chair, William D. Ankner, moderated the roundtable. EXPANDING PROGRAMS Phyllis Scheinberg Scheinberg described the expansion of the state infra- structure bank program as an opportunity and wanted greater federal involvement in the program. She described the federal credit program for transportation (TIFIA) as having come into its own and the applica- tion of grant anticipation borrowing (GARVEEs) as moving from the outer limits to the mainstream. Scheinberg suggested that these programs have worked and that now the need is to expand the programs, leverage them even more, make them more customer- friendly, and expand to other uses such as rail and freight investments. IDENTIFYING REFINEMENTS Frederick (Bud) Wright Wright echoed Scheinberg’s assessment that it is time to identify refinements rather than wholesale new programs. He predicted that programs once viewed as innovations would continue to move to the mainstream. LEVERAGING FEDERAL FUNDING Robert Jamison In reviewing the innovative finance approaches most rel- evant to transit investments, Jamison focused on the benefit of leveraging the predictability of federal funding through the Full Funding Grant Agreement program. He spoke about the dramatic increase in the use of tax- advantaged leases and noted the beginning of seeing benefits of the TIFIA program for transit. As Scheinberg did, Jamison urged an expansion of the state infrastruc-

ture bank program and related his general interest in opportunities that will arise as part of reauthorization. DISCUSSION William D. Ankner Following brief introductory remarks by each round- table participant, Ankner raised some questions with the group. First he asked whether there was concern about the overall level of debt and the extent to which there was a limit to its use. Wright recognized this as a legitimate concern but noted that the saturation point had not yet been reached and that reaping the advan- tage of transportation investments sooner rather than later was significant. Scheinberg commented that safe- guards in the program would keep debt from growing out of control. Ankner then questioned whether the group envi- sioned other new tools beyond debt financing as part of reauthorization. Wright highlighted toll credits, soft match, and other cash management mechanisms as pro- grams working to provide flexibility to the states. He suggested that refinements could be made in these pro- grams or similar ones, specifically the possibility of pro- gram match rather than a strict match on an individual project-by-project basis. Scheinberg highlighted pub- lic–private partnerships as a ripe area but noted that more definition was needed, specifically regarding how risk was shared most appropriately among public and private parties. Then Ankner asked about the prospects for value–congestion pricing in reauthorization. He noted that there had not been an enthusiastic response to date. Scheinberg responded that the federal government can do only so much and that local interest is critical for these techniques to move forward. She stressed the importance of education and the exchange of informa- tion and success stories but recognized the limitations without local buy-in. The next question related to reauthorization and the identification of focus areas. Jamison noted the impor- tance of building on TEA-21 successes of leveraging future federal funds. He cited the need to leverage pri- vate investment, to improve flexibility of the TIFIA pro- gram, and to expand the SIB program. He pointed out the importance of extracting more benefits from the transportation system, with the Dulles (Virginia) Corridor as an example of an opportunity to deploy business investment districts. Finally, Jamison men- tioned the importance of utilizing the planning process to maximize ridership and encourage transit-oriented development to draw in private interest. Scheinberg remarked, “Sometimes the role of the federal govern- ment is to get out of the way” and commented on the opportunity to reap the benefits of innovations and expand programs that work. She cautioned, however, about the importance of ensuring that expectations are not too high: innovative finance cannot solve all prob- lems, and realism about what it can help achieve is nec- essary. Wright discussed the importance of focusing on core program funding and recognizing that the process will likely be more difficult this reauthorization with the mounting pressures and constraints on federal spending. COMMENTS Questions and comments from conference participants focused on public–private partnerships, the prospects for private activity bonds and tax credit bonds for sur- face transportation, inconsistencies among the modal agencies regarding program implementation and regu- lations and opportunities for cleaning this up as part of reauthorization (or as an administrative initiative), the need to get serious in the next reauthorization about answering the long-term funding question, and envi- ronmental streamlining. Roundtable participants con- cluded by recognizing the important opportunity but also the challenge of handling multiple reauthorizations simultaneously. 2 1ROUNDTABLE OF TRANSPORTATION EXECUTIVES

2 2 GENERAL SESSION 3 Summary of Day 2 Reports on Concurrent Sessions Christie Holland, Florida Department of Transportation Laurie Hussey, Cambridge Systematics David Wresinski, Michigan Department of Transportation Paul Marx, Federal Transit Administration Following the concurrent sessions for Day 2, con-ference participants reassembled in a general ses-sion to discuss key discussion points, common themes, and areas for further research. A synthesizer provided an overview of each track, as follows: Track 1. Christie Holland, Florida Department of Transportation; Track 2. Laurie Hussey, Cambridge Systematics; Track 3. David Wresinski, Michigan Department of Transportation; and Track 4. Paul Marx, Federal Transit Administration. Each presenter summarized the sessions of the track for which they were responsible and drew out common themes, key observations, and opportunities for further research. Following is a synopsis of these summary reports. A detailed review of each track is provided in the following section. TRACK 1: HOW TO FINANCE THE NEXT TRANSPORTATION PROGRAM— REAUTHORIZATION AND BEYOND Christie Holland Holland provided a summary of the two sessions com- posing the second day of the conference for Track 1. She described a general presentation on alternative funding options and evaluation given by Tamar Henkin and noted the important evaluation criteria of revenue potential, stability and timing, legal and political feasi- bility, and administrative feasibility. She then outlined the panel presentations, which focused on funding for metropolitan planning organizations as well as funding for maintenance and renewal. Reviewing the session on tolls and other user charges in the afternoon, Holland noted the importance of iden- tifying beneficiaries and targeting funding approaches that match up with these beneficiaries. She offered the following points from the session: • Tolls are acceptable as an alternative to taxes; • Value pricing has received support of previous opponents, including the environmental community; and • Equity issues are sometimes overstated in relation to low-income road users. TRACK 2: TOOLS AND TECHNIQUES TO DELIVER MORE PROJECTS FASTER Laurie Hussey Hussey provided the summary of the second day of Track 2. She described the morning “all-star panel” that brought session participants from the underpinnings of the federal credit program to two projects now being sup- ported by TIFIA and concluded with a look to the future and a potential new tool, a freight infrastructure bank. The second session of Track 2 focused on quantifying and communicating the benefits and costs of innovative finance. Hussey described a diverse panel including an analyst, economist, and elected official.

She linked these sessions to the resource paper presented by Sharon Greene on Day 1 of the conference. The author contended that “without supporting legislative, administra- tive, and programmatic changes in the overall project devel- opment and delivery system, the financial innovations become far less compelling” in supporting the expedient delivery of projects. Hussey reported that the toolbox is apparently equipped not perhaps with all the answers, but with a significant number of financial tools capable of mov- ing projects that have achieved “readiness” into construc- tion and ultimate operation. However, the substantial “everything else” that precedes that state of readiness— environmental approvals received, institutional structures in place, stakeholder backing accomplished—is a key bot- tleneck in even reaching the point where the considerable financing tools at our disposal can be applied. Hussey noted that conference participants were hear- ing about only projects that managed to negotiate the development process and all its pitfalls. But participants were not hearing about good projects that cannot pass the first starting gate to take advantage of the demonstrable acceleration benefits of the financing tools. She remarked on the many smart people in the room, people who are in a position to help address non- finance-related barriers and make more good projects ready sooner. By shortening the time necessary just to arrive at the finance stage, where we have tools proven to accelerate project delivery from that point on, we will truly be taking best advantage of innovative financing strides to deliver more needed projects sooner. TRACK 3: STRUCTURES, INSTITUTIONS, AND PARTNERSHIPS TO DELIVER MORE PROJECTS FASTER AND CHEAPER David Wresinski Wresinski provided the synopsis of Track 3 and its six case studies. He noted—as others in the conference did—that the innovative financing tools are generally in place at the state and local level, that traditional pay-as-you-go approaches are creating problems, and that the need for alternative techniques has been proven. Wresinski identified several keys to success: • Customer focus, • Involvement of all partners and stakeholders, • Early identification of roadblocks, and • Knowledge of the tools and techniques to facilitate thinking beyond the box. TRACK 4: NEW TRANSPORTATION INITIATIVES AND DEMANDS ON FINANCING Paul Marx Offering a summary of the final track, Paul Marx described these sessions as including “everything and the kitchen sink.” The first session discussed possible solutions for intercity passenger rail service, such as expansion of eligibility for discretionary and appor- tionment funding. Marx mentioned the difficulty of some possible approaches because tracks—and fund- ing responsibility—cross state lines. The session also addressed funding for aviation and highlighted simi- larities and differences between that and passenger rail funding. The afternoon session emphasized funding for new technologies. Marx related comments by Richard Mudge that we should not be afraid to help private-sector actors make money. Potential direc- tions identified in this session included the elimina- tion of minimum project costs for credit program eligibility for projects introducing new technologies and a focus on developing a wireless network on the Interstate with at least a secondary purpose of enhanced security. 2 3SUMMARY OF DAY 2

2 4 GENERAL SESSION 4 Transportation Finance in the Context of Reauthorization and Beyond Administration’s Perspective Robert E. Skinner, Jr., Transportation Research Board Emil Frankel, U.S. Department of Transportation Conference participants assembled at thebeginning of the third day of the conferencefor a wrap-up session, which included high- level administration officials and staff from key con- gressional committees to address the prospects for reauthorization. Robert E. Skinner, Jr. Robert E. Skinner, Jr., Executive Director of the Trans- portation Research Board, offered some introductory remarks and introduced Emil Frankel, Assistant Secretary for Transportation Policy. Emil Frankel Frankel referred to testimony provided by Transporta- tion Secretary Norman Mineta before the Senate Envi- ronment and Public Works Committee. Mineta had articulated two goals: (a) to encourage investment by the private sector and (b) to strengthen the efficiency and integration of goods movement, especially inter- modal connections. Frankel pointed out that refine- ments in innovative finance techniques would be key elements in achieving these goals. He explained that, given constrained resources, innovative finance tools would be essential in stretching federal dollars as much as possible. He described reauthorization as an oppor- tunity to expand the options, resources, and expertise available. Frankel depicted the nation’s economy as dependent on the transportation system, especially with industries becoming leaner and leaner. He offered examples of just- in-time delivery and related inventory control as being fully reliant on a well-functioning transportation system. The speaker described innovative finance, not as a magic cure, but as an important part of an overall strat- egy to expand and stretch available funds to accelerate new transportation investment. He stated that regions facing the greatest impediments to mobility have paved the way for innovative financing approaches. Frankel concluded with a few specific program objectives for reauthorization: • Expand the scope of the TIFIA program and move into the mainstream as a basic component of every state’s transportation strategy and • Refine the GARVEE and SIB tools and make the latter more uniformly available. He noted that the existence of and reliance on tax- exempt financing for transportation has restricted the use of the private sector in financing transportation projects.

2 5 GENERAL SESSION 4 Transportation Finance in the Context of Reauthorization and Beyond Congressional Viewpoint Mortimer Downey, PBConsult, Inc. Jonathan Upchurch, U.S. House of Representatives, Committee on Transportation and Infrastructure Joyce Rose, U.S. House of Representatives, Committee on Transportation and Infrastructure Megan Stanley, U.S. Senate, Environment and Public Works Committee Jeff Squires, U.S. Senate, Environment and Public Works Committee PANEL OF CONGRESSIONAL STAFFERS Mortimer Downey Mortimer Downey moderated the first of two final panels, a panel of congressional staff that included • Jonathan Upchurch, U.S. House of Representatives, Committee on Transportation and Infrastructure; • Joyce Rose, U.S. House of Representatives, Com- mittee on Transportation and Infrastructure; • Megan Stanley, U.S. Senate, Environment and Public Works Committee; and • Jeff Squires, U.S. Senate, Environment and Public Works Committee. THE CAPITOL HILL ENVIRONMENT Jonathan Upchurch Initiating the panel presentation, Upchurch described the environment on Capitol Hill: the 108th Congress with a full plate with homeland security challenges, war with Iraq, and potential changes in political control. He reported the strains of the federal fiscal situation, the number of new players since TEA-21, and the changes in leadership on the relevant committees. Upchurch highlighted several areas of focus: smooth- ing out the Revenue Aligned Budget Authority provi- sion, the donor–donee situation, and Amtrak’s financial condition. REAUTHORIZATION AND FINANCING Joyce Rose Rose offered her perspective on transit and reauthoriza- tion. She related the achievements of TEA-21: in particu- lar, securing guaranteed funding through budgetary and financial firewalls, had never been done before and should be maintained as part of reauthorization. Despite the advances of TEA-21, Rose pointed out that the growth in revenues was still far less than in identified needs. Rose discussed the potential of indexing the gas tax at the national level and noted that 11 states index their state gas taxes. She offered alternatives to raise revenue: • Spending down cash balances in the Highway Trust Fund, • Indexing the gas tax to inflation, • Crediting the Highway Account of the Trust Fund with ethanol tax revenues currently going to the General Fund and, eliminating the tax subsidy, • Crediting the Trust Fund with interest earnings, • Addressing fuel tax evasion, and • Expanding innovative financing—though differ- ent from the other revenue-producing options, this step could help stretch available resources.

LEGISLATIVE INITIATIVES Megan Stanley Stanley designated possible legislative initiatives as either “losers” or “potential winners in terms of the likelihood of enactment.” The losers included turnback proposals and those aimed at indexing the gas tax. Potential winners included high-occupancy toll lanes and private activity bonds. Stanley discussed the tax credit bond proposal and indicated that not enough was known to indicate the likely success of this proposal. Stanley saw TIFIA as a potential winner in reautho- rization but recognized the need to have congressional staff more educated and involved and for states and local project sponsors to be the drivers of the program. PROGRAMMATIC REFINEMENTS Jeff Squires Squires pointed out that some programmatic refine- ments were necessary, especially where positive progress on congestion was not being made. He asserted that enhanced flexibility should be targeted toward programmatic improvements. OPEN DISCUSSION The open discussion included how the timing of avia- tion, Amtrak, and surface transportation reauthoriza- tion would affect the prospects for some of these programs. The group also considered the issue of security and recognized that the level of demand for surface transportation resulting from the renewed focus on homeland security was not yet known. The source of necessary financial resources—the trust fund or the general fund, for instance—was not known. The group also discussed the potential to remove federal restrictions on tolling, in particular tolling on the Interstate system, and opportunities to streamline the environmental process to expedite project delivery without compromising environmental stewardship. Finally, the group noted that without substantial increases in revenues, it would be best to maximize the flexibility of how funds can be used. Frankel reminded conference participants that Mineta was committed to preserving and enhancing programmatic flexibility. 2 6 TRANSPORTATION FINANCE

2 7 GENERAL SESSION 4 Transportation Finance in the Context of Reauthorization and Beyond Roundtable of Transportation Professionals William D. Ankner, Rhode Island Department of Transportation Phyllis Scheinberg, U.S. Department of Transportation Jacky Grimshaw, Surface Transportation Policy Project Steering Committee Michael Martin, American Road and Transportation Builders Association Janet Friedl, American Association of State Highway and Transportation Officials Judith Espinosa, Alliance for Transportation Research Institute, University of New Mexico Dennis G. Houlihan, American Federation of State, County, and Municipal Employees William D. Ankner moderated the final round-table, transportation professionals from arange of organizations and interests. The focus of this final panel was on looking ahead: What is on the horizon beyond reauthorization? What major items face transportation finance professionals and policy makers? What can we do now to get ready? Panel participants included • Phyllis Scheinberg, U.S. Department of Trans- portation; • Jacky Grimshaw, Surface Transportation Policy Project Steering Committee; • Michael Martin, American Road and Transporta- tion Builders Association (ARTBA); • Janet Friedl, American Association of State Highway and Transportation Officials (AASHTO); • Judith Espinosa, Alliance for Transportation Research Institute, University of New Mexico; and • Dennis G. Houlihan, American Federation of State, County, and Municipal Employees (AFSCME). FUNDING FUTURE PROJECTS Phyllis Scheinberg Scheinberg focused on the need to start now to think about how to fund projects in the future and noted that the viability end of the Highway Trust Fund as the sole solution has almost ended. She emphasized the need to start thinking seriously about alternative sources of funding. As discussed throughout the conference, Scheinberg stressed the important role of a potential commission to focus on this issue. She also underscored the importance of projecting an intermodal focus and of getting around the modal stovepipes. A PUBLIC TRUST Jacky Grimshaw Grimshaw stressed the fact that transportation agencies are operating in silos today and not working as part of a broader social agent or steward of the community. She described the provision of transportation services as a vital public trust and a means to a better quality of life, not an end in and of itself. ARTBA’S PERSPECTIVE Michael Martin Martin offered ARTBA’s perspective with three obser- vations: 1. ARTBA’s consensus is that needs outstrip resources—although the exact extent of the gap is in question, the existence of the gap is not; 2. There may be too much focus on innovative finance, which risks neglecting focus on the core program; and

3. There is a persuasive attitude of “not on my budget.” Martin described ARTBA’s “two cents makes sense” proposal, which calls for an increase in the federal excise tax and other programmatic adjustments, includ- ing an adjustment to RABA such that inflows are adjusted to match outflows rather than the other way around; an expansion of the SIB and TIFIA programs; and the creation of an escrow account for pay-as-you- go funding. He supported a blue-ribbon panel approach to identify alternatives for the future and stressed the importance of a stable and simple program for the future: it should generate sufficient revenues on a stable basis and in a simple manner. AASHTO’S LOOK AHEAD Janet Friedl Speaking for AASHTO, Friedl emphasized the need to look beyond the next six years and offered three specific points: 1. The need to consider what the system will look like—how people and freight will best be moved and what new forces might shape demands on the transportation system. 2. The need to determine how the system will be paid for on a program finance basis, how to extend the overall size of the program, and whether a new funding mechanism is needed—the 1956 answer may not meet 2020 needs and beyond. With this, she focused on the importance of thinking of the concept as project financ- ing, not just innovative financing; calling it innovative creates barriers for some to using it. 3. The need to consider how transportation funding fits into the broader context. Friedl focused on the need for continued innovation in tools and mechanisms and also on the need for human capital to deal with new challenges and the need to overcome institutional unwillingness to use all tools in the toolbox. RESEARCH AND ACCOUNTABILITY Judith Espinosa Espinosa called for a robust research program and char- acterized it as critical to future management and financ- ing of the transportation system. She asserted that policy should drive finance, not the other way around, and stressed the importance of ensuring accountability to the public, who is ultimately paying for the investments. She emphasized the need for sound data, sound research, and sound information to set good policy. If the public does not understand policy, skepticism mounts and a breakdown in communication results. Espinosa emphasized the importance of viewing the public as a partner and the fact that the public wants choices and also wants to know how institutions are per- forming. The key to successful partnerships is a good understanding between all parties. When such under- standing does not exist, communications break down and projects are ultimately delayed. LABOR PROTECTIONS Dennis G. Houlihan Houlihan, representing AFSCME, focused on the impor- tance of labor protections such as Section 13(c), Amtrak employee protections, and Davis-Bacon provisions. He reported the union as skeptical about innovative finance, particularly as it relates to private activity bonds. His primary concern related to the potential loss of accountability when finance moved from the public to the private sector. Houlihan concluded with a discussion of the impor- tance of workers’ rights and security and safety issues. He noted the importance of whistle blower protection and of civil service protection for individuals caught up in policy debates, such as those relating to environmental regulation. He was concerned about the need to maintain accountability and the need for states to have sufficient staff to provide necessary oversight for outsourced services. FOCUSING ON THE SYSTEM William D. Ankner Stepping in for Bill Millar of the American Public Transportation Association, who was unable to partic- ipate, Ankner reported the need to be continually focused on finding solutions to finance an integrated intermodal transportation system rather than its com- ponent parts. He pointed out the lack of a level playing field in federal transit and highway investments and called for a correction so that transportation decisions would be based on the best transportation decision, not what was statutorily or financially easier to do. 2 8 TRANSPORTATION FINANCE

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TRB Conference Proceeding 33--Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow summarizes the Third National Conference on Transportation Finance, held October 2002 in Chicago, Illinois and includes committee findings and recommendations developed largely on the basis of information presented and discussion held at the conference. The conference examined new transportation infrastructure and operations financing mechanisms, their structure, and the benefits and costs of implementing such techniques; and explored the development of additional new funding mechanisms and sources.

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