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14 F I NA NC I NG S U R FA C E TR A NSPOR TA TION IN T HE U NIT ED ST A T ES The TRB finance conference held that year focused on ics. Public officials operate in an environment that poses new techniques known collectively as innovative finance, difficult and often conflicting choices. With a funding gap which consisted of diverse public- and private-sector of $142 billion, Ms. Garvey stated that the United States actions that moved beyond the traditional federal-aid finds itself in unusual and sluggish economic times with and state-aid funding processes. a long climb ahead. Economists believe that financial In 1997, financing terms and acronyms that are spo- stimulus is needed, but at the same time there is increased ken of glibly today, such as private activity bonds (PABS), concern about the national debt. There are many con- Build America Bonds, state infrastructure banks (SIBs), flicts, and the national debt will likely be a defining issue and P3s, were all cutting-edge approaches in their forma- in the upcoming midterm elections in November. Two tive stages. A key innovator behind these new tools was national commissions have addressed the issue of the Jane Garvey, who was then serving as Deputy Adminis- national debt. They have worked separately, but they trator of FHWA. As the originator of the Grant Antici- shared information and presented choices and options. pation Revenue Vehicle (GARVEE) bond, she blazed an Currently, more than half of the nation's debt is foreign important trail in the world of innovative finance. owned. This is an unstable situation; if the United States By the time of the third conference in 2002 (Meet- does not change its ways, 95 percent of federal proceeds ing the Funding Challenge Today, Shaping Policies for will be paid in interest by 2019. Tomorrow), the Transportation Equity Act for the 21st Ms. Garvey observed that a situation as difficult and Century was in its fourth year, and transportation pro- politically charged as the current one does not have a fessionals gathered in Chicago, Illinois, to focus on the single solution. There is no question that the transporta- reauthorization of the federal transportation bill and to tion sector will be affected. Things will change, and the exchange information on tools and techniques to deliver unthinkable is possible. A number of tools are available, more projects faster. such as P3s and tolling the Interstates. While P3s have Now, 8 years later, Mr. Norman stated that those their detractors, successful P3s occur when the transpor- gathered in New Orleans for the fourth TRB finance con- tation program drives the solution. Arizona and Virginia ference await the reauthorization of the Safe, Account- have enacted statutes requiring that P3s be considered able, Flexible, Efficient Transportation Equity Act: A with state programs to address public needs. P3s usually Legacy for Users to set the course for national transpor- require comprehensive, up-front analysis. Public-sector tation funding. comparator analysis is one way to ensure that the right To counter the aftereffects of a 2007 recession and decisions are made. Good P3 contracts are also critical downturns in manufacturing, retail trade, and the finance in protecting the public interest and aligning public and and insurance industries, new federal initiatives and private interests. With a properly structured P3 arrange- economic stimuli have been created such as the Trans- ment, the public sector does not cede control, and there portation Investment Generating Economic Recovery are consequences when a private partner does not per- (TIGER) and upcoming TIGER II grant programs. Mr. form appropriately. Norman expressed his appreciation to FHWA Adminis- In the 1990s, the initial ideas for important innovative trator Mendez and Ms. Jane Garvey of Meridiam Infra- finance tools including the Transportation Infrastructure structure for agreeing to participate in the conference Finance and Innovation Act (TIFIA), SIBs, and PABs and for sharing information about the TIGER grants and came from the states as suggestions from the frontline insights on other initiatives. practitioners. In the context of the current national chal- Mr. Norman concluded his remarks by encourag- lenge, Ms. Garvey believes that the United States will ing the conference attendees to continue to innovate, continue to need this kind of proactive and creative input experiment, look toward the future, and participate in from transportation agencies meeting needs in the face of the thought-provoking discussions and formation of new reduced revenue and budgets. She noted that the politi- ideas at the conference to help define unmet research cal atmosphere today is polarized and poisoned, and she needs that TRB can explore to keep us all moving for- expressed the hope that the positive energies of real part- ward. nerships and rational voices will bring real solutions to real problems. Keynote Addresses Federal Perspectives on Finance Industry Perspectives on Finance Victor Mendez, FHWA Administrator, began his address Jane Garvey, the North American Chair of Meridiam by stating that he was encouraged to see so many young Infrastructure, suggested taking a step back to view people and students participating in the conference and transportation in the context of geopolitics and econom- that it is the responsibility of more senior transporta-

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T R A NS P O R T A T I O N P R IOR ITIES: MA PPING A C OU R SE F OR TH E F U TU R E 15 tion professionals to share their experiences with the through the end of 2010. He noted that Congress has next generation of practitioners. Administrator Mendez also recognized the value of the TIGER program and reminded the attendees how important research is and authorized an additional $600 million to fund a second to take advantage of the opportunity to learn from one round of grants. He stated that the United States must another throughout the conference. find innovative solutions to meet its transportation Administrator Mendez remarked that the public often needs and that tolling, congestion pricing, and P3s will expresses concern about the length of time required to all be part of the solution. He emphasized that toll- deliver major infrastructure projects. Even though the ing needs to pass the tests of political and public opin- public may not understand the process, he emphasized ion. To do so, Administrator Mendez emphasized the that transportation professionals still need to move for- importance of people receiving value for their expen- ward in a timely and efficient manner. There is a need ditures. He noted that there is a need to look beyond to find ways to use technological advances such as the the revenue stream to see what the ripple effects will Blackberry, YouTube, and the iPod to improve the deliv- be on other aspects of transportation policy. The deci- ery of transportation projects. The transportation sector sions the United States makes today will affect how does not appear to be moving as quickly as technology the nation travels tomorrow. Society needs solutions is advancing. that reduce emissions and congestion, and it needs He stated that the U.S. Department of Transportation to encourage public interest to track this important (DOT) is doing innovative work and currently has the agenda. The ideas and insight stemming from this con- opportunity to work with Congress to develop reautho- ference will be invaluable in shaping the next genera- rization legislation for the 21st century. The department tion of innovative finance tools. has ideas of what the future of the transportation sector should look like, and it must always consider the needs and wants of the public, with an eye to the bottom line. Questions and Answers It is important for the federal government to listen to the ideas coming out of this conference, which will serve as a Question: While many people support the use of P3s, catalyst for discussion and innovation. It is important to the reality is that they do not create funding. One inter- gain insight into public and private perspectives on solu- esting aspect of the effort to implement tolls on I-80 in tions to the nation's transportation challenges. Pennsylvania was a local poll that found that 80 percent Administrator Mendez noted that innovative finance of the public would be willing to pay up to $10 more tools such as TIFIA credit assistance will remain criti- per month to support transportation funding needs. The cal. This was true in 2009 when all P3 transportation reality is that the average driver already pays $18 per projects that reached financial close received TIFIA month in motor fuel taxes, so there appears to be a com- support. However, in 2010, U.S. DOT has received munication gap between public officials' concerns and 39 letters of interest for TIFIA support, with requests their understanding of what the public would actually for TIFIA loans exceeding $13 billion. These requests be willing to pay. exceed the available resources by far. The TIFIA pro- Administrator Mendez: Polls are polls. In Arizona, gram is likely to be oversubscribed, and the federal gov- the state recently faced challenges in advancing a bal- ernment will likely be unable to provide assistance to lot initiative to approve a 1-cent addition to the state's all projects. U.S. DOT's new budget includes $4 billion $0.18 per gallon motor fuel tax to pay for transportation in seed money for a proposed infrastructure fund, with improvements. The reality is that taxes on cell phones in the goal of leveraging $25 billion to capitalize this new Arizona are higher and do not generate the same kind of tool, which is modeled in many ways after the TIFIA pushback. There are always different political and public and TIGER programs. filters for issues such as these. He expressed his pleasure that FHWA had invested $26.5 billion in more than 12,000 projects through the Question: Tolling and vehicle miles traveled (VMT) fees Recovery Act. This investment has created or sustained are hopefully funding sources, but how can we fund more than 4 million jobs during a period when the econ- high-speed rail and bike initiatives? omy was losing 760,000 jobs per month. At the same Administrator Mendez: U.S. DOT supports high- time, the TIGER program has provided an additional speed rail. The key question is whether it is sustainable. $1.5 billion to support 51 projects after having received The underlying theme is to think much more holistically. applications for support of some 400 projects with a com- Ms. Garvey: We will need to raise the gasoline tax, bined capital cost of $60 billion. This resource imbalance so why not do so gradually? Debate on the debt will may be a preview of where the nation is headed. help to crystallize thinking on the need to increase the Administrator Mendez confirmed that Congress motor fuel tax. The reality is that 50 years after President had authorized funding for the Highway Trust Fund Eisenhower established the Interstate Highway System,