March 1, 2018
Senate Environment and Public Works Committee The Administration’s Framework for Rebuilding Infrastructure in America
Key Topics & Takeaways
- Administration Infrastructure Proposal: At the hearing, Transportation Secretary Elaine Chao discussed and defended the administration’s recently released infrastructure proposal. Democratic Senators were generally skeptical of the proposal’s leverage and funding projections, noting that it shifts the burden of finding financing for projects to states and localities. Sen. Ed Markey (D-Mass.) also expressed skepticism, though he went further and raised alarms that “Wall Street” will require local governments to impose user fees to generate returns on any investment in infrastructure.
- Permitting Reform: Permitting reform was discussed throughout the hearing, and Chao endorsed several permitting reform ideas, including allowing sequential reviews to occur concurrently, and eliminating duplicative permitting steps. Chao also said the permitting reform could improve project delivery speed while retaining environmental protections. Furthermore, Chao also noted that many pension funds (and other institutional investors) have money available to finance infrastructure projects, but that many states prevent this kind of private sector financing for infrastructure. Chao also argued that lifting permitting requirements would further incentivize pension funds to invest in infrastructure projects, as it would reduce project delivery costs and allow investors to realize a return faster.
- The Honorable Elaine Chao, Secretary, U.S. Department of Transportation
- The Honorable R.D. James, Assistant Secretary of the Army Civil Works
Chairman John Barrasso (R-Wyo.), Senate Environment and Public Works Committee
In his opening statement, Barrasso discussed how he believes that funding has not kept pace with the country’s infrastructure needs, stating that the time has come to make a significant investment in roads, bridges, ports, and water systems. He then broached the topic of the Trump administration’s plan, which proposes to spend hundreds of billions of dollars of federal money to generate over a trillion dollars in impact. He stated that President Trump’s plan promotes streamlining, allowing needed projects to start quicker and finish faster at lower costs. Barrasso then stressed how the country needs to speed up project delivery, praising the President’s plan calling for a 2-years-or-less limit for federal approvals on projects as a “common sense approach.” He then highlighted how the Trump administration’s plan makes rural America infrastructure needs a priority, stressing how the country needs an infrastructure plan that will benefit the whole country, regardless of geography. Barrasso closed with discussing how he believes Congress can work in a bipartisan way to improve infrastructure.
Ranking Member Tom Carper (D-Del.), Senate Environment and Public Works Committee
In his opening statement, Carper noted that he was glad to receive the administration’s proposal for infrastructure. Carper then discussed a number of issues that he had with the plan, noting first that he does not think the administration’s proposal financially adds up, refencing how when an economist from Wharton modeled the proposal, the economist came to the conclusion that at most the proposal would spur an additional $30 billion in state, local, and private infrastructure spending. Carper then expressed concern about the plan’s proposal to give projects incentive awards based almost entirely on the percentage of non-federal money that they raise, regardless of project quality and benefits, stating that he believes project quality should be among chief considerations. He also discussed how he was disappointed with the degree to which the administration seems to sacrifice environmental protections in an effort to deliver projects quickly, which Carper believes can potentially put communities at risk, as well as deprive the residents who would be most affected by these projects from making their voices heard. Carper closed with his hope for bipartisan infrastructure improvements.
The Honorable Elaine Chao, Secretary, U.S. Department of Transportation
In her testimony, Chao discussed how infrastructure is the backbone of the U.S. economy, as well as a key factor in productivity and economic growth. She highlighted that challenges to infrastructure are everywhere, from traffic congestion and delays to structural deficiencies in many of the country’s bridges. Chao stated that because of these challenges, 12 agencies have been supporting Trump on a comprehensive infrastructure proposal. She then discussed details of Trump’s proposal, which has the goal of stimulating at least $1.5 trillion in infrastructure investment and contains four guiding principles, which are: 1) use federal dollars as seed money to incentivize infrastructure investment; 2) provide for the needs of rural America; 3) streamline permitting to speed up project delivery; and 4) reduce unnecessary and overly burdensome regulations.
Chao then highlighted that a key element of the Trump administration’s proposal is to encourage and empower decision making at the state and local levels, as those levels know best the infrastructure needs of their communities. She discussed how half of the federal infrastructure funds would go towards incentivizing state and local investments in infrastructure, and a quarter of the remaining funds would go towards addressing rural infrastructure. Chao stressed that the Department of Transportation (DOT) is working on a new process to handle permitting of complicated multi-agency projects, as well as trying to do its part to grow the economy and create jobs through regulatory reform.
The Honorable R.D. James, Assistant Secretary of the Army Civil Works
In his testimony, James stressed that he is looking forward to working with Congressional members to advance the delivery of the nation’s water resources infrastructure through innovative approaches and streamlined processes. He stated that much of the country’s infrastructure is aging and requires a significant amount of resources to maintain. James noted that he believes the traditional approach to constructing and maintaining these projects is not sustainable, calling the Trump administration’s legislative proposal as one that provides a common-sense approach to the issue. James then discussed the legislative principles from Trump’s proposal that are directly applicable to the Civil Works organization’s responsibilities, which fall into six general areas: water resources infrastructure, inland waterways, incentives, the Water Infrastructure Finance and Innovation Act (WIFIA), environmental reviews and permitting, and divestiture. James stressed that he recognized the importance of streamlining and is looking to eliminate redundant and unnecessary reviews and approvals. In addition to the President’s legislative proposal, James discussed that he will look internally at the Civil Works’ organizations, authorities, policies, regulations and procedures to identify opportunities for increased efficiency and effectiveness.
Question and Answer
Administration Infrastructure Proposal
There was substantial discussion at the hearing about the leverage and financing proposals contained in the Administration’s recently released infrastructure plan. Carper stated that economists at Wharton have evaluated Trump’s infrastructure plan, determining that the administration’s numbers are off by 98 percent. He then added that the Heritage Foundation has looked at Wharton’s report on the matter and agreed that it was accurate in its analysis of Trump’s proposal. Carper asked Chao to respond to these experts. Chao responded that the administration disagrees with both Wharton and the Heritage Foundation, saying that “it takes people with real life business experience to know how it works.” Chao stated that these kinds of returns can be seen every day in the Build America Bureau.
Sen. Shelley Moore Capito (R-W.Va.) discussed the difficulties that rural areas have attracting private capital for infrastructure projects. Capito noted that in the fall of 2017, West Virginia passed a referendum authorizing a $1.6 billion bond for road and bridge projects and asked how that bond would be treated under the administration’s infrastructure proposal for the purpose of acquiring additional federal funds. Chao said the administration endorsed a three-year lookback period for state-level funds under their plan, and that she would talk about West Virginia’s situation with the White House.
Sen. Chris Van Hollen (D-Md.) expressed skepticism about the new ratios of federal/state-supplied funds for infrastructure projects, and whether states would be able to raise 80 percent of project costs to be able to qualify for federal support. Sen. Ed Markey (D-Mass.) also expressed skepticism, though he went further and raised alarms that “Wall Street” will require local governments to impose user fees to generate returns on any investment in infrastructure. Markey also said that private capital providers would love to see environmental protections “gutted” and deplored the Administration’s proposed limitations on lawsuits against infrastructure projects on environmental grounds. Other Democratic Senators also raised these concerns, and several also deplored the Administration’s FY19 budget, which proposed cuts in infrastructure programs while simultaneously calling for $200 billion in new federal infrastructure spending. Sen. Jeff Merkley (D-Ore.) noted that the FY19 budget results in a “net loss” for infrastructure. Chao responded that there is a disagreement with regards to the purpose and use of federal funding. Chao then said that the number Merkley mentioned is compared to FY 2018, and that if he were to look at FY 2017 there would not be a budget cut. Chao states that overall the DOT budget is pretty much the same in 2019.
Formula Funding and the Gas Tax
Van Hollen asked Chao directly if the President supported raising the gas tax. Chao punted, but called for Congress to find pay-fors for infrastructure.
Sen. Deb Fischer (R-Neb.) noted that Nebraska and other rural states benefit from formula funding for infrastructure projects and asked if the Administration supported formula funding programs for infrastructure. Chao said yes, and that the administration views formula funding programs already in law as an important supplement to an infrastructure program
Permitting reform was discussed throughout the hearing, and Chao endorsed several permitting reform ideas, including allowing sequential reviews to occur concurrently, and eliminating duplicative permitting steps. Sen. Jim Inhofe (R-Okla.) asked Chao whether she believes project delivery can be both timely as well as environmentally sound. Chao responded that yes, she believes it can.
Barrasso asked Chao if she agreed that streamlining is critical to expediting the needed investment in the country’s highways. Chao responded by saying that she agreed, and that there are also many private pension funds that are very interested about investing in public infrastructure, yet in a number of states the private sector is disallowed from participating in financing. Chao described that while she finds there to be interest from the private sector, one problem that the private sector faces is that they find there is a lack of ready projects to be financed. Chao noted that if the permitting process was to be speeded up and streamlined, it would actually result in more projects becoming available for the private sector to invest in.
Fischer asked about the viability of delegating federal permitting authority to states. Chao said that this idea had merit, and that state and local officials better understand their localities need. Sen. Dan Sullivan (R-Alaska) asked how permitting reform could improve the financial resources available for infrastructure projects. Chao noted that permitting delays increase project costs by an average of three percent a year, which increases the costs of financing projects.
Infrastructure Project Backlog
Barrasso noted that earlier this year, Congress agreed to an extra $10 billion a year for infrastructure. He asked Chao whether she agreed that this extra $10 billion a year would make a substantial difference to states and is a good start in Congressional efforts. Chao responded that as there is approximately $4 trillion in infrastructure needs within the country, she believes every dollar counts.
Sen. Ben Cardin (D-Md.) stated that while the country does need better transit and commuter rail, among other things, the country also currently has a problem of maintenance for current infrastructure. He asked Chao whether she could give a commitment to help with this maintenance. Chao responded that the overall funding for bridges and roads is assumed mainly at the state level, but that she will work with Congress on this issue.
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