SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 4849 words

COMMITTEE: HOUSE TRANSPORTATION AND INFRASTRUCTURE

SUBCOMMITTEE: HIGHWAYS AND TRANSIT

HEADLINE: PROGRAMS REAUTHORIZATION

TESTIMONY-BY: THOMAS W. HILL, CEO

AFFILIATION: OLDCASTLE MATERIAL GROUP, INC.

BODY:
STATEMENT OF THOMAS W. HILL CEO, OLDCASTLE MATERIAL GROUP, INC.

HOUSE TRANSPORTATION AND INFRASTRUCTURE COMMITTEE HIGHWAYS AND TRANSIT SUBCOMMITTEE

September 19, 2002

Mr. Chairman, Congressman Borski, members of the Subcommittee, thank you very much for providing the American Road and Transportation Builders Association (ARTBA) an opportunity to present its recommendations for the reauthorization of the federal highway and mass transit programs.

I am Tom Hill, chief executive officer of Oldcastle Materials, the largest highway materials supplier and paving contractor in the United States. We are headquartered here in Washington, D.C. Oldcastle has operations in 25 states and employs over 15,000 people in the transportation construction industry. I am here today on behalf of ARTBA, which I am privileged to serve as its 2002 chairman. ARTBA marks its 100th anniversary this year. Over the past century, its core mission has remained focused on aggressively advocating federal capital investments to meet the public and business community's demand for safe and efficient transportation. The transportation construction industry ARTBA represents generates more than $200 billion annually to the nation's Gross Domestic Product and sustains more than 2.5 million American jobs. ARTBA's more than 5,000 members come from all sectors of the transportation construction industry. Thus, its policy recommendations provide a consensus view.

Mr. Chairman, at the outset I want to express our deep appreciation to you personally and the bipartisan leadership of the full committee for its work thus far to maintain the FY 2003 highway program at the current year's $31.8 billion level.

At this hearing, we are focused on providing ideas for TEA-21 reauthorization. We at ARTBA believe one of the biggest things that the Congress and the Administration could do for reauthorization is to fund the highway program at $31.8 in FY 2003 to establish that as the reauthorization baseline. The baseline difference between $31.8 billion and $27.7 billion is huge. Over six years, that difference alone could translate into almost $25 billion additional dollars for highway investment across the nation.

As this committee has discovered through its comprehensive series of hearings on the reauthorization of TEA-21, the nation faces many surface transportation challenges. A wide array of transportation stakeholders have provided thoughtful suggestions on how these challenges could be addressed. Without adequate investment to fuel these solutions, however, we are faced with two equally unattractive policy alternatives: shifting money away from current activities to pay for new initiatives, or falling further behind in our efforts to, at minimum, maintain the surface transportation system's physical conditions, safety performance and traffic congestion levels. In our opinion, neither of these alternatives is acceptable.

In March 2001, the American Road and Transportation Builders Association published its detailed proposals for improving the federal highway and mass transit programs in a 72-page report entitled "A Blueprint for Year 2003 Reauthorization of the Federal Surface Transportation Programs." This report was the culmination of the work of a task force of over 100 ARTBA members. Our refined funding proposal for reauthorization, "Two Cents Makes Sense," was detailed before this subcommittee on July 16.

Mr. Chairman, ARTBA's vision for TEA-21 reauthorization is centered on three goals:

First, cutting the number of deaths and injuries on America's highways between 2004 and 2009 through targeted capital investments.

Second, ensuring that traffic congestion for the American public and business community does not get materially worse between now and 2009; and

Third, ensuring that the structural conditions of federally-aided highways, bridges and transit systems do not get materially worse over that same period.

These goals can only be accomplished by providing the capital investments the U.S. Department of Transportation and the American Association of State Highway and Transportation Officials (AASHTO) report are necessary to, at minimum, maintain existing system safety, physical conditions and performance.

New Assessments of National Transportation Capital Investment Needs: AASHTO, USDOT, APTA

The just released AASHTO "Bottom Line" report uses Year 2000 data provided by the state transportation departments and the U.S. Department of Transportation's HERS model to project highway and mass transit capital investment needs over the period 2000 to 2019. The report states that an annual capital investment of $92.0 billion in 2000 dollars will be required during the next 20 years by all levels of government to maintain current conditions and performance on the nation's highways and $125.6 billion will be needed annually to make all of the economically beneficial improvements identified by the model.

The AASHTO report does not assign a federal share to these needs estimates, nor does it factor in future price inflation. If one assumes the federal share of total highway capital investment, FY 2004-09, will continue to be about 47 percent1--the average share over the past 20 years--and that annual inflation will be 2.4 percent2--the estimate used in the President's FY 2003 budget-- the "Bottom Line" report suggests:

- The federal share of the investment needed "just to maintain" Year 2000 highway safety, structural and traffic congestion conditions would be $47.7 billion in FY 2004, rising to $53.6 billion in FY 2009.

- The federal share of the investment needed to make all economically justifiable improvements to the highway system would be $65.1 billion in Year 2004, rising to $73.2 billion in Year 2009.

The U.S. Department of Transportation is expected to soon release the biennial surface transportation conditions, performance and investment requirement report it is mandated to submit to Congress. The most recent report, issued in 2000 and utilizing 1997 data, suggested a minimum $50 billion per year federal investment requirement, when adjusted for inflation and historic traffic use. Annual inflation alone would be expected to drive that reported annual investment need beyond $60 billion by FY 2009.

The American Public Transportation Association (APTA) has stated that a $14 billion per year annual federal investment is necessary to meet minimum national transit needs.

Existing Revenue Options

Financing this level of investment will require more revenues than highway users are currently projected to pay into the Highway Trust Fund during the next six years. Based on information such as current highway user fees, expected population growth, number of drivers, vehicle miles traveled and other factors, the Congressional Budget Office and the U.S. Department of the Treasury currently project that revenues into the Highway Account will grow from $30 billion in FY 2004 to just under $35 billion in FY 2009. Projected revenue growth between now and FY 2009 will thus be far less than needed to meet federal highway investment requirements during the next six years.

Nearly two years ago, ARTBA proposed a number of options for enhancing Highway Account revenues. These include:

- spending down the current cash balance;

- indexing the motor fuels excise taxes for inflation;

- crediting the Highway Account with gasohol tax revenues that currently go into the General Fund;

- ending the gasohol subsidy or reimbursing the Highway Trust Fund from the General Fund for the cost of the subsidy;

- crediting interest on the Highway Trust Fund balances;

- eliminating fuel tax evasion; and

- expanding innovative financing programs.

Table 1 provides the latest revenue estimates for each of these options. These figures were computed by ARTBA's economics and research team based on the most recent available data from the U.S. Department of the Treasury, the Congressional Budget Office and other government agencies.

If all of these revenue enhancements were enacted by Congress, they would add $5 billion to projected Highway Account revenues in FY 2004. This would gradually rise to $9 billion in FY 2009. This would allow the program to grow to $44 billion by FY 2009, far short of the $60 billion needed just to maintain current structural, safety and traffic conditions.

Whether Congress will, in fact, adopt any, or all, of these options is at this point a matter of conjecture.

What is abundantly clear is that a minimally-adequate federal highway program after TEA-21 will require significant new revenues, beyond these seven options.

The main sources of funds for federal highway investment are the fees paid by highway users in the form of excise taxes on motor fuels-- gasoline, diesel fuel and gasohol. Each penny of the motor fuels excise taxes currently generates about $1.7 billion per year, with about $1.4 billion being deposited into the Highway Account of the Highway Trust Fund and $260 million deposited into the Mass Transit Account.

ARTBA has endorsed an increase in highway user fees as needed to maintain current structural, safety and traffic mobility conditions on the nation's highways and bridges. But highway users should not be asked to pay any more than absolutely necessary. The proposal I want to outline this morning is designed to provide the necessary level of federal highway investment during the next six years at the minimum cost to highway users

"Two Cents Makes Sense" - A Funding Proposal to Meet the Investment Requirements Outlined by the U.S. Department of Transportation and AASHTO

On July 16, ARTBA detailed a needs based financing proposal for TEA-21 reauthorization--"Two Cents Makes Sense"--at a hearing conducted by this subcommittee. The financing plan is a refinement of the funding recommendations ARTBA published in March 2001.

The "Two Cents Makes Sense" plan would provide the revenue stream necessary to double the annual federal investments in highways--to $60 billion--and mass transit--to almost $14 billion- -by FY 2009. This proposal is the only one currently being discussed that would grow federal highway investment during the next authorization period to the level the U.S. Department of Transportation (USDOT), the American Association of State Highway and Transportation Officials (AASHTO) and the American Public Transportation Association (APTA) report is the minimum needed just to maintain current safety, traffic congestion and structural conditions.

The "Two Cents Makes Sense" plan would provide steady, predictable and manageable federal highway program increases--in $5 billion increments--from $35 billion in fiscal 2004 to $60 billion in fiscal 2009. Federal transit investment would increase under our proposal in $1 billion annual increments. This would be achieved through:

- more efficient cash management of Highway Trust Fund (HTF) revenues; and

- a small, annual adjustment in the federal motor fuels excise user fee rate to assure the revenue stream necessary to cover the government's cash outlay in that year for the highway and transit programs.

Our proposal is a logical evolution of the concept embraced by Congress in TEA-21 of directly linking annual highway investment to the user fee revenue stream.

Under our proposal, the TEA-21 budget firewalls and protections would be maintained. This would include annual funding guarantees in the authorization legislation and the budgetary protections for the highway and mass transit programs, including the separate budget categories and the point of order in the House Rules that can be raised against legislation that would reduce the guaranteed funding.

More Efficient Cash Management of Highway Trust Fund Revenues

Under TEA-21, as has been the case for several decades, the federal government has been collecting more highway user revenue each year than it actually needs to pay the annual bills--or outlays--for the highway and transit programs. As a result, this money is being "warehoused" for up to seven years before it is actually spent.

That's why the trust fund balance continues to balloon. Here's how it happens: Based on years of analysis, the White House Office of Management & Budget and the Congressional Budget Office have determined federal highway funds spend out over a period extending seven years.

This spend out rate is unique among federal programs. Unlike the case with virtually every other federal program, of every dollar obligated during a fiscal year for the federal highway program, only 27 cents will actually have to be paid out of the HTF Highway Account during the first year. The next year, 42 cents will be paid, followed by 17 cents the third year and smaller amounts in following years (See Figure 2).

Fig. 2 - Pace of Outlays Resulting from Obligation of Annual Highway Funds

This "lag" between collection of user fee revenue from motorists and truckers to actual complete spend out of those revenues causes the significant annual growth in the Highway Trust Fund balance. Absent changes, the Highway Trust Fund's Highway Account balance would grow steadily through FY 2010. ARTBA proposes to correct this inefficient money management by returning the federal highway program to a true "pay-as-you-go" approach.

Returning to a True "Pay-as-You-Go" Approach

In the reauthorization, Congress would set annual investment targets to work toward accomplishing needs based performance results. This could be accomplished by starting with $35 billion in FY 2004 and ramping in $5 billion increments annually thereafter to $60 billion in FY 2009. This would similarly be done for transit investment. Once these authorization levels are established, the Congressional Budget Office would determine the annual cash outlay needed to fund the new authorization, plus remaining past authorizations.

The reauthorization legislation would also include authority for an annual adjustment of the federal motor fuels user fee excise rate to produce the amount of revenue to the HTF needed to meet the highway and transit program cash outlays for the year. This adjustment would have two parts: (1) a base adjustment to protect that purchasing power of the highway and transit programs that would be linked to the annual Consumer Price Index (indexing); and (2) depending on U.S. Treasury revenue projections for the Highway Trust Fund from all sources during the upcoming year (i.e., could include possible recapture of ethanol revenues, interest on the trust fund, prudent use of the existing HTF balance, revenues from innovative financing) an adjustment in the motor fuels rate above indexing that is necessary to provide the revenue needed to meet the outlay target.

By implementing these recommended changes, it is possible to increase federal highway and transit investment significantly without a large, one time increase in the motor fuels excise user fee rate (which would also exacerbate the HTF balance build up just discussed).

Funding the annual authorizations we have proposed, would, with implementation of the changes we have recommended, require at most an annual adjustment of the federal motor fuels excise user fee rate of 2.2 cents per gallon. Approximately one-half cent of that increase would be the result of indexing to the CPI. If the HTF revenue stream were enhanced by redirection and equitable taxation of ethanol, use of the existing HTF balance, more revenues due to a robust economy-- any or all--the annual adjustment in the motor fuels excise user fee rate would be lower than 2.2 cents per gallon (including indexing)! (See Figure 3)

Revenue RABA Provision: An Approach that Eliminates Current RABA Political and Program Planning Problems.

The "Two Cents Makes Sense" proposal would also replace the TEA- 21's RABA (Revenue Aligned Budget Authority) adjustment with a "Revenue RABA Provision." The necessary user fee increases in Figure 3

Under a "Revenue RABA Provision," if revenues into the HTF during any given fiscal year were to fall short of outlays, then the following year the statutory motor fuels excise user fee rate would be automatically allowed (or certified) to increase by the amount required to offset the deficit and make the trust fund whole. This would eliminate the political problems and program disruptions that have occurred with the FY 2003 transportation appropriation caused by the current RABA construct.

Conversely, if revenues to the HTF were to exceed required outlays during a fiscal year, then the following year the motor fuels excise user fee rate would be automatically decreased by the amount needed to offset the resulting surplus.

This "Revenue RABA Provision" would ensure that the highway and mass transit program does not contribute to the federal deficit during the next six years.

Looking Rationally at the Impact of an Annual Two Cent User Fee Adjustment: The Real World Gas Price Experience

During the past year and a half, the retail price of gasoline has fluctuated by an average 2.5 cents per gallon per week! (See Figure 4). In 14 of the weeks, the average national retail price of gasoline either increased or decreased by 5 cents per gallon or more. In 39 of the 75 weeks shown in Figure 4--or more than half the time-- the average retail price nationally fluctuated at least 2 cents per gallon from one week to the next. What this means, of course, is motorists are used to paying each week the level of annual adjustment in the federal motor fuels excise user fee rate proposed by ARTBA to support a $60 billion federal highway and $14 billion federal transit program by FY 2009!

ARTBA commissioned Zogby International to conduct a national survey of likely voters July 9-12, 2002, which found almost 70 percent would support an annual 2 cent per gallon increase in the federal motor fuels tax rate if the money it generated was used exclusively for transportation improvements. A 2 cent gas tax increase would cost the average driver $12 per year, or 6 cents per day. That compares to the estimated $259 each motorist pays per year in extra vehicle repair and operating costs driving on poor roads.

Tables 2 and 3, found at the end of this testimony, provide an analysis of how our "Two Cents Makes Sense" proposal would benefit individual state highway programs, based on both the existing apportionment formulas and in response to proposals to increase minimum state returns to 95 percent.

Maintenance of Effort Provision to Ensure Program Growth in Every State

A key component of financing highway, bridge and mass transit improvements is the partnership between federal, state and local governments to develop and maintain the nation's surface transportation network. It is critical for all partners to make an appropriate commitment to transportation investment. Unfortunately, a number of states let their own funds for highway and bridge investment lag upon realizing the increased federal funds they would receive under TEA-21.

To ensure increased federal surface transportation investment actually results in more funds for transportation improvement projects, ARTBA believes the reauthorization of TEA-21 should include a "maintenance of effort" provision that makes increased apportioned federal funds contingent on individual state highway and transit program investment levels consistent with, at least, their prior year investment.

Additional Recommendations: Safety, Capacity, Planning, Project Approval, Research & Future Funding Issues

Mr. Chairman, in addition to our funding recommendations, we also have a number of suggestions for improving the current program structure and project delivery mechanisms. They address safety, capacity, planning, the project approval process and research issues. They are summarized below:

Safety

- With new funding, upgrade the safety of high-risk, rural two- lane roads. Over 77 percent of all fatal accidents occur on two- lane roads that generally are not eligible for federal assistance. ARTBA and the National Association of Counties has developed a joint proposal for a new program to provide $1 billion annually to directly address the unique safety needs of rural two-lane roads. As the proposal calls for new revenues for the program, it would not come at the expense of any ongoing activities. It would, however, provide a direct source of federal revenues that states and local governments can use to improve safety on the nation's most dangerous roadways.

- To ensure safety is a top priority on all federally-aided projects, require the use of unit bid pricing for safety-related products, activities and systems on federally-aided project contracts.

- Strengthen federal roadway infrastructure safety programs and increase federal involvement and investment in roadway construction work zone safety initiatives like the National Work Zone Safety Information Clearinghouse.

Capacity

Use Interstate Highway Median, Air and Tunnel Right-of-Way for Development of Self-Financed "Truck Only" Lanes. The dramatic growth in commercial motor vehicle traffic that has accompanied the growing U.S. economy over the last two decades has resulted in a wide variety of benefits. At the same time, however, increased truck activity, combined with increased passenger vehicle use, has lead to even greater strain on the nation's highway and bridge network.

To address these problems and challenges, the federal government should encourage state and local governments to construct and maintain new, self-financed "truck only" lanes where it can be demonstrated that such facilities would benefit: public health and safety; the national and regional economies; and homeland security.

The addition of highway lane capacity should be made an eligible use of National Highway System and the newly-designated "State and Local Bridge and Highway Program" funds, even if some "inducedtravel" might occur, as long as the NEPA process evaluates its potential.

Program Structure

The existing "Surface Transportation Program" (STP) under the Highway Title of TEA-21 should be renamed and restructured as the "State and Local Bridge & Highway Program" (SLBHP). The law should emphasize that the primary function of this new program is to provide federal financial support for roads, bridges, pedestrian and bicycle infrastructure not on the National Highway System. Ten percent of SLBHP funds should still be allocated for transportation enhancements and categorical safety programs as is the case under current law. The dramatic increase in federal transit investment provided by the ARTBA "Two Cents Makes Sense" proposal would eclipse the need for shifting highway account revenues to transit purposes.

The National Highway System (NHS) is critical to federal objectives and the national economy. To ensure that federal funding for the NHS is a priority, allow the transfer of highway program funds under state control to local or regional transit projects only if the state's governor has certified that overall projected funding is adequate to meet all NHS capital needs outlined in the state's long-range transportation plan. A similar provision should be applied to the transfer of highway funds under the control of metropolitan planning organizations (MPOs).

Planning

We are heartened that members of the House and Senate from both parties continue to work on a solution to the dilemmas posed by the current environmental review and approval process for transportation improvement projects. The ill-conceived attempt to implement TEA-21's environmental streamlining provisions in 1999 demonstrates the clear need to tighten this provision and provide more explicit direction. Both Chairman Young and Senator Baucus are currently working such measures. We commend them and all members of this committee for the leadership they continue to show on this critical issue. It is important that any legislative fix to TEA-21's environmental streamlining requirements include provisions that:

- Provide teeth to the TEA-21 mandate to streamline the environmental planning and approval process for highway projects and address problems created by extremist interpretation of NEPA 4(f) provisions.

- Eliminate the current federal requirement that state and regional transportation improvement plans must be "fiscally constrained," or limited to currently available funding. The "fiscally constrained" requirement for long range transportation plans has become a barrier to the consideration of visionary surface transportation projects planning. The multi- year nature of transportation projects and the transportation planning process makes the identification of funds before projects can be considered unrealistic. For example, few transportation planners anticipated a 44 percent increase in federal transportation investment when TEA- 21 was being considered. Consequently, an adequate number of projects were not in the transportation planning "pipeline" due the fiscally constrained requirement and this contributed to a significant delay before TEA-21's investment levels produced tangible results.

- Consistent with the stated purposes of the CMAQ Program, not use CMAQ funds for programs and activities that occur outside of federal air-quality non-attainment and maintenance areas.

- Reform the transportation conformity requirements with the federal Clean Air Act to eliminate loopholes that have been exploited to unnecessarily delay or stop approved and environmentally sound highway projects.

- In recognition that gridlocked traffic causes increased emissions of harmful air pollutants, construction of single- occupancy vehicle (SOV) lanes should be made an eligible activity under the Congestion Mitigation & Air Quality Program (CMAQ) as long as the proposed project does not increase emissions of criteria pollutants. As an alternative, Congress could shift the funding for CMAQ programs and activities to the Highway Trust Fund's Mass Transit Account.

Research

- Ramp up federal support for highway research and technology transfer to $1 billion per year. To maximize the benefit of limited federal research dollars, research investments should be merit based and consistent with an overall federal/state/industry developed strategic research plan. For this purpose, an advisory panel of federal, state, educational institutions and private- sector stakeholders should be created to make annual recommendations to Congress and the Administration for the disbursement of federal highway and transit research funds.

- Require that the U.S. Department of Transportation's biannual reports to Congress on surface transportation conditions and investment requirements emphasize the total cost of maintaining both current system physical conditions and service performance levels. U.S. DOT should also be directed to utilize the Congressional Budget Office's most recent projections for future price inflation in projecting the future capital investment requirements.

- Mandate a federal study that involves representatives of the transportation construction industry, public and private-sectors, and health agencies that examines the issue of roadway construction noise in urban areas for the purposes of recommending best-practices for mitigating noise and providing a reasoned discussion of public health issues in this area.

Financing Surface Transportation Investments in the Future

- Create a "blue ribbon" presidential task force to provide recommendations to Congress on how alternative motor fuels and/or motor vehicle use should be taxed at the federal level to ensure that future revenues to the Highway Trust Fund are not further diminished as the nation transitions to nongasoline/ diesel powering sources (electricity, natural gas, ethanol, etc.) and reacts to other environmentallybased mandates affecting motor vehicle use and HTF revenues (CAFE standards, Transportation Control Measures, etc.). The structure for this commission should include key transportation stakeholders from the public and private sectors. The commission should be modeled on the National Civil Aviation Review Commission that was established in 1996 to provide consensus recommendations about the future of aviation policy, which was chaired by former Congressman and current U.S. Secretary of Transportation Norman Mineta.

Mr. Chairman, these and other types of important measures can become reality if ARTBA's recommendations to provide the necessary resources are provided for the next surface transportation reauthorization bill are embraced.

Again, we thank you for the opportunity to provide our ideas for reauthorization of the federal highway and mass transit programs. I would be pleased to try to answer any questions you might have about our testimony.

LOAD-DATE: September 20, 2002