they have to demonstrate that the project benefits will likely produce a return on investments. so that's a very important additional benefit. third, we can shift significant risks of infrastructure megaprojects from taxpayers to investors for risk of cost overruns, late completion of the project and risks of overoptimistic traffic and revenue projections. and fourth, we can get guaranteed maintenance of the projects that are done by means of long-term ppps because the same entity that builds it doesn't just walk away, but is responsible for operating it and maintaining it for a long period of time as a his competing for customers. now, i think it's time really to look -- take a hard look at the model the federal government has used for infrastructure which is user taxes, trust funds and grants. first of all, user taxes are now seen as just taxes, and any increase, even though it would

go for productive uses, is seen as a tax increase and, therefore, hard to get support for. it also creates disaffection such as people believing the program is all about bridges to nowhere in alaska. congress has created many unfunded mandates meaning it increases the costs states have to bear, and the model encourages states to fund projects out of annual revenues rather than financing them over the long term as all investor-owned infrastructure does, electric utilities, railroads, toll roads and so forth. the thrust of my written testimony is it really is time to rethink the federal government's policy. i think there are three key points for doing so. sort out which functions are truly federal, refocus the federal government on that and delegate the rest to state and

local governments where the need really is. second, shift from funding to financing which means federal policy needs to begin shifting much more from grants to loans on a basis, preferably, that does not put federal taxpayers at risk. and a good example of what i like is representative delaney's infrastructure fund which would not put taxpayers at risk. third, enable states to take on a larger share of responsibility by removing tax and regulatory obstacles to enable them to make better use of long-term ppp. and i also provide a near-term list of tax and regulatory changes that could begin this transition and a list of organizational changes including corporatization of the air traffic control system along the lines of the very successful way of canada and enabling the army corps of engineers to enter into long-term ppps to replace locks and dams.

this is an ambitious agenda. i'll wrap up saying just two points. one, infrastructure is critically important to our economy. we need to do a much better job of funding and managing it, and the ppp approach can make a big difference in this. the other is that given the fiscal condition of the federal government, the 20th century user tax trust fund federal grant money is unsustainable, and i think we really need to think hard about that. that's the hend of my -- the end of my testimony. >> thank you, mr. poole. mr. puentes. >> thank you, vice chair klobuchar, members of the committee. i very much appreciate the invitation. i think the governor and the members have already kind of laid out the need and made the case for why we need to invest in infrastructure, so my remarks are going to focus the ways the federal government can engage in new partnerships with both private actors and the public sector to invest in infrastructure and by so doing put americans back to work and rebalance the economy.

today low interest rates coupled with the attention of private firms and foreign funds are presenting growing opportunities for a fresh set of focused federal initiatives to support public and private sector leaders in states, cities and metropolitan leaders as they collaborate and innovate. for example, congress should revive the program to support state and local investments. established in twin, the two- 2009, the two-year program decreased borrowing costs and stabilized the municipal bond market. they proved wildly popular, as the governor noted. during their short existence, it financed one-third of state issuances, they were used for a variety of infrastructure including educational facilities and most notably for water and sewer projects. in reviving the project u lowering the tax subsidy from 35 to 28% would make the program revenue neutral.

since states and municipalities don't really need the same aggressive subsidy they did after the financial crisis, i think the lower rate really is appropriate for today's needs. next, while municipal bonds are geared towards public sector projects, other bonds such as pabs benefit a nongovernmental entity and are directly or indirectly paid back by a private business. based on estimates from the joint committee on taxation, eliminating the amt on all pabs could potentially cost the government about 49 billion annually, yet the exemption would lead to cost savings of almost $750 million for airports alone over the next ten years.

however, we know that public very private partnerships are complicated, and they vary widely from prompt to project and -- project to project and from place to place. as the challenges become more complex, there's a constant concern that public entities in some states, cities and metro areas are ill equipped to fullly protect the public interest. so one solution is the creation of a specialized institutional entity to assist with those expanding opportunities. these so-called ppp units include quality criminal, policy formulation and coordination, technical advice and standardization. these are voluntary, and budget costs should be no more than about $3 million annually. but another way to provide expertise to states and public inti beties that cannot deal with the projects themselves is through the creation of a national infrastructure bank. if implemented appropriately, it has the potential to leverage billions of dollars in private investment as been mentioned, provide a streamlined scheck --

selection process and provide a rigorous standard for investments. a one-time repatriation holiday could be used to finance the creation of the national infrastructure bank. today american corporations hold over $1.5 trillion in domestically untaxed deferred dividend payments overseas. while a similar repatriation holiday failed to generate domestic stimulus, a targeted program focused on infrastructure has the potential to deliver job-creating and economy-building projects for decades to come. by directing -- [inaudible] into the infrastructure bank or else compelling corporations to invest a portion of repatriated funds into bonds that support the institution, congress can encourage investment here in this time of gridlock. depending on the goals, capitalizing can occur in a flexible manner as well with levels ranging from $10 to $50

billion. of course, there are real costs and hazard associated, however, policymakers must also weigh the concerns of those things against the strategic and financial benefits of a well functioning strategic infrastructure bank. most of what i've described will require legislation, but i think we can do this. madam vice chairman, i know it won't be easy, but i think the time is ripe to invest in infrastructure projects that do put us on a path to a more productive and sustainable economy. thank you very much for the opportunity to appear before you dodd. >> thank you very much, mr. puentes. mr. edwards? >> thank you very much, ms. vice chair and members of the committee. thanks for having me testify today. infrastructure is extremely important to the economy. we need to insure that investments in infrastructure are as efficient as possible, and we can do that, in my view, by decentralizing the financing and ownership of infrastructure out of washington as much as we can.

state and local governments in the private sector are more likely to make sound investment decisions without all the federal intervention we have today. the first thing that's interesting to note is that most u.s. infrastructure is actually provided by the private sector. the private sector actually provides more than five times as much infrastructure to the u.s. economy as the federal, state and local governments combined. pipelines, cell phone towers, you add it all up, that's $2 trillion of private investment a year in infrastructure. again, five times the size of government infrastructure. so the policy upshot, from my point of view, is that a we also need to focus on things to increase private infrastructure investment such as doing tax reform. that said, government infrastructure's, of course, very important to the economy, but i think it should be done as much as possible at the state and local level, not the federal level. why do i say that? a firm of reasons. federal infrastructure investment is often misallocated from my opinion, look at amtrak investment, for example.

in my view, a lot of it is based on sort of political demands and not based on customer marketplace demands. federal infrastructure is often not operated efficiently, is often not priced properly. for example, if you look at the bureau of ec rah -- reclamations vast water infrastructure in the united states, water is vastly underpriced which causes inefficiency. federal infrastructure is often mismanaged and has large cost overruns. the faa has a very poor record in terms of bureaucrat cantic mismanagement and cost overruns, and a key problem with federal intervention, it seems to me, in infrastructure is that the federal government replicates mistakes across the country. states and private companies make mistakes, but when the federal government makes mistakes, it replicates it everywhere. high-rise public housing, which everyone agrees was a disaster, was replicated in the mid 20th century because of federal subsidies which induced cities

to do this. cities to do this infrastructure. one reason why there's growing in privatization in the united states and around the world. i fully support p3s and privatization of infrastructure, and is we should explore those opportunities, but we should also look at full privatization where it is possible. airports can be fully privatized. londons heathrow is a good example of that. there's a new $140 million jordan bridge completely privately financed, owned and operated and constructed. and air traffic control, as bob poole has pointed out, has been privatized in canada, britain and other places. indeed, i'm really truck by the canadian air traffic control privatization, a nonprofit corporation separate from government. it does its own operations, it funds its own capital investments separate from government and has been an extremely successful model, it's one of the safest systems in the

world. you compare that to the faa, the faa has a big demand for funds, there's budget instability in washington, and faa doesn't know where it's going to get the funding, she keyser cut -- sequester cuts threatened to interrupt air traffic control. so privatization of p3s have swept around the world but not so much in the united states, so why not? well, there's been a bunch of sort of built-in hurdles that are preventing more privatization of p3s in the united states. a key one is that the municipal bond tax exemption favors public facilities over private facilities. that's a big barrier. canada, for example, does not have that bare kerr. muni bonds are not be tax exempt income and property taxation. if you want, private entrepreneurs wanted to set up an airport, they would be taxed on their earnings, government

facilities don't pay income or property taxes. and here's a key thing that people often overlook. federal aid or federal subsidies are often viewed as a positive, but there is a negative crowd-out effect. here's what i mean. before the 1960s the vast majority of urban transit bus and rail in the united states was private. bus systems and rail systems in cities across america were private. then congress passed the urban mass transportation act in 1964. that act gave transit subsidies only to government-owned systems at the local level. the effect by the end of the 1960s is that virtually all transit systems in america became public owned, and we lost the competition and innovation and entrepreneurs that private transit brought to america because of those federal subsidies. so they work against privatization at the state and local level. there are other issues. the governor mentioned interstate tolling requirements. i agree with him, we have to look at that. and there are other federal

regulations that stand in the way of privatization. so to sum up, you know, there is widespread agreement that america needs topnotch infrastructure to compete in the global economy. the way forward, in my view, is for the federal government to reduce its control over the infrastructure. state and local goths should be encouraged to innovate to the fullest extent possible. let's get america's great entrepreneurs helping to solve our challenges. thank you very much. >> thank you very much to all of you. i'll get started here. i note, governor rendell, you talked about the investment in europe, and you talked about the fact that they have a history of investment with public/private partnership, and could you describe what they're doing there and how they got started in this way that allowed for more infrastructure and what we can learn? >> well, they got started similar to what senator warner and congresswoman delauro want to do. the e.u. countries put money in to begin to capitalize the fund.

and now the fund makes leans, it's am -- makes loans, they make enough money on the repayment of those loans not only to cover their entire administrative cost, but to add money to the fund itself. so it's been enormously successful. >> is it an infrastructure bank? >> it's an infrastructure bank, yes, that only loans monies to those projects where there's going to be a rate of return. one thing i wanted to say to my folks from the foundation k i for a democrat am probably the strongest advocate for public/private partnerships in the country. but let's not be deluded into thinking privatization is going to solve all of our problems. the company has 66,000 structurally-deficient bridges one of which was regrettably in minnesota. my guess is no more than 1500 could be tolled where there would be a reasonable enough rate of return to do the work necessary to rebuild or expand those bridges.

some, yes. there's a bridge in pennsylvania that goes i-95 going to new jersey to pennsylvania. it's not tolled now. if we toll that bridge, we can expand from four lanes to six lanes with a side avenue for cars to go off. it would cut waiting time from 45 minutes in rush hour to 15 minutes in rush hour. >> right. >> we can afford to toll that. but the vast majority of bridges, the vast majority of roads there's not going to be a private sector return on investment. airports, yes. locks and dams, perhaps. but there's some infrastructure that the government whether it be state, local or federal is going to have to step up. >> right. and i appreciated your point that even the simpson-bowles report and that group and the work that a lot of us have done in the middle on the budget like senator warner and others, we truly believe that you have to invest at the same time, that it's not exclusive, that you can

make that investment in some key things at the same time you're doing a long-term debt reduction by making some of the reforms that were talked about and also looking at closing some of the loopholes and doing some other things. >> and be remember, when you're talking about federal investment, one of the problems with the way congress scores is there's never any offsets. that type of investment produces a significant new federal tax revenue by the jobs that are created, by the corporate profits, etc. when you start offsetting that and offsetting the economic benefits, i again recommend your staff toss the cbo 2008 report where the cbo, again, not exactly a leftist-leaning organization, says we can afford $185 billion annual increase in infrastructure investment because of the economic and societal benefits to us. >> okay. mr. poole, mr. puentes, this infrastructure bank, i actually included a version of it in the rebuild america jobs act that also had some increased,

significant increased investment on the government side. and we got some support. we got a majority of the senators, but i led that bill last year, and we weren't able to get it through the filibuster. could you talk about the infrastructure bank, how you see it working and, by the way, how would rural projects be included? i get that question a lot at home. >> that is a good question. you probably couldn't do the same kind of things that you could do in terms of robust revenues and things in more urbanized areas. but infrastructure wangs, i mean -- banks, i mean, i have been critical of most of the infrastructure bank proposals that have come along because i really, i fear they don't have the same kind of protections that are built into tifia to insure, to make it likely these will be sound investments that have a dedicated revenue stream and investment-grade bond ratings, things like that. that's why i draw a distinction between those and congressman delaney's new proposal that

would not put the federal taxpayers at risk by creating debts that might not be repaid. and so i think we really need to be careful what we're doing. i mean, it was one thing -- >> and this is tying it in with pate ration? >> yes. that provides capitalization that comes basically from the private sector, not the treasury. >> and as i think mr. puentes pointed out, we tried this once, and i think people are open to looking at it again, but the rate has to be right so it brings in the funding we need, and i know people in the administration be, others are looking at it, but the rate is i think what'll have to be determined to be the right point so we actually are bringing in significant money. mr. per he's, do you want -- puentes, do you want to comment further on that? >> i think members here are right. we have to be careful about this. net infrastructure bank is certainly not going to address all the challenges we've talked

about, all things the governor highlighted at the beginning. but it is, we do see when we look around the world and we see what the needs are in the united states, there is an omission right now, and we don't really have a way to make decisions on projects that are truly of national significance. what i would like to see is some kind of entity that's focused op delivering those kinds of economic goals we have in the country, so the president's goal to double exports in five years is the far-reaching, ambitious foal that we have right now -- goal that we have right now, and the infrastructure bank would actualize some of those goals. there's obviously major freight projects that would come along with that in and around united states ports so that we're not investing in areas that are competing with one another. >> right. >> and they've also addressed the rural areas. freight moves all across this country, the country's very, very large, and freight moves from los angeles to chicago to elsewhere. so the infrastructure bank is not going to solve all

challenges. i think we're doing a good job on the transportation side, but we also need something that's looking at clean energy, water infrastructure and not continuing to silo nature which we make infrastructure investments -- >> uh-huh. >> it's not going to solve every problem. >> yeah, and i think we've already seen the congress is ready to come together. obviously, a long-term bill is much better, but there are the seeds to get this done. and i love your points about the goals because i thought that was one of the best things the president put out there, exports doubling in a number of years because we are working to get to that goal, and it made a difference, and people remember that. so that kind of a goal with infrastructure tied in with some new ideas, and as the governor pointed out, it's not a one thing fits all. there's a guy i was telling representative delaney up in moorhead and fargo near canada that actually is a guy that somehow got permission to be in this a shack and charge 75 cents every time someone crosses the

bridge. this is not good public policy. so that is not the one way to solve everything. so i think it's a combination of things that you've talked about today, and i know there's peopliering to get this -- yearning to get this done, and i think it's a great thing we could do to bring people together. people don't talk enough about the freight issue and the exports and the industry willing to pay more for locks and dams. there are a bunch of people in the private sector that want to join in and be part of this, and we've got to give them the vehicle to do it. i'm going to turn over to congressman delaney while i go to judiciary and, hopefully, come back. senator coats. thank you. >> well, this is an interesting topic here, and i'm enjoying the input that's being given us by the witnesses. and i want to go to an issue relative to what both governor rendell and mr. edwards were talking about, and that is the role of the federal government and the impact of keeping it

within a political process. you used the example, mr. edwards, of amtrak. you know, when the political process intervenes in the decision making process, it distorts the market. and while amtrak running up the east coast is a demonstrated market, stops in your state, governor, and yet in order to, in order to continue to subsidize that program -- i'm not going to name any particular states been -- but the line that runs from a to b better stop in tim buck tee, or i'm not going to support anything that's going to stop in philadelphia or going up the coast. and that's just a small example of what we run into. so i wonder how do we, how do we address that? how do we pull all this, how do we define the federal role in a

way that the politicization process doesn't distort the market in a way that discourages investors from the private sector, in a way that misallocates money out of the taxpayers' pocketbooks? i'll start with you, governor, and then, mr. edwards. >> you've dealt successfully with one of the problems, and that's overregulation of particularly transportation infrastructure. map 21 did a very good job in reducing some of the regulations and cutting timelines. the president, as you know, has issued an executive order to cut those timelines by 50%. that would be enormously helpful both on cost and getting things done quickly. so you've already done that. but the way to get politics out of the major projects, you're still going to have to give states basic grants to help them with their overall needs. but to take a good hunk of what the federal commitment is, give it to the infrastructure bank for projects of, as mr. person

puentes said, national significance, and let states or groups of states and private entities come in and compete. and the infrastructure bank makes those decisions based op cost benefit analysis, based on a review of the project to see whether they're workable, whether there's a reasonable run on the investment. that's one way of doing it. a second way is through the tiger grant process. the best thing about tiger, one, it allowed states to combine wine applications, so we got regional projects. two, tiger leveraged private investment and, three, it was competitive. and the decision was made by federal dot, and post of tiger's decisions -- most of tiger's decisions were based on cost benefit, not on politics. every state didn't get a project out of tiger or tiger funded the major projects. so the more competitive you make it and the more you give the decision making -- i know congress is always loathe to

devolve decision making to someone else. but if you give decision making to people who are experts, who are somewhat insulated from the political process be, we can do this. we can absolutely do it. it works in europe, and it can work here. >> mr. edwards, do you want to respond to that? >> part of the idea with an infrastructure bank is to get more private financing on infrastructure, and that's great. the problem with having a federal national infrastructure bank is that the decision making on infrastructure projects become, you know, national, ultimately, political decisions. i can name you agency after agency, army corps of engineers on down the list where politics intrudes decade after decade, and you just can't get around it at the federal government level. we need to decentralize decision making. the people spending the pun need to be spending it so they can make the proper cost benefit analysis. high-speed rail is a good example. if california wants to raise its own money and go for high-speed

rail, let them experiment. the rest of the country, the other 49 states can watch how well the system works and decide themselves whether they want to go down that road. but the problem with federal intervention is it distorts the decision making by state and local governments. and one good example, federal grants for urban transit. cities have gone for light rail systems when bus systems would probably be more efficient because the federal government pays the capital cost. the light government systems of capital cost, cities figure let's grab the money for capital costs for the light rail even in the long term bus systems are usually always more efficient. so i'm really concerned about the problem that when the federal government intervenes, it distorts that more efficient state, local government decision making. >> how do we get around the -- when i talk to mayors, governors and others they say, you know, so much of our early cost and so much of the decision making and the timelines are skewed simply

because we continue to run into lengthy, almost never ending environmental impact statement challenges to those and so forth, we have that going on in our state right now as well as the permitting process. i'd like to have whoever wants to -- >> well, again, you did a good job on that in map 21, and the president's executive order cutting the timelines for environmental impact statements. some of them take seven, eight years to complete. >> right. >> there's no reason under good god's earth it can't be done in six months. if you tell people they've got unlimited time, they will use unlimited time. >> sounds a lot like congress. [laughter] >> well, right. i always use the example of someone comes into a law firm and says i need an opinion letter, i need it next tuesday, and the head of the firm says, oh, this is a respectable firm, and we could never do it in that short period of period of time. pulls out of his pocket a cashier's check for a million

dollars. they get it done. if you give six months for an eis to be completed with only the most stringent waiver provision, it's amazing how they can get it done. when we prepared for stimulus, i wanted pennsylvania to pend our money quickly. -- spend our money quickly. i called contractors in, i said you have two months to respond. you've told me nobody's working, you've got two months. i said to my bureaucrats, you usually take 6-9 months to award, you've got two months. and we had people working with stimulus dollars in three months. congressman oner star's committee ranked the states on how quickly they spent that stimulus money, we were tied for first with three other states. it can be done. that's where congress can, i think, really do something terrific by insisting that it gets done. >> yeah. i want mr. poole to respond, but i just want to say, governor, with your permission, i want to take some of those quotes that you just said.

i'll make sure you have attribution, but i'm going to repeat the quotes of a democrat governor all over the state of indiana. >> no question. >> i think the governor's point about getting the times much shorter illustrates that we didn't -- we made some progress with map 21, but it should be much shorter than that with, you know, time certain, you know, time periods. but it is also the question that i raised briefly of the higher cost of a federal dollar. many states won't take, try very hard not to use federal dollars on highway prompts unless they d projects unless they absolutely need it because buy america and these other things that congress has imposed mean the cost is much higher. and now buy america, phwa -- fhwa has administratively decided now it applies to utility relocations as well, everything has to be made in america. utility companies have no idea where their the the tough is

made. so it's threatening to hold up billions and billions of dollars of transportation projects over a new administrative interpretation. >> thank you. >> thank you, senator coats. i'll use my time now, and then i'll turn it over to my friend from new york. you know, as we listen to the conversation that we've just had and we talk about the scale of the infrastructure of challenges we have in this country which also symmetrically indicates that we have a huge opportunity in this country to make this investment and get americans to work, it's clear that this problem that we have is kind of a multidimensional problem meaning we have it for a variety of reasons. we have it for political reasons, we have it for financial reasons. in other words, there hasn't been sufficient money allocated against some of these issues. and we have it, quite frankly, because the world has moved very quickly, and the infrastructure is of long lead, long tail business, and there's been rapid

changes in the world particularly in the last 0 or 25 -- 20 or 25 years that particularly around logistics and energy, etc., have accelerated much faster than people could have reasonably predicted. so there's lots of reasons we have these problems which, to me, means we should have multiple solutions against this problem. the classic, you know, we need many tools in the tool kit. and in my opinion, this issue is really our, should be our central and i think, governor, i think you said this very well your testimony, should be our central kind of economic domestic priority. ask all of the solutions that we've heard -- increasing privatization, reducing regulatory burden, coming up with a variety of infrastructure financing tools -- should all be considered very seriously because they're probably all needed, as the governor said. the cost of doing nothing is, in fact, not nothing, and we're paying that price, and we should be putting our shoulder against

all of these things. this is a good investment for us to be making. as mr. edwards said we shouldn't be make paing all this investment, a lot of it can be done by the private sector, but at the end of the day, there's certain core financings that have to be made. one of the things we've tried to work on with our legislation is also thinking about the time horizon because to some extent i think this notion of shovel-ready projects while it's catchy and it makes sense doesn't always correlate with good infrastructure policy. because, in fact, if you travel around the country and you look at decisions that have been made around infrastructure even if they will take years to actually implement because of the scale of the projects, create really good economic activity immediately because people know they're going to happen. in other words, there's a commitment to widen a port, and it's going to take five or six years to do it even with accelerated approval process, etc., everything will start changing around that port.

and which is why we've tried to come up with an entity that can operate in a disconnected way from the normal political cycle. so maybe, governor, i'd be interested in your views on how we should think about the time frame for some of these projects and planning in general and then, mr. ed yards, maybe you'd comment on that as well. >> well, in terms of time frame, one -- right now if you read the afc report, we need to fix it first. although we do need new capacity. there's a stunning statistic that since 1980 our percentage of vehicles on the road has increased by 104% since 1980. our lane capacity's increased by 4%. so we need to expand our infrastructure. but first we need to fix it first. and the good thing about fix it first is it is very stimulative because you don't have to go through eiss. the reason i was able to get work done in three months is

because we were fixing bridges, we were fixing roads. there's very little -- there's no requirement for an eis at all. so you can get to those projects quickly. right now the biggest challenge for perk is to fix what -- for america is to fix what we have. i hope you can get your staff to read the full report. it's outright frightening. >> right. >> frightening and disturbing. so if you fix it first, that's going to speed up the timeline. for projects, one thing i would differ with mr. edwards on is there has to be an entity to help fund regional projects. so it does no good for, let's say, the state of pennsylvania to put in a rail system that goes through to ohio and then all the way up to minnesota, let's say, with one type of new technology if ohio's going to have a new type of technology. >> right. >> that won't work. the trains won't be able to run. we have a mag lev system, they

have a conventional high-speed system. so there's got to be a vehicle for those projects. so there's got to be long-term, long-term vision with good controls and good speed mechanisms. but fix it first is going to solve a lot of our problems. >> mr. edwards, very quickly? >> you touched on something very important which it's not the short-term jobs, it's long-term efficiency. with seaports, we need to make them more efficient. the issue is the long-term efficiency that our manufacturers and producers can have more efficient seaports to take the bigger ships that are coming with a bigger panama canal. that's the issue. and with seaports, for example, they can be fully privatized. britain has privatized most of its seaports. the top seaports in the world are private. the advantage is they see customer demand rising, shipping demand rise, they go out to the market, they raise capital, they do the work.

they don't have to go to washington to lobby. if you have private ports, they can get things done quickly. >> thank you. >> but you can't dredge. and the most difficult thing that the atlantic ports have to do is dredge to the depth that can accept those big ships coming through the panama canal. only two of our 12 ports are dredged sufficiently. we're going to use a whole poetload of business to canada -- boat load of business to canada. >> i wanted to turn it over to my friend from new york who knows a lot about transportation, representative hanna. >> and we ought to use the money in the harbor trust fund. i mean, it's just sitting there as an offset as opposed to what it's intended to do. explicit in this conversation is the notion that the private sector is so much more efficient than the public sector. we know the public is sector doesn't pay taxes, we know it can issue low-cost bonds, and we're all agreed that, generally speaking, the federal government with all its rules and

prescriptive things that it impugns on local and state communities really add to the overall cost. yet we also know that private businesses need an internal or just a basic rate of return. i want to ask you, we're about to -- if we go forward with this, say take an airport, we're basically creating many monopolies that have long-term projected income streams and long-term projected debt streams and all based on the assumption that the government can't do it as well which i believe. i want to ask you, mr. edwards, what do you think the marginal capacity for those rates of return is based on your understanding and anyone about the jenin efficiency -- general inefficiency of government? and davis-bacon aside and other

things like that that i think are not something that are politically -- we're not going to change that, in my opinion. so what dueck? >> >> i'm not sure exactly what your question is, but private investors, there's absolutely no doubt it's absolutely crucial. they want to earn profits, the search for profits induces efficiency, it makes companies try to reduce costs -- >> governor rendell has said that there's 15 out of 1500 or out of thousands, correct? somebody must have looked at those and said these are the viable ones for the private sector to take over, the rest are not. i guess what i'm asking is, does anybody have an idea of how inefficient government is -- >> right. there have been some comparison studies of the p3s, for example, and traditional government contracting. there's an australian study i think identify got right here that compared a couple dozen p3s to traditional government contracting, and there is no doubt that private sector companies, they get stuff dope on time and on -- done on time

and on budget. it was finished on time and on budget because there's a strong incentive if private actors put in their own equity, they've got to keep the costs low, they've got to headache things finish on time. >> with so two possibilities exist here. we have a take 0% and if you want an internal rate of 10, so the public benefit arguably could be that difference, that 10%. it could be much wider. but we could enjoy both of those benefits. we could clean up our own mess because we run the risk of being too prescriptive going forward each to private organizations, plus we run the risk of creating these many monopolies over some local bridge that maybe the math was wrong and these review board done locally weren't done adequately. >> congressman, your point is well taken, but the key is eventual contract. we tried to lease the pennsylvania turnpike, my legislature, my republican legislature turned it down because they wanted to control

the patronage. they didn't want to turn it over to a private entity. we got a $12.8 billion bid from citibank in alberta. when the recession hit, they would have been holding the bag. the risk for the taxpayers in pennsylvania would have gotten a great deal. the key this is the contract. when you lease, you don't sell to a private entity, you lease it. and then you have in the lease the same rights that an owner who leases his house has. you have oversight. you put in maintenance standards they have to meet. so it depends on the level of government oversight. but the real savings come on the operational side because the private sector can and almost always, almost always -- there's some exceptions -- operates at a lower cost because of union costs. not necessarily it's going to be nonunion, but because of existing contracts, because of the number of people who are in a work force, they can reduce that, because they've got money to invest in technology faster

than the government does. so it's the operational that when they figure out what their rate of return has to be, they're talking about revenue, but they're also figuring out how they, what percentage they can cut costs. and those two things factor in -- >> airports in france, mr. poole, how do they compare to ours? we know there are a great many private -- >> right. well, actually, in france the airports are still largely government airports. one has sold about a third of the equity to investors, but the government still holds the majority share. airports in the u.k. are mostly privatized, but they do, the largest ones where there are monopoly problems, they do have utility regulation on the prices they can charge. so it's similar to what we do with electric utilities in this country because, again, of monopoly issues, having some form of -- >> has there been studies done between the differences between, say, how we do in our airports,

what they cost and -- >> there have been a few. there's a very good study out of the university of bc in canada that looked at a database of almost 200 airports worldwide and concluded that the ones that had either majority private or 100% ownership -- that could include a long-term lease -- were more productive, more efficient in terms of operating and that the least productive were full government ownership and multifunction port authority, unfortunately, for the new york port authority. >> thank you. my time's expired. >> if i can just jump in, i think this conversation's very important. i think what i'd like to take away from this is we need to get away from just this idea of things being public or private and this rigid notion of privatization. what we see merging throughout the country is an awful lot of innovation that's happening outside the beltway, all working with the private sector in cases where it may or may not fit.

so all prompts, as you mentioned, are not going to be appropriate for private interests. they're not going to raise revenue. so what i'd like to see happen is get to where it's this mix where it's not the federal government on top kind of working with states and metropolitan areas, but it's all mixed up with the private sector. so the bc example is a great model. there's something called partnerships bc in british columbia where when they're evaluating projects, they have to decide whether or not a private entity is going to make sense. sometimes it's going to work, sometimes it's not. i just want us to get past the notion that it's either going to be private or it's going to be public. they are very complex, there are lots of different projects, and it really depends -- >> and if you watch beyond transportation, take drinking water, big problem. epa estimates we're going to have to spend $335 billion in the next 0 years to pre-- 20

years to preserve our drinking water. there are some rich areas, you go into pennsylvania, and there's not a private water company in the world that wouldn't want to provide the water to lower marion. but you tell them they're going to provide the water to north philadelphia, and there'd be no bidders because there's no revenue to support increased rates. so, again, there is no one size that fits all. but i think the point we're all making, democrats and republics, witnesses, we're all making that a the private sector has to be an option going forward. one of the arrows we have in our quiver, there's no question about that. >> very good. i know representative delaney has some additional questions. >> yeah. i thought that was a very good discussion. and i think we also should be thinking about mix/private partnerships boat on a -- both on a prompt level which i think is the historical kind of framing for how we think about these things but to some extent on a more macro level.

we've tried to fund an infrastructure bank by effectively creating a giant public/private partnership. in other words, it's funded by private capital and provides a tax incentive by allowing companies to repatriate earnings. but, again, done in a very market-based approach where we actually auction off the bonds, we actually get the best deal for the taxpayer by doing it that way. but the other -- and, mr. poole, the other observation or question i had for you is we only think about efficiencies in terms of how we finance these activities. one of the things we've tried to focus on in our legislation is having the infrastructure bank, for lack of a better term, be more of a bond guarantor. because it seems to me while it may make sense in other countries to lend directly to the projects, in this our country local governments have the ability to issue debt on a tax-exempt basis. >> with right. >> and for as long as that exists, which i hope it exists for a very long time, that is a very advantageous way for local

governments to borrow money, and to the extent we have a larger financial support enterprise, it should be actually guaranteeing their debt as opposed to lending directly because of the efficiencies. i don't know if you have -- >> yeah, i agree, congressman. i think that's a very important point. we used to have bond insurance for infrastructure kinds of projects in this country until the financial crisis. and ambak and the others basically went out of business at that point, to there's a gap in the market right now that really would be much better for infrastructure investment if there were the kind of bond insurance or analogous bond insurance that used to exist before the financial crisis. so that's another point that i like about your proposal is that we, that's a need that needs to be filled, and until help a lot. >> right. and, mr. edwards, you talked about how local governments should be driving these decisions which i agree with. i don't think they should be driving all of the decision cans because some of these decisions

are inherently federal and multijurisdictional and of national importance, but the model where local governments really have a say in determining their own infrastructure, and when you think about infrastructure bank proposals or in our situation more of a bond guarantor which is more geared towards local governments, do you see this being more of an enterprise that operates against a national strategy, or do you think these enterprises would be better if they're focused on serving the needs of local municipalities? >> i haven't looked at your legislation in detail, but for me, the decision picking should be made where the money is raised and spent. if different people are raising the money than spending it, you get bad decision making. so i'd just like to see decentralized decision making which, to me, means decentralized ownership. >> those are all my questions. i just want to, again, add my thanks to governor rendell, mr. poole, mr. puentes and mr. edwards for their thoughtful testimony. it was a terrific constitution.

>> thank you. one last question i have is just how maintenance fits in with this. i always think about when we do these ribbon cuttings for a new transit project or a new bridge, and when you fix a pothole there's not usually a bunch of people celebrating. and so, or you fix a gusset under a bridge, how do you think the road maintenance and the bridge maintenance fits into all this, mr. poole and then mr. relationship dell? >> two answers to that. one is that a growing number of state dots are having great success with contracting, competitively contracting for highway maintenance. is one of the pie -- virginia is one of the pioneers, texas, florida. and so that's a way in which you can often get more value, more maintenance per dollar spent than doing it with state employees. but the other is a point that i made briefly, and you may have been out of the room when this came up, is that if you do long-term infrastructure ppps where the company, the entity

created to finance, build and operate the project also maintains it over a life that may be anywhere from 30 years to 75 or 99 years, so you basically create a guaranteed source of maintenance funding in those kinds of long-term arrangements. and that a's -- so if you think of the overall highway responsibilities of a state dot, if 20 percent of that can be converted to long-term p3s, that whole section then is guaranteed for a long period of time to be properly maintained. and the state in an annual budget sense only has to come up with, be responsible for looking at the may maintenance of the rt of us. so i think that's an advantage of the long-term pbe 3s that's not really full fully appreciated. >> governor? >> i want to correct one thing mr. poole said. most states, almost 100% of the maintenance as well as the building work done by private

contractors. the state workers usually do oversight or a little bit of painting, but we bid out everything. pennsylvania bids out everything, maintenance as well as new construction. let me just give you an example of one area in response to your question. i-95 runs through the city of philadelphia for 18 miles. there are 14 bridges in those 18 miles that i-95 goes over. it's estimated to put those bridges most of which are are either structurally deficient or functionally obsolete into fair, decent, safe condition would cost $4.5 billion. the city of philadelphia's entire capital budget for everything -- police stations, fire stations, rec centers, road paving -- is $120 million a year. now, there are two ways to do that. if we were allowed to toll i-95, we can't because it's a

privately accredited federal highway, they grandfathered the states that already tolled it, but we can't, we'd have a chance to raise some of that money. or alternatively, we're going to need a federal investment, and that's just maintaining. but it's maintaining the nation's largest highway, state and local responsibility, and we need help. >> okay. very good. i see representative palloneny's here -- mama loney's here x if you want to ask a few questions, we're going to end, i think. >> everything's happening at once. we had votes in financial services, and ten we had votes in government reform and oversight. i just feel infrastructure's so important, and why aren't we investing more in infrastructure? it creates good jobs. in the district that i'm privileged to represent, i have two major construction projects, the 2nd avenue subway and the east side connector, both of which have over $4 billion in federal funds and are creating over 40,000 jobs.

my question really is on high-speed rail. our country used to lead the world in infrastructure, and now we're falling apart when you go to europe, to china, to india. they all have high-speed rail. and particularly on the northeast corridor, it would be a corridor that makes money now for amtrak, and it would make money if we had high-speed rail -- i i see governor rendell between philadelphia and washington and new york to boston, all of this area. and your thoughts on how to move this forward. do you think it'd be possible to do a public/private match that would be able to protect the union agreements but would also give us the money to move forward? it's, obviously, a financing deal. and there's been a debate in congress over a infrastructure bank. some people support be pit as a financing mechanism, others say it's just another level of bureaucracy if you want to fund

be it, float your bonds, float your financing system and just move forward. what do you need an infrastructure bank for. and i'd like to open it up for answers and questions. we did get a high-speed rail down at the same payment of 300n between new york and boston which i find very exciting. >> congresswoman, i think i can speak for all four of us, we've all endorsed the concept of the infrastructure bank. we may have some differences about how it should operate, but we all endorse the concept. in terms of what you're saying, northeast corridor high-speed rail, it couldn't be a better example of 3p. and and let me preface this by saying i'm on the advisory board of japanese mag lab which if it were instituted on the east coast, you could get from new york to washington in 59 minutes, philadelphia to new york in 23 minutes. they're opening up in japan in november a 310 mile-an-hour mag l everything v system, and they want to constructive, and

they're -- construct it, and they're willing to put up part of the funding. it should be like the tiger grant. the majority should come from the private sector, but the states that benefit from it should also put up part of the funding. we wanted to expand the philadelphia to harrisburg rail line. amtrak, while i was governor, wanted to put 75 million in, i matched the 75 million. we cut the travel time from 120 minutes, two hours to 90 minutes. we increased ridership from 900,000 to 1.2 million. if we had high-speed rail in the northeast corridor, you could end the shuttles, the air shuttles. it would do so much for tarmac waiting time to get rid of those shuttles. we ought to be doing this. it ought to be our first big infrastructure bank 3p partnership. you'd have not only the japanese people, but you'd have a lot of bidders from the private sector. i think we all agree with that. the private sector would be happy to come in and bid for that. >> i would just note if i may

that most high-speed rail lines in the world don't make money, and the northeast corridor, you know, absolutely passenger rail probably makes sense. the problem is the federal government gets heavily involved in funding high-speed rail in the northeast corridor. every state in the union's going to want federal money for their own high-speed rail lines true areas that make, where it makes a lot less sense. so this is the problem with federal involvement is that there's always the political problem that people want the money shared around, and yet, you know, customer demand wise, high-speed rail may only make sense in some areas like, you know, the the boston to washington -- >> well, the seller makes money, but that's the job of the infrastructure bank. you insulate the infrastructure bank from political pressure like the brac commission which by and large works pretty well. philadelphia's been the unfortunate negative recipient of a lot of brac so i know it works pretty rell well. [laughter] you insulate it, and you have

those decisions made on a cost benefit analysis. he's absolutely right. the northeast corpser the is the first be project -- corridor is the first project we should try. then maybe we examine california to oregon and see if that would make money, and then we examine the midwest and see be that would make money. everyone knows if the seller makes money as a stand-alone, you know high-speed rail would make money. >> all right, one last answer here. >> and we need to think differently about the partnerships. the japanese examples are great because it's not just the rail line, it's real estate deals. and be tokyo train station, three million passengers a day, whatever it is, that's also a real estate deal also owned by the railroad companies. we've got to get beyond just thinking about these as individual infrastructure projects. >> thank you. that's a great way to end. i want to thank our witnesses. excellent job. we had great attendance once again at this hearing, and i know there is a lot of work that needs to be done. we have people right up here including representative delaney

and senator warner and others who are devoted to getting something done on the infrastructure bank part of this. but as we've discussed with governor rendell, there's also other things we need to do with bonding and other things that i think could be very positive. so we are excited to move ahead with this, and i hope it'll be one of our top bipartisan efforts in the coming year. it should be, and it will be. thank you very much, and the record will stay open for the next two weeks, and the hearing is adjourned. [inaudible conversations] [inaudible conversations]

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>> here are some programs to look out for this weekend: the 2012 rose about reading festival. whether president roosevelt's policies and legacy, the entire event will rear tonight starting at midnight and tomorrow at 3:30 a program with kevin malware and rich white on u.s. special forces capture of shade rivera. at 6:00 to to recent reports of the city of detroit filing bankruptcy we bring you a collection of books on american