competition between commands now. i want to show that i'm better than the other command and i'm getting the results better. go to forcecom's website. 'll have by installation the results of their individual audits of their documents whether they turn them in or not and whether their u right or wrong. >> not to beat a dead horse, once you start doing it, they'll be accountable. secretary hill, you're talking about as an example, ten units that haven't reported their cash or their budget tear outlays, whatever. how can that be? tell me about that? coming from the private sector, every division is report what their cash position is. how does that -- how are those units not accountable for that information? >> well, they are accountable but if it doesn't happen on time

that we can report to the treasury, got to do something. we're down to less than 1% in most cases for those journal voucher entries and it's got to get lower than that. so. >> i understand that -- >> i understand the accounting part has to account for something. how is the management structure holding those individuals accountable that aren't provides pretty basic information? >> one of the benefits of the audit is it's raising the visibility to our commanders. i doubt they knew that these things existed. some of them still don't. they will if they flunk the audit as bob speer said and my ol colleagues have said, this has become part of the readiness of the military. the vice chiefs are asking questions of their commanders. and if we're having trouble with journal vouchers, they'll be asking questions of them. do any of you want to add to this? >> you're making my point. you should go ahead and audit. >> we're ready to go. >> everything i'm seeing is we're just talking about getting audit ready. >> it's a milestone on the road

and no more than that. it's a milestone i believe we have to meet. if we don't they will come in and as jamie said, give us the same-day disclaimer and if it's a firm fixed-price contract we'll pay a lot of money. you should ask this question that we do need to be audit ready. >> and there's one other area i want to talk about. people have mentioned how disruptive government shutdowns and what the dysfunction is in terms of being able to obtain an audit. i understand the disruption and i understand how incredibly difficult is it to manage in those circumstances. the vat sector there's all types of disruptions and you're still able to audit your results. specifically, why does that really affect your ability to get an audit unless it's a personnel issue? >> it slowed it down wrap no more than that no less. we furloughed 650,000 people with their paychecks and the time they had was affected. we have to work beyond it and i

hope it never happens again. we need to work hard and the congress and the president to make sure it doesn't. >> thank you, mr. chairman. >> thank you. and thanks for all your questions. >> that's just one quick question and a brief response from each of you. we've heard today from secretary hill that audits are not free. they can be pretty expensive in some cases. don't want to waste money on an audit, i understand that. for each of our witnesses, starting with you, secretary hill, do you have the resources in this fiscal year, that's 2014, the resources in this fiscal year, 2014. and in the fiscal year 2015 budget request, from the administration. to actually conduct an audit? and -- >> are they adequate? >> yes, i believe they are. we worked hard to do so. i'll let my colleagues answer but there's a sizable amount of money set aside over the whole five-year period. fiscal 15 through 19, the

current year's defense plan to carry out the program. that's never been the case in the first 15 years. i think they are but i'll let my colleagues respond. >> adequate. we fenced them in to make sure we didn't touch the funds we needed in '15 to make sure we can continue on as part of our priority. >> thank you. >> yes, sir. i would agree. department of navy is in the same place. >> correct. >> doctor? >> i'd agree as well. we're setting aside fy 15 funds since the you had tors came on station in fy 15 and for fy 14 we have adequate funds to compare. >> the part i'm concerned about is the defense agencies. we haven't necessarily solved that problem fully and we're working it. >> one final question. bob, your service has been remarkability and i appreciate it. i'm concerned that who replaces you should have the management

experience, the educational experience. the financial auditing experience to actually lead this organization. we have a good nominee but he doesn't have any of those qualifications. your ideal replacement, not in terms of individuals, but you're ideal replacement, what qualifications would they have? >> first and foremost, i would want somebody that's a leader. i think mike mccord will do that. u want somebody that will know the defense financial management and federal financial management and it's not just audit. we have to worry about budget, too. that's part of the job of the undersecretary of defense comptroller. i think mike knows that well. we've got people who, he'll need help and i think he'd agree with it on the details of audit and accounting and all these acronyms. i'm not an accountant or an auditor but we have good people. one of them is sitting behind

me. my deafity chief financial officer who know this is well. he'll be there to help mike and he'll do a great job if he's confirmed. 134 >> before we head to the next panel, two things. mr. hill, thank you. the -- i would say for the bork that's being done, we're appreciative of that and we don't mean to appear to be unappreciative but for those of you at refusal speed we're going to keep going and get this airplane in the air and we just seen from dhs again and again what a great epg they provide for all of us including -- if you're not drilling down with them they can be a great resource. use them. i'm sure they would be happy to help. there's going to be a number of questions that we have follow-up questions to ask of you we ask that you respond to those in a timely way. thank you and good day.

>> mr. chairman, i'll do our darnest to stay. i want to tell you i have fairly frequent contact with the dod g and my deputy chief financial officer has regular contact with jao and the ig and i talked to them several times on this topic but i'll stay as long as i can and my colleagues will do the same. >> all right. we appreciate that, thank you. >> first panel is excused. our second panel will come on, please.

have welcome. we're happy and it's nice to see you again and i'm not going to give you an introduction because we're running way late. i want to make sure we have time to hear from you and ask questions so i'm going to do that all for the record. glad to see you and thank you for helping us as we deal with these difficult and challenging issues. you can lead off. >> yes, sir. thank you, chairman and distinguished members of the committee. thank you for the opportunity to appear before you today to

discuss the office of the inspector general and department of defense's effortion to reach audit deadlines of 2014 and 2017. hearing such of this are an important means of providing visibility to the congress, department and tennessee of the efforts to achieve financial accountability. these efforts, however, have been under way at the department for over 20 years. and in my prepared statement which i request be submitted for the record, i discuss areas required continued focus. >> you say both of your statements your entire statement will be made part of the record so feel free to summarize. >> to emphasize in that statement i emphasize the data quality, timeliness and enterprise -- enterprise resource planning systems are critical. it's also -- i would also like to highlight some achievements we observed in the last few years achieving auditable financial statements a team effort. we'll achieve extensive cooperation among all stakeholders. while the department has

multiple -- the ultimate responsibility to provide auditable financial statements, the office of inspector general under the ig act is responsible for providing independent and objective oversight of the department's efforts to improve the financial management and provide an opinion on the financial statements. independent accounting firms provide for support and work under the supervision of my office as the department produces auditable financial statements and the government accountability office will ultimately rely on the work of my office to develop its opinion about the financial statements of the united states. transforming the financial management of the department has proven to be a complex and difficult undertaking. the department senior leadership have recognized some of the difficulties related to the department's financial management. the problems with internal control and related financial systems. for example, to work around difficulties in obtaining adequate supporting documentation prior to balances the department has asserted

audit readiness on its schedule of budgetary activity versus a full statement of budgetary resources. while this incremental approach is a step forward it does not meet the statutory requirements because the schedule is a subset of the information required by the statement of the budgetary resources. through our oversight role we'll continue to work with the department and gao on moving toward auditable financial statements. the department must maintain its commitment and may actually need to increase its efforts to meet the 2014 and '17 deadlines. the department's efforts not be an exercise to get a clean opinion. rather it needs to be about obtaining quality data that can be relied upon to make critical decisions regarding the operations of the department. this kwon clouds my opening rooirks and i look forward to answering questions. thank you. >> thank you, sir. >> wimr. chairman, ranking members, thank you for the opportunity to discuss the challengetion of the department

of defense and improving its financial accountable. given the federal government's fiscal challenges it's more important than ever that kopg, the administration and federal managers have reliable, useful and timely financial and performance information to help ensure fiscal responsibility and demonstrate accountability, particularly for the government's largest department. today, i will first discuss the effects of the wairknesses of dodd management and operations and their actions to improve their financial management and aaudit results. my testimony is based on the past and ongoing work at dod. dod faces continuing challenges and establishing sound financial management processes and operations that can routinely generate timely, complete and reliable financial and other sets of information for day-to-day decisionmaking. operational impact of these weakness ps include first, dodd's inability to improperly account for and report their

total assets which are about 33% of the federal government's reported total o'sets including inventory of $254 billion and promptly, an approximate value of $1.3 trillion. second, its inability to accurately estimate the extent of its improper payments because of a flawed estimating methodology that limits corrective action. finally, reports of the violations, 75 violations reported for fiscal year 2007 through fiscal year 2012 total nearly $1.1 billion. to correct the financial management weaknesses, dodd has numerous efforts under way. congress has played a major role through its over site and mandates. important progress ahas been made but key channels remain. for example, in august of 2013, we reported that dod's audit readiness efforts would benefit from the strategy to help them

make decisions about assessing the risk and allocating resources, and taking actions under conditions of uncertaintity. dod identified several risk be they were not comprehensive. without the risk management, dod is not achieving its audit readiness goals. dod is monitoring its component agencies progress toward readiness as of september 0th, 2014 date, for asserting readiness on the statement of budget resourcees approaches. dod emphasized acertaining other readiness over ensuring the effectiveness of the processes, systems and controls. nevertheless, dod reports milestone dates that have slipped and timelines that have compressed making it necessary for other readiness will be completed by september of 2014. ongoing wark at the army illustrate this is issue. while the army asserted audit

readiness on various unition of its sbr, preliminary results show from our ongoing review indicate that the army did not complete key tasks to ensure that their sbr will be audi ready as planned. the deficiencies and gaps in army demonstrate a focus on meeting schedule milestone dates and asserting audit readiness before completing actions to resolve extensive control deficiencies. dod has identified contract paid as a key element of sbr. the service providers responsible for disbursing nearly $200 billion annually and the department's contract pay asserted that its processes, systems and controls over contract pay are audit ready. however, preliminary results from our ongoing assessments indicate that d-fast has numerous deficiencies that have not been remediated. until d-fast corrects the weaknesses its ability to process, record and maintain accurate and reliable contract

transaction data is questionable. timeframes are important for measuring progress. dod must not lose sight of its ultimate goal of implementing financial reform. recording business information, duty has had several multifunctional systems. critical to their improvement efforts. we found deficiencies like data quality, data conversion. system interface and training that affects their capability to perform essential business functions. de-fast personnel who are major users of the systems have reported different qualities in using the day-to-day activities. without the spended capability of these systems and trained users, duties, goals of establishing effective financial management operations and becoming audi ready jeopardized. the commitment of dod leadership continues to be encouraging but

implementation of the audit readiness strategy is an ambitious undertaking that would require the commitment and resources and efforts at all levels and components and across all dod financial and business operations such as those in the high-risk functional areas of contract management, supply chain management, support infrastructure management and weapon systems acquisition. to support this committee's oversight, jao h continue to monitor and report what the department financial management improvement efforts. many chairman this concludes my prepared statement. i'll be happy to answer any prepared questions others may have into thank you. >> my colleagues have given me a quote more than a few times, dr. allen binder, the vice chairman of the federal reserve for a number of years while allen greenspan was chairman and now he's teaching economics at princeton. i asked him once at a committee

he testified on deficit reduction and the question before them was -- what do you do, making additional progress in deficit reduction. the health care costs. medicare and medicaid eating us alive making our companies uncompetitive given how much we spend and how relatively little the japanese spend. so i asked, this is a big problem. a 800 pound gorilla in the room, what should we do and he said -- find out what works. and do more of that. that's all he said. find out what doesn't work and do less of o'that and he said, yup. for the folks who have been before us today, the department of defense, i said, i'll just keep saying it. we have an idea what worked because we've seen the department of homeland security go through this successfully. i asked him repeatedly, the

department of homeland security. some answered and some didn't what can the department of defense take for aurks? and, say, and imtheir opportunity to get to refusal speed and carry on beyond that. you want to go first, please? >> senator, i'm somewhat familiar with the department of homeland security. one of the key elements is leadership. while the dod has leadership at the highest level, i think it's very important for the key tenants of accountability and audit readiness to go down to the second layer and become institutionalized. that's what the ek was as dhs where it wasn't only at the top levels but it was institutionalized as the components did all the heavy lifting. >> thank you. >> yes, i would agree with that. if the issue that i see is someone said this earlier this morning but driving

accountability down oh through the ranks, i think there's no question that there's a commitment at the executive and leadership levels but i think making it apparent that readily accessible, believable numbers are important day-to-day in running a business operation or running a military unit. i think it's driving that accountability down and driving that understanding down. >> okay. i think a lot about culture and what you're saying as -- is it really a culture change? the three things we need to do to continue -- the deficit reduction and this is really from both commission. it saves money and it -- two, tax reform is low and it generates the revenues and number three, literally to look at everything we do and say how do we get a better result for less money. that's a culture change. they push down to the others.

we're an over site committee as you know. we're an oversight committee for the whole government. my next question this will be help us be a guided missile as opposed to an unguided missile. we talked about areas where progress is being made. make us as we proceed doing our oversight mission, going forward as we get the approach of september 14 and beyond. make us a guided missile and some of the stuff you heard and the testimony you heard and you don't feel entirely comfortable with, it should raise caution flag ares for us. direct us to that, if you will. direct it to those points of concern, please. >> i think the biggest concern that i would have and it's an ongoing concern is the erp's. the enterprise planning systems. the reliability of data or the unreliability of data certainly complicates the audit process

and makes it extraordinarily difficult to get done. if we can't take information from systems on its face value, if we have to spend and excessive amount of time verifying data, that in many cases, makes the audits undoable. so the continued focus by not just the financial leadership but the operating leadership. the i.t. leadership of the department on implements the systems and the systems become operationally accurate, is critical. so i think it's the focus has to be on improvement and i.t. capabilities. not just financial management.

>> it will take about two years to get it done and we're running against the time for that to happen. >> thank you. >> all right. >> three years ago, i think in 2011, we chaired a similar hearing and we asked whether the department of defense would meet congressionally-mandated goals of being able to audit all the finances by 2017. sit likely that they'll meet the

201 audit goal and what should the department do to increase the chances of meeting those audit deadlines? i think he talked the. >> it's unlikely that dod will meet the auditability goal for 2014 on the clete statement of budget resources. for the reason that i mentioned earlier on there's not enough time to make corrective action to have an efficient audit of the entire sbr like the nda asked for. some of these time slipages are also going to impact the 2017 data as well. more importantly, like he mepgsed, the system impbs are going to get in the way if not implements successfully before then and to the one is the workforce issue. they have to be trained and be ready to support an audit. >> thank you. briefly? >> i would agree. it's going to be difficult. i wouldn't put -- i have to look back and i think it's obvious

that the department can it will be a difficult road over the in effect three years with a lot of attention to system's improvement and that's the unpredictable part. >> i have to make sure we have the right resource. i may have to slip out of here. my thanks to you very much. this was a very good hearing. >> the program that the air force cancelled that i called for them to cancel 2 1/2 years before they cancelled it. and let's talk about

accountability. >> you all were talking about these erp programs are going to be big. if they have complications it will markedly impact things. >> was anybody held accountable? we settled for $150 million feather contract. that says we didn't know what we wanted and we were not managing the project right and we should have had the contract paying us. what does gao see in terms of that as i prime example how not to do it? >> we have not done a follow-up study on the system you had mentioned. one of the lessons learned is

not to have too big a system's be put out there in one increment. you should implement them in smul smaller chunks at their various gates which are tried and tested before you move forward. that was one of the key elements. >> continuous improvement? >> absolutely. that was one of the elements that was lacking based on the study that we have done several years ago, they were not following best practices on cost and scheduling. that's an early indicator that there were problems. >> i'm not familiar specifically with the air force situation but i can tell you that we have done a number of audits around the implementation and continue to do audits around the implementation and it seems to me that the -- what we're trying to do is -- what the department is trying to do is there are over 140 feeder systems that connect to these erp systems. and there seems often to be a

reluctance in changing those entry level systems because that creates a ripple effect of significant amounts of training and volatility of record keeping. so i think what we've got to do is learn from the -- one other thing i would mention is that the -- a lot of the core systems or the legacy systems, 140 systems that are out there, were really built for purposes other than financial management. and i think that's sort of the core take-away that i've learned in the seven months that i've been the ig. those systems were built to account for people and account for things, not to always account for dollars. so what we're doing now with these erp systems is essentially trying to build an i.t. structure that's also accounting for dollars. not just the movement of people and equipment like the department is historically trying to manage. >> some of the times when we bring in a big system what i've noticed especially in the defense department, not

exclusively, is we modify a ven system we're buying, to fit our needs rather than modify as much as you said, general rymer, modify the system in so once you modify a ven system, you create holes, defects and problems. and so the decision-making process and the knowledge about how to buy i.t., buying i.t. is hard. the other thing is. you got to really know what you want before you order it. we don't really know what we want. we place a contract and then all of the sudden we're changing what our needs are during the contract. >> based on the declaration by second panetta back in 2011, the

timelines were compressed. the timelines before the declaration was made were somewhat beyond 2014, so they were pulled back. one of the timelines that i want to highlight, we mentioned the air force timeline. that's in the first quarter of 2015 for so the point i was getting at is it's a bit questionable with compressed timelines and timelines getting extended, whether or not the work is going to be done to nick the corrective actions to reach u did it readiness.

>> do you agree this is an insignificant level? >> i don't think it's an insignificant level in nf any ada violation is significant in and of itself? what are the primary causes of their violations? >> it's a -- i would say fundamentally it's probably using -- well, the basic ada violation is using money that's not appropriate for a particular use. >> are some of the ada violations that have been seener erroneous? in other words, bad reporting that says they spent money on something that wasn't appropriated? in other words, are they false ada violations? >> i'm not aware of intentional violations. >> just accidental. >> in other words. >> the wrong -- >> i would say that's probably the nature of this. >> so, it's, again, financial

integrity. and accounting systems. that are leading to this. >> the systems -- they could be new systems. >> you all talked about this. can you, mr. rymer, can you talk to me about which erp's right now you think are most at risk of being unable to support an audit. >> i would have to give you that. i'll be may pi to -- >> yes, sir, i will. >> i made the point earlier. with secretary hail. hagel had on his desk every day once a week at least, where they are on their timelinetion. where they are on their budgets. where they are on terms of

changes in requirements. if you really want to manage that and it's not for him to know if everybody else works together to prepare that, they're going to know it and fix it so he doesn't have to say anything. so it's this upward mobility of financial information. that's why you want it. i mean -- who cares if we have audit if you have great financial systems and you know they're right, the audit is a confirming nature. the whole purpose of the audit is to change the financial system within the dod so they have a system they can utilize to actually hone and improve and make more efficient, everything that they do. would you agree with that? >> yes, sir, i would. i spent a good deal of my career, early career, in the banking industry. and i can tell you that certainly, that industry, i remember every day getting a balance sheet for the -- i knew exactly where my business was every morning. and i think we need to get to the level in the department

where the available and financial information is used in the decisionmaking process more often than it is now and it's not used as much simply because it's not there at someone's fingertips. >> you've reported that without fully they approximatelied erp's the d ochod will be unautomobil proviews reliable financial data without resorting to heroic efforts such as data call. can you explain what these manual work report rounds would look like and why they are not ideal? and did the navy have any financial work-arounds in their last audit? >> i would say, sir, that the inability to -- for an auditor to request and the data be provided in a timely fashion is a red flag in and of itself.

given the fact we were working on a schedule of budge stir activity as opposed to statement of budgetary resources i don't think we really made that distinction well enough today. although it's been talked about. but i'd like to point out that statement of budgetary resources means statement means that it's something management is asserting. and it is auditable. the schedule of budgetary activity is just a schedule. some of the difficulty we had with the marine corp audit was we were -- we were auditing a schedule and we were not auditing a statement. meaning the starting points were difficult to establish. meaning the in some cases the reliability is difficult. what it really means, sir, because we were working on a schedule of budgetary activity had not o&b requirements. there are 10 units that would trigger the 15th audit report date.

certainly, the marine corp is not a reportable unit and the schedule of budgetary activity is not a report -- not a report that has to be set up. so what we did was to essentially to show the marine corp what it takes to finish the race. we essentially left the audit opened for what ill is an extraordinarily long amount of time to allow them to get the data to learn where the data was and how difficult it was to get. >> work-arounds? >> yes. because the systems wouldn't provide data as we needed it, essentially to spend a great deal of time researching and developing. >> what that taught them was, here's what you're going to have to do to perform. >> yes, sir. >> here's where the problems are and here's where we're going to direct our efforts, right? >> yes, sir. >> going back to senator johnson. do the audit to find out what it is and that's what you did with the navy, correct? >> with the marine corp. >> i mean, can marines.

>> yes, sir. >> my background is in manufacturing. you have to have a process to control to produce a good product. >> i'm talking about up front to maintain and keep the process under control. in my business, the most significant thing we ever did in terms of improving quality and maintaining quality is we forced -- we required every operator to attach their initials to every role of plastic they produced. it was amazing how that worked

in terms of quality product. that's the point i'm trying to drive in terms of what is the level of accountability. whz the report that's generated by audit ready? how do you hold anybody accountable for not being audit ready? who is being held accountable? at what levels? general wherymer. >> i spent a good deal of time in the active components of the army so i can speak to some of this first hand. when at the lowest level data is entered, whether it's financial day the or payroll data, when it's entered it should be complete and commanders and first-level supervisors should look at this to make sure it's complete. oftentimes it's not. we may see a number not acompanied by a description. >> that's a detail problem.

i'm stalking about the overall of how to get the management information system up and running and be able to use the audit as a tool. when we talk about audit ready how do we hold anybody accountable for not being audit ready other than the secretary of defense? >> it has to become a personnel process. it has to be built into the performance expectations of managers. >> is there a report that's being generated that your unit your service is not audit-ready? >> nothing other, sir, than the disclaimers that we do when we are -- >> precisely. that's my point about what an audit would bring. it's a report that holds people accountable so you can work through the process to actually squeeze efficiencies out of the process. prevent these problems at the deficiency act. you need the audit. the sooner we do it the better

from my standpoint. let's talk about those reportable units. in the vat sector and that's my background. you get companies that go through an audit. they get bought by larger organizations and we don't necessarily throw out that audit firm. that audit firm continues to audit that unit. you can have an assembly of hundreds of individual divisions all being audited or back held accountable. in the end, you need information thr flowing out to the center is the books can be audited as well. that's what we're talking about in terms of 140 different feedable systems in an erp system which by the way, i've seen whether the mrp or erp systems be a disaster in the vat sector. it's incred -- the private sector. it's incredibly 2ki6 consult unless you understand exactly what information is needed to

feed the overall system. where are we breaking down in terms of the component parts through the department of defense to make this a manageable process because it's being going on for 20 years? it doesn't seem like it's a manageable process. is that part of the problem? last year in the department of defense -- >> how many of those do you think there should be? should it be 12, 100? 1,000? >> can i tell you what my advice would be? about 1,000. >> 1,000 sounds like a good number, sir. >> do you understand my point? >> yes, sir, i do. >> is that after base? >> does seem reasonable to you?

>> no, sir. i mean, they are incredibly expensive and we need to make sure they're big enough that there's a bang for the buck. >> how much are we spending trying to get audit ready? get my drift? we're spending all kinds of time and energy to get this audit readiness to do what? where is the accountability? when are we going to get the audit? i would rather spend money on the audit and realize what a disaster each particular unit is or how successful a particular unit is. then he can lift up the best practice and say, look at the marines. they're doing it. army, why aren't you doing it? even within the army, the different divisions. this commander over here, he can do it, why can't you? why aren't we utilizing this as a real management tool? again, getting back to the component parts, what would be just think about it.

should we be talking about hundreds of thousands of -- what would be the appropriate level to have individual audits and drive that accountability? >> one thing. >> does that person actually have control over the numbers? look at it organizationally. is it ten? ten is the o&b requirement. i think ten units, if i'm not mistaken and i think that's probably too few but frankly we're going a lot more than ten but not necessarily financial statement audits. i would explain that there's a lot of financial auditing that are not necessarily financial audit attestation audits that are going on. so there's financial accountability beyond just the financial statement audits.

how can we break this up into the accountable kpoeb nent parts and utilize that process in terms of figuring out where the audit should occur and how will the audits feed into the ten big omb audits and in the end, the overall audit for the defense department? get off this -- we're not going to conduct an audit until we know we're going to have a clean audit. and instead, eyes ause audit asl tool. thank you and thank the witnesses. >> thank you all again. i've got a lot of questions to ask but i'm not going to ask. i'm going to let you eat lunch. but the record will stay opened for a certain amount of time. 15 days until may 28th. and i would very much appreciate responses of questions, especially both of you. and we'll from there in september and october on how it's going. the other thing that i think is really important and, general, i

hope you'll do this. i know gao will look at this. this erp is a big deal. if it flubs, everything flubs. and so that ought to be right on the top target list. >> yes, sir. there's quite a bit of work going on. >> thank you both for your service. this meeting is adjourned.

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with live coverage of the ufrs house on c-span and the senate on c-span2, here on c-span3 we compliment the coverage by showing you the most relevant congressional hearings and public affairs events. on weekend, c-span3 is the home to american history tv with programs that tell our nation's story including the civil war's 150th anniversary. visiting battlefields and key events. american artifacts, touring museums and historic sites to discover what artifacts reveal about america's past. the best-known american history writers. the presidency and looking at

the policies and legacies of our nation's commander and chief. lecturers in history with top college professors delves into america's past. and "real america" government and educational films from the 1930's through the '70s. c-span3 created by cable tv and funded by your local cable tore satellite provider. watch us in hd. like us on facebook reason follow us on twitter. is there a lack of funding for infrastructure repairs across the nation? a senate transportation subcommittee looked at the u.s. transit system recently. the head of the federal transit administration told senators that right now, there's an 86 billion backlog in repairs. senators also heard local perspectives from pennsylvania, massachusetts, and dallas. unless congress acts, the highway trust fund which finances highway, bridge and transit projects will run out of money later this summer. this hearing is 1:15.

ghoom with this hearing of the subcommittee on housing transportation and community development is called to order. let me thank our witnesses for being here today to discuss what i believe is one of the most important challenges in our federal transportation program. investing in our transportation infrastructure and supporting 10 billion passenger trips every year, is essential to our mobility, our economic development, air quality and overall quality of life and our ability to create jobs and our global competitors. benefits of investing are clear.

the fact is, we're not investing enough. in 2009, a federal transit administration report found that of the seven largest rail systems, including new jersey transit, transit and the systems represented by two of our witnesses today, accept ta and mta, they had a $50 billion backlog in back projects, $50 billion just to make sure the systems were in reasonably good condition. not state of the art, but adequate. frankly, to me, it's simply unacceptable. investing in our transit systems is not a luxury, it's a necessity. it's a win, win, win that creates good, family wage jobs that make our infrastructure safer, more efficient, reliable and competitive. my home state of new jersey received an alarming wake-up call. the president of amtrak

announced within 20 years one or both of the tunnels under the hudson river between new jersey and new york will need to be shut down. shutting down the hudson tunnels is unthinkable and not investing in keeping them open. these tunnels are over 100 years old. to make matters worse, they were covered with corrosive fl floodwaters from hurricane sandy. according to amtrak, if one of these tunnels were to close, thel they would have to reduce from 26 trains per hour to six per hour. for those of you not familiar with the commute from new jersey to manhattan, let me tell you, two transit trains an hour is not going to cut it. we go from having the project

needlessly canceled, which would have built a new hudson tunnel to a future of closed tunnels and six trains an hour in the heart of the northeast corridor. that's simply unthinkable. losing the hudson tunnels is not something our region can work around. there's no detour. there's no extra capacity for the transit commuters to fall back on. we saw it during sandy when our transit system was inundated. we saw it after 9/11 when people used ferryboats to travel in new jersey to manhattan. the nation and new jersey is simply stuck in gridlock. losing one or both of the hudson tunnels means nothing less than the crippling of the region and send as terrible signal around the world about american competitiveness in the global economy, simply because we are unwilling to make the necessary

investments in our transit system. the tunnels are the starkest example of failure to invest, but every city and town across the country has their own examples with large rail, small bus systems. our transit needs $86 billion projected to grow to $142 billion by 2030 if we don't begin to invest today. at the end of the day, we all understand investing in our infrastructure is not a cheap proposition or politically easy in the current atmosphere. the cost is much, much higher. so, i look forward to hearing the perspective of our witnesses today in working with my colleagues on this committee and a member of the finance committee to have the funding mechanisms to address these challenges. let me introduce the first witness of our first panel. mr. dorval carter.

in addition to his work, he served in the senior position of the chicago transit authority, a system with good repair. i look forward to hearing his testimony, which comes with a great depth and breadth of knowledge. mr. carter, your full statement will be included in the record. i ask you to try to summarize it in five minutes or so to get it into a dialogue. with that, the floor is yours. >> thank you chairman menendez and thank you for inviting me here today to discuss the deficit in transportation infrastructure. as well as to highlight the obama administration plan to bring the bus systems and facilities into a great repair is part of the grow america act. this is a critical time for transit. ridership is at the highest level in generations and it's likely to continue as the u.s.

population is expected to increase to 400 million by 2050. while growing proportionately older and more urban. the caution i bring today is that the foundation we build on is already fracturing. let's be clear. transit remains one of the safest ways to travel. infrastructure carries hidden cost that we cannot and should not ignore. our performance report finds the backlog and transit maintenance stands at $86 billion, a 10% increase since 2010. we will need $2.5 billion more every year from all sources just to maintain the status quo. today, it's state and local governments taking the burden taking on the cost of annual spending to grow the transit systems. the biggest challenge is the rail system which account for 63% of the repair backlog with

most of that due to assets like rail stations, power, substations and more. they have a direct impact on riders. they undermine the resiliency of the transit systems and better spent on time and expansion. that's why a state of good repair is fundmental to everything we do at fta. you are going to get a two-for-one opportunity. not only do i speak for the administration, but someone who has worked on the ground with a transit agency to keep systems in a good state of repair. as you indicated, mr. chairman, i spent half my career in chicago which operates one of the oldest rail systems in the country. part of my jobs were procurement and warehousing of that agency. from that experience, i can tell you the older a system gets, the more challenging the simplest of

tasks becomes. for instance, where do you find parts for 100-year-old equipment. no one makes them anymore, you can't get them off the shelf. cannibalize existing prospects of get them yourself. when hurricane sandy damaged the commuter rail system that operates between new jersey and new york, chicago was one of the few places they could turn to for replacement parts. we cannot keep transit systems safe and reliable with the craigslist approach. instead, we need to make the right investments to get ahead of the problem and keep us there so we are not always a step behind. that means striking a responsible balance between investing and new capital construction and preserving and modernizing the existing infrastructure. one of the best tools we have is the transit asset planning tool. we are grateful for making it a

requirement for part of map 21. with better base planning, we can get a more accurate picture of true need enabling them to allocate limited resources effectively system wide. we use transit asset management at cta. it helped us prioritize and support the public funding. it provided a road map so federal, state and local funding partners knew we had a concrete plan to use resources efficie efficiently and wisely. we are looking to bring them nationwide. the latest conditions make the case for investment. the administration put forth a plan that builds on investments made through d.o.t. programs and the american recovery and investment act to address the backlog. the grow america act is the right plan to keep transits safe

and reliable. icon collude me testimony and will be happy to answer any questions we have. >> you didn't even use your five minutes. let me start off with one of the critical questions before the congress as the funding level of the transportation reauthorization. if federal funding remains flat in the coming years, do you believe that we can make any progress toward eliminating the $86 billion backlog? >> no, sir, i do not. our condition performance report indicated we need at least an additional $2.5 billion a year from all sources just to maintain the existing backlog. in order to make any sort of a dent in that backlog, you need somewhere around the neighborhood of $18.5 billion over a four-year period to make it happen. so, in order to address this

problem, we have to make significant investments in the transit infrastructure and the president proposed ways we think we can do that. >> it does not only meet the backlog challenge, it will accumulate. >> that's correct. >> now, in your testimony, you speak to the excellent work that fta has done for years trying to bring the state of good repair backlog and a formula based state of good repair program under map 21. i agree with your assessment of the importance of this program, but i know some have concerns about the funding increase given many map 21 to the state of good repair. can you speak to the need for having a strong federal state of good repair system? >> absolutely. if you look at the overall percentages for the contributions that the federal government makes to the issue of good repair, we only provide 40%

of the total contribution. the remaining 60% come from our state and local governmental partners. it is critical for all of us, federal, state and local to provide a level of funding that is both reliable and sustainable over an extended period of time to address the backlog. the stopping and starting makes it difficult for transit agencies big and small to properly plan for and address their capital backlog needs. >> are there certain types of modes or transit systems driving the current backlog? >> the rail systems make up 60% of the backlog. that's primarily due to the heavy cost of their infrastructure. as you can imagine, replacing power substations and rebuilding train stations and things of that nature is a significant cost. i couldn't want to diminish the impact this issue has on smaller systems as well. as you can imagine, to a small

operator in a rural part of the country with two or three buses. if a bus is 20 years old and maintaining the bus is difficult resulting in unreliable service and the impact of the operator is as bad as to a boston, mta or cta. >> now, in your testimony, you said something i know firsthand from my visits with port authority officials when hoboken, new jersey was inundated. they were showing me the circuit breakers that are so old they are no longer manufacturered. they had to resort to shipping things in from chicago. is that an exception? how pervasive is that throughout the system? >> i'm sure the other gms who speak after me will speak in

more detail than i can. as cta, the older transit systems like chicago, philadelphia, boston and others are dealing with the harsh reality their infrastructure is extremely old. replacing parts are difficult to finld. it's my luck we can identify scenarios like path where there was another system that was able to provide the parts on a temporary basis while they went through the basis of remanufacturing the parts they needed. >> your testimony is more people are choosing to live in urban areas where cars are less necessary, younger people less reliant on cars. those factors are leading to more transit ridership than other elements. could these increasing demands and transit systems result in the sdr backlog growing at a faster rate than the $2.5 billion increase a year that you currently project? is there any modelling going on

for the changes in calculating the backlog? >> our condition performance report is based on modelling we used to forecast what we believe the reasonable growth and transit would be over time. i think it's safe to say as demand increases, the backlog is going to be more and more of a problem. models suggest that. as we continue to address this problem, we have to deal with the reality of both the challenge of providing adequate level of funding to maintain the existing systems while dealing with the expanse needs that are required to grow the systems even more. >> finally, asset management, i think we will hear more about this from the next panel, it's one of the key changes authorized by this committee and map 21 was the creation of the transit asset management requirement. what work is being done with

transit agencies representing different sizes and models to determine best practices and create a standard that works for different types of systems. >> we are currently in a rule making process that is intended to get input from the industry as to how to approach the transit management program. we are also in the process of developing technical assistance for agencies to allow them to be in a better position to implement the requirements as well as developing tools to utilize that the federal government will provide to do the analysis for the transit management plan. it's critical that we have good, solid industry input into the process and develop a process and program that will address the various capacities and technical capacities of the agencies we have to implement it. >> senator warren? >> mr. chairman, thank you and

thank you for calling this hearing. i have questions for the next two witnesses. i'll just hold until then. >> okay. >> thank you. >> one last final question, workers rights, you know, we think about the challenges of transit systems operating and facing fiscal challenges in the state of good repair status. i also think about your testimony says nationwide almost a third of facilities used by transit agencies to house their operation staff and service their vehicles are in a marginal poor state of repair. are these facilities a threat to the health and welfare of our transit workers? >> first, i think i should be clear that we believe the systems are safe. transit is one of the safest modes of travel we have to us this day and age. we also believe strongly there are steps that need to be taken

to address the safety, not just of the general public, but the employees that work for the agencies as well. there's no question, when you are dealing with an aging infrastructure and the needs required to maintain that infrastructure, employees are going to be working in hazardous conditions that can make for an unsafe situation. there are steps they take and i know from my own experience, we focus closely at cta on making sure the operators have appropriate training, appropriate tools, the appropriate protocols in place to maximize the safety of employees when they engage in these activities. the reality is, for as long as it's going to take to fix the problem, that will require more workers to work in environments where it's a more dangerous situation than if it were in a good state of repair. >> thank you for your testimony. we look forward to continuing to be engaged with you as we develop the legislation the

committee is considering on the transit side of map 21 authorization. we appreciate your testimony. >> thank you, mr. chairman. let's hear from our three transit agencies about their work trying to maintain their systems to a state of good repair. as i call them up, i want to remind all our witnesses, their full statements will be included in the record and we ask you to summarize your statement within five minutes or so so we can enter into a dialogue with you. the first witness is mr. joseph casey, the general manager for the southeast pennsylvania transportation authority, accept ta service is important to a number of my constituents as well. i appreciate your willingness to appear before the subcommittee today. i know senator warren would like to introduce dr. beverly scott. i think this moment is a good time to do it.

>> thank you very much. it's my great pleasure to introduce dr. beverly scott of mbta and administrator for mass dot rail and tran sis. dr. scott is responsible for overseeing 15 regional transit authorities and freight and passenger rail program. dr. scott has tremendous expertise in these issues not only in massachusetts, but nationally. her career spans more than three decades and includes executive and senior leadership positions with some of the nations largest public transit systems. prior to coming to the mbta, dr. scott was chief executive officer and general manager of the metropolitan in atlanta tran sis authority, m.a.r.t.a. where she was the first woman to hold that position. general manager and chief executive officer of the

sacramento transit district, srtd and she served as the general manager of the rhode island public transit authority, ripta. she is recognized for her extraordinary leadership and thoughtful advocacy and increased investment in effective tran sis infrastructure. she is a leader in her field and named transportation innovator of change by president obama and the u.s. department of transportation for her long record of strong leadership and innovation in the transportation industry. we are very pleased to have you in massachusetts and very pleased to have you here today in washington. thank you. >> senator, thank you so much. >> thank you senator warren. sounds like our system could use a doctor. finally, the third witness is mr. gary thomas who serves as the president and executive director of the dallas rapid

transit. thank you for joining us. mr. casey, we'll start with you and move down the aisle. please try to summarize in five minutes or so, then we can get into back and forth. >> good morning. chairman menendez, senator warren, i want to thank you for the opportunity to testify in the federal role of bringing this nation's public transportation infrastructure to a state of good repair. i am joseph casey, general manager of the southeastern pennsylvania transit authority, septa. we are the sixth largest operator in the country and the largest in pennsylvania. septa provides 1.2 million passenger trips daily. it's important in the southeastern pennsylvania region. last year, americans took 10.7 billion trips on public transportation yet, at a time when ridership reaches the highest levels, the industry continues to fall behind and the investment required to bring the

transit systems to a state of good repair. according to the 2013 conditions and performance report released by the u.s. department of transportation in february, the state of good repair for transit system nationwide has risen to $86 billion. this number is projected to grow by $2.5 billion per year. the report states the total spending on state of good repair from all sources must increase $8.2 billion per year to address this backlog. the funding and operational pressures related to state of good repair are particularly acute in the large urban systems with aging rail infrastructure. infrastructure that counts for a majority of the state of good repair backlog. septa's backlog is in need of investment. the current backlog on the needs is now $5 billion, nearly 3/4 of which is concentrated in septa's

ailing infrastructure. the challenges are not unique in the old rail systems. in northeast illinois, the investment to bring chicago's regional rail systems to state of good repair would be roughly $20 billion. in georgia, the metropolitan atlanta rapid authority, marta will see their backlog grow to $7 billion by 2024 without additional state of good repair investment. in map 21, congress responded to the rail state of good repair crisis by creating a new formula grant, increase in funding for the rail transit system to invest in the state of good repair needs. on behalf of the riders in our region, i want to thank the committee in this role and making the program a reality. since 2010, i have served as chair of an informal group of the largest, oldest rail transit

system. together, carry approximately 80% of the public transportation passengers. we continue to maintain as we have since our formation in 2007 that the long term predictable and growing transit program that emphasize state of good repair in the rail transit systems that enable this nation's world class economy is not only good policy, but sound policy as well. to understand the entire cost of non-investing, we need to look beyond ridership and the broader benefits of public transit in our major, metropolitan areas. we rely on them to fuel the economics and competitiveness by connecting people to their jobs and allowing commuters to move on less congested highways ond mobility options. the nation's economy is damaged

when the major metropolitan areas cease to function. goods and people between u.s. and international destinations. maintaining the infrastructure is an established national priority and congress must preserve the government's 50 year plus commitment and preserve it in the highway trust fund. we spend too much time focusing on the cost of government infrastructure and too little time focusing on the crippling cost of not investing in infrastructure. a sort term patch on the highway trust fund, they will not address the crucial short fall in investment. if congress takes that approach, either for six months, a year or two years, transit systems will, again, be left without the appropriate funding or budget certainty needed to plan and execute infrastructure

rehabilitation projects. it's been 4 1/2 years since the last bill that provided long term investment and planning. the intervening period has been marked with uncertainty and insufficient funding growth. i urge this subcommittee and the full committee to develop a plan for a multiyear program with funding levels that increase from year to year to meet the growing needs across the country. robust and growing rail transit state of good repair and a fully funded core program that allows aging systems to sensibly accommodate ridership growth continuing to address state of good repair needs should be the centerpieces. i want to thank you for the opportunity to testify today and i look forward to answering questions you may have. >> thank you. dr. scott. >> chairman menendez, senator -- it's showing on. okay.

chairman menendez, senator warren, it's a pleasure to have the opportunity to testify this morning. for overall context the massachusetts transportation authority called the tee is the fifth largest transit provider in the united states with more than 1.3 million passenger trips per day and close to 400 million trips per year. that's across a heavy light rail bus network. we are also the oldest public transit system in the united states with a subway system that opened in 1897, the oldest in the country which still operates every day every weekday, peak period and a commuter rail network that was laid out in the 1830s, among some of the first railroads in the country. a network, which remains today, a vital link for our commonwealth, our partner stakes throughout new england and the

northeast region and the national passenger rail network along the northeast corridor. on our bus side, a critical element of our overall transit network, some of the bus facilities date back to the 20th century having been designed to serve horse drawn omni buses. achieving a good state of repair is a challenge for the team. today, we estimate our backlog of state of good repair at close to $5 billion. it is a challenge that we live every day. our customers experience with us every day and our employees work to overcome every day. speaking of our transit work force, the people infrastructure, those who plan, design, operate and maintain our systems, particularly our front line employees, it is also extremely important that work force development at all levels

is not an afterthought as we grapple with our need to achieve a state of good repair. all of this said, while we still have a long way to go indefinitely need a strong federal partner, including significantly increased investment in our transportation infrastructure, both in existing and well supported new targeted transit investments, under the leadership of governor patrick, we are making strides. through implementation of a serious transportation reform agenda including actions to bring transit employee health care and retirement benefits in line with other state agencies, the implementation of sustainable productivity and cost containment measures and the deployment of new technologies to improve the overall customer experience. on top of the transportation reform agenda, our governor proposed a way forward transportation program this year

to provide much needed increased local funding for the statewide transportation, a self-help plan, if you will, including the 15 regional transit authorities. this year, it was successful with the help of our legislature, the business and our communities a crocross the commonwealth resulting in the passage of the largest bond package for transportation as well as new investments in the commonwealth's history, including new state revenues dedicated to funding transportation. the first increase in over 20 years of the state gasoline tax. this increase is aligned with inflation to ensure the level of funding will keep pace over time. the reason i say these things is, as we stress this morning, the absolute criticality of a

strong, federal partnership, predictability of funding and significantly increased federal funding to help to turn the tide on this. i want to make it clear, we appreciate and we respect at the local level we need to step up and do our part as well. that's what you see on the part of our commonwealth. so, what i'll say is that we are -- things have certainly gotten much better, but we are continuing but we are definitely in a great need of continued support by the federal government. on the side of -- i want to take a little bit now, state of good repair, fix it first, common sense must happen. but, at the same time, we cannot wind up only looking at the whole, not the doughnut. we have to make new targeted investments for growth. so, for us, the most notable of

those projects at the federal level is our green line expansion project, which we are moving through the new starts program at this point in time and this project will, in fact, wind up for us, filling what has been a missing transit link, serving some of the most densely populated communities in the united states. right now, those communities of summerfield, medford and cambridge are only within 20% of those communities are within distance today of a rail station. when this project and prayerfully we will, in fact, hopefully receive an ffga for this project. when that's over, we will be able to provide access for what is over 50% environmental justice communities for within 75% of those communities will be within walking distance to rail, which will significantly wind up

decreasing their travel times by 65% to 75% and opening up a tremendous vista, if you will, of new job and economic development opportunities for a much needed community. so, at this point, i mean we have done everything, asset management, thank you transit administration for support. we believe we are struggling like everybody else but cutting edge in terms of asset management and moving in that direction. performance metrics, this is how we do our work. we are transparent in terms of what we consider the metrics to be in working with the public. we have also aligned what we are doing on the transportation side with critical public policies having to do with housing affordability, greening, resilience. it's not just transit for transit sake. itis about live ability overall economic competitiveness.

in conclusion, as we experience record high in growing transit ridership and increasingly aging systems, reaffirming the federal commitment and partnership with a program that has both predictability and growth is essential to making real progress to turn the tide on the state of good repair backlog. this is one that states and localities cannot successfully tackle on our own, federal partnership and investment is key. with deep respect, thank you very much. >> thank you. mr. thomas. >> thank you chairman menendez and committee members, i appreciate the opportunity to be here. we have a little bit different story to tell. we are not over 100 years old. as a matter of fact, we are just over 30 years old now. when the voters of north texas voted to dedicate a 1% sales tax in 1983 to create a

transportation agency. today, we operate bus, light rail, commuter rail, fair transit services and hov services in the north texas region covering 13 cities and 2.4 million people, providing, roughly, 107 million trips annually. i would also like to add we operate the longest light rail system in north america. so, as you can see, we have had very rapid growth, opening the first light rail segment in 1996 now operating 85 miles. later this year, we will add an additional five miles as we go to dfw airport. we will open it early and under budget. the oldest segments are only 18 years old, our state of good repair is controlled by a 20-year finance plan we adhere to. the financial plan, by policy,

ensures we balance revenues with the operational expenses, asset management and capital expansion. we are relatively young with over 15 years of asset management experience. a key component is a regularly controlled asset we do annually. every five years, we have an outside consultant come in and see where we are and if there's a course direction that needs to be changed. a more unified approach industry ride regarding the development of the asset plans holding each of us accountable for managing the assets. we are supportive of allowing the fda to implement the new policies before making policy revisions in a bill. the good news and perhaps the bad news is we have created a large appetite for transportation choices in north

texas. this, obviously, relates to where people live, where they work and we see that happening surprisingly as some people might find in north texas every day. this appetite requires not only maintaining our existing system, but growth of the system to address the fourth largest and one of the fastest growing metropolitan regions in the country. over 73% of our expenditures for the next 20 years is sdr, leaving little for growth, even though the demand is great. one of the keierre yas of need is what's happening in our core area of our system. right now, we have a hub and spoke system and the hub is a single corridor through downtown dallas. because of the growth of the system and the service we provide, the track conditions is deteriorating faster than initially anticipated.

we'll start a $45 million program later this summer, replacing over the next couple years the rail through this core area. additionally, we are planning a core capacity set or group of projects to relieve the pressure on this existing core. therefore, we are strong advocate for the core capacity program in map 21 to be preserved in the next bill. our core capacity project, as invisioned has capacity and flexibility reducing maintenance needs. a lot of new starts and projects go hand in hand with the core capacity as well as state of good repair projects. mr. chairman, in conclusion, in order to continue to provide transportation choices for north texas, we desperately need a long term, fully funded transportation bill providing stability and predictability for our agency and more importantly for our customers.

we applaud the six year term and the highway bill and the funding levels in the grow america legislation. i hope this committee would consider both of those and consider the recommendation and merge these together resulting in a six year fully funded bill for transit of $104 billion. of course, where public transit goes, community grows. on behalf of our board of directors, our employees and million ofs customers thank you for this opportunity today. i look forward to answering any questions. >> thank you all for your testimony. let me first start with a couple yes or noes, if we can. d.o.t.s conditions and performance report tells us that if recent investment levels are maintained by 2030, the nation's transit system will be facing

$142 billion in deferred system preservation, i underline preservation. seems we have work to do. by a simple yes or no, does anyone believe the current funding levels are enough to help you achieve a good state of repair? start off with you, mr. casey? put your microphones on while doing this i would appreciate it. >> they were insufficient. >> woefully insufficient. >> no, sir. >> if federal funding remains flat, does anyone believe or is it a possibility, i have heard, dr. scott your temperature about the commonwealth, if we remain flat, additional state and local funding alone can cover the cost of paying down the backlog. mr. casey? >> no. i will say last year the pennsylvania commonwealth passed the transportation bill. it was half of what our needs

are going forward to address the state of good repair. so, no, the state actually did their share, i think, but i think the federal government needs to step up and do more. >> dr. scott? >> same, sir. not posz blg. >> we have a large 1% sales tax. it is not nearly enough to do what we need to do as we move forward. >> mr. casey, your testimony states state of good repair for large urban rail systems. you noted that the average age of septa is 83 years old. bridges more than 100 years olds. it's a challenging impact. what need do your riders have on a day-to-day basis? >> we were faced with shutting down a lot of the rail system prior to the bill.

from a practical standpoint, slow down the track, then you have weight restrictions, then eventually shutting down the structure. we have, with the funding we have received from the state, prior to the funding from the state, we had no bridge repairs in our capital program. now that we did get state funding, i have 18 bridges i'm addressing in the next five years. just to give you the age of some of these bridges, i'll go through. there's 18 of them. the construction was 1891, 1900, 1891, 1900, 1896, 1916, a major bridge built in 1895. it's significant because it's 922 feet. 100 feet in the air, off the ground. i can go on and on. 1876, 1854, 1834, 1906, et

cetera. we have a very old system. a lot of this was built, you know, penn central, the redding railroad that went bankrupt. little has been done to rebuild them. we were in dire straight. the state gave funding to help dig out of the hole. as i said, with 103 bridges over 100 years old, we can only address 18 of them. >> scott, you said something maybe it's not about bridges but you talked about how your passengers also face the challenges. what are some of those challenges? >> same types of things. slow orders. just inability -- >> for the record, if you don't know what a slow order is. >> a period along the stretch of the track because of the

condition of the bridge or tunnel segment, i have to really, instead of take it at the speeds it really could go through from a design standpoint, we have to slow it down. we are taking taking it to a crawl of five to ten miles per hour. you can imagine what that means in terms of the commute time for our riders. so it's -- ultimately, get to the point where you have to literally close down a segment. >> let me ask you, mr. thomas, your testimony notes d.a.r.t. is considering applying to the core capacity. i think there's often a perception the program is used by much older, heavier rail systems. can you talk about the importance of a federal core capacity program in helping a newer light rail system like d.a.r.t. maintain good repair in. >> yes, sir.

the program in our case, would be incredibly vital and important as we continue to expand our system. we are at a point now where if we add to our system, we can't get more trains through the single corridor that goes through the downtown area. before we can add anymore to our system, really, as i tell a lot of folks locally, if something happens on the corridor, a fire happened not long ago, the fire and department put their hoses across, they didn't appreciate the idea of us rolling trains across the fire hose. we had to stop service during rush hour to make sure it dealt with it. the program gives us the flexibility and capacity to do that. what we are looking at, mr. chairman is a combination of projects, understanding that on one hand we have to provide our local on the other hand, the core program is limited in size

right now. we are looking at how we can reduce the size of the project and maybe combine projects to deal with that capacity issue in our downtown area. currently, we are looking at replacing the rail in the downtown area because of the traffic, the amount of traffic we put through downtown. the trains have already worn through the hardened surface on the rail. so, it's eating through the rest of the steel very, very quickly. we are at a point now where we have got to replace that and maintain it and at the same time figure out how to expand the system to give us flexibility and capacity through downtown that we need. that program ends up being important to us as we move forward. >> i have a couple key questions, but i want to turn to my colleague, senator merkley. >> thank you very much mr. chairman and thank you to all of you. immaterial to ask a limited

question that has come from several of my transit districts. given your experience on the ground, i thought you might have insight on this. this is essentially the situation where the discretionary grant has been changed to a funding formula in the bus and bus facility program under map 21. the result for a couple transit districts is they are having great difficulty requiring replacement buses like they did before, which means they are buying fewer, therefore not getting group bus discounts and they are keeping inefficient buses that need high levels of maintenance on roots. have you experienced in your own respective realms any challenge like this? i invite any of you to answer. >> i haven't, no. >> i haven't, no. >> i have not at the t, but we

have 15 regional transit authorities that are smaller systems and while we keep a good overview from the broad commonwealth level, i can tell you it is more challenging for them. >> thank you. >> from our perspective, i think it relates to the size of the agency and the where with all and the forward planning on the larger agencies. in many cases they can accommodate that and the smaller agencies can't. the trickle of money doesn't buy a bus. you can't save it up that quickly. >> thank you for sharing that directly from the front line. i'm listening with interest through the questions my colleagues are answering. i'm going to pass this on. >> thank you. >> senator warren. >> thank you mr. chairman and senator merkley. i want to ask from a different direction, that is the economic impact of our transportation

infrastructure and the state of our transportation infrastructure. the economy turns on it. this is how people get to work. this is how businesses get their goods to market. without transportation infrastructure or a decaying transportation infrastructure, the whole economy is in trouble. dr. scott, you mentioned the green line extension. i would like, for a minute to talk about that. this is an extension of the tee that would go to one of the most densely populated areas in the country, principally to summerville, massachusetts. i was very pleased to see that the president included $100 million in his fy '15 budget to get this expansion of the tee. what i would like to do is start with this question. can you talk about the lack of basic infrastructure has done to

the economy of summerville, then we'll talk about the others. >> i will tell you what it's done is stymied it. from one standpoint, just let me talk about the jobs portion of it. it's made it much more difficult for people within the summerville area to, in fact, be able to access good employment opportunities. that's outside as well as development within summerville. it's made it more difficult for summerville to attract business in employment opportunities. what i can say is i always look at things are what they are. just with the knowledge that this project is coming and we are absolutely committed to this project, just look at the development that started to take place already. you go and, in fact, we were delighted secretary fox actually took time to come through to actually see the project at

north point, okay. right there where we have 2.2 million in terms of development office, a residential and multiuse. union square, another 2 million square feet of development. this is development that absolutely would not be taking place, they are both absolutely right there where the transit is literally at the union square, the station is actually right there where the development is. then you look at what's taking place in places like max pack. so, the growth and the development that is just being cat l catalyzed if you will. it's unbelievable. >> i have walked through. >> i know. >> it really is terrific. i was going to ask the other half. it's expensive up front to make these investments yet study

after study shows when we do, we get enormous economic impact, job growth and economic development so, i want to thank you. i want to thank you for your advocacy on behalf of the green line and your advocacy on behalf of the whole transit system. enormously valuable. >> thank you. thank you. just the american public transportation association at the gross level has done work on this. for every 1 that goes into transit, the multiplier of at least $4 comes in terms of the broader impact. not just in terms of property values and residential development and all of that, but then looking at it as well in terms of jobs creations. i have seen numbers that for every billion dollars, you are looking iing at 23,000 to 42, 0

jobs. it's the outcomes and benefits we have for people and communities. >> let me extend that over to dallas. i have been looking at the studies there as well. you know, you have amazingly gone from zero hard rail to miles and miles of a system in 30 years. i saw two recent studies by the university of north texas that estimated $4.7 billion spent between 2002 and 2013 to expand light rail in the dallas system has already generated over $7.4 billion in regional economic activity, including tens of thousands of jobs that paid in excess of $3.3 billion in salaries, wages and benefits. made the point, also in one of these studies that more than

$5.3 billion in private capital transit oriented projects have been built or under construction or planned near the dark light rail stations. so, over time, if mr. chairman will endulg me for a minute, i wanted to give you a chance, mr. thomas to talk about, based on your experience, how capital investment in rail transit can stimulate economic growth and whether or not your experience in dallas can be replicated in other places around the country. >> it's been fascinating to watch, senator, what's happened in dallas. when we first started, we were focused on getting the rail on the line. i was going to move people safely, efficiently and effectively. other people understood the value of the infrastructure and they could take advantage of it in a good way for our community.

once that started, once people started realizing, now, as we look to other areas and the expansion, it's certainly to move people. it's also the air quality opportunity as congestion mitigation opportunities and the economic development opportunities. there was a point and time when the economy got soft and we had to start talking about a delay. we literally had buses of people showing up at our board meetings to explain to us why it was not a good idea to delay the projects. in large part, it was due to not just the transportation, but the economic development that was thought about and planned. the study completed by the university of north texas was an update of a study done previously. that was a very, very narrowly tailored study. it only looked at projects on the tax roles. so public funded projects, the big hospital expansion, the new

civic center, those weren't on that list. it is pretty incredible to see not only the projects, economic development, but the rental rates are part of that study. it shows the increase of rental rates within a quarter mile of the station. we are seeing it over and over, the 4-1 benefit that the studies have shown. >> thank you. would it be all right to ask mr. casey to weigh in? >> absolutely. >> mr. casey? >> we have a very old system. in the last number of years we haven't done a lot of expansion. what we are seeing a lot of investers wanting to build facilities whether it's homes, you know, apartment buildings, et cetera around the stations and utilizing the benefits of transit for, you know, for their development because it makes it much more attractive. but, again, there's a lot of

interest in expanding the system. there's one in this particular project, one of the heaviest lines wants to extend into the former navy yard, which is attracting companies from all over the place. so there is an expansion. i want to say more and more people in the philadelphia are opting or wanting to take public transit in the last 15 years. we have had a 50% growth on the rail system. 50%. the only thing limiting us from further expansion is capacity. the number of vehicles we have on the regional rail has increased a little bit, but it's minor. the cars are filled up. parking, it's, you know, if i was able to invest, there's no question on my mind you would see easily double digit growth. >> i want to thank you all for

much. thank you for your indulgent. transportation infrastructure is powerfully important. not in an end of its. it's important because this is how we help our economy move forward. thank you mr. chairman. >> thank you. one last set of questions for the panel. if you were sitting here instead of there, and being able to write the new transit provisions of map 21 outside of the funding issue, which we collectively agree on. is there anything that you would change or add that doesn't exist in the law today? >> as far as i'm concerned, i think we need to invest more money into the transit and whether it's -- we have issues from the older properties, but the smaller operators with buses have issues. the pot just really has to grow.

it's been insufficient for us to maintain our current system. >> what i would -- what i would stress is that we have begun to see the threads of it, but i think a focus in terms of performance and not rewarding bad behavior. i think that's important. i think connecting of the dots of state of good repair with things like going for full funding grant agreements. the more we do those kind of things that are self- self-reinforcing. when people say what keeps you up at night, i come back to work force. making sure there is funding, intentional funding to help in terms of the work force development. we put less than .5% in terms of training and development of our people. the kinds of thing that is keep me up at night, i can assure you every one of the operators here are the issues in terms we are

not going to have excellence in terms of the system without the people. i don't want to overdo this, but this is, we have 6200 employees at the tee. i can tell you today, there are 800 folks who have the time be able to retire. over 30% of those are in my specialized maintenance areas. when i take that number five years from now, it will become 1800 people who will have the time and years to retire, 38% of them are in my specialized area. signal, track, rail controllers, you can replace a general manager faster than we're going to be able to do that. to see synergies between this bill and education, work force and labor, would be absolutely unbelievable. >> mr. thomas, do you have any idea? >> yes, mr. chairman. i think it's flexibility. as we've seen this morning, each one of our cities is different. each city across the country is different. we all have different needs. we're all in different places. and so making sure that the bill going forward offers the

flexibility to each of us to do what we need to do in our respective cities to grow the economy, to provide opportunities to people. i think that's critical moving forward. >> i appreciate those answers. mr. casey, let me ask you, you chair the metropolitan rail discussion group and one of the groups' principles is funding should be prioritized according to need and national importance. to what extent do current federal programs adhere to that principle and what changes would you make in that line, if any? >> well, i think it's a recognition of the older systems and when you look at our system and, you know, our needs, and in philadelphia with the number of bridges and i think people are shocked to learn that we're responsible for 350 bridges and i think those infrastructure needs are different than the, i

hate to say it, dallas might not have those infrastructure needs. i think those issues have to be part of the discussions. you know, one thing i didn't discuss is, you know, our substation, power substations that are, you know, dealing with, you know, 1920 technology that's out there and they have been in operation since in some cases 1920s, 1930s. and generally they are 40, 50 years past their useful life. those critical issues really need to be addressed as we go forward. and it's not just one or two of them. i mean i have 15 of those substations that really have to be addressed at one time and if i have a failure on that, i just can't -- there's -- i can't get the parts. if i fail, it fails and it's down for a long time. >> dr. scott, my understanding

is that the mbta is working to develop an asset management plan for a number of years, well before any federal requirements were created in map 21. can you give the committee some details on how are you asset management system works and has it helped your agency better target its investments and by any chance is the fta asked you or talked about some best practices that can be considered in new federal asset management requirements. >> absolutely. first i do want to, fta has been right there at the table with us from the very beginning and we were some of the first pilot programs that they really helped to fund in terms of being able to develop the data bases and things of that nature. what i will tell you is that it is radically reshaped, i'll be quite candid in terms of how we've done our capital planning. it's no longer -- i mean this is

really a robust involvement on the part of all the departments. you have to be very, very clear in terms of exactly what is the need, what is it going to wind up being the benefit that comes from it. we're beginning now to particularly as we bring our maintenance management systems, we're beginning to actually move into being able to look at life cycles so that we can, in fact, actually change the method in terms of how we do procurements for some of -- you have to have the data to support doing much more in terms of life cycle procurements. no capital project comes to the table without there being a full look in terms of not only the aspects of safety and ab sew lessens but innovation, resilience, accessibility and also the people implications and the long-term operating implications of those investm t investments. none of that would have happened if we had not been much more thoughtfully and intentionally

looking at both the data as well as just changing our decision lens, if you will in terms of how we do resource allocation. it's a work in progress but very, very different than what we had done in prior years. >> mr. thomas, you state that dart's capital program has mechanisms built in to deal with funding volatility. given years of trust fund instability, the uncertainty of the annual up aations process on the transit new start account and even in the past the government shutdown how has the volatility impacted d.a.r.t.'s ability to provide reliable transit service and how are you preparing for the possible concerns as it relates to the highway trust fund? >> well, certainly, as i said, we have a 20-year financial plan and that 20-year financial plan anticipates all the revenues and expenses over the next 20 years.

we adjust that annually. obviously we don't know exactly what's going to happen for the next 20 years but we have several economists that work with us to help us identify what's going to happen from a local funding perspective. and then we take a very conservative approach from the federal participation. however, if the trust fund is not funded after the end of this calendar year then it would require us to make significant cuts as we move forward. we're already in the process of looking at what that would be. what those service impacts would be and starting to determine where that list is and to communicate what that list might look like to our constituents in the north texas area. >> let me ask you all a final question. i don't know if senator warner has any others. i assume that in some shape or

form, you survey or deal with your ridership in trying to understand both their views of the operations of your present systems, the views that they may have about any potential expansion or curtailment, so if i were to ask you, switching my role from this position to sitting on a senate finance committee which has to find a way to fund this, would your ridership support an increase in a revenue source if it's dedicated to the transit system what would you say? they would say? >> i would say yes. i think the bottom line of riders want improved service, they want more frequent service, they want better facilities, and in the region i think, you know, as happened in the state of pennsylvania, at least our

region was almost unanimous in supporting a transportation bill. and i really think the riders and the citizens of that region would support the same. >> dr. scott? >> i believe that i absolutely believe that our public would. i think that there are two pieces to that. however, i think they will support but they have to be very clear about what the outcomes are that are intended and it's about much more than ridership, okay. the other is -- i just think that people want accountability, okay. and so the issue, the focus in terms of performance and transparency but absolutely tied to outcomes that they can be real clear about and they want. okay. and with real good transparency and accountability i believe. and i have another one i would like to just, i forgot to say. and that is you asked the question, i think that at the

federal level to make sure that every dollar that we do, and you can enforce this, okay, is to make sure we make smart investments. for every dollar let's make it a smart dollar. so that means that everything that we can do in terms of technology, we need to be looking at and also what we can do in terms of resilience. along our corridor, anything that we do, i tell this in the capital program, the water tables are changing, don't you bring me stuff that was built for 100 years ago, okay. we have to be looking for the future and so those are once again themes in terms of outcomes that you can drive at the federal level to make every investment we make smart and also that means that on the research and development end we are woefully behind in this country in making investments because there have been slashes in our research and development funding for transportation and it is sorely, sorely needed. >> mr. thomas?

>> the voters within our service area have proven over the years they are supportive of transit and dedicated funding. when they initially voted to approve a 1% sales tax in 1983 to create an organization that at the time they had no idea what it would do or what it would be capable of doing, and then subsequently have voted by large margins to allow us to issue long term debt and other opportunities. so, yes, sir, i believe so. >> let me take advantage of the one final, i promise this is the final. you know, we have a debate in the committee as it relates to gas tax dollars, which the advocates for highway and of course we're always going to have highways as part of our overall system but they say well, a gas tax dollar shouldn't be used for transit purpose