[Senate Hearing 110-820]
[From the U.S. Government Publishing Office]
S. Hrg. 110-820
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2009
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
ON
S. 3261
AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF TRANSPORTATION AND
HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 2009, AND FOR OTHER PURPOSES
__________
Amtrak
Department of Housing and Urban Development
Department of Transportation
Nondepartmental witnesses
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
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41-272 PDF WASHINGTON : 2009
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__________
COMMITTEE ON APPROPRIATIONS
ROBERT C. BYRD, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont TED STEVENS, Alaska
TOM HARKIN, Iowa ARLEN SPECTER, Pennsylvania
BARBARA A. MIKULSKI, Maryland PETE V. DOMENICI, New Mexico
HERB KOHL, Wisconsin CHRISTOPHER S. BOND, Missouri
PATTY MURRAY, Washington MITCH McCONNELL, Kentucky
BYRON L. DORGAN, North Dakota RICHARD C. SHELBY, Alabama
DIANNE FEINSTEIN, California JUDD GREGG, New Hampshire
RICHARD J. DURBIN, Illinois ROBERT F. BENNETT, Utah
TIM JOHNSON, South Dakota LARRY CRAIG, Idaho
MARY L. LANDRIEU, Louisiana KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island SAM BROWNBACK, Kansas
FRANK R. LAUTENBERG, New Jersey WAYNE ALLARD, Colorado
BEN NELSON, Nebraska LAMAR ALEXANDER, Tennessee
Charles Kieffer, Staff Director
Bruce Evans, Minority Staff Director
------
Subcommittee on Transportation and Housing and Urban Development, and
Related Agencies
PATTY MURRAY, Washington, Chairman
ROBERT C. BYRD, West Virginia CHRISTOPHER S. BOND, Missouri
BARBARA A. MIKULSKI, Maryland RICHARD C. SHELBY, Alabama
HERB KOHL, Wisconsin ARLEN SPECTER, Pennsylvania
RICHARD J. DURBIN, Illinois ROBERT F. BENNETT, Utah
BYRON L. DORGAN, North Dakota KAY BAILEY HUTCHISON, Texas
PATRICK J. LEAHY, Vermont SAM BROWNBACK, Kansas
TOM HARKIN, Iowa TED STEVENS, Alaska
DIANNE FEINSTEIN, California PETE V. DOMENICI, New Mexico
TIM JOHNSON, South Dakota LAMAR ALEXANDER, Tennessee
FRANK R. LAUTENBERG, New Jersey WAYNE ALLARD, Colorado
THAD COCHRAN, Mississippi (ex
officio)
Professional Staff
Peter Rogoff
William Simpson
Meaghan L. McCarthy
Rachel Milberg
Jon Kamarck (Minority)
Matthew McCardle (Minority)
Ellen Beares (Minority)
Administrative Support
Teri Curtin
C O N T E N T S
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Page
Thursday, March 6, 2008
Department of Transportation..................................... 1
Thursday, March 13, 2008
Department of Housing and Urban Development: Office of the
Secretary...................................................... 53
Thursday, April 3, 2008
Department of Transportation:
Federal Transit Administration............................... 117
Federal Highway Administration............................... 117
Federal Railroad Administration.............................. 155
Amtrak........................................................... 157
Department of Transportation..................................... 167
Nondepartmental witnesses........................................ 197
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2009
----------
THURSDAY, MARCH 6, 2008
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Lautenberg, Bond, Specter, and
Stevens.
DEPARTMENT OF TRANSPORTATION
STATEMENT OF HON. MARY E. PETERS, SECRETARY
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. This subcommittee will come to order. Good
morning. Today, the subcommittee holds its first hearing of the
year and we're very pleased to welcome Transportation Secretary
Mary Peters back before the body, and I also want to welcome
Phyllis Scheinberg, who's the Department's Assistant Secretary
for Budget and Programs and Chief Financial Officer.
You know, much earlier in my career, I was the first woman
ever appointed to the Transportation Committee in my State
senate and at the time some of my senate colleagues there in
Olympia made it very clear to me that they didn't think it was
a role for women doing transportation policy. So, I'm only
sorry that they can't be here this morning to see this. It
takes, as my friend Senator Mikulski says, a lot of women and a
few good men to get anything done. So, Mr. Bond, I welcome you
here as well.
Last year, the White House and the Democratic Congress went
to battle over budget priorities. The majority in Congress
believed we could not ignore our needs here at home, including
transportation and housing, two areas where we have very grave
needs. In the end, we were able to provide over $1 billion more
for the Department of Transportation than the President
requested. That was $2.3 billion more than the 2007 level.
I certainly hope we can do better this year, but we're
starting off at a huge disadvantage. Last year, President Bush
wanted to increase the level of spending for the Transportation
Department. We just disagreed on how much transportation
spending should grow.
This year, however, President Bush wants to take us
backward and cut transportation funding by more than $2.1
billion. In fact, the President wants us to take back the $1
billion we added to his budget request last year and cut an
additional $1.1 billion below that level.
The administration's deepest cuts would be to investments
in highways and airports along with his usual request to slash
Amtrak and throw the railroad into bankruptcy. These cuts would
be devastating and his proposal is unacceptable.
In the last 15 months before the President unveiled his
2009 budget, the U.S. economy lost 284,000 construction jobs.
Just this week, the Commerce Department reported that
construction spending in January, which includes spending on
highways and other municipal projects, took its biggest single
month's drop in 14 years, but the President's response to the
dismal economy and rising unemployment has been to send us a
transportation budget that makes a bad situation worse.
By cutting highway and airport investments by a combined
$2.6 billion, his budget would eliminate an additional 120,000
jobs. Each one of these jobs represents the difference between
a family with some economic stability and a family staying up
at night worrying about where they're going to find next
month's rent and it would put off for yet another year the
repairs and improvements our roads and airports already need
very badly.
The President claims that his proposals would return the
budget to surplus by the year 2012, but when you dig into the
details, you find that the President has to rely on a series of
unrealistic and irresponsible gimmicks to get there. One of
those proposals should frighten every member of this
subcommittee. He wants to cut federally-funded transportation
services by 25 percent by 2012. His budget would have the
Federal Government just give up its responsibility for funding
our highways, airports and maintaining critical safety
programs. I guess he expects a quarter of the Department of
Transportation to simply disappear in the next 4 years.
Thankfully, five floors above us right now, the Senate
Budget Committee is marking up a budget with realistic and
responsible priorities for our Nation. I am a long-time member
of that committee and I can assure you the budget we will
report this evening puts Transportation on a very different
path than the one proposed by President Bush.
Under our budget, Transportation would grow by almost $4
billion above the levels requested by the President for next
year and Transportation funding will continue to grow above the
level of inflation into the future.
The President's budget would effectively slash
transportation funding by about $45 million over the next 5
years. The administration has defended its proposals to cut
highway funding by $1.8 billion next year because the Highway
Trust Fund is rapidly running out of money.
I've been warning Congress and the administration for years
about the problem we face with the Trust Fund. We discussed
that problem at last year's hearing. This year, I've worked
with the Finance Committee to ensure that at least for 2009, we
won't have to cut highway funding next year. That bill is
awaiting action on the Senate Floor.
The Bush administration has offered an alternative: cut
highway funding by $1.18 billion and steal from the Transit
Account of the Trust Fund to bail out the Highway Account, and
while the DOT maintains this loan from the Transit Account
would be paid back once the Highway Account has sufficient
resources, there's absolutely nothing in the administration
budget projections to indicate whether repaying that loan would
actually be possible.
By stealing from Transit to pay for highways, all we do is
speed up the time it will take for the Transit Account to be as
bankrupt as the Highway Account and that is just not a
solution.
So, as we face looming shortfalls in highway funds, the
only other idea being proposed by the administration is a sea
of new tolls to be paid by the driving public. Secretary Peters
recently advocated this new system of road pricing in a speech
to the National Governors Association and her testimony
addresses this today.
Road pricing basically requires drivers to pay steep new
tolls and these new tolls are not just for traveling over
brand-new highways and bridges, they'd be levied on the network
of roads that have already been built with taxpayer funds. So,
the administration is advocating now that working families who
are already paying almost $4 a gallon for gas and who are
barely making ends meet should pay brand-new tolls on highways
they already paid for.
Now I believe new tolls have a place, especially for
expensive projects, new projects, like a brand-new bridge, but
the administration's plan is simply unrealistic for most
Americans. Our families struggle enough to keep their cars on
the roads so they can travel between their jobs, their kids'
schools, their childcare centers and their homes.
I also believe the Federal Government should be cautious
about the idea of leasing major transportation assets,
including toll roads, to private investment banks. This idea is
popular among mayors and governors. Here's how it works. Banks
pay a huge amount of cash upfront, allowing cities and States
to spend it immediately, but when the money's gone, their
successors in office watch the toll revenues roll directly to
the investment bank for as long as 99 years. If the money's
used on transportation, this could be a good idea, but I think
we have to be very careful if we're talking about leveraging
transportation assets to get quick cash to pay down debt or to
spend on other things.
So, as we discuss this today, I look forward to hearing the
Secretary's views on whether governors and mayors, when they
lease out transportation assets, should be required to invest
their windfalls on transportation needs, and I also want to
hear whether she believes this toll revenue is really a
substitute for the Federal Aid Highway Program that has served
to unify our communities and our country for the last half
century.
Senator Bond?
OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND
Senator Bond. Thank you very much, Senator Murray. I thank
you for being such a good working partner, look forward to
working with you on this year's THUD bill and we welcome
Secretary Peters for appearing before us today to testify on
the Department's budget submission for 2009.
Not that I need to add anything to encourage your gambit
about woman power but 35 years ago when I started appointing
the first women as heads of departments in the State of
Missouri Government, one of them very humbly told me, you know,
with the trouble that women face today, to take on a job she
has to be twice as good, twice as effective and twice as
efficient as a man. Fortunately, that's not at all hard, but
that is not my quote. That's from a department head woman who
is a great friend of mine.
Madam Secretary, this will potentially be the last time
that you appear before us. We have appreciated your service in
the Department as Administrator of the Federal Highway
Administration and now as Secretary overseeing all of DOT, and
I look forward to your comments on the overall dismal budget
picture for all of the modes of transportation within the
Department.
As the chair has noted, the 2009 budget proposes $68.2
billion in gross budgetary resources which is a decrease of
$2.13 billion from the level enacted in our recent omnibus
appropriations package. That level of reduction in spending for
transportation is a non-starter.
Madam Secretary, during this final year of SAFETEA, I would
have hoped that the administration would have remained
committed to meeting the guaranteed funding levels for highways
and transit as authorized. I understand from your testimony you
believe you've lived up to the terms of SAFETEA by providing
$286.4 billion over the life of the bill, thereby fulfilling
your commitment to the spending agreement made with Congress
when the president signed SAFETEA.
I have to disagree respectfully with that assessment and I
believe that the chair and I will continue to try to honor our
commitment to highways and transit.
Last year on the Senate Floor, I did not support the
additional $1 billion for bridges that was included in the
final omnibus appropriations bill. As you know, a majority of
my colleagues felt that in light of the Minnesota bridge
collapse, additional funding for bridges was necessary not only
for Minnesota but for all 50 States. For this reason, an
additional $1 billion was provided in obligation limitations
for bridges in the final omnibus which I call ominous because
they always turn out bad things for those of us who work on the
individual appropriations bill.
That negotiation was separate and apart from the deal that
was agreed to by the administration when SAFETEA funding levels
were agreed to and the guarantees under SAFETEA should be met.
SAFETEA guaranteed the States $41.2 billion for highways.
However, this budget only provides $39.4 billion. This
reduction comes in part from a projected negative revenue
aligned budget authority of $1 billion, plus another $800
million in reductions.
Similarly, this budget proposes to fund the Federal Transit
Programs at a level which is $200 million below the SAFETEA
authorized levels for new starts. These funds allowed an
increased investment in key highway and transportation projects
which will compliment and assist the continued growth of the
U.S. economy.
I stated before and I'll go on record again that these
large rescissions of contract authority on the States cannot
continue. For the last several appropriations cycles, we have
increasingly used the practice of rescinding unobligated
highway contract authority to make the overall size of
transportation funding in our bill appear smaller.
The Department's budget submission regrettably joins us
once again in using this budget gimmick to mask overall
spending. Last year, regrettably, we included a rescission of
over $4 billion in contract authority which was much higher
than I was able to comfortably accept. Your budget submission
now includes a rescission of almost $3.9 billion in contract
authority and also does not reflect the $8.5 billion rescission
in contract authority which will take place on September 30,
2009, the final day of SAFETEA, making the total rescission
proposed for 2009 $12.39 billion.
There are real world consequences to these rescissions that
are beginning to materialize from our actions. According to the
individuals who run State departments of transportation,
rescinding contract authority can limit our State departments
of transportation ability to fund the priorities and operate
their programs as efficiently as possible.
Our States need the flexibility to identify the Federal Aid
Program categories to which these rescissions should apply,
assuming we should continue to rescind these large amounts of
contract authority. Last year, in exchange for agreeing to this
high rescission in the THUD bill, I was able to convince my
colleagues that rescission decisions should be made and remain
in the hands of the States who know best where they should be
made.
However, the Energy Bill passed and mandated in statute
that proportional rescissions out of all the core funding
categories are required, thereby severely limiting the ability
of our States to set our spending priorities.
For example, if these high rescissions continue to be made
and Missouri is forced to apply the categorical rescission,
Missouri will be forced to cancel projects on their State
implementation plan. Missouri has some categories with zero
unobligated balances and would be forced to cancel projects
currently on the STIP in interstate maintenance, national
highway system, and Surface Transportation Program categories.
I've been told by our colleagues from Nevada that they have
no remaining balances and our rescission decisions are starting
to impact actual capital programming. The same is becoming true
in Tennessee and Alaska and maybe many other States.
Proportional rescissions of contract authority will hamper
Missouri's program as well as many other States.
Madam Chair, this is an area where I think we need to work
together to correct. I hope we can find a way to reduce the
level of rescissions and, if necessary, at least give them the
flexibility so that they don't incur the cost, the expense and
the waste of canceling contracts already underway.
I also hope we can work with the Senate Finance Committee
to fix the current shortfall in the Highway Trust Fund to get
us through 2009 and beyond. It appears to me that no one can
really get a handle on the Highway Trust Fund shortfall that we
will face this year.
Last August, Madam Secretary, our staffs were briefed on
the midyear projection of revenue into the Highway Trust Fund
and we were told that a $4.3 billion gap would occur at the
beginning of 2009. Lower than anticipated tax receipts, which
fund the Highway Trust Fund, were due in part to a sharp
downturn in vehicle miles traveled, VMT, and truck sales being
down 20 percent.
It would appear then that high gas prices were having a
major impact on the traveling public and their willingness to
drive long distances. I expect these issues to continue to
limit the availability of funds for the Highway Trust Fund.
The budget you have before us today re-estimates that
shortfall in the Highway Trust Fund to $3.3 billion, based upon
slower than expected outlays on earmarks and projected negative
RABA. To make up for this shortfall, your budget calls for
another budget gimmick, allowing the HTF to borrow up to $3.3
billion from the Mass Transit Account to cover the shortfall in
the Highway Account. This is what I would call at best a
bandage for a bleeding wound, but it's taking a bandage off of
another area that will be bleeding just as badly.
What we really need is a solution from the Senate Finance
Committee to get us through 2009 and into 2010 until a
comprehensive reauthorization proposal can be passed and signed
into law.
Madam Secretary, in this year's budget, you've proposed
once again a Congestion Reduction Initiative redirecting a $175
million in debt earmarks from ISTEA. Given the fact that $848
million was awarded or is conditionally awarded for five
communities using 2007 funds and only one of the five has met
all of the terms of its urban partnership agreement, one might
ask why do you feel you need more money?
I understand that Minnesota, at $133 million, is close, but
New York with $345 million and San Francisco with almost $159
million are not going to know from the State legislatures until
March 31, of this year and Seattle is not to be decided until
September 2009. No one at this point really knows if any of the
three undecided urban partners will meet their deadlines or if
their proposals will have any real effectiveness in reducing
congestion.
Once again, on another subject, we have a non-starter for
Amtrak. Last year, we gave Amtrak $1.3 + billion, $850 million
for capital and debt service, $475 million in operations. The
budget we have before us proposes to reduce this level by 40
percent.
Beyond the issue of what's the right number for Amtrak lays
the recent Presidential Emergency labor board settlement which
is not included whatsoever in the budget that we have before
us.
As for aviation and, of course, the bad news keeps getting
worse, the administration again attempts to slash funding from
the Airport Improvement Program by $765 million. This is the
third year in a row that the administration has attempted to
reduce substantially this critical account beyond acceptable
levels.
I look forward to working with the chair and fellow members
of this committee to restore these cuts and to ensure that the
Nation's airport infrastructure receives the appropriate
Federal investment.
Nevertheless, Madam Secretary, you know the importance of
airport infrastructure in regards to solving our aviation
congestion problems. We applaud you for acknowledging that many
of our Nation's major congestion choke points need to develop
and improve secondary airports to handle traffic.
I talked last night with several pilots who said that they
were very much concerned because we've got a lot more resources
up in the air than we have places to land them and it's not
just air traffic control, its actual facilities.
Madam Secretary, you deserve credit for seeking to change
the landing fee structure to incentivize moving operations to
off-peak hours and secondary airports in congested areas and to
change the way airport projects are financed both at major hubs
and at secondaries. We need to ensure proper investment in
these secondaries if we're truly serious about battling
congestion and properly funding the AIP Program goes a long way
towards that goal.
In closing, I would only say that healthy investment in
highway, transit and aviation programs, including safety,
improves America's quality of life and is the lifeblood of our
Nation's economic growth.
Thank you, Madam Chair.
Senator Murray. Senator Lautenberg.
STATEMENT OF SENATOR FRANK R. LAUTENBERG
Senator Lautenberg. Thank you, Madam Chair, and Secretary
Peters, we wish you well in your next endeavors and I know how
hard you worked to put things together. Unfortunately, they did
not come together, whether it was the President's choice or
whether we didn't bite hard enough to make him aware of the
fact that the Nation's suffering terribly as a result of
insufficient investment.
If we want to strengthen and grow our economy, the one
thing we must do is invest in our transportation infrastructure
now. The President isn't willing to make these critical
investments. That's kind of obvious. He wants to cut funding
for bridges, highways, repairs by almost $2 billion. He also
wants to fund transit programs at $200 million below the level
that Congress authorized.
Now these cuts hurt States like mine, like New Jersey and
its working families that need transit options the most, and
airline passengers will fare no better under this budget. The
delays will continue. As a matter of fact, the projections are
that they'll get substantially worse in the years ahead.
President Bush wants to raise airline taxes, cut funding
for our Nation's airports and runways by $765 million. Our air
traffic control system is already dangerously understaffed and
the FAA has done far too little to prevent runway incidents.
President Bush once again is trying to bankrupt Amtrak and
it's really shocking when we see that whether it's out of
desperation or choice that Amtrak ridership is substantially
higher than it's been. In the year 2006, we had 24,300,000
passengers. In the year 2007, we had 25,800,000 passengers, and
the revenues also have showed substantial increases, whether or
not the choice was made out of, as I said earlier, desperation
or convenience, but the revenues were up almost $200 million in
those 2 years.
So, when we look at reductions in funding for Amtrak, it
really makes one wonder why. At a time of record high gas
prices, record airport delays, we should not be taking away
this popular energy efficient and convenient travel option
which people are using in record numbers, as I just described.
Our economy depends on our transportation infrastructure.
It demands a greater investment and commitment from the Federal
Government and I look forward to working with my colleagues on
this subcommittee to provide the leadership that we need for us
to provide the critical factors to enable our Nation to
function more efficiently, creating less toxic emissions, and
to be able to search for new technologies and innovations,
remembering that population growth in America in 1970, we had
200 million people, 37 years later, we have 300 million, and
the transportation system was certainly not built for that kind
of growth and we have to make adjustments and make them rapidly
because it doesn't look like we're leveling off in population
growth.
Thank you, Madam Secretary.
Senator Murray. Thank you. Secretary Specter.
Senator Specter. Madam Chairman, Senator Stevens has asked
for 30 seconds.
Senator Murray. Senator Stevens.
STATEMENT OF SENATOR TED STEVENS
Senator Stevens. Madam Chairman, I greet the Secretary, but
I ask unanimous consent to make my statement appear in the
record and the questions submitted for me. I have to go on the
Floor.
Senator Murray. Without objection.
Senator Stevens. Thank you very much.
[The statement follows:]
Prepared Statement of Senator Ted Stevens
Madam Secretary, I understand the challenges that the Department
faces to provide funding for our Nation's aging transportation systems,
with growing congestion and the continued need to continue to
prioritize safety.
It is important that, as we work with the Department of
Transportation to address these challenges, we must continue our
commitment to increase aviation safety and rural community access.
The FAA has made great strides in aviation modernization and
safety. As we move forward, it is important that we understand the
challenges faced in Alaska. We're a State that's one-fifth of the
United States in size, as you know. We have very few roads. Our taxis,
our buses, and our ambulances are almost all aircraft. Seventy percent
of our communities are not connected to the outside world or to each
other by roads. They are accessible only by air and in some instances
by water.
Because of our reliance on air travel, the hazardous weather
conditions, and diverse terrain, (AK has 17 of the 20 highest peaks in
the United States), Alaska has served a critical role in the
development and implementation of aviation safety technology, which
will be implemented nationwide as the ADS-B system. (Known as capstone
in AK).
In last weeks Commerce Committee hearing, we discussed some of the
shortfalls of this years proposed budget, specifically cuts to the
essential air service program which provides a lifeline for isolated
communities in my State and across the Nation.
Despite the many shortfalls of this years proposed budget, I look
forward to working together to address the needs of our Nations'
transportation systems, as well as the needs of Alaska.
I appreciate the funding provided in the proposed budget for Alaska
Flight Service Modernization ($14.6 million). As the FAA considers the
final investment analysis of how to modernize the Alaska Flight Service
Stations, I want the Department to understand that the flight stations
in Alaska provide services beyond the functions provided by stations in
the rest of the Nation, as many facilities do not have towers. I hope
that the Department recognizes that reality, and continues to make
safety as primary concern as we move forward.
STATEMENT OF SENATOR ARLEN SPECTER
Senator Specter. Thank you, Madam Chairwoman. I will be
brief. I left the Judiciary Committee where I'm ranking and I'm
needed there for a quorum.
I wanted to raise some issues which are very, very serious
to Pennsylvania. Secretary Peters, I know you're aware of them,
but I've not had any responses from the Department. So, I
repeat them here.
There had been a commitment that the flight routing over
Delaware County in Pennsylvania would not be done between 9
a.m. and 11 a.m., and 2 p.m. to 7 p.m., unless there is a
significant backlog, and that commitment was made by a
representative from your Department named Steve Kelley and the
planes are being routed over Delaware County when there is no
backlog at all, which has created an enormous and justifiable
local furor and other approaches are not being used, such as a
river approach, and we would like to know the details.
I've been trying very hard to get Mr. Sturgell to come for
a hearing so we could deal with these issues and I would
appreciate your assistance on that.
On another matter, the scheduling of flights at the
Philadelphia International Airport is intolerable. You don't
have to look at the schedules to know it. I can give you lots
of personal experience on the subject, and I had written to you
back on November 8, of last year and December 18, of last year
and I would very much appreciate responses to those letters,
and I've asked to have a meeting convened among the carriers,
similar to the one which you held in New York. That meeting
impacted on Pennsylvania and the Philadelphia International
Airport because there are analogous routes. So these are
matters of enormous importance to my State and to me
personally.
There has been an application pending in your Department
regarding MAGLEV, a high-speed line which we're trying to move
ahead in Pennsylvania, and it has been pending for more than a
year and I personally called the key official and got
assurances that something would be done and a long time has
passed since then.
So again I would appreciate it if you would give that your
personal attention.
In conclusion, let me associate myself with the remarks of
Senator Lautenberg about Amtrak. It's enormously vital in this
country and Congress has had to intervene consistently and I
think that a more realistic approach needs to be taken by the
administration on the subject.
Thank you, Madam Chairwomen.
PREPARED STATEMENT OF SENATOR ROBERT C. BYRD
Senator Murray. Thank you. The subcommittee has received a
statement from Senator Byrd which we will insert into the
record.
[The statement follows:]
Prepared Statement of Senator Robert C. Byrd
Madame Chairman, In May 1829, President Andrew Jackson vetoed the
Maysville Road bill. The measure would have funded a section of the
national highway running through Maysville, Kentucky, across the Ohio
River, into Cincinnati. Failing to comprehend or acknowledge the
benefits to the national economy, the Jackson administration derided
the funding for the Maysville Road as local, pork-barrel spending. But
U.S. Senator Daniel Webster, who understood that local projects often
have national implications, especially investments in transportation
infrastructure, opposed the President's veto. He remarked, ``There is
no road leaving everywhere, except the road to ruin. And that's an
administration road.''
I often think about that quote--the administration's ``road to
ruin.'' President Bush's budget included lots of bombast against State
and local infrastructure projects, derisively dismissing them as
special interest earmarks. Once again, a presidential administration is
failing to recognize that inadequate infrastructure in one State
affects the economies of other States. It affects the Nation as a
whole. Therefore, it is the Federal Government's unquestionable role to
do something about it.
Let's consider the statistics. According to the American Society of
Civil Engineers, our Nation has 590,000 bridges, and one out of every
four is structurally deficient or functionally obsolete. One of those
bridges was the I-35 bridge that collapsed in Minnesota last year.
Because of congested roads, Americans sit in traffic for 3.5 billion
hours annually, at a cost of $63 billion to the economy. Our airways
are not much better. Airports are struggling to accommodate an
increasing number of airplanes and jumbo jets, and passengers are
forced to wait interminably on runways. Rail capacity is limited.
Intercity passenger rail service is routinely attacked by this
administration, leaving it in a precarious state of near-bankruptcy.
Commuter rail and transit infrastructure is aging, and budgets are
shrinking, as fares increase and services are reduced.
Our Nation's deteriorating infrastructure expands well beyond the
Transportation Department. There are 3,500 deficient and unsafe dams
posing a direct risk to human life if they should fail. Of the 257
locks on the more than 12,000 miles of inland waterways operated by the
U.S. Army Corps of Engineers, nearly half of them are functionally
obsolete. For every barge that is affected, it is the equivalent of
disrupting 58 semi-trucks carrying cargo across the country.
Aging water facilities fail to comply with safe drinking water
regulations. Outdated wastewater management systems discharge billions
of gallons of untreated sewage into surface waters each year. Existing
transmission facilities within the national power grid are overwhelmed
by bottlenecks, which elevates the risk of regional blackouts. Our
public parks, beaches, and recreational harbors need attention because
they are falling into disrepair. These facilities are anchors for
tourism and economic development in many States.
Congested roads and long commutes, crowded airlines and delayed
flights, vulnerable bridges, energy blackouts, failing dams, dirty
water and waste mismanagement--these are the festering signs of a
Nation's infrastructure which is slowly starving. And it's happening on
this administration's watch. It's happening because the Bush
administration refuses to fund our country's basic infrastructure--the
bones on which the muscles of a sound economy depend.
This is Mr. Bush's ``road to ruin.''
An editorial in The Washington Post in 2005 described the situation
this way: ``[We] have let the Nation's plumbing rust, its wiring fray,
its floor joists warp and its walkways crumble . . . Sooner or later,
though, we're going to have to pony up . . . If you continue to ignore
that drip, drip, drip in the upstairs bedroom, pretty soon you're going
to be pricing a new roof.''
This editorial appeared only weeks before Hurricane Katrina. The
investments we delayed and postponed in New Orleans cost lives. The
investments we delay in transportation infrastructure cost lives, and
undermine our economic prosperity. When it comes time to pay, it costs
tens of billions of dollars in repairs and new building, much more than
would have been necessary had we not ignored the problem. These are
painful lessons that this administration is stubbornly refusing to
acknowledge. Our constituents expect us to have the vision to look down
the road and put policies in place that ensure productivity and
prosperity. But instead, some have chosen the rocky road to ruination.
One thing is certain. If we allow the drip, drip, drip to continue, we
will one day suffer the crushing costs that come when the roof falls
in.
Senator Murray. Secretary Peters, we will now turn to you
for your testimony.
STATEMENT OF HON. MARY E. PETERS
Secretary Peters. Madam Chairman, thank you very much. I
know that Senator Specter has to leave. My apologies that we
have not been responsive; we will ensure that we respond right
away, sir. I am aware that there is a hearing scheduled in
Philadelphia for April 7, on the Philadelphia air routings.
Chairman Murray, members of the committee, thank you for
the opportunity to appear before you today to discuss the
administration's fiscal year 2009 budget request for the U.S.
Department of Transportation.
President Bush is requesting $68.2 billion for America's
transportation network in the next fiscal year, including
funding for the Department's mandatory programs.
We are working with the President to hold the line on
spending, while giving travelers and taxpayers the best
possible value for their transportation dollars by transforming
the way our transportation system works and is funded.
Our focus is on real transportation solutions that make
travel safer, improve the performance of our transportation
systems so that they operate more efficiently and serve us
better, and apply technologies and contemporary approaches to
today's transportation challenges.
For the first time since the creation of the interstate
highway system, we have an incredible opportunity to come
together and completely reassess our approach to financing and
managing the surface transportation systems. Because gas and
diesel taxes are levied regardless of when, where or how
someone drives, a misperception has been created that the
highways are free.
As with any scarce resource that is perceived to be free,
demand will chronically exceed supply. In the case of highways,
the peak demand is serious and it's growing worse in every
medium or large city in the United States today.
While highway spending at all levels of government has
increased by 100 percent in real dollar terms since 1980, the
hours of delay during peak travel periods experienced by
drivers has increased by over 200 percent during the same
period of time. Nationwide, congestion imposes delay and wasted
fuel costs on the economy of at least $78 billion a year.
The true costs of congestion, however, are much higher.
Consider the significant costs of unreliability to drivers and
businesses, the environmental impacts of idle-related auto
emissions, increased gasoline prices and the immobility of
labor markets that result from congestion. All of these costs
substantially affect interstate commerce and our ability as a
Nation to compete in a global economy.
The President's budget includes $14.6 billion for the
Federal Aviation Administration (FAA). The budget request
assumes passage of the President's reauthorization proposal for
FAA programs and revenue streams associated with that reform
package.
With the more efficient revenue structure, we will be able
to build on our exemplary safety record in aviation while
expanding the number of aircraft that the Nation's airspace can
safely handle at any given time.
The key to achieving higher levels of safety and efficiency
is to move to 21st century technologies to guide air traffic.
The fiscal year 2009 budget request would more than double the
investment in these NextGen technologies, providing $688
billion for key research and technologies, including the
transformation from radar-based to satellite-based navigation
systems.
Without these reforms to help finance increased air traffic
control capacity and modernization, we can all expect,
unfortunately, to spend more time waiting in airports or
strapped in an airplane seat sitting at the end of a runway.
Nearly 31 percent of the funds requested for fiscal year
2009 support safety programs and activities. The budget allows
us to build on our successes in delivering safer transportation
systems by focusing on problem areas, such as runway
incursions, as well as motorcycle crashes and pedestrian
injuries on the road.
It is important that we continue a data-driven safety focus
that allows us to target our resources more effectively to save
lives. Last week, the Department announced a new national
strategy that will bring new focus, including resources and new
technology, to reducing deaths on the Nation's rural roadways.
Our Rural Safety Initiative will help States and communities
develop ways to eliminate the risks drivers face on America's
rural roads and highlight the available solutions and
resources.
The President's fiscal year 2009 budget builds on the
exciting things that we're doing at the Department of
Transportation, things that will help move America forward on a
new course, a course that delivers high levels of safety, takes
advantage of modern technology and financing mechanisms, and
mitigates congestion with efficient and reliable transportation
systems.
Madam Chairman, as I mentioned, I believe that we are at an
important crossroads in terms of our Nation's transportation
system. I have put some ideas out there, but I am anxious to
work with you and to hear your ideas, and those of this
committee, as we move forward to meet these challenges.
PREPARED STATEMENT
Thank you for the opportunity to appear before you today. I
look forward to working with Congress and with the
transportation community so that together we can ensure that
America continues to have the best transportation system in the
world.
Thank you.
[The statement follows:]
Prepared Statement of Hon. Mary E. Peters
Chairman Murray and members of the subcommittee, thank you for the
opportunity to appear before you today to discuss the administration's
fiscal year 2009 budget request for the U.S. Department of
Transportation.
President Bush is requesting $68.2 billion for America's
transportation network in the next fiscal year, including funding for
the Department's mandatory programs. We are working with the President
to hold the line on spending, while giving travelers and taxpayers the
best possible value for their transportation dollars by transforming
the way our transportation system works and is funded. At the
Department of Transportation, our focus is on finding real
transportation solutions that make travel safer, improve the
performance of our transportation systems so that they operate more
efficiently and serve us better, and apply advanced technologies and
contemporary approaches to today's transportation challenges.
Consistent with these priorities, nearly 31 percent of the funds
requested for fiscal year 2009 support safety programs and activities.
The budget allows us to build on our successes in delivering safer
transportation systems by focusing on problem areas like runway
incursions, as well as motorcycle crashes and pedestrian injuries on
the road. It is important that we continue a data-driven safety focus
that allows us to target resources more effectively.
Just as the budget supports continued strong progress on the safety
front, it also builds on our comprehensive efforts to identify new
partners, new financing, and new approaches to reduce congestion. One
example is the New York region where the Bush administration has moved
aggressively to alleviate congestion in the air and on the ground. The
administration recently announced short-term measures to bring
passengers relief from chronic flight delays and we have been
supporting Mayor Bloomberg's efforts to reduce the crippling congestion
on the streets of Manhattan. If last year's record traffic jams and
flight delays taught us anything, it is that traditional financial
approaches are not capable of producing the results we need to keep
America's economy growing and America's families connected.
Fiscal year 2009 is the final year of the current surface
transportation authorization--the Safe, Accountable, Flexible,
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU).
The President's budget fulfills the President's commitment to provide
the 6-year, $286.4 billion investment authorized by SAFETEA-LU. For
2009, the budget provides $51.7 billion in 2009 for highways, highway
safety, and public transportation.
To honor that commitment, even with an anticipated shortfall in the
Highway Account balance of the Highway Trust Fund, the President is
requesting temporary authority to allow ``repayable advances'' between
the Highway Account and the Mass Transit Account in the Highway Trust
Fund. This flexibility will get us through the current authorization
without any impact on transit funding in 2009; however, unreliable
Trust Fund revenues are another sign that we need to more aggressively
begin moving away from our reliance on fuel taxes by partnering with
State and local governments willing to develop more effective means to
finance our surface transportation infrastructure.
It is increasingly clear that America's transportation systems are
at a crossroads. Even as we continue to make substantial investments in
our Nation's transportation systems, we realize that a business-as-
usual approach to funding transportation programs is no longer
effective. We need serious reform of our approaches to both financing
and managing our transportation networks.
For the first time since the creation of the Interstate Highway
System, we have an amazing opportunity to come together and completely
re-assess our approach to financing and managing surface transportation
systems. For too long, we have tolerated exploding highway congestion,
unsustainable revenue mechanisms and spending decisions based on
political influence as opposed to merit.
Now, thanks to technological breakthroughs, changing public opinion
and highly successful real-world demonstrations around the world, it is
clear that a new path is imminently achievable if we have the political
will to forge it. That path must start with an honest assessment of how
we pay for transportation. In fact, our continued transportation
financing challenges are in many ways a symptom of these underlying
policy failures, not the cause.
Because gas and diesel taxes are levied regardless of when, where
or how someone drives, a misperception has been created that highways
are ``free.'' As with any scarce resource that is perceived to be free,
demand will chronically exceed supply. In the case of highways, this
peak demand problem is serious and growing worse in every medium or
large city in the United States. While highway spending at all levels
of government has increased 100 percent in real dollar terms since
1980, the hours of delay during peak travel periods has increased
almost 200 percent over the same time period.
Traffic congestion affects people in nearly every aspect of their
daily lives--where they live, where they work, where they shop, and how
much they pay for goods and services. According to 2005 figures, in
certain metropolitan areas the average rush hour driver loses as many
as 60 hours per year to travel delay--the equivalent of one and a half
full work weeks, amounting annually to a ``congestion tax'' of
approximately $1,200 per rush hour traveler in wasted time and fuel.
Nationwide, congestion imposes delay and wasted fuel costs on the
economy of at least $78 billion per year. The true costs of congestion
are much higher, however, after taking into account the significant
cost of unreliability to drivers and businesses, the environmental
impacts of idle-related auto emissions, increased gasoline prices and
the immobility of labor markets that result from congestion, all of
which substantially affect interstate commerce.
Traffic congestion also has an increasingly negative impact upon
the quality of life of many American families. In a 2005 survey, for
example, 52 percent of Northern Virginia commuters reported that their
travel times to work had increased in the past year, leading 70 percent
of working parents to report having insufficient time to spend with
their children and 63 percent of respondents to report having
insufficient time to spend with their spouses.
Nationally, in a 2005 survey conducted by the National League of
Cities, 35 percent of U.S. citizens reported traffic congestion as the
most deteriorated living condition in their cities over the past 5
years; 85 percent responded that traffic congestion was as bad as, or
worse than, it was in the previous year. Similarly, in a 2001 survey
conducted by the U.S. Conference of Mayors, 79 percent of Americans
from 10 metropolitan areas reported that congestion had worsened in the
prior 5 years; 50 percent believe it has become ``much worse.''
Around the country, a growing number of public opinion polls
reflect the unpopularity of gas and diesel taxes, particularly when
compared to open road electronic tolling. Most recently, in a King
County, Washington survey conducted in December 2007, respondents
preferred financing the reconstruction of a major bridge with
electronic tolling instead of gas taxes by a margin of 77 to 17
percent. In addition, the concept of variable tolling using new
technologies in which prices vary regularly based on demand levels
received support from 76 percent of respondents and opposition from
only 22 percent.
A survey of public opinion surveys conducted in November 2007 for
the Transportation Research Board by the research firm NuStats found
that ``in many parts of the United States, a wide gap exists between
elected officials' perceptions of what the public thinks about tolling
and road pricing and what public opinion actually is.'' Summarizing
their findings, the report said, ``in the aggregate there is clear
majority support for tolling and road pricing. Among all surveys, 56
percent showed support for tolling or road pricing concepts. Opposition
was encountered in 31 percent of the surveys. Mixed results (i.e., no
majority support or opposition) occurred in 13 percent of them.''
In the 2007 edition of their Annual Survey of U.S. Attitudes on Tax
and Wealth, the Tax Foundation wrote, ``the one surprise this year was
at the State and local level, where gas taxes were viewed as the least
fair tax. That's the first time any State-local tax has edged famously-
disliked local property taxes out for the honor of most unfair tax.''
Virtually every economist who has studied transportation says that
direct pricing of road use, similar to how people pay for other
utilities, holds far more promise in addressing congestion and
generating sustainable revenues for re-investment than do traditional
gas taxes. And thanks to new technologies that have eliminated the need
for toll booths, the concept of road pricing is spreading rapidly
around the world. The brilliance of road pricing is that it achieves
three major policy objectives simultaneously.
First, it will immediately reduce congestion and deliver
substantial economic benefits. Drivers have proven in a growing array
of road pricing examples in the United States and around the world that
prices can work to significantly increase highway speed and
reliability, encourage efficient spreading of traffic across all
periods of the day, encourage shifts to public transportation and
encourage the combining of trips. In fact, the National Household
Travel Survey shows on an average workday, 56 percent of trips during
the morning peak travel period and 69 percent of trips during the
evening peak travel period are non-work related, and 23 percent of peak
travelers are retired.
Second, it will generate revenues for re-investment precisely in
the locations that need investment the most. Recent estimates in a
forthcoming paper, ``Toward a Comprehensive Assessment of Road Pricing
Accounting for Land Use'' by economists Clifford Winston and Ashley
Langer at the Brookings Institute conclude that utilizing congestion
pricing in ONLY the largest 98 metropolitan areas would generate
approximately $120 billion a year in revenues while simultaneously
solving the recurring congestion problem in those areas. Implementation
of a broader road pricing strategy tied to wear and tear and
reconstruction costs would obviously produce even higher revenue. In
2006, as a Nation, we spent approximately $150 billion on all of our
highways. State and local officials would even gain additional
flexibility to reduce the wide array of taxes currently going into
transportation that have nothing to do with use of the system.
Third, direct pricing will reduce carbon emissions and the
emissions of traditional pollutants. According to Environmental
Defense, a nonprofit environmental organization, congestion pricing in
the city of London reduced emissions of particulate matter and nitrogen
oxides by 12 percent and fossil fuel consumption and CO2
emissions by 20 percent; a comprehensive electronic road pricing system
in Singapore has prevented the emission of an estimated 175,000 lbs of
CO2; and Stockholm's congestion pricing system has led to a
10-14 percent drop in CO2 emissions.
Technology must play an important role in relieving traffic on our
Nation's highways. Through programs like our Urban Partnerships and
Corridors of the Future initiatives, we have been aggressively pursuing
effective new strategies to reverse the growing traffic congestion
crisis. The interest around the country has proven quite strong--over
30 major U.S. cities responded to our call for innovative plans to
actually reduce congestion, not simply to slow its growth.
The fiscal year 2009 budget would encourage new approaches in
fighting gridlock by proposing to use $175 million in inactive earmarks
and 75 percent of certain discretionary highway and transit program
funds to fight congestion, giving priority to projects that combine a
mix of pricing, transit, and technology solutions. While State and
local leaders across the country are aggressively moving forward,
congressional support and leadership is critical. These projects will
help us find a new way forward as we approach reauthorization of our
surface transportation programs.
Through the Urban Partnership initiative, communities submitted
innovative transportation plans that would not just slow the growth of
congestion, but would reduce it. The Department promised to allocate
the Federal contribution in a lump sum, not in bits and pieces over
several years. This initiative is part of a national dialogue about how
transportation should be funded in the future. Congestion pricing is
being talked about in major newspapers and cutting-edge traffic-
fighting packages are combining technology and tolling, using the
revenues to expand highway and transit capacity.
In August 2007, the Department awarded $850 million in Federal
grants to five cities--Miami, Minneapolis, San Francisco, Seattle, and
New York--to support their bold and innovative strategies to reduce
gridlock and raise new funds for transportation. The Department's
discretionary grant awards under the Congestion Initiative in fiscal
year 2007 were awarded in accordance with the statutory criteria of the
applicable Federal-aid programs and Federal appropriations law.
Local leaders in Minneapolis, for example, are tackling congestion
there by converting HOV lanes to HOT lanes, congestion pricing new
capacity on the shoulders of I-35 West, and deploying high-end bus
rapid transit service and intelligent transportation technologies.
San Francisco, meanwhile, plans to charge variable tolls on its
most congested roadway into the city, implement a comprehensive smart
parking system and institute traffic signal coordination at 500 key
intersections throughout the city.
And, New York City Mayor Bloomberg--together with key members of
the New York State legislature, environmental leaders, and city
business leaders--is advancing the most comprehensive congestion
solution yet seen in the United States: ``cordon pricing'' of Manhattan
south of 86th Street, supported by new bus rapid transit service to the
city center.
Accessible and cost-effective transit projects also help fight
congestion, and the President's budget includes over $10 billion for
transit programs. The President's budget includes $6.2 billion to help
meet the capital replacement, rehabilitation, and refurbishment needs
of existing transit systems. Also included is $1.4 billion for major
New Starts projects, which will provide full funding for 15 commuter
rail projects that are currently under construction, as well as
proposing new funding for 2 additional projects. Another $200 million
will be used to fund 13 projects under the Small Starts program.
The President's budget includes $14.6 billion for the Federal
Aviation Administration (FAA). In addition to critical new technology,
the budget includes sufficient resources to hire and train an
additional 306 air traffic controllers--people who are key to keeping
the system safe.
The budget request assumes Congressional passage of the President's
reauthorization proposal for FAA programs and revenue streams. With a
more efficient revenue structure, we will be able to build on our
exemplary aviation safety record while expanding the number of aircraft
that the Nation's airspace can safely handle at any given time. Also,
our proposal would modernize how we pay for airport infrastructure
projects and allow us to overhaul the Nation's air traffic control
system.
Key to achieving higher levels of safety and efficiency is the move
to 21st century technologies to guide air traffic. For the flying
public, this investment is critical if we are to deploy the state-of-
the-art technology that can safely handle dramatic increases in the
number and type of aircraft using our skies, without being overwhelmed
by congestion. The fiscal year 2009 budget request would more than
double investment in these Next Generation Air Transportation System
(NextGen) technologies, providing $688 million for key research and
technologies including the transformation from radar-based to
satellite-based navigation systems.
The fiscal year 2009 budget once again provides the framework of
the Next Generation Air Transportation System Financing Reform Act, a
new proposal that will make flying more convenient for millions of
travelers. As air traffic is expected to nearly triple by 2025, our
aviation system requires a more reliable and responsive source of
revenue to fund the modern technology required to manage this expanded
capacity. The investment in NextGen will allow the FAA to not only
handle more aircraft, but also to maintain high levels of safety,
reduce flight delays, and reduce noise near airports.
From a finance perspective, our proposal replaces the decades-old
system of collecting ticket taxes with a stable, cost-based funding
program. Based on a combination of user-fees, taxes and general funds,
it creates a stronger correlation between what users pay to what it
costs the FAA to provide them with air traffic control and other
services. The incentives our plan puts in place will make the system
more efficient and more responsive to the needs of the aviation
community.
Without reforms to help finance increased air traffic control
capacity and modernization, we can all expect to spend more time
waiting in airports or strapped in an airplane seat, sitting at the end
of a runway. There has already been a vigorous debate about the
structure of the system, and we ask Congress to support our substantial
aviation reform.
We also urge action on making needed reforms to the Nation's
Intercity Passenger Rail system. The President's fiscal year 2009
budget provides a total funding level of $900 million for intercity
passenger rail. Included in this total is $100 million for a matching
grant program that will enable State and local governments to direct
capital investment towards their top rail priorities.
Our ``safety first'' priority includes ensuring the safe and
dependable transport of hazardous materials throughout the
transportation network. The President's budget request would increase
funding for pipeline safety programs to over $93 million by funding
eight new inspectors to increase oversight of poor performing pipeline
operators and increasing State pipeline safety grants by $11.3 million.
Last week, the Department announced a new national strategy that
will bring new focus, including resources and new technology, to
reducing deaths on the Nation's rural roads. The Department's Rural
Safety Initiative will help States and communities develop ways to
eliminate the risks drivers face on America's rural roads and highlight
available solutions and resources. The new endeavor addresses five key
goals: safer drivers, better roads, smarter roads, better-trained
emergency responders, and improved outreach and partnerships.
We are also requesting $174 million to support a fleet of 60
vessels in the Maritime Security Program to assure the viability of a
U.S.-flag merchant marine capable of maintaining a role in
international commercial shipping and of meeting the sea lift needs of
the Department of Defense.
Finally, the President's budget includes $17.6 million to support
the first year of a $165 million, 10-year asset renewal program for the
Saint Lawrence Seaway Development Corporation. After 50 years of
continuous U.S. Seaway operations, this federally-owned and operated
infrastructure is approaching the end of its original ``design'' life.
Coordinated large scale capital reinvestment is now required to assure
continuous, safe and efficient flow of maritime commerce.
The President's fiscal year 2009 budget builds on the exciting
things we are doing at the Department of Transportation to help America
move forward on a new course--a course that delivers high levels of
safety, takes advantage of modern technology and financing mechanisms,
and mitigates congestion with efficient and reliable transportation
systems.
Thank you for the opportunity to appear before you today. I look
forward to working with the Congress and the transportation community
to ensure that America continues to have the best transportation system
in the world.
FUNDING FOR INFRASTRUCTURE INVESTMENTS
Senator Murray. Thank you very much, Secretary Peters. As I
mentioned in my opening statement, few areas of our economy
have deteriorated as badly as employment in the construction
sector. By far and away, the two biggest cuts in the
transportation budget are your proposals to slash highway
funding by almost $2 billion and airport funding by more than
$750 million.
Together, those cuts represent a potential loss of about a
120,000 well-paying jobs.
Given the state of the economy, why does the President
right now feel that it's the right time to cut back on
infrastructure investments and really worsen the job losses in
our construction sector?
Secretary Peters. Madam Chairman, we understand that
there's some disagreement with this body in terms of what the
President has proposed in those areas.
As I have mentioned, the President asked us to use great
care in spending our taxpayers' dollars and to tighten our
budget wherever we could.
In terms of highway, highway safety, and public
transportation programs, we are meeting the commitment of the
Safe, Accountable, Flexible, Efficient Transportation Equity
Act: A Legacy for Users (SAFETEA-LU) legislation in terms of
the full $286.4 billion authorized. We are reducing the request
for the Federal Highway Administration based on the $1 billion
of Revenue Aligned Budget Authority (RABA) that would take
place this year, $800 million in highways, and $200 million in
transit for a total of $2 billion.
Madam Chairman, we understand that these reductions are
going to cause some concern with State leaders, but we believe
that we can help them bring new resources to bear that will
help them meet their needs, and as you mentioned, create the
jobs that are associated with them.
In terms of the Airport Improvement Program, our proposal
funds all important safety projects. We also included in the
administration's FAA reauthorization proposal other new
mechanisms that would allow airports to bring more money to
bear to meet infrastructure at our airports.
I think Senator Bond made a very good point. The challenge
that we have in aviation is not just in the sky, but it's also
on the ground. Improving the efficiency of the capacity that we
have today, and expanding that capacity in the future, is going
to be crucial if we're able to meet the growing demand for
aviation.
AIRPORT INFRASTRUCTURE INVESTMENT
Senator Murray. Well, I've heard you justify highway cuts
in the past by talking about the precarious situation of the
Highway Trust Fund, but in terms of the huge cuts to the
Airport Program, there is still a lot of money in the Aviation
Trust Fund to maintain the current level of spending.
Your proposed cut in airport investment might cause the
loss of more than 30,000 construction jobs.
Can you tell this committee why you're proposing to cut
airport infrastructure when we know that airport congestion is
worsening and there are adequate funds in the Trust Fund today
to cover that?
Secretary Peters. Certainly, Madam Chairman. The balance,
as you indicated, in the Aviation account is about $1.5
billion. Unfortunately, it's only approximately 2 months worth
of operations, down substantially from what it has been in the
past.
But back to your question about why we are not proposing
more for the Airport Improvement Program. Madam Chairman, we
included $2.75 billion, which would cover all essential safety
projects and those projects that are on deck and ready to go
right now.
Last year when we sent the administration's aviation
reauthorization proposal to Congress, we proposed new
mechanisms that would allow airports to use new ways to bring
money to bear for these important capital improvement projects.
Senator Murray. And you're waiting for Congress on that?
Secretary Peters. We have been, Madam Chairman. We
understand that there may be some difficulty in reaching that
goal.
HIGHWAY TOLLING
Senator Murray. Well, let me go back to the highways. You
know the condition of the Highway Trust Fund and the Revenue
Study Commission that you chaired issued a report and put a lot
of options on the table as far as fuel taxes, user fees,
public-private partnerships, freight fees, streamlined funding
categories, a number of things.
You dissented from that report and instead you are here in
front of this committee today advocating a $1.8 billion funding
cut which is by using a raid on the Mass Transit Trust Fund of
expanded tolling.
Can you talk to us about how you see tolling to be a near-
term solution to the crisis that we're facing?
Secretary Peters. Madam Chairman, I would be pleased to do
that. I think the goal that we together have is to move the
solutions to transportation challenges that our Nation faces
into 21st century solutions.
We, as a Nation, have depended on fossil-based fuel taxes
for most of our surface transportation funding on a Federal
level since the mid-1950s when the interstate highway system
was first authorized. That mechanism served us well to deal
with the challenges that we had at the time in terms of
connecting major cities in the United States. But because it
bears no direct relationship to the use of the system, and
because those revenues, as you said, are dropping off
substantially at this point in time, it no longer is adequate,
responsive, or sustainable. In fact, it's not a popular taxing
mechanism with the public as well.
The Energy Independence and Security Act, and other
important reforms that this Congress passed and the President
signed, will move us into more fuel efficient vehicles, which
is very good and very important. It will help our environment.
We'll also move away from burning fossil-based fuels and use
more alternative and renewable fuels.
All of those things point to the way that we need to do
something different in the future, Madam Chairman, and that is
why I dissented from the committee majority recommendation to
increase by some 40 cents a gallon fuel taxes----
Senator Murray. In favor of tolls, but tell us how, if you
think the cities and States are ready to collect an additional
$1.8 billion by this coming October to fill the hole in this.
Secretary Peters. Madam Chairman, I will do that. There is
conservatively right now about $400 billion available in
private sector investment funds that could be brought to bear
not only to meet that $1.8 billion, but to meet substantially
more than that if we create the proper environment. Many States
have done so already, where these funds can be used.
In fact, Madam Chairman, I think you mentioned earlier a
new SR520 bridge in your home State.
Senator Murray. For a new bridge?
Secretary Peters. For a new bridge. Yes, ma'am. A new
bridge for SR520 has enjoyed popular support in Seattle and in
Washington State, and I think Governor Gregoire has properly
targeted use of private sector funds for an important and, you
said, new project like that.
Senator Murray. But your proposal is on existing highways.
You're asking taxpayers to pay tolling on roads that are
already paid for, and I know in your testimony, you talked
about New York and London as innovative approaches to financing
our highway system.
Most of America doesn't look like London or New York and I
know this committee has become well aware of public concern
about tolling. Last year, the Texas delegation on a broad
bipartisan basis insisted on a provision in our bill to
prohibit Governor Perry from implementing a toll plan.
So, based on that Texas experience, do you really think
America is ready for widespread tolling?
Secretary Peters. Madam Chairman, if I may correct, I am
not advocating tolling on existing highways. Some of the local
and State governments did for five urban partnership proposals,
but it is not something that we're driving.
I wouldn't necessarily take it off the table, but I would
say it has to be up to State and local elected officials to
make a decision about where and how they would provide tolling
and bring these new revenue sources to bear.
Again, I believe, Madam Chairman, that we have an
opportunity to bring substantial new revenues into the system.
That is my goal. My goal is to make more money available to us
on a Federal level, and on a State and local level without
imposing new taxes on our citizens, which several of you have
mentioned with the high fuel prices today places a very great
burden on those of limited income.
Senator Murray. Well, tolling is a burden on those with
limited income, too, and you mentioned King County in my State.
I just want you to know that a survey was conducted by the
Washington State DOT and it found that 57 percent of those in
King County oppose tolls on our major freeways. So that's not
an easy route to this decision either.
Senator Bond?
SAFETEA-LU RESCISSIONS
Senator Bond. Thank you very much, Madam Chair, and let me
go back to the questions on rescissions, if you don't mind,
Secretary.
SAFETEA-LU requires an $8.5 billion rescission. How much
contract authority would be available for future rescissions if
we were to include the $3.89 billion that is in your budget,
along with the $8.5 billion rescission for SAFETEA-LU? I've
heard it's only about $4.5 billion, is that correct?
Secretary Peters. Senator Bond, I'm going to refer to our
Assistant Secretary for Budget and Programs, so I hopefully can
give you the correct and right answer on that.
Ms. Scheinberg. Senator, I don't have the exact number that
would be left, but as you know, SAFETEA-LU itself authorized
the rescission of the $8.5 billion.
Senator Bond. I know.
Ms. Scheinberg. So that was----
Senator Bond. How much is left if you take another $3.89
billion out?
Ms. Scheinberg. I don't have that number.
Senator Bond. I'm going to guess its $4.5 billion. So, let
me know if I'm wrong.
Ms. Scheinberg. Okay.
[The information follows:]
The Federal-aid highway program currently has $16.8 billion in
excess contract authority. Under the Safe, Accountable, Flexible,
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU),
$8.6 billion in contract authority will be rescinded in fiscal year
2009. If Congress were to also enact the $3.2 billion in rescissions
proposed in the fiscal year 2009 President's budget request,
approximately $5 billion in excess contract authority would remain at
the end of the current authorization.
AVAILABLE CONTRACT AUTHORITY
Senator Bond. But in any event, the point is we're scraping
the bottom of the barrel.
And my second question, Madam Secretary, would be what
would be the practical effect on State DOTs of having to
utilize their annual Federal highway funds without excess
contract authority?
Secretary Peters. Senator Bond, the effect would be that
they would not be able to let certain contracts if they hit up
against the limit of their contract authority. It's a little
like requiring a minimum balance be kept in an account. Even
though funds are there, they would not be able to spend it
absent sufficient contract authority.
Senator Bond. So, this would be another major roadblock, to
mix a metaphor, in construction, is that correct?
Secretary Peters. Senator, it certainly could be limiting
and I think it's indicative of what we're facing right now. The
system has supported our surface transportation needs for over
50 years, but will not be able to do so in the future.
URBAN PARTNERSHIPS
Senator Bond. Well, that's my major worry. Madam Secretary,
you come from State government. I was in State government. One
of the things that I really didn't appreciate in State
government, when the Federal Government told us that we could
get some money or they'd take some money away, when we made
decisions that normally are appropriate for the people in the
State through their elected officials to make in the State
government.
Now it looks to me that this urban partners effort which
gobbled up $844 million in 2007 is designed to provide, pick
one of them, you can call it an incentive or you can call it a
bribe to State legislatures to pass bills authorizing tolling
and it may or may not work, but now you come back and you
proposed 75 percent of the funds for discretionary programs be
made available for critical congestion relief projects.
Well, just as you did today, I suffer from congestion
problems as well, but when you look across the country, we kill
people in areas outside of--when traffic is going very slowly,
you don't kill so many people.
Now I'm one who got hit by a car in the congestion, so I
know that's bad, but I survived it, but in many of our States,
the real need is to keep people safe on the highways and I
really question the judgments going into this urban partnership
and, No. 2, I'd like to know if the States involved, King
County, Washington, New York, California, Minnesota, don't go
along with the incentive or bribe, what's going to happen to
all that money?
Why is it necessary to have $175 million more for
congestion pricing when there's still potentially huge 2007
dollars that have not been awarded and we are facing drastic
shortfalls elsewhere?
Secretary Peters. Senator Bond, I'm to start with my
apologies for being a little bit late this morning. I would
have happily paid a toll to get on an express lane and be here
on time this morning, but I didn't have that option.
That said,----
Senator Bond. Maybe when enough people see congestion, they
can make up their own minds in their areas whether they want to
use tolls while we use some of the other money, some of the
money to keep people off of crowded highways and rural efforts.
Anyhow, excuse me. Pardon the interruption.
RURAL AREA ROAD SAFETY
Secretary Peters. Senator, let me first speak to the rural
areas. You are correct. We're very concerned about rural area
road safety. That is precisely why we designed a program to
bring resources available from all across the Department to
complement and supplement those revenues already available in
safety programs.
It is a huge concern of mine and one that I've been
devoting personal resources to and have asked, in fact, our
Deputy Secretary to stay on top of as well.
Let me go back to the cities that you asked about, the
urban partner cities.
Senator Bond. Thank you.
URBAN PARTNERSHIPS
Secretary Peters. As you mentioned, several of them have to
get enabling legislation in order to go forward and spend the
money that we allocated from the 2007 budget for them. They
have until March 31, 2008 to do that, the one exception being
Seattle which has until September 2009.
If they fail and are not able to get the legislation they
need to move forward with those projects, then we will take
back the funds and redistribute them to other cities.
Why other cities, sir? We received 26 applications from
cities who had put together very comprehensive plans to reduce
congestion in their cities. If we are not able to go forward
with New York or San Francisco or some of the other cities,
then we will move to other cities who have good plans.
Cities like Los Angeles who wish they had been in the
opportunity the first time, cities like Houston, St. Louis,
Atlanta, Denver, and many other cities at the ready to give us
a very strong proposal to spend this money in their areas. That
is why we have requested an additional allocation of money in
the President's 2009 budget because there is a tremendous pent-
up demand in our urban areas.
Senator Bond, if we were able to fix some of these problems
in urban areas, then we would improve air quality
substantially, as well as congestion. We're going to use
technology and learn tools that will help us to reduce
congestion in other areas.
Where we are able to bring private sector revenues to bear,
as would be the case in supplementing what we have allocated to
these cities in many areas, then that frees up money that we
can spend on other important priorities, like our rural roads.
STATUS OF THE DULLES RAIL PROJECT
Senator Bond. Jumping over to mass transit, what's the
status of the Dulles project? I understand you're reviewing it.
When's there a final determination? If the money doesn't go
forward, I understand there will be considerable funds lapsing.
How would you handle them should that project not go forward?
Secretary Peters. Senator Bond, we're in continuous
discussions with the project sponsors about the Dulles Rail
Project. It's been emphasized to me by many people how
important that project is to this region.
Our responsibility, of course, based on statutes that
govern the program, is to ensure that we are allocating the
money in a manner that gives the public, whose money it is, the
best opportunity for investment. So, we're working very hard
with the project sponsors to try to work out details on that
project.
Senator Bond. I understand from the head of that division
that there are significant problems with that in your initial
analysis.
Secretary Peters. Senator Bond, that is correct. In January
we put in writing for the project sponsors some of our
significant concerns about the project. They have been back in
touch with us and we are working to obtain additional
information from them, but we have not yet reached a final
decision.
Senator Bond. Thank you very much, Madam Secretary. Senator
Lautenberg?
AMTRAK
Senator Lautenberg. Thank you. Madam Secretary, you were
careful to suggest that the President wants us to be
responsible to the taxpayer dollars and as a consequence guards
them very carefully.
But is that without concern for the convenience of our--the
reliability, the innovations that we desperately need on our
transportation systems?
I don't understand why, for instance, that when we look at
Amtrak, Amtrak said it needs more than twice the $800 million
that President Bush asked for in order to operate safely and
reliably next year, and when I look at the President's budget
requests over the years, there's no contact with reality.
In 2002, the President requested $521 million. The
appropriation came out to $826 million. The scene was repeated
the next year, $520 million from the Bush office and the Amtrak
request was $1.2 billion. It wound up over a billion. There's
this constant reduction in offers to help Amtrak get to where
it has to be to accommodate the rush and the interest for
passenger loads.
So, by law, you're granted a seat on the Amtrak Board along
with six more of the President's appointees. Does the President
know what the railroad's actual funding needs are when he makes
these; you'll forgive me, ridiculous requests?
Secretary Peters. Senator Lautenberg, as you mentioned, I
have a seat on the Amtrak Board and I am represented on a
regular basis by Administrator Boardman, the head of our
Federal Railroad Administration (FRA). He works with the Board
in terms of establishing their budget.
We believe that Amtrak can operate more efficiently. You
mentioned earlier the significant increase in ridership that
Amtrak is experiencing. In fact, they generate about $2 billion
in revenue annually. I have to say it is confusing to me how
ridership can go up substantially but requests for subsidies
also go up substantially. It would seem that there ought to be
some economies with substantially increased ridership, that
Amtrak would be able to operate more efficiently.
That said, the President's budget proposes $900 million in
funding, including $100 million that could be State matching
grants. The reason for that, Senator, is that we see
substantially increased ridership and efficiency in
circumstances where States support routes. In fact, ridership
was up 88 percent in those circumstances as opposed to 17
percent overall.
And finally, we believe that Amtrak management must
continue the reforms and make strong business decisions----
Senator Lautenberg. That recommendation is so hollow;
you'll forgive me, Madam Secretary. You say that because the
ridership has gone up on this antiquated system, it can't stand
it. There are constant calls for better maintenance. There are
constant calls for better trackage. There are constant calls
for better equipment.
So, why the needs are less is for me unfathomable. The fact
of the matter is that the system is overworked just like our
highways are overworked and our skyways are overworked. There's
too much demand, and you cannot take profits out of these
things and expect it to be realistic.
It surprises me that the logic that you produced suggests
that you're doing less and expecting more from the railroad.
The railroad has never been funded properly, never, and as a
consequence, they're ricketing along with equipment that long
since should be off the tracks. I use Amtrak a lot and I see
it. You can't ride on the best line that Amtrak has, the Acela
line, and you can't write with a steady hand there because the
ride is so bumpy and the thrusts right and left are so sharp. I
saw one of the cabin attendants fall down the other day and
that's the way the system is.
Do you think it ought to be better than it is? Are you
satisfied with what we've got out there?
Secretary Peters. Senator, we think it would be better for
the Government to invest in capital for Amtrak, and to reduce
substantially over time the operating subsidies being paid to
the railroad.
Senator Lautenberg. Do you know of any system, any
commuting system where they're able to cover their costs from
ticket revenues?
Secretary Peters. Senator, as you know, most do not.
However, most----
Senator Lautenberg. Most don't. I can't think of any that
do.
Secretary Peters. But most do not substantially continue to
increase subsidies over time.
AIRLINE CONSUMER RIGHTS
Senator Lautenberg. If they don't increase the subsidies,
then the quality of the operation deteriorates rapidly.
Last year I worked with leaders on this subcommittee to
include a $2.5 million program for enforcement of airline
consumer rights. Why did the President cut this funding level
by $1.4 million in the 2009 budget? Shouldn't we be increasing
funding during a time of more frequent delays and a rising
number of consumer complaints, and don't you look at the--the
Department look at what the prospects are that by 2014, delays
are going to be 60 percent higher than they are now?
Where do we deal with the customer complaints, learn from
them and make the appropriate adjustments?
Secretary Peters. Senator, you're right. Consumer
complaints are a problem and we need to do something to fix the
root cause so that people don't have unhappy experiences.
That said, the 2008 appropriation includes $2.5 million for
the Office of the General Counsel's Aviation Consumer
Protection Enforcement Program. We are spending the money that
was provided by Congress in December when the Consolidation
Appropriations Act passed.
We're increasing staffing levels so that we can pursue
investigations and enforcement actions. We are also using the
funding to enhance the Aviation Enforcement and Consumer
Protection Program, including updating the Consumer Complaint
Application System, and updating the Aviation Consumer
Protection Web site so that flyers have access to information.
Senator Lautenberg. But it all boils down to one thing. I
don't mean to be rude. That is, we're not able to maintain the
kind of service reliability that we need, and I point out here
to you that since fiscal year 2004 till fiscal year 2007, that
the subsidy per passenger mile on Amtrak has gone down over 20
percent.
So, it doesn't wash and we can go ahead with this
unspecified response to these things by talking about what we
ought to be doing and how we ought to make this adjustment and
it doesn't wash.
Madam Secretary, what we're doing today is not only a
serious impairment to our functioning as a society but what
it's doing is setting a trap for much worse things in the
future and it's too bad.
Thank you very much.
AVIATION DELAYS
Senator Bond. Thank you very much, Senator Lautenberg.
Madam Secretary, as those of us who try to fly know, delays in
our aviation system were some of the worst on record last year
with flights arriving on time only 73 percent of the time.
Aside from the caps on operations for the New York-New
Jersey area, what else is your Department doing to ensure what
some of the folks who fly the airplanes see as being not just a
repeat of last year but even a bigger problem?
Secretary Peters. Well, Senator, we're working very hard to
hopefully not let that happen. First of all, the caps that have
been imposed already at JFK International Airport will be very
quickly announced for Newark. LaGuardia, of course, is already
operating under some limitations and we're looking at what we
may need to do to refine that.
Also, as Senator Specter indicated, Philadelphia is in the
airspace. We want to make sure that we don't push in one place
and have that pop out and overburden another airport.
That said, a substantial redesign of the airspace in the
New York region will give us operating efficiencies. We also
put forth a change in what we call the airport rates and
charges policy to allow airports more flexibility by varying
charges by time of day. This hopefully, would help spread out
the peak demand for those flights. As was just mentioned with
Senator Lautenberg, substantially beefing up the Consumer
Complaint Office would enable us to know what those complaints
are and to respond to them.
In fact just last week I met with a task force that deals
with tarmac delays so that we can work with the airlines and
the airports to find better ways not to have planes sitting out
on the tarmac for lengthy periods of time in the event of
weather system delays.
We're working with the Department of Defense to establish
``holiday express'' lanes. These are flight lines that the
military normally uses along the Atlantic seaboard, but would
be made available to commercial flights on a more frequent
basis should the weather systems require that.
We believe that if we can relieve congestion in the New
York City region, where about 40 percent of the delays
nationally emanate, then we can make a big difference. But I
promise you, Senator, that the airlines, the airports, our air
traffic controllers, and I, all of us are doing everything we
can not to have a repeat of the Summer of 2007.
AIRLINE SERVICE TO SMALL AND RURAL COMMUNITIES
Senator Bond. As I believe I mentioned to you last year, I
was one who experienced one of those tarmac delays. Not only
was the 2\1/2\ hours I sat on Reagan runway unproductive, we
landed from St. Louis and the airline said that the FAA won't
let us move, the FAA said it's the airline's problem. So, I sat
there for 2\1/2\ hours as the NFC playoff game was finished on
television and that was brought back to mind as I was watching
some recent football playoff games and I do hope that there are
some common sense solutions. I would be happy to share ideas
but something has to go be done.
Now you mention pushing in one place and causing a problem
in another place. I know that there's aviation congestion
initiatives to charge higher rates during peak hours has some
appeal, but let me ask you about how this could impact service
to small and rural communities.
Some of the carriers are telling us that feeder flights--if
they're moved to off-peak hours--will not be profitable for a
lot of carriers and small communities can lose service. You've
got a one hand and the other hand. How are you going to balance
that?
Secretary Peters. Senator, that is an excellent question.
We negotiated with the airlines when putting the caps in place.
We did not want to cut out feeder flights that feed into other
line-haul flights, and in the case of a number of airlines,
international flights, which provide greater profitability than
many domestic flights. That is why we negotiated with
individual airlines in setting caps and in monitoring the
situation so that we don't disadvantage certain areas from
having flights meet at the feeder airport, if you will, at the
right time.
Senator Bond. Well, as one who sometimes uses those feeder
flights, if you're maybe going a half hour earlier, if that
would allow you to get the small planes in so you can meet with
the larger plane and delaying the outbound feeder flight from
the incoming plane, but that's going to require a lot of
negotiations and I'll look forward to seeing that.
Secretary Peters. And Senator, let me apologize to you and
to all other passengers who had such miserable experiences. My
youngest daughter spent the better part of a day in one of
those delays with a then 8-month-old baby. So, it is
unacceptable and I do----
Senator Bond. I think that 8-month-old baby may have been
on the plane on which I was delayed.
Secretary Peters. Was she beautiful and quiet?
Senator Bond. You talk about instant consumer feedback,
that young passenger expressed him or herself very, very
vocally and very firmly.
Secretary Peters. You would have recognized her, sir. She
is the most beautiful grandchild in the world with the
exception of yours.
FEDERAL ROLE IN TRANSPORTATION FUNDING
Senator Bond. Fortunately or unfortunately, I don't have
one yet.
Madam Chair, for the record, I think I better go vote, but
I would ask the Secretary as chair of the National Commission
Report to describe either in your testimony here or for the
record what you believe the Federal role in transportation
funding should be, and I thank you very much for your service
and for your kind work in attempting to answer very difficult
questions, and I wish you well and I'm happy to return it to
the chair.
[The information follows:]
Our country is at a transportation policy crossroads. For the first
time since the creation of the Interstate Highway System, we have an
amazing opportunity to come together and completely re-assess our
approach to financing and managing surface transportation systems. For
too long, we have tolerated exploding highway congestion, unsustainable
revenue mechanisms and spending decisions based on political influence
as opposed to merit.
Now, thanks to technological breakthroughs, changing public opinion
and highly successful real-world demonstrations around the world, it is
clear that a new path is imminently achievable if we have the political
will to forge it. That path must start with an honest assessment of how
we pay for transportation, not simply how much (our current focus). In
fact, our continued transportation financing challenges are in many
ways a symptom of these underlying policy failures, not the cause.
Until we decide what our national transportation priorities are,
and what roles are appropriate for Federal, State and local government
as well as the private sector, we will be unable to adequately address
our Nation's infrastructure needs. Trying to be all things to all
people has proven to be an unsuccessful strategy.
The Department believes that the Federal role in transportation
should be completely re-focused on truly national imperatives. In our
view those include:
--Improving and maintaining the condition and performance of the
Interstate Highway System. Roughly one quarter of all highway
miles traveled in the United States takes place on the
Interstate System;
--Reducing congestion in major metropolitan areas and increasing
incentive funds to State and local officials that pursue more
effective congestion relief strategies. A more effective
integration of public transportation and highway investment
strategies is central to this challenge;
--Investing in and fostering a data-driven approach to reducing
highway fatalities;
--Using Federal dollars to leverage non-Federal resources;
--Focusing on cutting edge, breakthrough research areas like
technologies to improve vehicle-to-infrastructure
communications; and
--Establishing quality and performance standards.
To better prioritize funding, earmarks should be eliminated. In a
September 2007 report by the DOT Inspector General, a review was done
of 8,056 earmarked projects within the Department's programs that
received more than $8.54 billion for fiscal year 2006. Ninety-nine
percent of the earmarks studied ``either were not subject to the
agencies' review and selection process or bypassed the States' normal
planning and programming processes.''
Beyond earmark proliferation, there are a wide array of special
interest programs that have been created to provide funding for
projects that may or may not be a State and local priority. While it is
true that not all earmarks or special interest investments are
wasteful, it is also true that virtually no comparative economic
analysis is conducted to support these spending decisions. No business
could survive for any meaningful period of time using a similar
investment strategy. Recent studies have shown that the economic return
on highway capital investments has declined into the low single digits.
Virtually every economist who has studied transportation says that
direct pricing of road use, similar to how people pay for other
utilities, holds far more promise in addressing congestion and
generating sustainable revenues for re-investment than do traditional
gas taxes. And thanks to new technologies that have eliminated the need
for toll booths, the concept of road pricing is spreading rapidly
around the world. The brilliance of road pricing is that it achieves
three major policy objectives simultaneously.
First, it will immediately reduce congestion and deliver
substantial economic benefits. Drivers have proven in a growing array
of road pricing examples in the United States and around the world that
prices can work to significantly increase highway speed and
reliability, encourage efficient spreading of traffic across all
periods of the day, encourage shifts to public transportation, and
encourage the combining of trips. In fact, the National Household
Travel Survey shows on an average workday, 56 percent of trips during
the morning peak travel period and 69 percent of trips during the
evening peak travel period are non-work related, and 23 percent of peak
travelers are retired.
Second, it will generate revenues for re-investment precisely in
the locations that need investment the most. Recent estimates in a
forthcoming paper, ``Toward a Comprehensive Assessment of Road Pricing
Accounting for Land Use'' by economists Clifford Winston and Ashley
Langer at the Brookings Institution conclude that utilizing congestion
pricing in ONLY the largest 98 metropolitan areas would generate
approximately $120 billion a year in revenues while simultaneously
solving the recurring congestion problem in those areas. Implementation
of a broader road pricing strategy tied to wear and tear and
reconstruction costs would obviously produce even higher revenue. In
2006, as a Nation, we spent approximately $150 billion on all of our
highways. State and local officials would even gain additional
flexibility to reduce the wide array of taxes currently going into
transportation that have nothing to do with use of the system.
Third, direct pricing will reduce carbon emissions and the
emissions of traditional pollutants. According to Environmental
Defense, a nonprofit environmental organization, congestion pricing in
the city of London reduced emissions of particulate matter and nitrogen
oxides by 12 percent and fossil fuel consumption and carbon dioxide
(CO2) emissions by 20 percent; a comprehensive electronic
road pricing system in Singapore has prevented the emission of an
estimated 175,000 pounds of CO2; and Stockholm's congestion
pricing system has led to a 10-14 percent drop in CO2
emissions.
AIRLINE CONSUMER COMPLAINTS
Senator Murray. All right. Thank you very much, Senator
Bond. Madam Secretary, it seems that every couple years or so
when passenger conditions get really bad, the airlines provide
improvements for awhile and then things get worse again and the
DOT Inspector General has said that your Department should take
a more active role in overseeing some of the customer service
and he made several recommendations, some of which date back to
2001, asking that your Department conduct incident
investigations of long onboard delays, oversee the airlines
policies for dealing with these onboard delays and improving
the airlines performance reporting.
Can you tell us what progress you have made on any of those
recommendations?
Secretary Peters. Senator, I would be happy to. I want to
go back to what you said about this being a recurring theme. In
the summer of 2001, there were some pretty miserable
circumstances. Tragically when 9/11 happened, that wasn't the
case again.
It is my goal and the goal of the Department not to have
recurring delays. The Inspector General's report has been very
important to us and we are following each recommendation very
carefully. For example, I just mentioned the Tarmac Delay Task
Force that we convened last week. It includes representatives
of the airlines, airports, and passenger groups. Kate Hanna,
for example, who by virtue of having had a miserable
experience, started a passenger group to look at aviation
delays.
As I mentioned earlier, we are beefing up the Airline
Enforcement Office to make sure that we are more responsive to
consumers when they have complaints. We are categorizing delays
and in the case of chronically delayed flights, we're going
back to the airlines and putting them on notice that they will
face substantial penalties if they continue to misrepresent to
the public that a plane will take off at a certain time when in
fact more than 70 percent of the time it does not take off on
time.
Each of the recommendations that the Inspector General made
are very important to me. We're following up on those and I am
taking this very seriously.
Senator Murray. Okay. Well, one of the things the IG
complained about was that your office was issuing enforcement
orders to airlines and then just letting the airlines certify
in writing that they'd complied, no onsite follow-up occurred.
Do you really trust the airlines to police themselves when
complying with your enforcement orders?
Secretary Peters. Senator Murray, we're going to be able to
do random checks to ensure that they have complied.
Senator Murray. Are you doing random checks now?
Secretary Peters. I don't--Madam Chairman, I will get back
to you if they've started yet. I believe they have, but let me
confirm that for you.
Senator Murray. Okay. I'd appreciate an answer back on
that.
[The information follows:]
The adoption of or compliance with voluntary airline customer
service commitments is not required by statute or Department of
Transportation regulation. Neither are carriers required to track their
compliance with their commitments. In fact, only a limited number of
air carriers have adopted such commitments and the commitments that
have been adopted are couched in terms that would, in general, make
them unenforceable. The Department is currently conducting a rulemaking
to enhance airline passenger protections, 72 Federal Register 65233
(November 20, 2007), which, in part, proposes to require carriers to
conduct self audits of compliance with their customer service
commitments.
PRIVATIZATION OF PUBLIC TRANSPORTATION FACILITIES
Senator Murray. Let me change the topic a little bit.
You've been an advocate for the privatization of public
transportation facilities and in my opening remarks, I talked
about an increasing number of mayors and governors who've
enjoyed huge cash windfalls by privatizing transportation
projects, Indiana Toll Road, Chicago Skyway.
However, in many cases, these cash windfalls have not been
used to pay for transportation improvements. Now the city of
Chicago wants to privatize Midway Airport which is one of the
30 busiest airports in the country, over 300,000 flights a
year.
Do you believe that a mayor or a Governor that privatizes a
transportation facility, be it an airport, a highway, should
use their cash windfalls strictly for transportation?
Secretary Peters. Senator Murray, ideally I think it should
be spent on transportation. I will caveat whether or not I
should substitute my judgment for that of Mayor Daley or
someone else, if they believe that a higher public good can be
served by spending the money elsewhere. I believe that it would
break trust with people if that money were spent elsewhere,
absent a thorough and open dialogue with the public and with
elected officials before decisions are made.
Senator Murray. Well, in terms of that, Midway Airport has
received $370 million in direct airport grants from the FAA for
infrastructure improvements and several million dollars more in
direct investments to modernize its navigation air traffic
control systems.
Right now, there are a variety of financial institutions
that are preparing bids to pay the city of Chicago a huge cash
windfall in exchange for the right to lease that airport for a
period as long as 99 years.
Given that the Nation's airline passengers have provided
hundreds of millions of dollars in grants to that airport, do
you think the city should be required to spend their cash
windfalls specifically on transportation needs?
Secretary Peters. Senator, we're looking at that as the
process moves forward on Midway Airport and on privatization. I
hear what you're saying and will take another look at the
decisions that we may be making in that light.
Senator Murray. Well, since that city is moving to
privatize the Midway Airport, the law does require the airport
to pay back a portion of Federal grants that they've received
over the years. However, we know that you as Secretary do have
the authority to waive that requirement if the city requests
it.
Do you expect to grant Chicago an exemption from repaying
its Federal grants?
Secretary Peters. Senator, it would be premature for me to
respond right now, absent knowing more about it, but I will
look at the arrangements and the negotiations that are ongoing
and get back to you specifically with an answer on that point.
Senator Murray. Have you talked about that situation at
all?
Secretary Peters. We've talked about it, Madam Chairman. We
have talked about it, but I don't--not to the level of detail
that I would be comfortable giving you a definitive response to
that question today.
Senator Murray. Okay. Well, I would like to hear back from
you on that question.
[The information follows:]
Under title 49 United States Code section 47134, ``Pilot program on
private ownership of airports,'' a public-use airport that has received
Federal assistance may apply to the Secretary of Transportation, and
through delegation the FAA Administrator, for certain exemptions to
allow for the sale or lease of an airport. In the case of Midway, for
example, the city of Chicago may only apply for exemptions to lease the
airport because the statute only permits the sale of general aviation
airports. The FAA's decision to grant exemptions is permissive under 49
U.S.C. 47134(b). The statute provides that the Secretary ``may'' grant
an exemption. An exemption is neither automatic nor required by the
statute.
Two exemptions may be granted under the statute to a sponsor of a
public-use airport. First, the statute permits the FAA to exempt a
sponsor from the requirement to use proceeds from the sale or lease of
the airport for airport purposes only. However, FAA may grant this
exemption only if the amount is approved by at least 65 percent of the
air carriers serving the airport, and by the air carriers that account
for at least 65 percent of the total landed weight of all aircraft
landing at the airport in the preceding year. Second, the FAA is
permitted to exempt the sponsor of a public use airport from any
obligation to repay to the Federal Government any grants, or to return
to the Federal Government any property.
The FAA accepted Midway's preliminary application to the FAA for
participation in the Airport Privatization Pilot Program, established
pursuant to 49 U.S.C. 47134. The city of Chicago states, on page 18 of
its preliminary application for privatization of Midway, ``As part of
its application to the FAA for approval of the proposed transaction the
city will request that the FAA grant exemptions from otherwise
applicable regulatory requirements, including the prohibition on use of
airport revenues for non-airport purposes by the city and the private
operator; and the requirement to repay Federal grant funds.'' However,
this is only a preliminary application. If the city of Chicago applies
for these exemptions in its final application, the FAA will apply, at a
minimum, the statutory and policy requirements necessary for the FAA to
evaluate an application, including any exemptions requested by the
sponsor. The FAA may consider an application for an exemption only if
the FAA finds the sale or lease agreement includes provisions to ensure
the following:
--The airport will continue to be available for public use on
reasonable terms and conditions without unjust discrimination;
--The operation of the airport will not be interrupted in the event
lessee becomes insolvent or files bankruptcy;
--The lessee will maintain, improve, and modernize the facilities of
the airport through capital investments;
--Every fee of the airport imposed on an air carrier the day before
the date of the lease of the airport will not increase faster
than the rate of inflation unless a higher amount is approved
by at least 65 percent of the air carriers serving the airport,
and by air carriers who had a total landed weight during the
preceding year of at least 65 percent of the total landed
weight at the airport;
--The percentage increase in fees imposed on general aviation
aircraft at the airport will not exceed the percentage increase
in fees imposed on air carriers at the airport;
--Safety and security at the airport will be maintained at the
highest possible levels;
--The adverse effects of noise from operations at the airport will be
mitigated to the same extent as at a public airport;
--Any adverse effects on the environment from airport operations will
be mitigated to the same extent as at a public airport;
--Any collective bargaining agreement that covers employees of the
airport and is in effect on the date of the sale or lease of
the airport will not be abrogated by the sale of the lease; and
--he approval will not result in unfair and deceptive practices or
unfair methods of competition.
The FAA will need a final application from the city of Chicago
before FAA can apply these provisions.
AIR TRAFFIC CONTROLLERS
At the end of 2004, the Department of Transportation
published its first Workforce Plan for Air Traffic Controllers.
That plan showed that the number of air traffic controllers the
Department expected to lose and how many it planned to hire
over the following 10 years. That plan has now, I believe, been
updated twice and the record shows the FAA has gotten it wrong
each and every year. They have consistently underestimated the
number of controllers who leave the Department every year, and
I continue to hear reports that the air traffic control
facilities are understaffed, new air traffic controllers are
not adequately trained, experienced air traffic controllers are
too busy doing their own job to train new hires and experienced
controllers will retire before your Department will be able to
bring on fully trained replacements.
Can you tell this committee if you are confident that the
FAA management really has a handle on how to manage this
workforce?
Secretary Peters. Madam Chairman, we may have
underestimated in some cases, but the differences are not as
large as I think some folks have been led to believe. I'll give
you the specific numbers.
But before I do that, let me say how important the air
traffic controllers are to the fact that we are enjoying the
safest period ever in aviation safety. I think a great deal of
the credit goes to air traffic controllers who do a magnificent
job managing the planes with an antiquated system.
We're facing a substantial increase in the number of
retirements because, after the Professional Air Traffic
Controllers Organization strike back in the 1980s, significant
numbers of new air traffic controllers were hired to replace
the controllers who were fired. Many of the new controllers who
were hired back then are reaching retirement age. So, we're
going to have a need for new controllers.
Last year we planned to hire 1,386 controllers. We actually
hired 1,815. We planned for 700 controllers to retire. The
actual number of retirements was 828. There is other
``leakage'' of air traffic controllers, such as resignations,
removals and, tragically, deaths. We had assumed 243. There
were actually 264.
Transfers and promotions, this is an area where a number of
the air traffic controllers are promoted into management. We
had estimated 185 and the actual number that moved up was 407.
There are also academy failures; we had estimated 69, and the
actual number was 60.
Based on the first quarter of this year, Madam Chairman, we
are within the range of accuracy for the number of retirements
we had forecast. We continue to monitor and modify the
Workforce Planning document so that it can be as accurate as
possible.
I can tell you that we are meeting the controller hiring
goals. We are also meeting the goals of getting those
controllers through their training. The simulators that we have
allow us to get the training done a little quicker without
taking an experienced controller off terminal----
Senator Murray. Yes.
Secretary Peters [continuing]. And to assist them.
Senator Murray. I'm well aware of that earmark that
provided those simulators and I have heard you in the past say
we don't--we shouldn't be doing earmarks and I just have to
comment as you say that, that is one of those earmarks that's
making a huge difference out there.
Secretary Peters. Yes. The simulators are doing a great
job.
Madam Chairman, we never put an air traffic controller that
isn't fully certified for a task on terminal to do that task.
As air traffic controllers complete their training program, and
prior to full certification on the tasks that they're certified
to handle, we are mindful of not taking our more experienced
controllers off terminal to assist others.
Senator Murray. Well, I guess the larger question is do you
feel confident that the FAA is managing its workforce well? I
know now that bonuses are being paid to retain experienced
controllers, there was no request for or money budgeted or
planned for those bonuses. You're just paying them to keep
experience levels there.
So, I'm just asking you a confidence question. Do you think
the FAA is managing its workforce? Are you confident in that?
Secretary Peters. Madam Chairman, I am more confident today
than I was 15 months ago. I have worked with Acting
Administrator Sturgell very carefully on this issue.
As you know, our Inspector General and others in the
Department of Transportation, including our Assistant Secretary
for Budget and Programs, have looked at the management of the
FAA workforce. I am more comfortable today than I was when I
first came to this position that we are managing the workforce
correctly, but it is something we're going to have to stay on
top of because, as I said, we're hitting a big retirement wave.
Senator Murray. Well, you should know that we are very
concerned. We're hearing a lot across the country, as I told
you, about understaffing and not adequately trained and
experienced air traffic controllers who are having a very hard
time trying to train because of inadequate staffing. So, I
would hope that you'd stay on it and get back to this committee
throughout the next several months as we follow this.
Secretary Peters. Madam Chairman, I will do that.
MOTORCYCLE FATALITIES
Senator Murray. Okay. Let me turn to a topic that I know is
near and dear to your heart and that is an issue about
motorcycles.
At last year's hearing, I complained about the fact that
your agency was delaying by 3 years your very own deadline for
reaching your highway safety goal of one fatality per 100
million vehicle miles traveled.
Now when you dig into the data as to why you are not
reaching that goal, you discover that there's a big problem in
the rising number of motorcycle fatalities. They have increased
every year now for 9 years in a row and I know you're a
motorcyclist yourself. You know the issue.
Your own Department maintains that helmets are estimated to
be 37 percent effective in preventing fatal injuries to
motorists. However, over the last 5 years, helmet use has
actually declined by 20 percent and now today there only 20
States, the District of Columbia, and Puerto Rico, that
actually require helmet use by all motorcycle operators.
Do you support the mandatory enactment of motorcycle helmet
laws?
Secretary Peters. Madam Chairman, I support giving the
information to States so that they can act on helmet laws. I
have also made myself available to a number of States and, in
fact, have called governors when I see substantial increases in
the number of motorcycle deaths in a State, especially a State
that has repealed its helmet law.
I think it's very important. We could have saved easily 700
lives last year if all motorcyclists wore helmets. So, I am
very interested in pursuing this. In fact, we have recently
sent out a letter asking that we have the ability to use some
of our safety money for education on the importance of helmet
use. We got some pushback, frankly, on that, but we think it's
that important that we've stepped out to do that.
Also, following our discussion last year, I filmed a public
service announcement on motorcycle safety, including a hard
push on helmet use, and reiterated the fact that had I not had
a helmet on when I had a crash, I think that I would be a brain
injury patient today.
Senator Murray. I was aware of that.
Secretary Peters. I keep that helmet in my office to remind
me of how important that is.
Senator Murray. Well, I understand that there are
restrictions on DOT's lobbying efforts on behalf of specific
laws, such as motorcycle helmet laws. However, as part of the
last reauthorization law, DOT was given an exception that
allows you to lobby on behalf of the enactment of primary
seatbelt laws.
Would you support a similar exception that would allow DOT
to lobby on behalf of motorcycle helmet laws?
Secretary Peters. Madam Chairman, yes, I would.
Senator Murray. Very good.
Secretary Peters. Maybe I should be careful with the use of
the word ``lobby.'' There's been some concern about that term,
but yes, I would support our ability to----
Senator Murray. An exemption similar to the seatbelt law.
Would you use that authority, if you had it, to go out and talk
to States?
Secretary Peters. Madam Chairman, yes, I would.
ALCOHOL-RELATED FATALITIES
Senator Murray. Okay. Great. Let me ask you about another
safety issue. Your staff has explained that another factor in
missing your highway fatality reduction goal has been your
failure to make progress in reducing the number of fatalities
resulting from drunk driving.
In 2006, the most recent year for which we have data, there
are over 17,500 alcohol-related fatalities and 50 percent of
those had a blood alcohol level that was at least twice the
legal limit. I think we've got to start taking bolder steps to
prevent drunk drivers from getting behind the wheel and this
summer, the NHTSA Administrator urged increased use of ignition
interlocks for our repeat drunk driving offenders.
Given that we have not made any measurable progress in
reducing the alcohol-related fatalities, haven't we moved past
the point of merely urging, just asking for these ignition
interlocks? Shouldn't we be looking at some requirements?
Secretary Peters. Madam Chairman, as I mentioned earlier,
generally speaking, we would prefer to use education and let
State officials make these decisions.
Governor Richardson in New Mexico, for example, was one of
the first States to help pass a law for mandatory ignition
interlocking devices for those convicted of drunk driving. The
requirement has been very effective in that State and has since
been replicated in a number of other States.
So if one State shares with another what's been effective,
then we believe that more States will adopt laws like this.
Arizona, my home State, recently adopted very strict penalties
for repeat offenders, especially for repeat DUI offenders.
We're also aiming more of the money that you have made
available to us for what we call ``high visibility
enforcement'' DUI checkpoints, especially around holidays.
Every holiday, I go out and meet with officers who are doing
these kinds of checkpoints to reassure them that they're doing
the right thing.
Another problem we're having, Madam Chairman, is substance
abuse. We haven't always provided the tools that law
enforcement officials could use to distinguish someone who
doesn't register a blood alcohol level in excess of the legal
limit, but is obviously impaired. So, we're supporting law
enforcement in terms of more tools to identify impaired
drivers, and that's been very successful. More often, that
requires a blood test instead of a breathalyzer test. But
again, we are working with States to educate and make resources
available to them to use to detect impaired drivers.
Continued advertising campaigns such as, ``You Drink and
Drive, You Lose'' help to push more information out there.
Governor Napolitano in Arizona has been very effective in
saying that if you drink and you drive, then you will go to
jail. Make no mistake about it. They have worked with the
judicial branch on adjudication. Too often, someone who is
caught driving drunk pays a lawyer, gets a plea bargain, and
the offense never appears on their driving record. Governor
Napolitano has done a very good job of working with the
judicial community to make sure that when drivers are caught
drunk, then they're not allowed to plea bargain.
Senator Murray. Okay. All right, well, thank you. I
appreciate your aggressive efforts on that.
Secretary Peters. Thank you.
CROSS-BORDER TRUCKING PILOT PROGRAM
Senator Murray. Let me turn to one of your favorite topics.
There has been a lot of discussion over the Department's
interpretation of the language that was included last year in
the Consolidated Appropriations Act on the Cross-Border
Trucking Pilot Program.
I understand the Commerce Committee is going to have a
special hearing on the question and it may be that the courts
will have to make the final decision, but I want to focus on a
different question about this demonstration program. It's a
question that I first asked you when you appeared before this
subcommittee last March and I didn't get a very clear answer.
And I wanted to know if your Cross-Border Program continues
precisely what happens at the end of the 1-year pilot period in
September?
Secretary Peters. Chairman Murray, we will evaluate the
pilot at the end of the year, and report back to you on the
results. It would not be my intent to continue the program past
that time, absent learning something different. We would
certainly come back and talk with you about that.
Senator Murray. So, we will expect that program to cease in
September?
Secretary Peters. Madam Chairman, that is my understanding
because there is a prohibition in the 2008 appropriation
against establishing a program. Our interpretation, as you're
aware, is different than others. We are continuing to implement
a program that has already been established.
If we were to move forward at the end of our pilot program,
I believe we would be in violation of the 2008 appropriation.
Senator Murray. So, will the Cross-Border Trucking stop
then in September?
Secretary Peters. Madam Chairman, that would be my intent,
absent something changing in the law prior to that time.
Senator Murray. Okay, all right. Well, I will then assume
you will come back to us with your exact intent at that time
and if you want to continue any Cross-Border Trucking after
that point, you will have to get our authority to do so?
Secretary Peters. Madam Chairman, that is my understanding,
based on the language in the 2008 appropriation. I will ask our
Counsel's Office to follow up with you and be more precise. I
am not an attorney, but that is my understanding, yes.
[The information follows:]
In clarification, as announced in February 2007, the Cross Border
Demonstration Project was intended to last a period of 12 months.
However, section 6901 of the U.S. Troop Readiness, Veterans' Care,
Katrina Recovery, and Iraq Accountability Appropriations Act of 2007 (
the Supplemental Appropriations Act) required the Department to
undertake the Demonstration Project in accordance with the pilot
program statute found at 49 U.S.C. 31315(c). The latter provision
authorizes the Department to extend the Project to a maximum period of
3 years. As the Department noted in its brief in the 9th Circuit case
challenging the Project, the Department has the discretion to extend
the project up to 3 years pursuant to that provision.
Section 135 of the Consolidated Appropriations Act, 2008, division
K, provides that ``[f]unds appropriated or limited'' in that act for
transportation into the United States by Mexico-domiciled motor
carriers would be subject to the terms and conditions of section 6901
of the 2007 Supplemental Appropriations Act. The 2008 Appropriations
Act also prohibited the expenditure of funds ``to establish'' a cross
border motor carrier demonstration program. The Department read that
language as prohibiting the funding of any new programs, but not as
prohibiting the funding of the ongoing Project, which was established
in September 2007. The continued implementation or extension of an
existing program, by definition, does not constitute the establishment
of a new program and, therefore, would not be barred by the 2008
Appropriations Act. At this time, although this extension authority is
available, the Department has made no decision whether to extend the
time frame for the Demonstration Project.
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. Okay. Well, I will submit some other
questions on that and we will look forward to what your
response is at that time.
I do have some other committee members and myself included
that do have some questions that will be submitted for the
record and your prompt reply would be very much appreciated.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Patty Murray
AIRLINE CUSTOMER SERVICE
Question. Domestic airline delays last year were the second-worst
ever recorded. In fiscal year 2008, this committee provided an
additional $2.5 million for your General Counsel's office to increase
its enforcement activities and better protect airline consumers.
What specific activities are you funding with these additional
funds?
Answer. Our Aviation Enforcement Office is increasing its staffing
levels in fiscal year 2008 to pursue investigations and enforcement
action with respect to many areas of public concern, such as
unrealistic scheduling, failing to provide timely refunds, and failing
to provide flight delay information. A portion of the requested funds
has been and will be used to pay the salaries and expenses of the new
hires.
The office is also using the additional funding for start-up costs
to enhance the aviation enforcement and consumer protection program,
including: (1) upgrading the consumer complaint application system and
computerized tracking and monitoring system; (2) upgrading the DOT
aviation consumer protection Web site to make it more consumer friendly
and useful; (3) contractor support for drafting a regulatory evaluation
to accompany a consumer protection rulemaking and a task force on
tarmac delays; and (4) hosting ``listening'' forums to hear the
problems that air travelers are encountering, and a disability forum
concerning a new disability regulation. We have also put aside travel
funds for on-site investigations and compliance reviews and trips
related to carrier compliance education and consumer information and
assistance. Further, the additional funds will be used by the Aviation
Enforcement Office to print consumer brochures (e.g., Fly Rights) and
widely distribute them to help consumers understand their rights and
responsibilities as an air traveler. It would also enable the office to
translate into Spanish new consumer protection-related materials
developed by the office.
Question. Do you believe your agency's enforcement actions have any
meaningful impact on the airlines' behavior when it comes to customer
service?
Answer. Enforcement is one of the best ways to effect change. For
example, the U.S. Department of Transportation's Aviation Enforcement
Office has had significant success in reducing the number of
chronically delayed flights as a result of its on-going investigations
of chronically delayed flights operated by the airlines that are
required to report on-time performance data to the Department. The
office considers any flight that is late by 15 minutes or more at least
70 percent of the time it operates during a calendar quarter to be
chronically late. There were 183 chronically delayed flights in the
first quarter of 2007. This was reduced to 79 chronically delayed
flights in the first quarter of 2008. Moreover, during the first two
consecutive quarters we reviewed (the first and second quarters of
calendar year 2007), there were 27 chronically delayed flights in both
quarters. This was reduced to 3 chronically delayed flights in both the
fourth quarter of calendar year 2007 and the first quarter of calendar
year 2008. No flights remained chronically delayed during three
consecutive quarters.
The Aviation Enforcement Office has been encouraged by the results
of its investigation. In addition, based on carrier correspondence and
meetings with the majority of the reporting carriers, the Aviation
Enforcement Office has observed that carriers are now monitoring
chronically delayed flights more closely. Moreover, the office is aware
that the carriers are now taking concrete steps to correct chronically
delayed flights, such as adding more flight time, moving departure
times, changing aircraft routings, and providing spare aircraft and
crews.
NEW STARTS PIPELINE
Question. Madam Secretary, your budget proposal would fund the
Federal Transit Administration at a level that is $200 million less
than what is authorized by SAFETEA-LU. Your budget would fully fund the
Small Starts program, but it would take the full $200 million cut out
of the New Starts program. According to your staff, this is because a
larger pipeline of projects is developing for the Small Starts program,
while there is less demand for the New Starts program.
From where I sit, there seems to be a great demand for the New
Starts program. I hear all the time from metropolitan areas trying to
compete for a New Starts full funding grant agreement, or ``FFGA.''
Please tell me why the pipeline of projects competing for a New
Starts FFGA is shrinking at the same time that there seems to be a
great demand for Small Starts funding?
Answer. Several factors likely contribute to the smaller New Starts
pipeline, which the Federal Transit Administration (FTA) defines as the
list of projects in the preliminary engineering and final design phases
of project development.
First, the reduction of the number of projects in the pipeline
reflects FTA's improved management of the New Starts program. FTA is
more actively managing the New Starts pipeline, approving into
preliminary engineering only projects that FTA believes have a very
strong likelihood of receiving a Full Funding Grant Agreement (FFGA).
Many projects do not meet the criteria, so they never make it into the
pipeline or drop out along the way.
Second, project development delays sometimes reduce the New Starts
pipeline. Such delays can be attributed to the lack of local funding
commitments, unforeseen environmental impacts and concerns, and local
decisions to make significant changes in the scope of the project under
development to meet revised priorities, goals, and objectives. When
these situations occur, project sponsors withdraw from the pipeline
until such time as they can resolve local issues.
Last, the simplified and streamlined Small Starts process created
by the Safe, Accountable, Flexible, Efficient Transportation Equity
Act: A Legacy for Users (SAFETEA-LU) is causing metropolitan areas to
reconsider major capital investments in favor of less costly, smaller
scaled projects.
In summary, local decisionmakers determine whether they want to
pursue funding under the rigorous New Starts program. The need for
considerable technical resources and strong political and financial
support can affect those decisions.
PROMOTION OF THE NEW STARTS PROGRAM
Question. At a time when oil prices reach over $100 per barrel, and
the President is learning that prices at the gas tank may pass $4 per
gallon this spring, I do not believe that this administration is doing
enough to invest in transit alternatives. Americans need another option
than sitting in traffic congestion and burning gasoline.
Madam Secretary, what are you doing to promote the New Starts
program and ensure that metropolitan areas are able to compete for
these valuable grants?
Answer. During the past year, FTA has offered numerous training
courses, attended conferences, and issued guidance pertaining to the
New Starts program. The following table lists training courses
sponsored by FTA and conferences at which FTA made presentations on the
New Starts program.
RECENTLY SPONSORED FTA NEW STARTS TRAINING
------------------------------------------------------------------------
Training or Conference Location Month and Year
------------------------------------------------------------------------
Alternatives Analysis....... Washington, DC...... April 2007.
APTA Bus and Paratransit Nashville........... May 2008.
Conference.
Association of Public Toronto, Canada..... June 2007.
Transportation Association
(APTA) Legislative
Conference.
Transportation Research Denver.............. August 2007.
Board: Transportation and
Land Use.
Travel Forecasting.......... St. Louis........... September 2007.
Alternatives Analysis....... San Francisco....... November 2007.
Alternatives Analysis....... San Diego........... February 2008.
APTA Legislative Conference. Washington, DC...... March 2008.
Small Starts Workshop....... Pittsburgh.......... April 2008.
New Starts Roundtable....... Pittsburgh.......... April 2008.
Alternatives Analysis....... New York............ April-May 2008.
Small Starts Workshop....... Phoenix............. May 2008.
New Starts Roundtable....... Phoenix............. May 2008.
World Bank.................. Washington, DC...... June 2008.
TRB-Innovations in Travel Portland, OR........ June 2008.
Forecasting.
------------------------------------------------------------------------
FTA plans to sponsor an alternatives analysis course in Seattle in
July 2008, and an alternatives analysis course in Washington, DC during
the fall.
FTA has also issued several guidance documents, which can be found
on FTA's public Web site at http://www.fta.dot.gov, including: (1) New
Starts, Small Starts, and Very Small Starts Fact Sheets--Spring 2007;
(2) Reporting Instructions and Templates--May 2007; (3) Guidance on New
Starts Policies and Procedures--June 2007; (4) Preliminary Engineering
Checklist--August 2007; and (5) Proposed Guidance on New Starts
Policies and Procedures--April 2008.
In addition to promoting New Starts, FTA has been actively involved
with the following other programs: (1) Public Transportation
Participation Pilot Program; (2) Transit-Oriented Development & Joint
Development; (3) Transportation Planning Capacity Building Program; (4)
Public-Private Partnership Pilot Program (also known as Penta-P); and
(5) Urban Partnership Agreement Program.
OVERSIGHT OF THE NATION'S BRIDGES
Question. Recent news reports have highlighted some problems with
your Department's National Bridge Inventory. While these stories may
not have told the whole story, it seems that the best case scenario is
that this database needs to be greatly improved in order to be a useful
tool for overseeing bridge conditions. The worst case scenario is that
States are neglecting to inspect thousands of bridges within a 2-year
time frame as required by Federal regulations.
Madam Secretary, other than collecting data from each State, please
describe to me exactly what your Department does to ensure the safety
of the Nation's bridges.
Answer. The National Bridge Inventory (NBI) database contains more
than 90 individual data items on nearly 600,000 highway bridges.
Information in the NBI is used for apportioning Highway Bridge Program
funds to the States, preparing the biennial Conditions and Performance
Report to Congress and the annual report on bridge materials required
under SAFETEA-LU, monitoring bridge conditions and compliance with the
National Bridge Inspection Standards (NBIS), research, and other
reporting.
The collection and maintenance of bridge inspection data by the
Federal Highway Administration (FHWA) does not, by itself, ensure
bridge safety. However, this information is of critical importance to
States, localities, and Federal bridge owners as they carry out their
inspection responsibilities under the NBIS. Based on these inspections,
safety is enhanced through timely maintenance, repair, and
rehabilitation conducted as a result of these inspections, along with
proper load posting and enforcement of load restrictions.
FHWA monitors compliance with the NBIS regulation through various
oversight activities. FHWA Division Offices oversee each State's bridge
inspection program. The primary means of monitoring the State program
is through a comprehensive annual review. The review includes assessing
overall compliance with the NBIS as well as the quality of bridge
inspection.
A typical review involves a field check of a sampling of bridges to
compare inspection reports for quality and accuracy; interviews with
bridge inspection staff to review procedures; and a review of various
inventory data reports to assess compliance with such things as
frequencies, load posting, and data accuracy. Annual reviews are
supplemented with periodic in-depth reviews of specific program areas
such as bridge load capacity rating and posting practices.
The FHWA Resource Center assists in oversight by providing expert
technical assistance to Division Offices and partners; assisting in
development and deployment of policies, advanced technologies, and
techniques; and deploying market-ready technologies. Also, the FHWA
Resource Center assists in coordinating and conducting bridge
inspection reviews and program exchanges, as well as delivering and
updating training.
FHWA Headquarters' oversight responsibilities include issuing
bridge inspection policies and guidance; maintaining the NBI;
monitoring and updating an array of bridge inspection training courses;
collecting, reviewing, and summarizing the Division Office annual
program review reports; and monitoring overall NBIS compliance.
FHWA also works with the States at Technical Committee Meetings of
the American Association of State Highway and Transportation Officials
Highway Subcommittee on Bridges and Structures to assure that the
States and local agencies apply the state-of-the-knowledge in bridge
design, construction, maintenance, and inspection practices to assure
bridge safety and durability.
Question. Are there additional tools that you need to be more
effective in overseeing bridge safety?
Answer. Bridge safety is ensured by the States, localities, and
Federal bridge owners as they carry out their responsibilities under
the NBIS. Various tools are used during bridge inspections as
appropriate based on the type of inspection being performed. These
tools include basic items such as hammers, binoculars, tape measures,
and laptop computers, as well as more sophisticated non-destructive
evaluation tools such as ultrasonic testing, eddy current, and infrared
thermography equipment.
With respect to FHWA oversight of the national bridge inspection
program, the need for the types of tools described above is limited as
FHWA does not conduct the physical inspections. FHWA relies on
computers to assist in analyzing, summarizing, and maintaining data as
part of its compliance monitoring activities. There have been advances
in computing and software technology that have the potential to improve
the effectiveness of FHWA oversight as well as general program
administration, and those advances are currently being explored.
Question. According to the news reports and staff at your
Department, field offices of the Federal Highway Administration are not
required to make a thorough review a State's bridge database to ensure
that its inspections are up-to-date. I am disconcerted to hear that
your staff may be doing ``spot checks'' of this important data.
Madam Secretary, are ``spot-checks'' an adequate method for
overseeing a State's bridge inventory?
Answer. The NBI contains more than 90 individual items of data for
nearly 600,000 highway bridges. More than half of the bridges are owned
by localities. With such a large and complex database, spot checks and
sampling of data are considered effective means of strategically
utilizing limited resources to monitor a very large program; however,
they do not guarantee 100 percent compliance with NBIS regulation
provisions nor complete data accuracy.
It is important that the NBI data be accurate and up-to-date. There
are provisions in the NBIS regulation to ensure that States and Federal
bridge owning agencies are keeping their data up-to-date (refer to 23
CFR 650.315). There are also provisions within the regulation
pertaining to the need for quality control and quality assurance
procedures, in part, to maintain a high degree of accuracy and
consistency in bridge inspection data (refer to 23 CFR 650.313(g)).
The ``spot checks'' of data do not represent the entirety of FHWA's
oversight. FHWA oversight of the National Bridge Inspection Program
includes the following major components:
--An annual review of each State's bridge inspection program with a
sampling of bridge site visits;
--Resolution of any issues resulting from the annual reviews;
--Preparation of an annual NBIS summary report for submittal to
Headquarters; and
--Ensuring that the State submits their annual NBI data to
Headquarters.
Procedures and guidelines for conducting the annual reviews are
documented in the FHWA Bridge Program Manual. The reviews typically
involve interviews with inspection personnel, bridge site visits, and
data review and analysis using standardized and ad-hoc reports from the
NBI along with data from specific inspection records. As an additional
check on quality, individual NBI data submittals from the States and
Federal agencies are checked for errors and inconsistencies prior to
loading into the NBI.
Inspection frequency is one of the NBIS provisions that are
evaluated during each annual review, per FHWA policy. This evaluation
most often requires the analysis of data; however, it may involve only
a sample population of an individual State's total bridge stock. Since
the NBI contains a snapshot of data at a given point in time, an
analysis of inspection frequency often requires use of more up-to-date
data from the individual State's inventory.
Question. States can negotiate with your Department on a set of
criteria for putting some bridges on a 4-year schedule for inspection,
instead of the usual 2-year schedule required by highway regulations.
The criteria for putting bridges on a slower schedule vary from one
State to another, and your Department has set no overall standard for
setting these schedules. Yet, on its own Web site, the Federal Highway
Administration promises ``to work with our partners to ensure quality
and uniformity in signs, signals, and design standards on the Nation's
major highways.''
Madam Secretary, can you explain to me why the Highway
Administration should not also promote uniformity in bridge
inspections?
Answer. FHWA promotes uniformity in the national bridge inspection
program. By definition, the National Bridge Inspection Standards
developed by the FHWA establish national uniformity in inspection
procedures, inspector qualifications, inspection frequency, inventory
data, and organizational responsibilities.
With respect to extended inspection intervals, the National Bridge
Inspection Program statute, 23 U.S.C. 151, requires the establishment
of minimum standards, including the maximum time period between
inspections.
Effective October 12, 1993, FHWA adopted as final the interim final
rule that introduced a provision for adjusting the frequency of routine
inspection for certain types or groups of bridges to better conform
with their inspection needs. The provision allowed States to develop an
alternative inspection program which specifies bridges that may be
inspected at intervals longer than 2 years, not to exceed 4 years;
however, FHWA approval was required to go beyond the normal 2-year
interval. This provision was retained in the 2005 NBIS regulation
update, but the intervals were revised to be stated in terms of months
instead of years.
The baseline requirements for FHWA approval of a 48-month
inspection frequency policy are described in the Technical Advisory T
5140.21, dated September 16, 1988. The Technical Advisory defines
uniform basic criteria for identifying classes of bridges that, in
general, would not be considered for routine inspection at intervals
longer than 24 months. The basic criteria that apply to all State
requests include:
--Bridges with any condition rating of five or less.
--Bridges that have inventory ratings less than the State's legal
load.
--Structures with spans greater than 100 feet in length.
--Structures without load path redundancy.
--Structures that are very susceptible to vehicular damage, e.g.,
structures with vertical over- or under-clearances less than 14
feet, narrow thru or pony trusses.
--Uncommon or unusual designs or designs where there is little
performance history, such as segmental, cable stayed, etc.
The Technical Advisory further states that the criteria developed
for establishing the interval between inspections, if greater than 24
months, shall include the following:
--Structure type and description.
--Structure age.
--Structure load rating.
--Structure condition and appraisal ratings.
--Volume of traffic carried.
--Average daily truck traffic.
--Major maintenance or structural repairs performed within the last 2
years.
--An assessment of the frequency and degree of overload that is
anticipated on the structure.
The basic criteria are not negotiable; however, individual States
may add to this list or establish more stringent criteria.
Once the criteria for extended intervals have been approved by the
FHWA, monitoring is required to ensure continued compliance with the
criteria. FHWA has recognized the need to improve monitoring in this
area and will focus on reviewing this during future annual compliance
reviews.
ADA COMPLIANCE OF COMMERCIAL BUSES
Question. Madam Secretary, access to transportation is critical to
ensuring our Nation's disabled citizens can lead full and independent
lives. Since the passage of the Americans with Disabilities Act (ADA),
great strides have been made in making transportation more accessible
to the disabled, yet work remains. As you know, DOT has its own ADA
regulations, yet one agency--the Federal Motor Carrier Safety
Administration (FMCSA)--contends that it lacks the authority to enforce
the Department's own ADA regulations.
This issue has already been litigated in court and the D.C. Circuit
Court disagreed with FMCSA's claim that it lacked the authority to deny
or revoke operating authority to commercial buses that are unwilling or
unable to comply with DOT's own ADA regulations and remanded the case
back to FMCSA. Yet, notwithstanding these reports of disabled travelers
being denied access to transportation and the court's ruling, FMCSA's
position has not changed. In response to the court, the agency
reasserted its position that it lacks the authority to enforce
compliance with DOT's ADA regulations.
Can you explain to me why FMCSA--the sole Federal agency
responsible for granting or denying operating authority to commercial
buses--does not have the authority to enforce the Department's own ADA
regulations?
Answer. The U.S. Department of Transportation (DOT) is mindful of
its responsibilities for ensuring access to transportation services for
all travelers, including those with disabilities, and its multi-year
Strategic Plan emphasizes the importance of enhanced access to
transportation services by travelers with disabilities. The Federal
Motor Carrier Safety Administration (FMCSA) also works to ensure access
to transportation services by individuals with disabilities within the
limits of its legal authority.
In the D.C. Circuit decision that addressed FMCSA's authority to
consider alleged violations of the Americans with Disabilities Act of
1990 (ADA) in determining whether a passenger carrier is fit to receive
operating authority, Peter Pan Bus Lines, Inc. and Bonanza Acquisition,
LLC v. Federal Motor Carrier Safety Administration, 471 F.3d 1350
(2006), it was the position of FMCSA that it did not have such
authority. The court remanded the case to the agency because it
disagreed with the FMCSA's determination that the relevant statutory
language clearly did not permit the agency to deny operating authority
for a carrier's failure to comply with ADA requirements. The court did
not support FMCSA's interpretation that the statutory language was
clear and unambiguous. It determined that the text of the statute was
ambiguous, instructed FMCSA to re-examine the statute, and emphasized
that remanding the case to the agency did not mean that FMCSA's
interpretation of the statutory language was necessarily incorrect. The
court further stated that after the agency revisits the issue, its
decision will be entitled to deference by the court, as long as the
agency's reading of the statute is reasonable.
In a decision issued October 26, 2007, after thoroughly re-
examining the governing statute, FMCSA reaffirmed its earlier finding
that it lacks statutory authority to enforce the ADA through the
agency's licensing procedures. Peter Pan Bus Lines, Inc. and Bonanza
Acquisition, LLC have sought review of this decision in the D.C.
Circuit Court of Appeals and the parties will be filing their
respective briefs with the court later this year.
Question. While I disagree with your assessment that FMCSA lacks
the authority to enforce the Department's own regulations, have you
requested the specific authority that you think you need to begin
enforcing these regulations?
Answer. While this case is under consideration by the D.C. Circuit
Court of Appeals, FMCSA has not sought specific authority to enforce
ADA requirements when reviewing passenger carriers' requests for
operating authority. However, FMCSA is closely monitoring the status of
the pending legislation entitled the ``Over-the-Road Bus Transportation
Accessibility Act of 2007,'' H.R. 3985. H.R. 3985 was passed by the
U.S. House of Representatives on December 12, 2007, and was reported by
the Committee on Commerce, Science, and Transportation, U.S. Senate, on
April 24, 2008.
FUNDING FOR PIPELINE SAFETY OFFICE
Question. I want to take a moment to discuss your budget request
for the Office of Pipeline Safety. This office is seeing an increase of
nearly $14 million, or 17 percent. I want to applaud you for
recognizing the needs in that area. Just this past year alone, we saw
pipeline-related fatalities in Mississippi, Louisiana and Minnesota.
Last year, the Congress added 15 new inspection positions and your
budget request for 2009 proposes to add 8 additional positions.
Given the importance that we both see in this area, can we expect
to see these positions filled promptly?
Answer. The Pipeline and Hazardous Materials Safety Administration
(PHMSA) has launched an aggressive recruitment strategy to promptly
fill vacant inspection and enforcement positions. PHMSA's strategy is a
three pronged approach: (1) entry level--outreach to colleges and
universities training future inspectors; (2) mid-level--offer current
industry inspectors recruitment bonuses; and, (3) senior level--recruit
retiring senior inspectors that are industry experts.
PHMSA offers a variety of Federal incentives such as remote
deployment from home and recruitment incentives. Recent legislative
proposals with regard to pay setting in Alaska (as well as other non-
foreign areas) will, if passed, also assist in the longer term
attractiveness of employment in that location and should aid in
recruitment in that State. Since the Consolidated Appropriations Act of
2008 was enacted, PHMSA has recruited 13 inspection and enforcement
personnel.
Question. Do you expect to have problems recruiting the right
candidates for these positions? We would like to ask you to keep us
regularly updated as to the progress you are making at bringing these
people on board.
Answer. The expertise required to maintain and expand any safety
program is specialized, constituting inherent challenges to recruiting
the ``right'' candidates. However, PHMSA's recruitment strategy is
predicated on those challenges and the agency expects to address and
overcome them. For example, qualified candidates are interviewed by an
expert panel. In an effort to ensure that PHMSA is meeting its
recruitment goals, the agency is monitoring the process and will
provide the committee with monthly updates; the most recent is provided
below.
PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION
PIPELINE SAFETY--FISCAL YEAR 2008 INSPECTION/ENFORCEMENT POSITIONS AS OF 5/31/2008
----------------------------------------------------------------------------------------------------------------
Number of
Inspection/ Actual On- Accepted Percent of
Location Enforcement Board Offers Vacancies Positions
Positions Filled
----------------------------------------------------------------------------------------------------------------
Headquarters.................... 12 9 .............. 3 75
Eastern Region.................. 13 11 .............. 2 85
Southern Region................. 14 11 1 2 79
Central Region.................. 20 16 1 3 80
Southwest Region................ 25 22 1 2 88
Western Region.................. 25 22 1 2 88
-------------------------------------------------------------------------------
TOTAL..................... 109 91 4 14 82
----------------------------------------------------------------------------------------------------------------
FEDERAL INVESTMENT IN TRANSPORTATION
Question. Secretary Peters, you have argued that tolling and
privatization can translate into a greatly reduced role for the Federal
Government in financing transportation infrastructure. In fact, the
President's out-year projections for the Department of Transportation
call for a major reduction in the Federal investment transportation.
How would tolling and the private sector support a national
transportation system that includes building infrastructure in
disadvantaged areas? For example, would the private sector and tolling
have built the Appalachian Development Highway System?
Answer. Public private partnerships are a valuable supplement to,
not a replacement for, the national highway system and networks of
local streets and roads. In some parts of the country tolling could
certainly be considered one of the options by States that can not
afford desired improvements with the existing mix of Federal and State
highway taxes to replace bridges or expand capacity of existing
highways running through disadvantaged areas.
Question. If certain States choose to toll, does that mean that the
Federal Government should be spending less in those areas? Or put
another way, will the citizens in those States be financing their own
transportation while other places receive a greater share of Federal
resources?
Answer. Under current law, the amount of Federal funding that is
distributed to States is not affected by whether or not a State has
toll roads.
Question. The details of your proposal are not part of your budget
request; when will we see the specifics? Are you working on a
legislative proposal?
Answer. The authorization for current Federal surface
transportation programs does not expire until the end of fiscal year
2009. Reauthorization will be a major factor in the fiscal year 2010
budget deliberations.
Question. Most Federal oversight over the highway system consists
of requiring State and local governments to meet Federal standards
before receiving their highway grants.
How would your Department continue to oversee the safety and
performance of the transportation system when it no longer plays as
critical a role in highway financing?
Answer. Even if support from the private sector significantly
enhances our transportation capacity, the Federal Government will
continue to play a critical role in both highway financing and safety.
The U.S. Department of Transportation has a proven ability to oversee
the safety and performance of both transportation systems that it helps
finance, such as highways and transit, as well as those that are
predominantly controlled by the private sector, such as trucks,
pipelines and railroads.
nationwide differential global position system (ndgps)
Question. The fiscal year 2009 budget requests funding at $4.6
million for the NDGPS, which is consistent with the requests in prior
years. However, the cost of this program is likely to increase in
fiscal year 2009 by as much as $800,000.
Is the budget request sufficient funding to maintain all current
services and keep NDGPS equipment in good repair?
Answer. The U.S. Department of Transportation (DOT) is committed to
maintaining current inland (terrestrial) NDGPS services to the many and
varied users of these services, as identified by the Research and
Innovative Technology Administration (RITA) in its recently completed
NDGPS Assessment. President Bush's fiscal year 2009 budget includes
$4.6 million to continue inland NDGPS operations.
In March 2008 DOT approved, and the interagency National Space-
Based Positioning, Navigation and Timing (PNT) Executive Committee
(EXCOM) endorsed, a decision to continue inland NDGPS services as a
national utility in support of America's surface transportation,
precision agriculture, natural resources and environmental management,
and surveying communities. (See: http://www.dot.gov/affairs/
dot5508.htm).
Question. If NDGPS costs were to increase in 2009, where would the
additional funds come from? Alternatively, in what way and to what
extent might service be reduced?
Answer. As part of its decision to continue inland NDGPS
operations, DOT is seeking a cost-share mechanism with other Federal
agencies that use NDGPS. DOT is still developing this mechanism through
the interagency NDGPS team, and is examining if there are any changes
that may be made to the near-term costs of operating and maintaining
the NDGPS system.
Question. The NDGPS has deferred maintenance requirements and also
needs an upgrade to catch up with the Coast Guard's DGPS technology. It
is reported that these could be completed in 2009 for $3.5 million, but
will grow more expensive in the future.
Does RITA expect to complete this refresh? If so, when, and what is
the cost expected to be at that time?
Answer. The 2009 budget includes $4.6 million for annual operating
costs of the NDGPS system. The U.S. Coast Guard is expected to complete
the Maritime DGPS refresh by second quarter fiscal year 2009. As is
prepares the fiscal year 2010 budget and develops a cost share
methodology, DOT and its partners are evaluating the costs of deferred
maintenance, and of upgrading the inland component of NDGPS to be
equivalent with the Coast Guard maritime component.
______
Questions Submitted by Senator Patrick J. Leahy
INFRASTRUCTURE MAINTENANCE
Question. On your congestion initiative, which I do not believe has
been authorized by Congress. There are vast areas of the country with
transportation funding needs that have more to do with aging
infrastructure than overcrowded roads. In Vermont, for instance, 453 of
our 2,675 State- and town-owned bridges (nearly 20 percent) are
structurally deficient.
In fiscal year 2007, DOT was granted full authority to make
spending decisions with all of its discretionary funding. Instead of
using this opportunity to show fairness and evenhandedness nationwide,
modal agencies across the DOT decided to give away all of their money
to a few big cities. You should have seen the letters I received from
my constituents back home. They ranged the gamut from disappointment to
frustration to infuriation. And I agreed with every one of them.
While the Minnesota bridge tragedy last year refocused Congress in
the fiscal year 2008 appropriations process on the need to repair
deficient bridges and roads, it is disappointing to look at the DOT's
budget request for the coming year and again see a proposal that
emphasizes congestion mitigation and kicks essential infrastructure
maintenance further down the road.
How will you ensure that rural areas around the country will be
treated fairly and equitably under this budget proposal?
Answer. The foremost transportation goal of Federal, State and
local governments no longer is establishing connectivity, but rather
ensuring that people and commerce are able to move efficiently. The
Department is deeply concerned about the massive problem of traffic
congestion, which presents significant challenges to this goal and
affects millions of people across the Nation every day. Hence, we have
proactively established the congestion initiative under the
Department's existing authorities. It also bears mentioning that the
Government Accountability Office has testified favorably before
Congress regarding the Congestion Initiative, highlighting our efforts
as ``encouraging'' and stating that ``successfully addressing the
Nation's mobility needs [will require] strategic and intermodal
approaches and solutions.'' \1\
---------------------------------------------------------------------------
\1\ Statement of Patricia A. Dalton, Managing Director, Physical
Infrastructure Issues, GAO. Testimony before the Subcommittee on
Transportation, Housing and Urban Development & Related Agencies;
Committee on Appropriations; House of Representatives; March 7, 2007.
---------------------------------------------------------------------------
When implementing programs, I have been consistent throughout my
tenure as Secretary in attempting to focus the Department's limited
discretionary resources on projects that yield the greatest possible
benefits. With this in mind, fiscal year 2007 discretionary funding
decisions focused not on a big city ``give-away,'' but rather on the
results of a competitive and comprehensive application and review
process. This was Congress's intended role for the Department when
Congress established various ``discretionary'' grant-making programs in
SAFETEA-LU and in prior authorizations.
With respect to the question of highway spending in rural areas of
the Nation, I can assure you that the Department is concerned with the
condition, safety, and performance of rural roads. The latest
information published in the 2006 Conditions and Performance report
notes that the percentage of travel in rural areas on roads of good
pavement quality has steadily increased from 46 percent in 1995 to 58.3
percent in 2004. Further, over this same time the condition of bridges
in rural areas has also improved from year-to-year, with the percent in
deficient condition at their lowest levels in the most recent year for
which we have data. Safety levels on rural highways have also shown
considerable improvement over the last decade.
The steady improvements we have witnessed on the condition of rural
highway and an safety performance nationwide is commensurate with the
level of spending on these roads. Highway capital outlays in 2004 on
arterial and collector roads in rural areas amounted to $22.9 billion,
as contrasted with $36.2 billion for the same class of roads in urban
areas. When looked at on a per vehicle-mile of travel (VMT) basis,
outlays were 2.4 cents per VMT for rural roads and 2.2 cents per VMT
for urban roads.
In summary, highways in rural areas of the Nation are being
improved at a steady pace, and their condition and performance reflect
the fact that highway funds are being directed to these road systems at
an appropriate level.
INFRASTRUCTURE MAINTENANCE
Question. You recently chaired a national commission on
transportation financing that concluded we are not spending nearly
enough to build and maintain our transportation infrastructure. While a
majority on that panel agreed that we must keep open the option of
increasing the Federal gas tax in order to upgrade our existing
transportation system, you dissented and said the Federal Government
should instead pursue ``a different kind of investment,'' like tolling,
congestion pricing, and public-private partnerships. I am not sure if
you have been to Vermont before, but I am afraid that the traffic
volume on our roads will not even pay for the tollbooth operators, much
less the huge backlog in deferred maintenance projects piling up at the
Vermont Agency of Transportation. On top of that, I do not foresee many
private equity firms being interested in getting a piece of the action
on I-89, I-91, or I-93 in Vermont--except maybe during leaf peeping
season.
Has your Department developed any specific financing proposals that
would be ready to implement as part of this year's appropriations bill
or next year's reauthorization bill to address the over $225 billion in
new investment that the national commission said we need annually to
upgrade our transportation system?
Answer. The Department disputes the validity of the Commission's
assertion of $225 billion in annual needs. First, this figure
represents simply an estimate of projects whose benefits slightly
outweigh their costs--a criterion that does not take into account the
fact that resources are limited, and on which we do not base investment
decisions in any other sector of the economy. Raising the fuel tax
reduces disposable incomes available for private sector expenditures--
many of which may have benefits in excess of their costs. Second,
several of the investment assumptions used in the Commission analyses
include unjustifiable investments, and are not based on a strict
benefit-cost analysis. Finally, the Commission Report gives inadequate
consideration to the potential for controlling demand for investment
and increasing the efficiency of the current system, including through
the use of congestion pricing to increase the performance of existing
roads.
Regarding congestion pricing, this is one tool available to States
and localities for improving the performance of transportation systems.
We do not suggest it is a blanket solution for addressing all highway
funding needs. Where there is considerable congestion, pricing can be
an effective strategy for managing traffic and producing revenues that
can support local transportation systems. Where there is not
congestion, local governments will likely continue to rely on
conventional financing mechanisms, at least for the near term. As
technologies develop Federal, State, and local governments will have
growing opportunities to use innovative means to raise transportation
funds, regardless of the level congestion.
The Department is currently developing financing proposals to
address the Nation's surface transportation infrastructure needs, which
we hope to present to Congress later this year as part of a broader
surface transportation reauthorization proposal.
ESSENTIAL AIR SERVICE
Question. I am disappointed that the administration once again has
proposed such a significant cut in the Essential Air Service program
and a new general provision that would lead to considerable reductions
in service to rural communities across the country. Specifically, the
President's budget requests only $50 million for the EAS program--far
less than half of the $125 million that Congress appropriated last
year. The $50 million funding level is clearly insufficient to meet the
needs of EAS communities around the country, as over 60 would be
dropped from the program immediately under the administration's
proposal.
While this is not the first time that this administration has tried
to kill the EAS program, as its chief administrator, how do you expect
small communities around the country, like Rutland, Vermont, to
maintain their Essential Air Service with only $50 million in direct
funding?
Answer. The Essential Air Service program was designed when airline
rates, routes, and services were regulated as means of providing
temporary support to some communities during the transition of the
airline industry to a deregulated structure. Although the program was
eventually made permanent, it has remained fundamentally unchanged
since its inception. That is one reason the administration has proposed
reforms over the last several years. We believe that the program needs
to be targeted to serve the needs of the most truly isolated
communities across the country, and the administration's plan offers
specific proposals to accomplish that objective.
It is clear that the EAS program must be reformed or the costs will
continue to escalate. As more and more regional carriers upsize their
fleets to larger turboprops or even regional jets, it will leave more
and more communities reliant upon subsidized EAS. In addition, as the
spread of low-fare carriers continues, more local communities will be
unable to support their local airport's service as travelers will drive
to nearby, low-fare jet service. EAS service of two or three round
trips a day cannot compete with low-fare jet service, and more and more
communities are falling into this situation. The administration's
budget request is wholly consistent with the notion that the most
isolated communities should continue to receive subsidized EAS in order
to keep them connected to the national air transportation system.
______
Questions Submitted by Senator Dianne Feinstein
SMALL STARTS
Question. The fiscal year 2009 budget proposal included funding for
five projects in California through the ``small starts'' program. These
projects will allow a number of California communities to expand their
public transit offerings. I have worked to secure past funding for this
project, and I appreciate the administration's support.
Can you describe for us the rigorous review that ``small starts''
proposals undergo? Am I correct that these projects are some of the
most cost effective transportation projects in the Country?
Answer. The Small Starts evaluation and rating process is a
simplified version of the process used for New Starts projects. Small
Starts projects must meet the criteria specified in law, which include:
project justification (cost-effectiveness, transit supportive land use,
and other factors such as economic development) and local financial
commitment. The rigorousness of the Federal Transit Administration's
(FTA) review depends on the estimated capital and operating costs of
the Small Starts project. Those projects which qualify as Very Small
Starts (under $50 million total capital cost, less than $3 million per-
mile capital cost, and more than 3,000 riders in the corridor today)
essentially qualify automatically as meeting the project justification
criteria specified in law. Therefore, FTA performs little review other
than to ensure the project qualifies.
For projects that do not qualify as Very Small Starts, FTA reviews
and evaluates their estimates of ridership, cost-effectiveness, and
transit supportive land use. Those projects with estimated operating
costs totaling less than 5 percent of system-wide operating costs
automatically qualify as meeting the local financial commitment
criteria, so FTA again performs little review. If the project's
operating costs are greater than 5 percent of system wide-expenses,
then FTA reviews and evaluates a detailed financial plan submitted by
the project sponsor.
There are seven projects in California approved for project
development and these are included in the Annual Report on Funding
Recommendations (the ``New Starts Report''). Four are Very Small Starts
(limited review and evaluation by FTA) and three are Small Starts
(subject to more rigorous FTA review/evaluation). The Very Small Starts
are automatically ``warranted'' as being cost-effective based on the
aforementioned qualifying criteria. The three Small Starts projects are
cost-effective (San Francisco received a High rating for cost-
effectiveness, San Bernardino received a Medium-High rating for cost-
effectiveness, and Riverside received a Medium rating for cost-
effectiveness.) Of these seven projects approved for project
development, five were recommended for funding in the fiscal year 2009
President's Budget. The other two projects, San Bernardino E Street
Corridor and Van Ness Avenue BRT, were not ready for a funding
recommendation.
CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS
Question. The fiscal year 2009 Department of Transportation budget
proposal requests $855 million for the National Highway Traffic Safety
Administration (NHTSA), an increase of only $17 million for the agency
that administers Corporate Average Fuel Economy (CAFE) Standards.
Considering that NHTSA has to write a whole new set of CAFE standards
to comply with the Ten-in-Ten Fuel Economy Act, I am concerned that
this increase is insufficient. What assurance can you provide the
Senate that this budget request will allow NHTSA to put out new CAFE
regulations on time?
Answer. On April 22, 2008, NHTSA issued a notice of rulemaking
proposing standards for Model Years 2011 through 2015 passenger cars
and light trucks. The CAFE program was appropriated $1.88 million in
fiscal year 2008 as part of the $12.8 million provided by Congress for
NHTSA's rulemaking activities. NHTSA estimates that it will require an
additional $3.8 million in fiscal year 2008 to support expanded CAFE
activities, and submitted a reprogramming request to the committee on
June 2, 2008. The fiscal year 2009 budget request is $3.88 million.
Question. The law requires NHTSA to issue draft CAFE regulations at
least 30 months before they go into effect. Therefore, NHTSA must issue
draft CAFE regulations for Model Year 2011 this year. Is NHTSA on track
to issue draft CAFE regulations on time? In what month do you expect
NHTSA to issue draft regulations?
Answer. On April 22, 2008, NHTSA announced a notice of proposed
rulemaking for CAFE standards applying to model years 2011-2015. After
a 60-day comment period that ends July 1, 2008, NHTSA will begin work
to finalize CAFE standards for those years. NHTSA expects to publish
the final rule before the end of this year. This rule must be published
by April 1, 2009, to be effective for the 2011 model year.
Question. The Ten-in-Ten Fuel Economy Act requires a fleet-wide
average of at least 35 miles per gallon by 2020. Between now and 2020,
NHTSA must increase fuel economy ``ratably'' and issue the regulations
in 5 year increments. Will the draft rule, for the first 5 years,
accomplish at least a 5 mile per gallon increase, so that NHTSA
maintains steady progress towards 35 mpg in 2020?
Answer. Overall proposed CAFE standards for the entire light duty
fleet would increase by approximately 25 percent over 2011-2015, as
shown the table below. This is a 4.5 percent average annual rate of
growth and exceeds the 3.3 percent annual average increase required in
the Energy Independence and Security Act of 2007 (EISA). The overall
proposed fuel economy requirement in 2015 is 31.6 miles per gallon
(mpg). This is 6.3 mpg higher than the combined standard in 2010. If
these standards were finalized, the agency would only need to increase
CAFE standards by 2.1 percent per year from 2016-2020 to achieve a
combined standard of exactly 35.0 mpg in 2020 (as required by EISA).
PROPOSED PASSENGER CAR AND LIGHT TRUCK CAFE STANDARDS
----------------------------------------------------------------------------------------------------------------
Combined
Year Car Standard Truck Standard Standard
----------------------------------------------------------------------------------------------------------------
2011............................................................ 31.2 25.0 27.8
2012............................................................ 32.8 26.4 29.2
2013............................................................ 34.0 27.8 30.5
2014............................................................ 34.8 28.2 31.0
2015............................................................ 35.7 28.6 31.6
----------------------------------------------------------------------------------------------------------------
Question. Last year the 9th Circuit Court of Appeals struck down
NHTSA's new fuel economy standard for light trucks and SUVs, in part
because NHTSA refused to quantify the benefits of reducing greenhouse
gas emissions as part of its cost effectiveness analysis. Has NHTSA now
developed a valuation method to quantify the benefits of reducing
emissions of gases that cause global warming?
Answer. In its April 22nd notice of proposed rulemaking, NHTSA
proposed placing a value on reductions in carbon dioxide emissions.
NHTSA reviewed the literature and proposed a value based on information
from Working Group II's contribution to the Fourth Assessment Report of
the United Nations Intergovernmental Panel on Climate Change (IPCC).
The IPCC report tentatively concluded that the most likely value for
the global benefits was $14 per metric ton of carbon dioxide. However,
the value for benefits to the United States could be as low as $0 per
metric ton of carbon dioxide. The IPCC conclusion was derived from a
peer-reviewed study that examined 103 estimates of the social cost of
carbon from 28 published studies. While NHTSA used the midpoint of the
$0-$14 range ($7 per ton) as a value for the analysis in our notice, it
also conducted sensitivity analyses around the upper and lower
boundaries. NHTSA realizes that substantial variability exists in
estimates of the domestic and global values of carbon dioxide
reductions. The agency consulted with the Environmental Protection
Agency and the Department of Energy on this issue and will continue to
do so for the final rule. The agency also requested and anticipates
receiving comments during its rulemaking process on how to estimate
properly the value of reducing carbon dioxide emissions.
Question. The fine for failing to meet CAFE standards equals $55
per mile per gallon, per vehicle below the standard, which is below the
cost effective price of improving fuel economy. As a result, some
European firms choose to pay CAFE fines year after year instead of
improving fuel economy. Historically the big three U.S. automakers have
complied with the standards because paying fines would have led to
stockholder lawsuits. But now one of these firms is privately held,
creating the possibility of increasing fuel economy violations. Should
Congress consider increasing CAFE fines so that it is in the economic
interest of automakers to comply with the standards?
Answer. NHTSA is committed to achieving the fuel savings sought in
EISA, and will continue to work with Congress to achieve the goals of
EISA. Historically, most manufacturers have met fuel economy standards.
Should we see a reversal of this trend, NHTSA will examine all options,
including a provision to double the fine and/or additional legislative
authority.
Question. According to an investigation conducted by the House
Oversight Committee, Secretary Peters and numerous other staffers
contacted the Environmental Protection Agency and Members of Congress
to ``solicit comments against the California waiver,'' as a Department
of Transportation official put it. Did Secretary Peters call Governors
and urge them to oppose the California waiver? According to internal
DOT e-mails, Secretary Peters spoke with Steve Johnson about the
California waiver on June 6, 2007. Did Secretary Peters encourage him
to deny the waiver?
Answer. To repeat a clarification that we have made in response to
previous Congressional inquires on this subject, the Department of
Transportation (DOT) did not under take any improper ``lobbying'', as
that term is used in the anti-lobbying restrictions found in 18 U.S.C.
1913, or provisions routinely contained in annual appropriations acts
restricting the use of appropriated funds for ``publicity or propaganda
purposes'' to support or defeat pending legislation. As we have
previously acknowledged, however, DOT undertook an effort to contact
Governors and Members of Congress to inform them of California's waiver
petition and of its possible implications.
As I have previously indicated, I spoke with EPA Administrator
Stephen Johnson concerning the California waiver petition. I recall a
conversation in which he indicated that the docket would benefit from a
wider array of commenters, including State Governors or other elected
officials who represent stakeholders. We discussed the possibility that
such potential commenters might need an extension to the comment period
on order to submit comments. We also discussed DOT's longstanding
position in favor of a uniform national fuel economy regulatory scheme.
CALIFORNIA MARITIME INDUSTRY
Question. On February 11, I wrote to Maritime Administration
Administrator Sean T. Connaughton:
``. . . to express my concern that the actions of the U.S.
Department of Transportation Maritime Administration (MARAD) are
causing harm to the maritime industry in the State of California. This
industry, which I have worked to expand for more than three decades,
employs thousands of Californians on board ships, in ports, and in our
shipyards. I request that you explain why MARAD has pursued an effort
that may significantly decrease cruise ship visits, cruise ship turn-
around operations, and cruise ship maintenance in California.''
In order to better understand how MARAD's recent efforts conformed
to its mission, I asked a series of questions, but I have received no
response. Please answer the following questions, first asked in my
letter nearly one month ago:
If CBP finalizes its draft ``Hawaiian Coastwise Cruises'' rule,
does MARAD estimate that any U.S. flagged cruise ships will begin
servicing Californian ports of call? If so, how many annual ports of
call will result?
Answer. Based on information available to the Maritime
Administration, operators of large U.S.-flag cruise ships do not appear
to currently have plans to offer services from ports in California to
Hawaii, regardless of the final outcome of the Customs and Border
Protection (CBP) rule. Whether U.S.-flag cruise ships service
California ports of call is a market decision, so it is not possible to
provide at this time a specific number of annual ports of call that
will result.
Question. If CBP finalizes its draft ``Hawaiian Coastwise Cruises''
rule, does MARAD estimate that total cruise ship visits to California
ports will decrease? If so, how many annual ports of call will be lost
as a result?
Answer. Under the CBP proposal, foreign-flag ships could alter
itineraries and still call in Hawaii in order to provide a cruise
experience similar to what is currently offered, resulting in little or
no decrease in calls to California ports. However, it is far more
likely that poor economic conditions and highly elastic demand for
leisure travel will reduce the total number of cruise ships visits to
California ports in the short term. The Maritime Administration has not
received specific information from cruise ship operators on the
projected effects of the CBP draft rule. Therefore, the Maritime
Administration has not developed estimates of the potential reduction
in the number of port calls in California.
Question. Have you or any other MARAD officials visited cruise ship
operating companies to discuss their round-trip cruise itineraries that
depart from California ports and visit ports of call in Hawaii?
Answer. The Maritime Administration regularly meets with ship
operating companies. Some companies have identified some aspects of
their plans to reduce round-trip cruise voyages from California to
Hawaii based on operating economics and poor demand. These business
decisions, however, were based on the industry market assessment made
prior to the November 2007 announcement of the CBP to reinterpret
Passenger Vessel Services Act (PVSA) rules.
Question. If so, have you or any other MARAD officials encouraged
cruise ship operating firms to reduce their total number of annual
round-trip cruises that depart from California ports and visit ports of
call in Hawaii?
Answer. The Maritime Administration has not encouraged any operator
to reduce any legal vessel operations in any trade. On the contrary, in
pursuit of its mission to improve and strengthen the U.S. marine
transportation system, the Maritime Administration supports the cruise
industry, operating in compliance with the PVSA.
Question. Do you believe that advocating for decreased cruise ship
activity in California's ports is consistent with the mission of MARAD
if no increase in U.S. flagged service in Californian ports is expected
to result?
Answer. The Maritime Administration has not advocated for decreased
cruise ship activity in California's ports. Rather, the Maritime
Administration strongly supports cruise industry operations that are in
compliance with the PVSA.
Question. Approximately 40 percent of all container traffic enters
the United States through the ports of Los Angeles and Long Beach.
Moving the goods out of the ports has severe economic consequences and
human health impacts. What does this budget proposal do to address
these impacts?
Answer. One of the primary objectives of the Maritime
Administration is to ensure the continued success of our Nation's
Marine Transportation System. This includes not only the ports and
near-port intermodal connectors, but also ensuring water access and the
interstate road, rail and Marine Highway corridors that move the
freight into and out of the ports.
Nowhere is this more important than the ports of Los Angeles and
Long Beach. Included in this budget are the resources necessary to
staff our Southern California Gateway Office, located in the port of
Long Beach. This Gateway Office, as in the other nine Gateway Offices
in our Nation's major ports, works to identify bottlenecks and ways to
improve freight movement, as well as work on environmental and
community challenges in the ports and their intermodal connectors.
This office also supports the broader Department of Transportation
National Strategy to Reduce Congestion and one of its key elements, the
initiative to reduce Southern California freight congestion. The
Maritime Administration led the development of a Southern California
National Freight Gateway Cooperation Agreement, signed in October 2007,
among Federal, State and local entities to achieve an agreed agenda to
seek improvements in freight throughput capacity in Southern
California, balanced with environmental and community concerns. The
team is actively assessing issues and potential solutions that are
compatible with California's Goods Movement Action Plan. The Maritime
Administrator and Deputy Administrator have met frequently with port,
environmental, and community stakeholders to identify solutions that
improve the environment, health and community while sustaining
international trade.
For example, the Maritime Administration is actively working with
the Port of Los Angeles and Pacific Rim ports to transfer emissions
reduction and energy efficiency technology. The Maritime Administration
continues to participate in the International Maritime Organization and
the International Standards Organization to develop international
regulations standards that address marine emissions from vessels and
ports. At the same time, the Maritime Administration continues to
collaborate with academia to develop unique and groundbreaking tools
that assess optimal crossmodal freight routing in an effort to reduce
energy consumption and emissions.
NATIONAL GOODS MOVEMENT STRATEGY
Question. California has identified $48 billion in transportation
infrastructure needs directly related to goods movements. In November
2006, Californians passed Proposition 1B, agreeing to tax themselves to
pay for a $20 billion transportation bond, $2 billion of which are
about to go towards goods movement projects. What is the status of the
Department of Transportation's efforts to develop a national goods
movement strategy and what revenue sources do you intend to seek to
finance a national system?
Answer. The Department of Transportation commends the State of
California for its vision and planning to improve freight flows, both
through individual efforts at the local level as well as through the
comprehensive Goods Movement Action Plan released in 2005 and the
follow-on Multi-County Goods Movement Action Plan. The continued
efficient flow of freight through Southern California to and from
factories and consumers across the Nation is a vital component of the
national economy. The port complex of Los Angeles/Long Beach is the
busiest container seaport in the Nation and the fifth busiest in the
world. The rapid increase in freight volumes through the complex has
strained existing infrastructure and has raised the urgency of
environmental concerns surrounding this activity that is so essential
to our Nation's economic growth.
The Department of Transportation is addressing the need to improve
freight movement nationwide through our comprehensive National Strategy
to Reduce Congestion. Transportation system congestion is one of the
single largest threats to our Nation's economic prosperity and way of
life. Whether it takes the form of cars and trucks stalled in traffic,
cargo stuck at overwhelmed seaports, or airplanes circling over crowded
airports, congestion costs America almost an estimated $200 billion a
year.
In 2006, the Department of Transportation announced a major
initiative to reduce transportation system congestion. This plan
provides a blueprint for Federal, State, and local officials to
consider as we work together to reverse the alarming trends of
congestion, which is critical to improving freight flows through our
transportation system. Several components of the initiative are
directly addressing goods movement. They include congestion relief
programs, public-private partnerships, national road and rail
corridors, and technological and operational improvements to the
transportation system and its business processes.
A recent example of the actions taking place to improve freight
flows is the plan announced by Secretary Peters on April 25, 2008, to
cut traffic jams, provide better bus service, and clean the air in Los
Angeles. The area is eligible for more than $213 million in Federal
Congestion Reduction grants. The funds would also finance the creation
of new High-Occupancy Toll (HOT) lanes, which single-occupancy vehicles
can use by paying a variable toll. Through the concept of ``congestion
pricing,'' these tolls would vary with travel demand and real-time
traffic conditions throughout the day so that transportation
authorities can better manage the number of cars in the lanes to keep
them free of congestion, even during rush hour. As congestion is
reduced, freight velocity will improve.
The Department is implementing other congestion pricing
demonstrations in areas of extreme congestion in order to reduce
gridlock and clear the air. These demonstrations can be replicated in
other cities and regions to improve the efficiency of the
transportation system across the Nation. The initial demonstrations are
being funded with grants from the Department of Transportation,
including $495.1 million through the Urban Partnership Program and
$366.7 million through the Congestion Reduction Demonstration Program.
In addition, the Department is advocating that metropolitan planning
organizations designate freight projects as funding priorities in their
transportation planning.
The Department also recognizes the potential for private sector
participation in national, regional and local transportation projects.
A major element of the National Strategy to Reduce Congestion is the
potential for public-private partnerships (PPPs) to jointly finance
transportation projects. PPPs provide benefits by allocating the
responsibilities to the party--either public or private--that is best
positioned to control the activity that will produce the desired
result. With PPPs, this is accomplished by specifying the roles, risks
and rewards contractually, so as to provide incentives for maximum
performance and the flexibility necessary to achieve the desired
results.
CONTAINER FEES
Question. There seems to be a growing consensus that container fees
are likely to be the most significant source of funds to pay for the
billions of dollars necessary to move goods through Southern
California, if not the Nation. For example, there are now bills both in
Congress (Rep. Rohrabacher) and the California legislature (State Sen.
Lowenthal) proposing container fees. The ports of Los Angeles and Long
Beach have already approved, but not yet implemented, their own
container fee plans. Has the Department of Transportation explored the
feasibility of a national container fee system at water, land and air
ports of entry as a means to finance goods movement infrastructure
specifically? What is the department's position on container fees?
Answer. The Department of Transportation has not explored the
feasibility or desirability of a national container fee system to
finance goods movement infrastructure. There are several approaches and
alternatives to the implementation of container fees that the
Department is evaluating. Direct assessments on shipments is an
approach that has been presented to Congress and to the California
legislature. Other approaches, such as the successful PierPass program
at the ports of Los Angeles and Long Beach, uses a congestion pricing
model that provides an incentive for cargo owners to move shipments at
night and on weekends. Cargo owners moving containers at the two ports
during peak daytime hours are required to pay a Traffic Mitigation Fee,
which helps fund the cost of operating five new shifts per week at
marine terminals. Another approach is the use of public-private
partnerships as a means to finance infrastructure growth and congestion
mitigation.
The Department has consistently heard from shippers, carriers and
the transportation industry that the acceptability of the concept of a
fee depends upon how the fee is structured and collected, the amount of
the fee, and how the funds are used. Of particular concern is that an
assessment be clearly tied to specific transportation improvement
projects that will improve freight flows, and that it be clear from the
outset whether the fee is permanent or would sunset after the specific
projects are completed. Another key issue is whether non-containerized
cargoes using port facilities and rail and road connectors would also
be included in the assessment.
SUPPORT FOR S. 406
Question. Public Transportation Systems serving urbanized areas
exceeding 200,000 in population may not use funds received through
section 5307 of the United States Code to pay for operating expenses.
However, some very small systems--with fewer than 100 buses--exist in
urbanized areas. I have cosponsored a bill (S. 406) that would allow a
system with fewer than 100 buses to use these funds for operating
expenses, as other small bus systems are allowed to do.
Does the Secretary of Transportation support S. 406? If not, please
explain why.
Answer. Currently, the Federal Transit Administration's (FTA)
urbanized area formula program is focused on capital assistance; during
the remaining time under the current authorization--SAFTEEA-LU--the
agency is not prepared to support operating assistance in areas over
200,000 in population. FTA believes a proposal based on fleet numbers
is not appropriate for at least three reasons:
--The urbanized area formula program is based on urbanized area
populations. The manner in which public transit is organized in
an urbanized area is a local decision, which FTA is prohibited
from regulating.
--FTA also believes good public policy should not include any feature
in the urbanized area formula program that could be viewed as
discriminating between transit agencies in a single urbanized
area.
--A proposal based on fleet numbers would discourage agencies from
expanding bus service for fear of losing operating assistance.
______
Questions Submitted by Senator Ted Stevens
ALASKA FLIGHT SERVICE STATION NETWORK
Question. The FAA is currently reviewing how to modernize the
Alaska Flight Service Station network. As part of the FAA fiscal year
2009 budget request, the FAA intends to conduct a final investment
analysis of how to modernize the Alaska flight service stations. Could
you provide the committee with an analysis of the alternatives the FAA
is considering? Does the FAA intend to consolidate any current
facilities? Will any new technologies be approved for new sites?
Answer. The Federal Aviation Administration (FAA) has laid out a
plan to modernize Alaska flight services in an evolutionary manner. FAA
plans to modernize the current technology while maintaining existing
operational flight services. The Alaska Flight Service Modernization
(AFSM) plan is divided into two segments. Segment 1 is defined as the
one-for-one replacement of the current automation system by February
2010 when the current automation system's (Operational and
Supportability Implementation System) period of performance on the
contract will expire. Segment 2 is composed of two parts--the
deployment of a new technology voice switch and the modernization of
facilities (infrastructure).
FAA is looking for ways to expedite the deployment of the voice
switch (part of segment 2) by the end of 2011. After the automation and
voice switch technologies are delivered with remote user access
capability, FAA will have implemented the new flight services concept
of operations.
The strategy for the modernization of the facilities will be
determined by what is required to support the new concept of operations
in Alaska flight services. After approximately a 2-year period of
demonstration and analysis, FAA will determine whether projected user
benefits are being achieved and adjust our plan as necessary.
Generally, FAA does not support the consolidation of Alaska flight
services facilities, but does support expansion of flight services
delivery. FAA has not completed the investment analysis work for
facility modernization but expects to do so by 2014.
FAA has an ongoing program to sustain Alaska flight service
facilities that will continue to operate while the system is
modernized. FAA will not consider implementing any strategies to
consolidate facilities in Alaska until the technology has proven itself
efficient, and full coordination has been completed with users and
primary stakeholders, including congressional oversight authorities.
SMALL SHIPYARDS
Question. The shipbuilding industry is vital to our Nation's
commerce and security. In 2006 the Congress enacted legislation
establishing a program within the Maritime Administration that provided
financial assistance to small shipyards throughout the Nation. This
program is especially beneficial to shipping communities in my State of
Alaska. Small shipyards received $10 million in assistance last year,
but the administration's 2009 Budget proposes no funding for this
program. What do you plan to do to ensure the viability of our nation's
shipping industry and small shipyards specifically?
Answer. The Maritime Administration's (MARAD) fiscal year 2009
budget proposal was developed well in advance of the enactment of the
fiscal year 2008 appropriation for the small shipyard grants program,
the first time this program has been funded. On April 22, 2008, MARAD
awarded $9.8 million in grants to 19 shipyards throughout the United
States. These funds will be expended for projects over the next 2
years, which will enhance the viability of small shipyards.
PIPELINE AND HAZARDOUS MATERIALS SAFETY
Question. Why is the President's budget request for Pipeline Safety
$10 million below what this committee authorized in the Pipeline
Inspection, Protection, Enforcement and Safety Act of 2006?
Answer. The Pipeline and Hazardous Materials Safety Administration
(PHMSA) is making good progress toward achieving the goals of the
Pipeline Inspection, Protection, Enforcement and Safety (PIPES) Act of
2006. In its first budget submission since the PIPES Act, the
Department is requesting a significant increase in funding of PHMSA's
Pipeline Safety Program in order to continue implementation of the
PIPES Act. The $93.3 million request, a $13.5 million increase over the
fiscal year 2008 enacted level, supports the top three PIPES Act
priorities: (1) increasing financial support for State pipeline safety
programs; (2) preventing excavation-related damage to pipelines; and,
(3) increasing Federal inspection and enforcement personnel. The
administration has kept its commitment to help States with increased
financial support, up to an average of 60 percent of program costs and
closer to our shared goal of funding 80 percent of costs. We are
supporting stronger damage prevention programs by providing incentives
to States to develop more effective programs and to expand the use of
civil enforcement authority against anyone who violates ``one-call''
laws. We are increasing PHMSA's pipeline safety inspection and
enforcement personnel to 123 full-time positions. The national pipeline
safety program has been successful in driving down risk by targeting
safety areas of greatest concern. This budget will allow PHMSA to
continue to sharpen its focus while maintaining the gains it has made
over 20 years.
Senator Murray. We thank you for taking your time today and
your testimony as well as all your staff I know who have worked
very hard for this as well.
Secretary Peters. And again my apologies for being late
this morning.
Senator Murray. All right. Well, it was a transportation
issue, I understand?
Secretary Peters. Yes, it was.
Senator Murray. That's under your jurisdiction.
Secretary Peters. Indeed.
SUBCOMMITTEE RECESS
Senator Murray. With that, this subcommittee is recessed,
subject to the call of the Chair till next Thursday.
[Whereupon, at 11:29 a.m., Thursday, March 6, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2009
----------
THURSDAY, MARCH 13, 2008
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:30 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Lautenberg, Bond, Specter, and
Allard.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
STATEMENT OF HON. ALPHONSO JACKSON, SECRETARY
ACCOMPANIED BY:
BRIAN MONTGOMERY, COMMISSIONER, FEDERAL HOUSING ADMINISTRATION
PAULA BLUNT, GENERAL DEPUTY ASSISTANT SECRETARY, OFFICE OF
PUBLIC AND INDIAN HOUSING
NELSON R. BREGON, GENERAL DEPUTY ASSISTANT SECRETARY, OFFICE OF
COMMUNITY PLANNING AND DEVELOPMENT
MILAN M. OZDINEC, DEPUTY ASSISTANT SECRETARY FOR PUBLIC HOUSING
INVESTMENTS
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. This subcommittee will get to order, and I
want to thank the Secretary for coming a half-hour early and I
apologize. We had votes early this morning, so we had to move
up the time. I know Senator Bond will be here as well, so I'll
go ahead and start my opening statement and we'll start moving
in that order so we can get to some questions in a few minutes.
Today we are going to hear testimony from the Secretary of
Housing and Urban Development, Alphonso Jackson. The principal
mission of Secretary Jackson's agency is to address the housing
needs of our most vulnerable citizens. My colleagues on this
subcommittee and I take our responsibilities towards these
citizens, as well as all taxpayers, very seriously. We believe
it is our duty to protect and expand the opportunities for the
neediest in our society, provide hope for people struggling to
keep a roof over their heads, and redevelop blighted
neighborhoods in partnership with our mayors and our Governors.
But in recent months the mortgage crisis has really tested
HUD's ability to keep people in their homes and carry out its
mission, and its performance has been totally inadequate. The
mortgage crisis threatens the housing and credit markets
throughout the economy. Millions of families are at risk for
foreclosure. The administration has the responsibility to do
everything in its power to prevent this crisis from spinning
further out of control. Yet its solutions, such as the FHA
Secure program and the HOPE Now Alliance, will help just a few
hundred thousand borrowers at most.
Today, as I usually do, I reviewed in advance the formal
testimony that Secretary Jackson submitted for this hearing. I
have to say that I agree with some observations and I disagree
with most of the rest. I agree wholeheartedly with the
Secretary when he says that his 2009 budget request, quote,
``is measured in more than dollars; it is measured in the lives
we touch.'' But as I read the President's budget request for
HUD, I'm very concerned because it doesn't touch nearly enough
lives, and even while the number of people in need is growing
quickly every day.
This budget proposes to cut Housing for the Elderly by more
than a third and it proposes to cut Housing for Persons with
Disabilities by almost the same amount. The President's budget
proposes to completely eliminate funding for the HOPE VI
program, which tears down the most decrepit public housing
facilities and replaces them with modern, safe mixed income
housing.
It proposes to cut the Public Housing Capital Fund by
almost a fifth, which would reduce our efforts to keep public
housing sanitary and safe for tenants. It proposes to slash
Housing Counseling for distressed homeowners by 60 percent,
even though there is an unprecedented demand for help. And its
budget proposes to cut Community Development Block Grants by 18
percent, more than $650 million, at a time when the economic
downturn is forcing our cities and towns to slash their own
local budgets and slow down their own community investments.
The cuts to just these six programs total $1.6 billion. So
yes, I agree with Secretary Jackson that we should measure this
budget, as he says, by the lives we touch. But in the midst of
a national housing crisis the effect of this budget will be to
hurt those most in need, rather than to provide a helping hand
to a more stable and secure future.
Secretary Jackson will tell us in his opening statement
that his budget proposal reflects America's compassion and
commitment. Well, I think the American people feel compassion
and they are committed to helping needy senior citizens,
disabled, and people at risk of losing their homes. But that's
exactly what this budget does not do. This budget reflects a
lack of compassion and commitment demonstrated by the Bush
Administration and its misguided budget priorities.
Perhaps to me the most egregious statement in the
Secretary's testimony is his observation that ``The President
has been a strong proponent of funding for housing
counseling,'' and that's a quote. The reality is the President
has fought our efforts to increase this funding every step of
the way. Almost every observer of the mortgage foreclosure
crisis in both the public and the private sectors has
emphasized the urgent need to expand housing counseling
resources. At a time when the threat of foreclosure looms over
the heads of literally millions of families, it is essential
that we get the word out that they do have options. Too many
families are ignoring their lender's calls. Too many families
fear that nothing can be done, and too many families are left
at home, hoping and praying that things will just work
themselves out.
This committee recognized that problem last year, even
while the Bush administration complained about our efforts and
issued veto threats. The fact is this committee on a bipartisan
basis had to fight the administration even to provide an
additional $180 million to expand housing counseling through
the NeighborWorks America. When the committee added this money,
we got letters from OMB that threatened to veto our
appropriations bill, and those veto threats specifically cited
the counseling money as an example of excessive and unnecessary
spending.
OMB Director Nussle told us that our expanded effort could,
and I quote, ``produce adverse consequences, including
interfering with existing efforts by private and public
entities to address mortgage foreclosures.''
And the White House opposition has continued since then.
Just a few weeks ago, our majority leader introduced an
amendment to the stimulus bill that would boost our housing
counseling resources by another $200 million.
Now, the reality is we are still not meeting the needs that
are out there today. Even our historic funding increase last
year will only reach 450,000 families when we know as many as 2
million families need this help. But what was the White House's
response to Senator Reid's proposal? Another veto threat,
saying it's excessive funding.
As I said earlier, the administration's 2009 budget request
actually cuts total resources for Housing Counseling by more
than 60 percent in the coming year. So I don't see how anyone
can say the President has supported that effort. And this, as I
said, is not just a partisan fight. In the last 7 years, this
subcommittee has consistently had to rewrite the HUD budget to
ensure that critical programs serving our citizens and
communities are not slashed or dismantled. That's been true
under the leadership of Senator Bond and of myself. And it is
an example of the administration's lack of dedication to
helping low-income and working families and its failure to
invest in our communities.
Now, an equally important responsibility of this
subcommittee is to keep an eye on how our tax dollars are being
spent, so I want to turn to that. Earlier I said I agreed with
Secretary Jackson that his budget should be measured in the
lives it touches. Unfortunately, allegations have surfaced
recently that HUD funds have in fact touched the lives of some
of Secretary Jackson's personal friends. We have read the
allegations of cronyism by Secretary Jackson. We have read
allegations that he inappropriately interfered in hiring and
contracting, and we have read allegations that he tried to
dictate the spending decisions of public housing authorities to
benefit his acquaintances.
I know Secretary Jackson has grown tired of reading those
allegations questioning his character. I've grown tired of
reading them, too. I believe they've taken a real toll on the
morale of HUD employees and the credibility of HUD's
leadership.
Many of these allegations are currently being investigated
by the HUD Inspector General and the Department of Justice. I
want to point out that Secretary Jackson has been charged with
absolutely nothing. Our system of governance and justice
presumes innocence and Secretary Jackson is owed that
presumption.
That said, as part of this hearing I do intend to ask
Secretary Jackson some direct questions regarding his conduct
as Secretary, how he has administered funds provided by the
subcommittee, and how he has interacted with other HUD staff
whose salaries are paid for by this subcommittee. I expect the
Secretary to provide direct answers. Our oversight
responsibilities require no less and I appreciate the
Secretary's cooperation.
With that, I will turn to Senator Allard for his opening
comments.
STATEMENT OF SENATOR WAYNE ALLARD
Senator Allard. Madam Chairman, I want to thank you and
Ranking Member Bond for providing a hearing to hear the fiscal
year 2009 budget of the Department of Housing and Urban
Development. I would also like to welcome Secretary Jackson to
the subcommittee. Secretary Jackson, we appreciate you making
time in your busy schedule to be here, especially since this is
your second morning in a row testifying before the Senate.
HUD has a long history of problems. For years it was the
only Cabinet-level agency on GAO's high risk list. However, I
want to take this opportunity to publicly commend Secretary
Jackson and now Secretary Martinez, who was there before him,
for his progress on this point. Last year the remaining HUD
programs were removed from GAO's high risk list. This is a
tremendous accomplishment and represents a great deal of work,
and I would encourage Secretary Jackson, all the dedicated
staff at HUD to remain focused on maintaining the positive
direction.
Certainly one of the biggest challenges HUD faces is the
tight fiscal scenario. This is a constraint shared by nearly
all agencies. No one denies that the budget for HUD or any
other agency, for that matter, is insufficient to meet every
single perceived need in this country. Increasingly, the
definition of a need seems to be a bottomless well. I believe,
though, that this budget strikes a reasonable balance at
meeting the most pressing needs while still being responsible.
I support the administration's decision to pursue fiscal
responsibility for these times. It would be irresponsible to
continue to overspend and leave a mounting debt for future
generations.
It is easy to look at the proposed HUD budget and complain
that it lacks money. Certainly needs are great and in a perfect
world we would have the money to meet all needs. However, the
administration has had to make some very difficult choices, and
the choices at HUD were, I'm sure, no exception in their
difficulty. The budget is evidence of these difficult choices
and I commend the administration for facing reality and not
simply taking the easy way out.
I want to reiterate a position that I have put forward at
previous meetings, but I believe bears repeating: HUD's success
as an agency is not defined by a budget number. More money does
not necessarily mean more people are served or that people are
served any better. This would seem to be especially true when
reviewing the effectiveness of HUD's programs as determined by
the PART analysis. Forty-five percent of HUD's funds are spent
on programs we either know are failing to produce results or we
have no way to tell whether they are producing any results.
Why do we talk at such length about the dollars going to
HUD, but fail to look at what is coming out the other side? I
for one intend to keep looking at both sides of the equation.
I appreciate the opportunity to do this, to do so at this
hearing. Mr. Secretary, your testimony will be helpful to this
subcommittee and it will be helpful as we begin the
appropriation process.
Thank you, and thank you, Madam Chairman.
Senator Murray. Senator Lautenberg?
STATEMENT OF SENATOR FRANK R. LAUTENBERG
Senator Lautenberg. Thank you, Madam Chairman, for holding
this hearing. We welcome Secretary Jackson here. We have to ask
questions about why it is, when one of the most difficult
things for young people growing up and ultimately winding up
often in difficult situations out on our streets, while we
spend over $3 billion each and every week on the war in Iraq
and supplementals to support that in addition to that, and we
turn our backs on the housing needs for people who lack the
income to get themselves into normal routine housing.
So these are tough times for families struggling to keep
their homes now. Thousands of families may lose their homes
because they were sold risky subprime mortgages. And instead of
realizing the American dream, more than 35,000 households in
New Jersey may have their homes taken away.
That's why I co-sponsored the Foreclosure Prevention Act to
help homeowners refinance their loans and to be able to afford
their payments and keep in their homes. Our bill would also
provide an additional $4 billion in community development block
grants, known as CDBG, for local governments to purchase
foreclosed properties and to renovate them to improve
neighborhoods. CDBG invested more than $98 million into New
Jersey's neighborhoods last year, creating vibrant and safe
communities, new homes and shops, new jobs, and more
opportunities, and a better atmosphere totally.
But while we were trying to do our part in the Congress,
the American people are not getting enough help from the other
side of Pennsylvania Avenue, where the housing for President
Bush is more than adequate. Despite the acknowledged success,
President Bush wants to cut funding for CDBG by nearly $1
billion, and he also wants to cut funding for public housing.
New Jersey has more than 38,000 public housing units and the
average income of those residents is $12,000 a year, $250 a
week. How can you afford decent housing with that? You've got
to have help from our Government. Without these public housing
units, these men, women, and children would literally be out on
the streets.
We're spending billions and billions, almost into the
trillions, on housing and restructuring Baghdad and other
cities in Iraq, and yet we're willing to turn loose young
people on the streets who are so demoralized by the places
they're forced to live in. And yet the President's budget
request is nearly $900 million short of what our housing
authorities need to patch leaky roofs, fix heating systems, and
to make other repairs to their residents' homes.
Finally, Madam Chairman, the President's budget falls short
when it comes to the section 8 program, a program that's worked
very well over the years. Section 8 is the Federal Government's
most important program for low-income families trying to find
decent and safe homes in the private market by making up the
difference between what the resident can afford to pay and the
actual rent.
Once again, the President's budget is more than $1 billion
less than what America's families need to succeed in their
goals for life. In New Jersey alone, these cuts would cost
3,000 people their housing assistance and possibly their homes.
Every child, every individual, and every family deserves a safe
and affordable place to call home, and if the President wants
to see America's homeowners and public housing residents
through these tough economic times, his budget doesn't reflect
that interest.
I look forward to working with this committee to make sure
our public housing residents, the section 8 program, and our
housing authorities get the resources they need to succeed. Mr.
Secretary, I hope that you'll communicate your concerns for
public housing, for affordable housing, to the White House and
to the President and let them know that this is something that
must be done to help keep stability and reasonable fairness in
our society.
So we welcome you here, Mr. Secretary. But there are a lot
of questions that are going to have to be answered.
Thank you.
Senator Murray. Thank you, Senator.
Senator Specter, do you have an opening statement?
STATEMENT OF SENATOR ARLEN SPECTER
Senator Specter. Yes. Thank you, Madam Chairman.
I join the subcommittee in welcoming Secretary Jackson here
today. He has a job of enormous importance, housing and urban
development, which has a very, very heavy impact on my city.
Public housing is a matter of the utmost importance as it seeks
to provide decent accommodations for people, a very important
factor, providing a home, providing a basis for family, for
school.
We have a very high crime rate in Pennsylvania, especially
in Philadelphia, and adequate and affordable housing is very
important. Beyond the overall concern I have for the housing
issues, there has been a matter that's very contentious between
the Department of Housing and Urban Development and the
Philadelphia Housing Authority, something that the Secretary
and I have discussed personally. There is an issue which could
cost Philadelphia $50 million at the end of this month unless
it is resolved.
Senator Casey and I undertook to try to mediate the
dispute, spent a little more than an hour on November 1, in my
office, a very rancorous, cantankerous, bitter meeting, which
perplexed me. And I asked the parties to go get it worked out,
but if they didn't I would try again.
On December 11, I sat down with them again for an hour, and
there have been some very sharp accusations in that matter,
which I hope we do not have to go into. What I want to do is I
want to see the matter resolved. There is litigation now. It's
costing the United States Government a lot of money to hire a
lot of expensive lawyers, and taking up the time of the United
States District Court for the Eastern District of Pennsylvania.
And we're all on the same team.
I was very much concerned to read in the Washington Post
yesterday some e-mails which pertain to this matter between two
of the Assistant Secretaries of HUD. This is what they said,
``Would you like me to make his life less happy?''--I think
referring to Carl Greene, the head of the Philadelphia Housing
Authority. ``If so, how?'', Orlando J. Cabrera, then Assistant
Secretary at the U.S. Department of Housing and Urban
Development, wrote about Philadelphia Housing Director Carl
Greene. Kim Kendrick, an Assistant Secretary who oversaw
accessible housing responded, ``Take away all his Federal
dollars.'' She typed symbols for a smiley face at the end of
her January 2, 2007 note. Cabrera then wrote back a few minutes
later, ``Let me look into that possibility.''
The Philadelphia Housing Authority Director Greene says
that this is in retaliation for his refusal to comply with a
request, or really a demand, made by the Secretary, and there
are alleged calls from the mayor.
I hope we don't have to get into the details of it, and I
hope we're able to get it worked out. But I have some important
questions. I noticed in your statement, Mr. Secretary, that you
will only take written questions. Well, that's not
satisfactory. This is a subcommittee of the United States
Senate, charged with putting up billions of dollars for your
Department, and there are some very important questions that
have to be answered. And I say that in a context that I don't
like. You and I have worked very closely together, and when I
wrote to you yesterday I scratched off ``Mr. Secretary'' and
put ``Al'' and signed it ``Arlen'' because you and I have an Al
and Arlen relationship.
But when $50 million is at stake and the kind of
allegations that are involved here, I hope we don't have to get
to the bottom of it. What I hope is we can settle it.
Thank you, Madam Chairman.
Senator Murray. Senator Bond, I apologize for starting
ahead of time with the votes going on. Do you want to make your
opening statement?
OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND
Senator Bond. I might as well, and begin by apologizing to
you, my colleagues, the Secretary, and those here. This morning
a wreck on North Capitol of a school bus put me about 45
minutes behind. So this is the day when I could least afford to
be 45 minutes behind, but I appreciate your going ahead, and
again my sincere apologies.
I thank you, Madam Chairman, for having this hearing. I
believe Senator Murray has already noted this is likely the
last time we will have the pleasure of receiving testimony from
Al Jackson, the Secretary of HUD. I would say also, the
Secretary's a good friend. We worked together in previous
transmogrifications and I hope that he will be able to provide
closure for a number of HUD programs, most especially public
housing reform, lead-based paint, as well as providing
demonstrated leadership on the subprime mortgage crisis.
These are no small challenges that have to be resolved.
Nevertheless, I hope that this hearing will assist us in
crafting an appropriations bill that will assist in meeting at
a minimum the housing and community development needs of the
Nation.
HUD continues to face a slew of funding and programmatic
issues which are not likely to be resolved for a number of
years into the future. This statement is not intended to
detract from any accomplishments of the Secretary, but it is an
honest assessment of HUD as it continues to have problems, many
of which are long-term and, to be quite frank, require a lot
more funding than the administration is willing to commit.
Unfortunately, many of HUD's programs are part of a safety
net to assist many low- and very low-income families with
greatest needs, including seniors and persons with
disabilities. In many cases these are persons who are unable to
help themselves, through no fault of their own. These are the
people we all want to help.
Unfortunately, HUD's problems are not just a question of
inadequate funding. I believe strongly that HUD does not have
adequate staffing or expertise to ensure that its programs can
work effectively. This coupled with the risk of many impending
retirements from the senior ranks also means that HUD will have
difficulty conducting the necessary oversight to prevent fraud,
abuse, and negligence in its programs.
On top of these problems, HUD has admitted that its IT
systems are antiquated, underfunded, flat-out do not work as
expected. That's a real hat trick, and that is a serious
problem, which not only compounds HUD's program failures, but
it further enhances the risk of fraud, abuse, and loss of
program income.
Nevertheless, I congratulate Senator Murray for her
aggressive efforts to ensure that the final fiscal year 2008
appropriations bill included language that provides a separate
appropriation for each of HUD's primary offices. Frankly, I
think that was an excellent move. With HUD's assistance and
this information, our subcommittee should be able to make
constructive funding decisions on staffing requirements once we
understand which offices are overfunded and which are
underfunded. The bottom line is that we need to help ensure
that HUD staff is allocated to the office with the most needs,
where they can provide the best expertise.
I also expect HUD to make personnel recommendations for HUD
offices consistent with staffing needs within the next 2 months
to the House and Senate Committee on Appropriations.
For another year, I must express extreme disappointment
with the proposed administration HUD budget for fiscal year
2009. For example, the administration has increased overall
funding by some $600 million in fiscal year 2009, with an
advanced appropriation of $400 million, for 2010 project-based
assistance. Unfortunately, HUD has been short-changing its
long-term rental contracts to preserve and pay existing section
8 project-based needs and now we find ourselves in a $2.4
billion hole. That's unacceptable. HUD's approach is to fund
2009 needs through bits and pieces despite a legal obligation
to fund fully all housing for the entire term of the contract,
many of which begin in 2009, but stretch into 2010.
Not only is this approach of dubious legality, but it
creates a financial burden of $2.4 billion from 2009 into 2010
without any clear way to pay for the obligation without short-
funding other important programs or possible shortfalls in
long-term contracts.
Public housing has its concerns, but I'm pleased that the
Public Housing Operating Fund received an increase. I assume
these funds will operate to assist PHAs in meeting their asset-
based management requirements. More funds are needed, but this
is a start. Nevertheless, cutting the Public Housing Capital
Fund by some $400 million is counterproductive, especially
since public housing will only result in higher costs later by
failing to address deteriorating needs, which will only get
worse.
The administration wrong-headedly continues to request the
elimination of HOPE VI. While I would support certain reforms
to expedite demolition and streamline construction with HOPE
VI, I do support HOPE VI, which has transformed communities
throughout the Nation, building mixed housing that has
leveraged new investments, economic development, stable
communities, from which hospitals, schools, and jobs have
grown, often resulting in an increase in the tax base and a
reduction in crime.
I know, Mr. Secretary, you're quite familiar with Murphy
Park and the King Louis Developments in St. Louis, which took
some of the most uninhabitable, dangerous high rises and
converted them into mixed use viable communities with decent
housing on a mixed income basis.
I think we should look at HUD through a gestalt process
whereby we take public housing as a whole, with a goal to fix
all PHA problems as a totality, and we're going to have to do
that regardless of costs.
Even more drastic, section 811 housing for persons with
disabilities would be gutted, from $237 million in fiscal year
2008 to a meager $65 million under the 2009 budget request.
These are people who rely on this program and in many cases
this housing represents the primary focus around which services
and related programs are provided.
Equally serious, the administration seeks significant
reductions to the section 202 elderly housing program. In the
section 202 program, the administration proposes a cut of $195
million from a 2008 funding level of $730 million. People are
getting older. Our population's getting older. The demand and
the need for this housing are growing, not contracting.
For the sake of time, I will highlight only several other
important issues and leave other issues for later resolution.
But in particular, HUD's FHA Single Family Mortgage Insurance
program has always been a concern of mine, especially since
homeownership appears to be a bigger priority to the
administration than affordability and foreclosure. To some
extent, I will tell you quite frankly I think the emphasis on
homeownership helped to drive the foreclosure crisis we're now
in. We were warned about it. Zero down payments, all these
wonderful ideas to give people who couldn't afford housing the
opportunity to get into the housing didn't do them any good
when we put them in housing they couldn't afford, no matter how
many gimmicks up front, whether it was seller financed Nehemiah
or no down payments provisions.
I think we all need to recognize that homeownership is a
great goal, but it's not achievable for everyone. Rental
housing has its place and in many cases it's more affordable
and realistic for people and families in this country. I've
lived in rental housing and there is nothing wrong with that if
you are not in the position to buy a house and ruin your credit
when you can't make the payments.
In addition, I emphasize an agreement I have with FHA.
Namely, FHA is not intended to bail out either homeowners or
lenders regardless of negligence, predatory lending, or
whatever. In other words, FHA is not permitted to refinance
mortgages at mortgage costs that are above the current value of
the property. FHA could obviously refinance mortgages at the
actual appraised value and I would urge FHA to do so.
My real concern here is the appraisal system is flawed and
to some extent to blame for the housing crisis we're now
facing. It's certainly a worthwhile discussion that may result
in the need for legislation or State action. I'd be very
interested to see how FHA plans to deal with appraisals.
In particular, FHA needs to report quarterly to the House
and Senate Committees on Appropriations on appraisal reforms. I
do expect people guilty of fraud to be barred from the
appraisal program, perhaps even including fines and jail
sentences.
If we do not see action and FHA losses actually increase,
it might be time for a new FHA corporation or a new housing
GSE. If that sounds harsh, just talk with families who've lost
their homes.
One of the major problems facing HUD and FHA is seller down
payments. In general, this is where seller-funded nonprofits
provide down payment assistance to families in order to qualify
for FHA mortgage insurance. Unfortunately, this practice, while
it's done well for the sellers, allowing them to sell the
property, but if it results in inflated real estate prices and
the risk of default then the FHA winds up holding the bag.
In fact, the costs to the FHA have been dramatic. From 2000
to 2004, these loans as a percentage of FHA's business grew
from 6 to 30 percent, with approximately a 35 percent default
rate. In fact, without some change in the law or HUD practice,
seller down payments will cost as much as $1.4 billion in
appropriations to pay for losses in 2009. Unfortunately, courts
have not been receptive to HUD's attempt to ban the practice,
justifying the most recent decision on procedural grounds.
Finally, there is a local issue where three relevant
Federal agencies are required to meet the basic requirements of
legislation that identifies and makes unutilized and
underutilized public lands available on preference to homeless
providers. HUD conducts the initial analysis; Health and Human
Services provides the application with a preference to any
homeless provider. The biggest problem in Missouri is a certain
homeless provider who repeatedly appears to have gotten
priority for HUD excess properties. The provider has no
relation to any other homeless provider in Missouri, never
participated in the Federal homeless funding or local continuum
of care. There has never been any comprehensive attempt to
administer these facilities in a professional manner.
Among the troubling issues, there have been reports of
rapes committed by employees, theft, as well as a recent knife
and chain saw attack by a psychiatric patient. Equally
troubling, the Springfield facility is near a school, which
clearly poses some risk to the students.
Unfortunately, the Government appears unable to implement
its responsibilities as to excess properties for the homeless.
I know any major change would cause concern. My suggestion and
compromise is not to eliminate the program, but to tie the
program, this program, to homeless participants and the Federal
continuum of care to ensure the excess property will be used
effectively and appropriately.
I initially supported the law because of the past bias
against housing the homeless in almost any community.
Nevertheless, not all Federal properties are appropriate. We
almost ended up with a homeless shelter in St. Louis that was
an obsolete Social Security building in the downtown district,
which was going through revitalization, and if they made that
the largest homeless shelter in the Nation it would have doomed
the revitalization efforts of downtown St. Louis. That's only
one example of property decisions made under a poorly
administered law.
Madam Chairman, I apologize for the length of my statement,
but, as you may have noted, I have a lot of concerns dealing
with HUD. I thank you and my colleagues and the Secretary for
the indulgence.
Senator Murray. Thank you very much, Senator.
Secretary Jackson, if you will give your opening statement.
STATEMENT OF HON. ALPHONSO JACKSON
Secretary Jackson. Thank you very much, Chairwoman Murray.
And I want to thank Ranking Member Bond and the members of the
committee for the opportunity to appear before you today.
Madam Chairman, I am here to present the fiscal year 2009
HUD budget. But before I do that, I want to thank you, Madam
Chairman and the entire subcommittee, for priority given to FHA
Modernization. We need the legislation right away. As you and
your colleagues finish work on this important legislation, I
should mention the administration's remaining priorities with
respect to what's in the final bill.
First, the legislation must allow HUD to address the recent
explosion in loans where the seller provided buyers with down
payment assistance and then add the price into the home. These
loans have a foreclosure rate three times the norm. They are
costing hard-working Americans their homes, and these types of
loans have pushed FHA to the brink of insolvency.
Second, Congress should allow FHA to proceed later this
year with some flexibility in setting premiums. I assure you we
have no intentions of increasing premiums on our bread and
butter customers, but a few modest changes will strengthen
FHA's ability to offer safe alternates to home owners who want
to refinance out of high-cost subprime loans and will actually
allow us to reduce the premium for our potential home owners
with low income.
Such legislation would fit well into the general direction
of the President's budget. We need actions that are positive,
solutions to complex problems that confront home owners in the
housing market, like FHA modernization and the Government-
sponsored enterprises.
The proposed budget is fiscally sound, representing a
historical investment of $38.5 billion for programs at HUD.
This is an increase of more than $3 billion, or 9 percent over
last year's budget. The budget is almost $1 billion more than
our current budget authority. This funding will be timely and
on target for people served by this Department. We need this
budget to maintain the current home ownership and to stimulate
new purchases. It will help us expand our current effort.
Let me put the budget in context. Last year President Bush
and I introduced FHA Secure to help more Americans facing
foreclosure refinance into safer, more secure FHA loans. We did
this using the current regulatory authority. As we have been
able to make the FHA available to more qualified families,
there has been a noticeable increase in the number of closings.
We believe that FHA Secure will help about 300,000 families
refinance into affordable FHA-insured mortgages. FHA Secure has
proved to be extremely valuable.
Madam Chairman, you should also know that only in 5 months,
from September 2007 through January 2008, FHA has pumped more
than $37.5 billion of much-needed mortgage activities into the
housing market. More than $14.7 billion of that investment came
from FHA Secure.
FHA modernization would greatly assist our effort. As you
know, the economic stimulus package provided a temporary 10-
month window. We announced the new loan limits last week when I
was in California. This will help hundreds of thousands of
people nationwide, perhaps as many as 250,000. But this is no
substitute for the FHA modernization, which would raise
appropriate loan limits permanently and also provide other
important changes that would benefit American home owners.
At a time of high foreclosure, FHA is helpful in other
ways, such as a strong loan loss mitigation program which has
saved hundreds of thousands of homes from going into
foreclosure.
In addition to FHA-related actions, we are also taking
steps to ensure it is easy for home owners to understand the
fine print when they do sign on the dotted line. That's why we
are committed to RESPA reform. We're in the process of
publishing a new Real Estate Settlement Procedure Act rule and
hope it will bring much-needed transparency to the home buying
process.
Now, the budget will work in concert with other actions
that we must take. For instance, the proposed budget
appropriately increases funding for housing counseling. America
needs the present request for $65 million in the budget for
housing counseling. Those funds, in addition to the $180
million provided to NeighborWorks, will serve our constituents
very well.
Many Americans are facing foreclosure. We know that we can
stop these foreclosures and housing counseling works very well.
This funding will help partially address the crisis and prevent
such a situation in the future. It will get the job done. We
want to make sure that housing counseling services get the
funds they need, now and in the future, and can manage the
funds they get.
We also need to continue Government efforts to partner with
the private sector to help build back the housing market. The
Hope Now allowance is a good example. Hope Now is a private
sector voluntary industry effort to address foreclosure through
freezing mortgage interest rates and working directly with
financially troubled home owners.
I also commend a recent effort by six Hope Now Alliance
members to provide a temporary pause for home owners in the
foreclosure process. These actions provide direct assistance to
those in need right now. These are the sort of responses that
provide quick help for home owners.
As in the past, Madam Chairman, the largest part of our
budget is for affordable rental housing. Combined, this budget
seeks more than $29 billion for the rental assistance program,
which is expected to help more than 4.8 million households. We
are mindful of the continuing need for more affordable rental
housing. Especially low- and middle-income workers still find
themselves priced out of the real estate market. We need to
maintain the units currently available and expand their
numbers. This budget will help us do that.
Finally, the homeless must not be forgotten. We are making
strides to cut the number of chronic homeless within our
continuum of care approach. For the first time ever, we saw a
decrease in the number of chronic homeless last year, a drop of
12 percent. We must continue that process. Our budget once
again seeks an increase for homeless programs to continue this
good work.
PREPARED STATEMENT
Madam Chairman, I know that you are mindful of the need to
help our Nation's homeless veterans. Americans are deeply,
profoundly grateful for the service and sacrifice of our
Nation's veterans. In this proposed budget there is a request
for $75 million for our Veterans Affairs supportive housing
program. Prior to 2008, this program has not been funded since
1993. Working with the Veterans Administration, we will create
an additional 9,800 vouchers for fiscal year 2009. This will
bring the total of approximately 20,000 homeless veterans to be
able to be served through social service and housing.
Overall, I believe that this is a good budget and I look
forward to working with you to carry out this. Thank you very
much.
[The statement follows:]
Prepared Statement of Hon. Alphonso Jackson
INTRODUCTION
Thank you, Chairwoman Murray, Ranking Member Bond, and the members
of the subcommittee for this opportunity to appear today.
Madam Chairwoman, the budget for the Department of Housing and
Urban Development (HUD) represents an investment in the American people
by the American people. This investment is measured in more than
dollars. It is measured in the lives we touch, whether in creating and
protecting sustainable homeownership, preserving affordable rental
housing, helping the homeless, or revitalizing our cities.
The budget reflects America's compassion and commitment. The
President's budget will ensure housing assistance for those in need,
preserve and promote homeownership by addressing subprime mortgages,
strengthen communities by sustaining homeownership gains, make further
progress towards ending chronic homelessness, and continue the trend of
improving HUD's management and performance.
Almost every American is touched by our programs, directly or
indirectly. And there are few things more personal or cherished as the
house or apartment where we live, watch our children grow up, and where
we grow old. Our budget is about promoting new homeownership and making
the American dream possible. The budget is about protecting families
already in homes. It is about expanding affordable rental housing. It
extends funding and services to those in need, including the disabled,
veterans, the homeless, people with HIV/AIDS, and elderly and disabled
people affected by hurricanes Katrina and Rita. Further, it continues
to support and encourage community growth and revitalization.
I believe we have a good budget. It is fiscally sound, supports our
mission, and fits in well with the overall vision for the President's
entire fiscal year request. My Department would receive an historic
investment, $38.5 billion. This is an increase of more than $3 billion,
or 9 percent, over last year's proposal. The budget is almost $1
billion more than our current budget authority.
Let me break this down in more detail.
ENSURING HOUSING ASSISTANCE
I am pleased that the budget strongly ensures housing assistance
for those in need. As in the past, the largest part of our budget is
for affordable rental housing. Combined, this budget seeks more than
$29 billion for our rental assistance programs which we expect will
help more than 4.8 million households. We are mindful of the continued
need for more affordable rental housing, especially as some low-and-
middle-income workers find themselves priced out of the real estate
market in many cities. We need to maintain the units currently
available and this budget will help us do that.
The budget increases primary housing programs by providing $7
billion to renew all project-based rental contracts and $400 million
for an advance appropriation to bridge renewal funding into 2010. This
will help provide housing assistance for nearly 1.3 million low-income
tenants.
We also increase housing choice vouchers, reaching over 2 million
low-income families, while removing the cap on the number of housing
units that Public Housing Authorities may assist.
The budget also supports public housing operations with a request
for $4.3 billion, the highest proposed funding level in history. This
will cover the necessary operating expenses for 1.2 million public
housing units.
The proposed budget also seeks $300 million for persons living with
HIV/AIDS. This funding would provide housing and care for 70,500
people.
The proposed budget also contains $3 billion in Community
Development Block Grant (CDBG) funding for States and local
governments. We have once again asked Congress to revise the outdated
funding formula for this program. With appropriate revisions, we can
distribute resources more efficiently and fairly, making this funding
more effective and helpful.
Madam Chairwoman, let me also add some comments about the recovery
effort from Hurricanes Katrina, Rita, and Wilma. The disaster was
unprecedented. Recovery will take many years. We have been deeply
involved in these recovery efforts.
You should know that HUD has funds available of nearly $20 billion
throughout the gulf coast region to assist in recovery. States have
spent approximately $8.5 billion to date. So far, more than 110,000
homeowners in Louisiana and Mississippi have received financial
assistance from HUD. We know that there is more to do--much more. We
have learned much and worked through some enormous difficulties. But
progress is noticeable.
The American people should be proud of their investment and their
compassion. If anyone wants to see America's heart, they should go to
the gulf coast, where so many people have given generously of their
time, their love, their patience, and their courage.
The gulf coast is coming back, and one important reason is a
fundamentally sound approach to recovery.
When Hurricanes Katrina, Rita, and Wilma devastated the gulf coast,
many of our most vulnerable citizens lost the only homes they had
known. We recognized last year that some of those families affected by
the storm needed additional time to recover, which is why the
administration transferred the responsibility for housing these
families from Federal Emergency Management Agency (FEMA) to HUD under
the Disaster Housing Assistance Program (DHAP) and extended Government
housing assistance another 18 months to 30,000 families.
The President is also requesting $39 million to ensure that the
elderly and disabled families displaced by the 2005 gulf coast
hurricanes remain protected at the conclusion of DHAP. These Disaster
Displacement Assistance vouchers will provide permanent affordable
housing to eligible elderly and disabled families, while the remaining
storm victims who are not on fixed incomes continue on the path to
self-sufficiency.
The Department will administer these vouchers as part of the
section 8 Housing Choice Voucher Program. We will make rental
assistance payments on behalf of these families, whether they have
relocated or returned home.
PRESERVING AND PROMOTING HOMEOWNERSHIP
Promoting homeownership remains one of the central goals of this
administration. We have to get the housing market back on track. We
know that homeownership is good for families, the community, the
Nation, and the world. Homeownership equals empowerment, wealth
creation, independence, and fulfillment of the American Dream. It gives
the family a stake in the community. Homeownership is a source of
pride. It is particularly important for America's minority communities,
which historically have lower rates of homeownership.
Clearly, the housing crisis is a powerful challenge. After the
unprecedented, historic gains in homeownership between the start of the
decade and 2005, there has been a downward trend in homeownership. The
troubling rates of foreclosure and other housing indices reveal more
than a statistical drop or figurative decline. They tell us of families
losing their homes, of people losing their investments, and of dreams
stolen away.
The causes are many. But the subprime situation is often the
reason. But not all subprime loans are bad. Subprime loans broadened
the availability of credit and led to housing investment for those who
previously had less than perfect credit. And the majority of subprime
loans are still being paid on time. About 20 percent of subprime loans
are problematic. This means that many families cannot afford their
subprime loans. Some families are on the edge of a financial abyss. The
rapid rate of foreclosure threatens to continue unless appropriate
actions are taken.
This budget will help HUD in its efforts to address the housing
crisis. It will give us the tools we need to continue our work. We must
reverse the downward trend in housing indices and homeownership. We
must help homeowners retain their homes. We must also look to the
future because we must increase the number of families who own their
own homes. And we must retain the sizable increase in minority
homeownership. As you may recall, in 2002, the President challenged the
Nation to create 5.5 million new minority homeowners by the end of this
decade. And we have made substantial progress: 3 million more minority
families have become homeowners since 2002. We must build on that
progress.
Of course, the President's stimulus package will help. I'm grateful
Congress has given this package its support. By temporarily increasing
FHA loan limits, we can back more safe, sound mortgages in high-cost
States and help homeowners trapped in exotic subprime loans to hold on
to their houses.
We also need the President's request for $65 million in this budget
for housing counseling. Why? Well, we have learned that housing
counseling makes a powerful difference in homeownership and foreclosure
avoidance. You see, many of the failed loans were a surprise because
the homeowner didn't read the fine print and didn't understand the
contract. Housing counselors could have helped the homeowner gain a
better perspective about affordability and balanced expectations.
Families must buy homes they can afford. They must understand the
contracts--have an especially clear idea of the features of financing
and the ramifications of resets, and the terms and the timelines.
Prospective homeowners must have a prudent mortgage, not a ``suicide
loan.'' We must remove the mystery, confusion, and vagueness from the
process. There must be full disclosure, understandable information, and
a transparent process.
That's why we need housing counselors to be fully engaged in the
process. Housing counselors are an important line of defense against
foreclosure. They can enlighten homeowners and help prospective owners
determine the affordability and appropriateness of a mortgage. They can
explain the contract and answer questions.
The President has been a strong proponent of funding for housing
counseling, and has worked with you to more than double the funding for
housing counselors since the start of this administration. Now, given
the magnitude of the crisis we face, it is important to expand funding
for housing counseling. The President's request in this area is
paramount to prevent future foreclosures.
These funds, in addition to the President's request of $180 million
for the Neighborhood Reinvestment Corporation, provide great services
to those in need. And we now know that spending in this area is a sound
investment, saving the Nation from expenses related to foreclosures,
lost revenues, slowdowns in business spending and new housing
construction, and declining home values.
The administration is also taking steps to ensure it isn't as hard
for homeowners to read the fine print when they do sign on the dotted
line. That's why we are committed to reform of the Real Estate
Settlement Procedures Act (RESPA). We hope to publish a new RESPA rule
in the coming days. Our goal is to bring much needed transparency to
the home-buying process.
strengthening communities by sustaining homeownership gains
The President has also requested a substantial increase of $263
million for our HOME program. This would bring the funding level up to
nearly $2 billion for the Nation's largest block grant program
specifically designed to produce affordable housing. This request
includes $50 million for the American Dream Downpayment Initiative,
which provides flexible housing assistance, and increases affordable
housing and minority homeownership. Since the inception of the HOME
program 16 years ago, almost 812,000 units of affordable housing have
been created.
We also need to support other efforts to maintain current
homeownership and stimulate new purchases. In August 2007, the
President and I introduced an effort, FHASecure, to help more Americans
facing foreclosure refinance into a safer, more secure Federal Housing
Administration (FHA) loan. We did this using current regulatory and I
am pleased to report that the program is helping many families avoid
foreclosure. There has been a noticeable increase in the number of
closings with FHA. Two months ago, there were 2,500 closings a month
with FHA. Now, there are 4,500 closings a week! By year's end, we
expect FHA will be able to help more than 300,000 families refinance
into affordable FHA-insured mortgages.
Madam Chairwoman, you should also know that FHA has mailed letters
to hundreds of thousands of at-risk homeowners to urge them to
refinance with safer, more affordable FHA-backed mortgages. These
letters are being sent to homeowners who already have or soon will
confront the first reset of their adjustable rate mortgage, and are
currently living in locations subject to FHA loan limits. We will be
sending these letters out to about 850,000 at-risk homeowners.
But we could do so much more with legislation to modernize the FHA.
Congress needs to quickly complete work on a bill that will immediately
give us authority to expand FHA's ability to serve the very type of
borrowers who were lured into high-cost, high-risk loans. We need to
make the minimum down payment more flexible, create a fairer insurance
premium structure, and permanently increase FHA's loan limits. This
will allow more families to use FHA, perhaps hundreds of thousands of
families. We need FHA modernization as soon as possible. Every day of
delay places qualifying homeowners at unnecessary risk. Our estimates
indicate that FHA modernization could help as many as 250,000 more
families by the end of 2008.
We asked for this bill 2 years ago to help us avoid the mortgage
crisis. But now we need it to help address the crisis.
I am also pleased that the mortgage industry has stepped forward to
help. Treasury Secretary Paulson and I have worked closely with the
mortgage industry to address the housing crisis in another way: enlist
proactive industry cooperation. The industry worked with the
administration to develop a program called the HOPE NOW Alliance to
help homeowners at risk of foreclosure. The Alliance has implemented a
plan that could help up to 1.2 million homeowners avoid foreclosure
over the next 2 years by providing systematic relief that includes
modifying or refinancing existing loans, moving borrowers into
FHASecure loans, and implementing a 5-year freeze on interest rate
resets for subprime loans. The industry has already assisted 370,000
homeowners. HOPE NOW has contacted more than half a million borrowers
in the second half of 2007.
There are other actions that will help. So, you'll see the budget
has a sharp increase for our Self-Help Homeownership Opportunity
Program (SHOP) that works with organizations like Habitat for Humanity
and others to build housing through sweat equity.
Fair housing practices are an important aspect of homeownership.
This year marks the 40th anniversary of passage of the Fair Housing
Act. Our budget provides $51 million to protect the right of all
Americans to be free from housing discrimination based on race,
religion, gender, sexual orientation, family status, or disability.
This is an increase of $1 million over the current appropriated level.
I also hope you will notice our new Fair Lending Division. This
office will examine questionable mortgage practices and investment
complaints from homebuyers. It is an important addition--a new way to
directly address unfair practices.
This new division has already made an impact. Recently, HUD awarded
grants totaling approximately $1 million for the development of
strategies to address lending discrimination. These grants were awarded
to State agencies in Ohio, Massachusetts, Colorado, and Pennsylvania,
States with some of the highest rates of foreclosure in the Nation. The
agencies in these four States are developing ``best practices'' for
intake procedures, investigation techniques, and education and outreach
activities for their mortgage lending enforcement programs. These
``best practices'' will be made available to all State and local
agencies in the Fair Housing Assistance Program (FHAP).
ENDING CHRONIC HOMELESSNESS
And the homeless must not be forgotten. We are making strides in
reducing chronic homelessness with our ``continuum of care'' approach.
We are working to provide assistance across the entire spectrum of
homelessness. This continuum of care is vital because homelessness is a
complex, difficult, multi-dimensional problem, both for those who are
homeless and for those who are working to meet the needs of the
homeless.
Our national effort to end homelessness has been steadfast, with
strong commitment and investment. Since 2001, HUD has awarded
approximately $10 billion in funding to support the housing and service
needs of the homeless.
We are working especially hard to stop the revolving door for the
chronically homeless. Early on in this administration, President Bush
set a goal to end chronic homelessness in America. If we are to be
successful, we must help break a cycle of circumstances and behaviors
that consistently place the chronically homeless on the streets.
And there is evidence that we are making progress. The investment
by HUD and local communities is working. In November, HUD announced
that, across the country, local communities saw a nearly 12 percent
drop in the number of individuals who literally call the streets their
home, nearly 20,000 fewer persons living on our streets. This was good
news. It shows that the hard work of thousands of people is paying off,
that our efforts can make a powerful, positive difference.
Of course, we still have a long way to go before ending chronic
homelessness. There are still people living on the streets, many of
them are mentally ill, addicted to alcohol and/or drugs, or physically
disabled. These are the most vulnerable among us, the hardest-to-house
and the hardest-to-serve. The chronically homeless are people who are
homeless for more than a year or who continue to cycle back into
homelessness. They are people who need serious, sustained assistance to
overcome their homelessness.
Madam Chairwoman, I know you are mindful of the need to help our
Nation's homeless veterans. Americans are deeply, profoundly grateful
for the service and sacrifice of our Nation's veterans. In the proposed
budget, there is a request for $75 million for our Veterans Affairs
Supportive Housing Program (VASH). Prior to fiscal year 2008, this
program had not been funded since 1993. Working with the Veterans
Administration, we will create an additional 9,800 vouchers for fiscal
year 2009, bringing the total to approximately 20,000 homeless veterans
being served through housing and social services and double the number
of available housing vouchers.
CONTINUING HUD'S IMPROVED MANAGEMENT AND PERFORMANCE
Finally, I would like to discuss the management of the Department.
For the first time since 1994, the Government Accountability Office
(GAO) removed HUD's single-family housing mortgage insurance and rental
housing assistance programs from the list of High-Risk Federal
programs. I am very proud of that fact.
I am also very pleased that HUD achieved a clean opinion in its
2007 financial statements, continuing a multi-year trend.
We need to build upon this progress. So, Madam Chairwoman, I also
want to mention that the $313 million included in the request for our
Working Capital Fund will enable the Department to make critical
upgrades to our aging information technology (IT) systems. If we want
to improve the delivery and control of the Department's significant
program resources for the benefit of the people and communities we
serve, then it is imperative that we have sufficient funding for IT
systems modernization efforts. The $65 million reduction of our 2008
request for IT funding was devastating. That reduction has stopped
practically all HUD systems modernization efforts.
Madam Chairwoman, this subcommittee should know that without
sufficient funding, we will be unable to modernize FHA's 25 year old
mainframe systems to effectively support FHA program reforms. We will
be unable to improve the automation of the section 8 Project-Based
Assistance contract renewal and payment processes. We will be unable to
effectively implement asset management improvements over the public
housing stock. We will continue to manage our $16 billion a year
Housing Choice Voucher Program through a cumbersome spreadsheet process
rather than an automated database that can provide timely information
for HUD and Congressional oversight. HUD has demonstrated the ability
to successfully use its limited IT funding. I urge you to support the
budget request for IT funding.
CONCLUSION
Overall, this is a good budget for the Department . . . balanced,
reasonable, appropriate, and workable. It allows us to operate within a
framework of cooperation and partnership with other Federal agencies,
State and local governments, and non-profit initiatives. The American
people count on HUD . . . count on us for direct assistance, grants,
professional administration, and high-quality public service. With this
budget we meet those expectations. With this budget we can get the job
done.
I also want to thank the employees at HUD for their extraordinary
service during a very trying and difficult period. Madam Chairwoman and
members of the subcommittee, I am sure that you would be extremely
impressed by the day-to-day work product of our employees. I am very
proud of my colleagues at HUD.
Madam Chairwoman, as we proceed through the budget process, I look
forward to working with you. I thank you and the subcommittee for your
consideration of this budget request.
SELLER DOWN PAYMENT PROGRAM
Senator Murray. Thank you very much, Mr. Secretary.
We will have 5-minute rounds, and I'm told that we may
start voting as early as 10:30, so I will try and make mine
short so we can get to everybody.
Mr. Secretary, HUD's budget assumes that there will be
major reforms to the FHA Single Family Housing program and I'm
told that if these reforms are not enacted this year the MMI
Fund could potentially face a $1.4 billion shortfall. We're
also told this is largely the result of the defaults of the
seller down payment program. What are your views on the seller
down payment program and its impact on the solvency of the FHA
fund?
Secretary Jackson. Chairlady, we really believe that the
seller down payment program, if we are still forced to carry
it, will create severe problems for us, on the brink of
insolvency for this year. We have heavy reserves, but this year
it's creating a problem. As I said when I was reading the
statement, it's three times higher than our default rate. We're
about two and one-half and they're three times higher. It is
presenting serious problems.
Senator Murray. What is the default rate for the program?
Secretary Jackson. What is that?
Mr. Montgomery. The foreclosure rate is 2.3 percent and the
default is about 6.3 percent.
Secretary Jackson. Foreclosures--well, come and tell the
chairlady.
Mr. Montgomery. Brian Montgomery, FHA Commissioner.
Our overall foreclosure rate the last quarter of 2007 is
2.3 percent. The default rate is about 6.3 percent.
Senator Murray. What is it costing the taxpayer to run this
program compared to the standard FHA mortgage program?
Mr. Montgomery. The Secretary is exactly right. These loans
that have seller-funded down payment assistance are two and
one-half, three times more likely to default. As you know, part
of what we've been trying to do is to sound the alarm on just
how volatile these loans are. We proposed a rule, too, that
would eliminate that type of assistance, but were stopped, sued
and stopped in two court decisions last week.
Senator Murray. Let me ask you, Mr. Secretary. Last week
the U.S. District Court for the District of Columbia vacated
the HUD final rule that prohibited the Seller Down Payment
Assistance Program you're referring to from acquiring an FHA
guarantee. How does that court decision affect HUD's ability to
ensure the solvency of the FHA Fund?
Secretary Jackson. Chairlady, I'm not sure that I can
answer that because the judge in his opinion said exclusively I
was not to deal with the process. He excluded me out of the
process. Brian can answer it for you, but I cannot.
Senator Murray. Well, let me get an answer in writing from
you, because I do want to ask one more question on my time and
turn it to Senator Bond.
[The information follows:]
Seller Downpayment Program
The Department is re-publishing the Notice of proposed rulemaking
in order to allow for additional comment on information that further
explains and supports HUD's proposal to prohibit seller-funded down
payment assistance. In its proposal, HUD is advising the public that
the current practice that allows for seller-funded down payment
assistance is having a serious negative impact upon the overall
financial health of the FHA Fund. The Senate's FHA modernization bill
also prohibits this type of assistance.
HECM
Senator Murray. HUD's Housing Equity Conversion Mortgage,
the HECM program, provides elderly home owners the option of
taking out a reverse mortgage on their home in order to meet
their financial needs today, providing them with the
flexibility to use that equity in their homes for what they
need, health care, home repairs. As we're watching our elderly
population struggle with this economic downturn, this program
has become increasingly important to them. In fact, it is the
fastest growing loan program within FHA.
We are seeing some pretty distressing news reports,
including one by AARP, of unscrupulous sales agents who are
selling older home owners annuities, long-term care insurance,
investments, home repairs, that are very high in cost and low
in value to the consumers, and sometimes these schemes are done
with the collaboration of lenders participating in the HECM
program.
What steps is your Department taking, Mr. Secretary, to
crack down on these abusive practices directed at HECM
borrowers by sales agents and lenders?
Secretary Jackson. You're absolutely correct, chairlady,
and we are doing everything with the Office of Housing to seek
out these persons. We're very, very concerned about this
process because we do a large number of HECM loans. And I am
very, very committed to senior citizens that they don't lose
their homes. So we are making every----
Senator Murray. Are you taking any action against any of
the lenders?
Secretary Jackson. I can get that information for you. I
know that our Assistant Secretary has taken some action. I'm
just not sure how much action we took.
Senator Murray. Okay. I'd like that back in writing, then.
Secretary Jackson. I will make sure I get that for you.
[The information follows:]
Housing Equity Conversion Mortgage (HECM)
Over the past 2 years, FHA has taken major steps to mitigate risk
in its Home Equity Conversion Mortgage program. During fiscal year
2007, FHA reviewed 90 mortgages and a total of 4,572 HECM loan files,
uncovering findings in half of the loans examined. FHA issued findings
letters to these mortgagees notifying them of the deficiencies.
PUBLIC HOUSING CAPITAL FUNDS
Senator Murray. Senator Bond?
Senator Bond. Thank you very much, Madam Chairman.
I'm very much concerned about the Capital Funds for public
housing. Apparently a 2000 ABT study estimated the annual
accrual needs of capital. When you inflate them to 2009, it
looks like they are being budgeted at about 79 percent of the
need, which I understand to be about $20 billion. There are
multi-billion dollar backlogs existing.
Do we have an adequate estimate or a reasonable estimate of
what those needs are, and how do you plan to maintain this
large inventory of housing into the future if we're not meeting
the ongoing needs?
Secretary Jackson. Senator Bond, I really believe that we
do, and I will give you the overview and I will have Paula come
and give you the depth.
As you know, when we created the Commission on Severely
Distressed Public Housing back in the late 1980s, early 1990s,
we said that there were about 88,000 severely distressed public
housing units in this country. As of to date, we have
demolished 150,000. We've built back some 60 or 70,000.
Senator Bond. Thanks in large part to HOPE VI in some
areas.
Secretary Jackson. No question. And you know you will not
get an argument with me about HOPE VI.
Senator Bond. Just because I set it up, I appreciate your
willingness to agree.
Secretary Jackson. You won't get an argument.
But I will let Paula give you the details.
Senator Murray. Please. We're concerned about it.
Ms. Blunt. Just to add to that, I would like to say that
we're still using the figures from the 1998 study that you were
talking about, and we are in the process of procuring services
to do a new capital needs study and that will be under contract
by next month. So we will have a real more current estimate of
what those modernization needs are.
Senator Bond. Based on that previous estimate, what is the
general range of the needs and how much of that is funded in
this budget?
Ms. Blunt. I'm not sure. I guess we would have to get back
to you on that. I'm not sure of the exact dollar amount in
terms of those needs right now.
Senator Bond. That's what I'm very worried about. Frankly,
until OMB understands these needs are a critical investment,
we're going to see the stock decline and we're going to face
even greater costs in the future.
Secretary Jackson. What we've done, Senator, is given the
housing authorities permission to use their bond authority in
many cases, to use their reserves to make sure that they do the
capital replacement.
PUBLIC HOUSING OPERATING FUND
Senator Bond. That's a band aid. That's a band aid but it
isn't curing the underlying infection.
Let me turn to the Operating Fund. There is $4.3 billion in
the request. How much of these funds will be dedicated to
ensure proper training of asset-based management and how ready
are the PHAs to take it on? Is this something they have the
ability to do?
Secretary Jackson. I think so. As you know, Senator, even
before we moved to asset-based management, when I was in St.
Louis and Washington, DC and Dallas, I basically practiced
asset management. Those assets that were not viable we got rid
of and only managed those that were viable. That's all we're
asking again for the housing authorities around the country to
do.
I think they have the ability to do that, and we will
assess that process.
Ms. Blunt. If I could just add to that, as you mentioned
the technical assistance and training, we have $5.9 million
that we're suggesting for that. Just as early as yesterday, we
sent out invitations to the industry to come meet with us in
order to talk about what they feel the best use of that money
is in terms of what kind of technical assistance that the
housing authorities need in this transition to asset
management. We're in the first stages of that, as you know.
HOPE VI
Senator Bond. I will have a bunch of questions on section 8
and FHA, but I'm not going to pass up HOPE VI without asking
you how we can keep it alive, how we can facilitate
development. Have you considered new bonding authority,
continued redevelopment through an alternative program? How do
we get rid of the distressed housing?
Secretary Jackson. Senator, let me say this. Of the 270-so
grants that we have made on the HOPE VI, 75 have been completed
to date since 1990. We have outstanding right now about $1.4
billion. I would love to somehow recapture the money and send
it to cities that have performed well.
Senator Bond. Well, I would agree----
Secretary Jackson. I just think that----
Senator Bond [continuing]. But if they're not doing the
job----
Secretary Jackson. We have some cities with HOPE VI moneys
that are 10 years old that have not been spent. If we could
just capture those between 5 and 10, we could probably get $600
million out of this process or more. So I think that the money
is there and we should utilize it for those cities that are
performing well.
Senator Bond. I believe we've tried to get that done, but
your staff has been resisting because it's a difficult choice.
But we need to continue to talk about that.
Secretary Jackson. I'll be happy to.
Senator Bond. If you'll support it, maybe you can pass that
word down to some of the folks who work for you.
Secretary Jackson. I will do that.
Senator Bond. Thank you very much, Mr. Secretary, Madam
Chairman.
Senator Murray. Senator Specter?
PHILADELPHIA, PA/UNIVERSAL COMMUNITY HOMES DISPUTE
Senator Specter. Thank you, Madam Chairman.
Mr. Secretary, did you call Mayor Street about the dispute
that Philadelphia Housing Authority was having with Universal
Community Homebuilders?
Secretary Jackson. Senator, I did speak to the Mayor, but
not about any dispute.
Senator Specter. What did you speak to the Mayor about?
Secretary Jackson. Just the completion of the HOPE VI
project, that's all.
Senator Specter. But you're saying that you did not talk to
him about the dispute PHA was having with Universal Community
Homes?
Secretary Jackson. Senator, I've said to you that I spoke
to him about the completion of the project, that's all.
Senator Specter. Nothing about Universal's unhappiness with
having this piece of property not turned over to them?
Secretary Jackson. Senator, I've just told you the truth.
Senator Specter. So you're saying that didn't enter into
your conversation at all with Mayor Street?
Secretary Jackson. Senator, I have told you the truth and I
think that the person who spoke to him mostly was our staff
member, Dominic Bloom, who spoke to him.
Senator Specter. Do you know what your staff member told
Mayor Street?
Secretary Jackson. Just we were concerned about the
completion of the project.
Senator Specter. Anything about Universal Community Homes
being unhappy that the land wasn't turned over?
Secretary Jackson. Senator, I have told you the truth, and
I think you and I have a relationship. I have not lied to you
and I'm not lying to you now.
Senator Specter. Did anyone from Universal contact you
concerning PHA's refusal to turn over that ground?
Secretary Jackson. If they did, I mean, I can't remember, I
really can't. I don't think--I can't remember. I don't want to
say no, I just can't remember.
Senator Specter. A possibility that they did?
Secretary Jackson. I can't remember.
Senator Specter. Mr. Secretary, you have these e-mails,
three e-mails on January 12, 2007. The e-mails are ``Would you
like''--this is Mr. Cabrera: ``Would you like me to make his
life less happy,'' referring to Carl Greene. What reason would
Mr. Cabrera have for wanting to make Carl Greene's life less
happy?
Secretary Jackson. I think you would have to ask Mr.
Cabrera.
Senator Specter. Well, I will.
When you saw these e-mails, albeit only 2 days ago, didn't
they arouse some concern or suspicion on your part that
something was amiss if they're out to make Carl Greene's life
unhappy?
Secretary Jackson. I think if you look at what I said, what
I submitted to you last evening, Senator, it said I think it
was made out of frustration, and I made that very clear to you.
I think that you and I have had lots of discussion on this
matter and we had not come to a resolution, and I was working
directly with you to try to get a resolution. And I think that
many of our staff people, as I said, were operating on a very
frustrated level.
Senator Specter. Well, what were the frustrations if not
retaliation?
Secretary Jackson. I can't answer that, sir. I just think
that, as I said to you before, we had been trying to work the
accessibility out, as in my memorandum to you; work it out,
that's all we are trying to do, to make sure that the civil
rights of the disabled are covered. That's all we're talking
about.
Senator Specter. Well, Mr. Secretary, you have these e-
mails, ``Would you like me to make his life less happy? If so,
how?'' on January 12. You have a response, ``Take away all of
his Federal dollars,'' on January 12. A response to that, ``Let
me look into that possibility,'' on January 12. Then on January
12 your Department tells PHA that they might be in danger of
losing a lot of money.
Isn't that an extraordinary coincidence----
Secretary Jackson. Senator----
Senator Specter [continuing]. If not causally connected?
Secretary Jackson. Senator, as I stated to you earlier, I
will make every endeavor to answer the questions, but I don't
know the intricacies. That's why when I--it was not there to
insult you. That's why I said that if there were questions,
please, if you can tell me what they are I will go back and
have the staff answer those questions for you. I really don't
know all of the intricacies.
As I said to you in the memo, I saw this as of Tuesday. Am
I concerned? Yes. But I don't know all the intricacies.
Senator Specter. You say you are concerned, yes, and what?
Secretary Jackson. I don't know all the intricacies of what
occurred. That's why I'm saying that's why I'd like to get back
to you, to find out what occurred, why it occurred, and have
the staff answer your questions.
Senator Specter. Well, Mr. Secretary, I will pursue that
with you. But on this state of the record, the question is what
were these Assistant Secretaries doing? And when you have this
exchange of e-mail about making his life unhappy and taking
away the funding and ``I'll look into that,'' and then the same
day they take action which now is amounting to a potential loss
of $50 million, that's just too much of a coincidence. It all
happens on the same day.
These aren't collateral frustrations or something else.
This is simultaneous. That kind of timing is very, very
forceful evidence that they're taking action to take away the
money, making his life unhappy, and they're doing it for this
reason.
Secretary Jackson. Senator, again, as I stated to you
earlier, I will be happy to get back to you. As I stated in the
memorandum to you, I saw this for the first time on Tuesday,
and I am making every effort to get to the bottom of it.
When you sent me the letter--and I really appreciate it
because you did say ``Al''--that's why I responded so quickly,
because I thought that, to try to get to the bottom of it. I
don't know all the answers at this point.
Senator Specter. Well, Mr. Secretary--just another minute,
Madam Chairman--I will take you up on your offer. Then you're
willing to sit down with me and Mr. Cabrera and Ms. Kendrick
and get to the bottom----
Secretary Jackson. Mr. Cabrera's no longer with us.
Senator Specter. Well, I know he's no longer with you. I
will invite him. Will you encourage him to come?
Secretary Jackson. I have no problems at all.
Senator Specter. Thank you very much.
One addendum, what I would really like to do at the meeting
is to spend our time to see if we can't solve the controversy.
I would a lot rather deal with the substance of this issue and
get $50 million for housing for the poor in Philadelphia than
air a lot of laundry.
Secretary Jackson. Senator, we have been trying to resolve
that. I think the staff has been working very hard to resolve
that. But I would tell you this. I'll do whatever you ask
because I have a great deal of respect, but I don't think we
can sit down and resolve the problem when a lawsuit was brought
against us. It would be very difficult.
Senator Specter. No, no, you're not right about it. The
case can be settled. The parties can come together. The judge
would be delighted.
Thank you very much, Mr. Secretary. Thank you, Madam
Chairman.
Senator Murray. Thank you very much, Senator.
Senator Lautenberg.
PUBLIC HOUSING MAINTENANCE
Senator Lautenberg. Thank you very much, Madam Chairman.
Mr. Secretary, we're all upset, frustrated, if I may use
your own terminology, with what's happened in the funding needs
for the maintenance of public housing. What we see is
technology gone awry.
And despite the housing authorities' alarm about public
housing in crisis, especially with rising utility and
operational costs, despite that, President Bush's budget falls
$850 million short of what is needed just for the maintenance
needs of public housing. How can these authorities provide
decent affordable housing that thousands of people depend on
when they don't have the money to make the basic repairs? What
should they do?
Secretary Jackson. I think, Senator Lautenberg, that's a
very fair question. I believe that since we have demolished
almost 150,000 units in this country since 1990, we believe
that we still have enough capital funds, with the bonding
authority, with the reserve, and, as Mrs. Blunt said a few
minutes ago, with we're doing the second portion of the study
for the capital needs. If this study comes out that there's
more capital needs, I will be the first to defend that process
and come before you.
Right now, I think we have enough capital needs, and if I'm
wrong I'll be the first to admit I'm wrong.
Senator Lautenberg. Why is that taking review now?
Shouldn't it have taken place before the budget was presented?
Were you consulted before you got your budget for the year?
Secretary Jackson. We do this on a, I think it's about
every 8 or 10 years we do the study. What is it?
Every 10 years, and this is the time for us to do it and so
we're doing it again.
Senator Lautenberg. Now, what happens every 10 years?
Secretary Jackson. We do a study, Senator, to decide what
the capital needs are for all of the housing authorities, the
2,300 housing authorities around the country.
Senator Lautenberg. For a 10-year cycle?
Secretary Jackson. Yes, for a 10-year cycle.
Senator Lautenberg. Anybody hear about inflation or growth
in population or any of those things?
Secretary Jackson. Yes, sir.
Senator Lautenberg. I'm not sure what a 10-year cycle does,
a 10-year review does.
And this has been reviewed by my colleagues. Last April in
front of this committee you said to me that you hadn't touched
one contract, and that was after the IG, Inspector General,
looked into allegations that you injected political favoritism
into Government contract awards. Now an investigation is taking
place for asking a housing authority official in New Orleans to
provide a contract to a friend. And there are new questions
about your involvement in a controversy involving a friend and
the transfer of property in Philadelphia. I think Senator
Specter covered that.
How do you feel about those comments now?
Secretary Jackson. Senator, I will say that I think it is
best, with all the misinformation that has been put out right
now, to simply let the investigators do their job quickly and
expeditiously as possible. Therefore, I am going to let the
investigators complete their work before I make any public
comment.
I am confident that when the dust settles and the
investigators finish their work, the allegations will be put to
rest. But I would like to just continue to try to do the work
that I've done to provide decent and affordable housing. That's
really where I am.
Senator Lautenberg. Your statement, Mr. Secretary, doesn't
match with the budget that's being sent here now to us. We
can't get the job done. We can't provide decent, affordable
housing. You say that you support it, but how can we do that
without the funds necessary?
Secretary Jackson. I really think, Senator, that the funds
are sufficient to carry out this responsibility. I guess I'm in
a very unique situation, having been the only HUD Secretary to
run a housing authority. I ran three housing authorities. And I
truly believe that the funds are sufficient, and that I have
worked with the people in the industry to make sure that the
funds are.
You know, the question is can you always use more? The
average person will say yes, there's no question about it. But
I think that clearly sir, they have enough tools to work with
to carry out and produce safe, decent, sanitary housing for low
and moderate-income people.
Senator Lautenberg. You suggest--and I'll take just a
moment more, Madam Chairman, if I may. You suggest that there's
a lot of misinformation out there. You--I quoted you here. Are
you saying that these were--this was not your statement that
you haven't touched a contract, and this was after the
Inspector General looked into allegations? Is that the
misinformation you're----
Secretary Jackson. No, sir, that's not. When I said that to
you, I specifically said that--I think it's a quote--``I have
not touched a contract,'' which means that I cannot originate a
contract, I cannot cancel a contract. Those are handled by the
contract review board and others in the agency. I will be
happy, if you want to, to show you the process that is used.
Senator Lautenberg. Well, I would hope, Mr. Secretary, you
knew what was coming at this hearing. You knew the questions
that were going to be asked. And to be able to defend what took
place at the same time insufficient funds to carry out a
serious responsibility to provide safe and affordable housing
is very disappointing.
Thank you, Madam Chairman.
Secretary Jackson. Thank you.
Senator Murray. Senator Allard.
SELLER FINANCING
Senator Allard. Thank you, Madam Chairman.
I want to follow up a little bit on what Madam Chairman had
asked you about, seller finance. I think it's important that we
draw a distinction between seller financed down payment and
what would be referred to as legitimate gift down payment
assistance, which creates real equity, the latter creating real
equity in the home. Can you say a few words on the beneficial
forms of down payment assistance? And then I'd like to have you
comment a little bit about the American Dream Down Payment Act
that we both worked on.
Secretary Jackson. Surely. I'd like Brian to do that for
you if it's okay with you, Senator.
Senator Allard. Yes.
Mr. Montgomery. Yes, sir. Brian Montgomery, the FHA
Commissioner.
Sir, are you talking about the volatility of the seller-
funded, or----
Senator Allard. Well, there are two down payment assistance
categories. There's the seller finance, where you have your
problems, and then there's what we call sort of gift down
payment assistance----
Mr. Montgomery. Yes, sir.
Senator Allard [continuing]. Which is the kind of
assistance that's promoted by the American Dream Down Payment
Act. I think that it's important that the committee understand
the difference between those two types of down payment
assistance.
Mr. Montgomery. Yes, sir. Thank you. There are several
groups of borrowers that use FHA. There are those families that
tend to save the money themselves, sock it away; when they have
enough money for a down payment they apply for an FHA loan.
There are others who use the seller-funded down payment
assistance, which I think we've addressed that issue. And then
there are those that use assistance from units of local
government, State and local housing finance agencies.
It's no surprise that the lowest claim rates are those that
save their own money and then purchase a home. Those that use
assistance from local housing finance agencies and others; the
claim rate is about one and one-half times larger than it is
for those who use their own funds. But it jumps up to two and
one-half, almost three times more likely to go to claim, when
families use the seller-funded down payment assistance.
Senator Allard. Okay. On the American Dream Down Payment
Act, what are you proposing for that program in your budget?
Mr. Montgomery. That is under a different office in HUD,
sir, but I believe its $25 million.
ADDI
Mr. Bregon. Good morning, sir. My name is Nelson Bregon.
I'm the General Deputy Assistant Secretary in the Office of
Community Planning and Development. We administer the American
Dream Down Payment Initiative under the HOME program.
For that program, originally the administration had
requested $200 million. It has been funded at $50 million. Now,
for 2008 we received $10 million in funding for that program.
That money is distributed by formula. It goes to participating
jurisdictions. There are about 600 of them, and those
participating jurisdictions use the moneys as down payment
assistance for low income residents.
Senator Allard. I see.
Mr. Bregon. Of that portfolio, I think about 12 percent are
FHA-guaranteed. Then Mr. Montgomery has the numbers as to the
default rate on the ADDI program is similar to the regular
portfolio of the FHA.
Senator Allard. I see, okay. Thank you.
Secretary Jackson. Thank you.
RESPA
Senator Allard. I want to move to RESPA if I might.
Secretary Jackson. Yes, sir.
Senator Allard. I understand that the proposal that you're
working on now is close to 270 pages--I guess this is a rumor
on the street--and that the good faith estimate, which was
previously proposed would be one page long, is now somewhere
around four pages, another rumor on the street.
Further, a new form of comparing GFE and HUD is apparently
being introduced and real estate closings will now have to have
a script read explaining aloud loan terms and fees.
It doesn't sound like simplification to me. I know that's
what one of your goals was. And I wondered if you might explain
those rumors.
Secretary Jackson. Well, let me say this, Senator. It is
simplification, but I will let Commissioner Brian go into depth
with it.
Senator Allard. Okay.
Mr. Montgomery. Thank you, sir. The 278-page preamble will
be published tomorrow in the Federal Register. However, today
it is available for public viewing at the offices of the
Federal Register, so I can discuss it in some instance.
While the preamble is long, we are updating a 34-year-old
statute, the Real Estate Settlement Procedures Act. We think
that it's implicit from what we've seen the last several years,
that there's better disclosure to the borrower, there's greater
certainty of costs, so we avoid the sticker shock between the
good faith estimate today and what ends up on the HUD-1
statement. You can talk to some of the consumer groups, as I'm
sure you have, and they will share multiple instances of
families who witnessed and experienced that sticker shock
first-hand.
So our guiding principle is that we wanted to develop a
good faith estimate, a standardized form that takes some of the
best of what other organizations have proposed, from what we've
seen in best practices, and make it a document that not only
fully articulates to the borrower what they're getting into,
but also provides them a document that they can now do what
very few borrowers do, and that is shop for the best deal that
they can get.
Senator Allard. Was the process simplified?
Mr. Montgomery. Yes, sir, absolutely. And I want to say----
Senator Allard. Less paperwork, so when you're closing,
instead of it being this, it's more like this?
Mr. Montgomery. We are doing our best to do that, sir. It
may shorten by a quarter of an inch. I can't promise you much
more than that. But I will say this: We've conducted extensive
consumer testing and the consumers have been telling us that
they like the standardized form. They like the fact--none of
us--very few of us have degrees in finance, and when you see
terms in a closing document, we've all experienced that process
in our life and I don't think any of us when we leave that
closing table feel 100 percent good about what we've just done.
Now, the euphoria of owning your home may overtake that. But
you put your best faith into the system.
We are trying to get to the heart, where consumers leave
that settlement table where they've had it explained to them
and they say, you know, I feel good about what I've just done.
The closing script that would be read along with the HUD-1
statement is the single most item that consumers told us they
like the most, because now it's being explained to them in
plain, simple English what they were doing.
Senator Allard. Thank you, Madam Chairman.
HUD OVERSIGHT
Senator Murray. Thank you, Senator.
Mr. Secretary, obviously there are a number of issues in
front of this committee regarding the budget that are extremely
important. However, as I said in my opening statement, this
subcommittee has a tremendously important oversight role for
every dollar appropriated by it. And as you have heard, your
agency is operating under a cloud right now. I know, as I said
in my statement, you're tired of the allegations, we're tired
of them. I think it's important that we clean up some of that
and want you to answer a series of questions that I have as
openly and as honestly as you can. Our committee has the
responsibility for taxpayer dollars and I would like you to
answer in the spirit of that.
Mr. Secretary, you did testify before us last year that you
have never involved yourself in any contracts with HUD. You
said: ``I have not touched one contract, not one.'' I would
like you to address the allegations regarding your involvement
in the hiring of William Harrison to serve as a construction
manager at the Housing Authority of New Orleans. Since 2002
your agency does run that authority in receivership.
Mr. Harrison reportedly is a personal friend of yours and
received between $400,000 and $500,000 through a no-bid
contract for 18 months of work. That's a good bit more money
than you make as the Nation's top housing official. Mr.
Harrison has told the press that he believes he was hired for
this position because of your involvement.
It's alleged that you personally involved yourself in
seeing to it that Mr. Harrison was paid on a timely basis.
Finally, it has been alleged that members of your senior staff
slapped the wrist of certain officials at the Housing Authority
of New Orleans that questioned the hiring of Mr. Harrison.
Mr. Secretary, did you personally recommend Mr. Harrison to
be employed by the Housing Authority of New Orleans, as he
asserts?
Secretary Jackson. Chairwoman, I think it is best, with all
the misinformation being put out there right now, to simply let
the investigators do their job quickly and expeditiously as
possible. Therefore----
Senator Murray. You have an opportunity to----
Secretary Jackson. Therefore----
Senator Murray. You have an opportunity to set the record
straight here and I'm asking you a direct question.
Secretary Jackson. Therefore, I'm going to let the
investigators complete their work before I make any public
comment.
Senator Murray. Well, it is alleged that you personally
called one of your employees, Mr. Donald Babers, to complain
that Mr. Harrison was not getting paid in a timely way by the
Housing Authority of New Orleans. He is your appointee on the
HANO board of directors. Have you personally complained to Mr.
Babers, to any HUD contractor, or to any other individual
currently or formerly employed by HUD regarding whether Mr.
Harrison was getting paid or the pace at which he was getting
paid?
Secretary Jackson. Again, chairlady, I think it is best,
with all the misinformation that is being put out there right
now, to simply let the investigators do their job quickly and
expeditiously as possible.
Senator Murray. Mr. Secretary, you have an opportunity
before this committee that has oversight of your agency and the
tax dollars that we appropriate, to clean this up, and I would
ask you to answer honestly if you could for us this morning.
Secretary Jackson. Therefore, I'm going to let the
investigators complete their work before I make any public
comment.
Senator Murray. Well, did you ever discuss with Mr. Thorson
any HUD contractor or any other individual currently or
formerly employed by HUD the matter pertaining to Mr.
Harrison's contract and whether or not it should be signed?
Secretary Jackson. I think it is best to let the
investigators complete their work, and I will say again that I
think it is important that they complete that work and I will
let them do that before I make any public comment.
Senator Murray. So it is clear you'll not answer any
questions about New Orleans. Let me ask you about the Housing
Authority of the Virgin Islands. It's had a very troubled
history and it's also operated by your agency in receivership.
It's alleged that you personally advocated the hiring of a
friend of yours, Mr. Michael Hollis, by a company called Smith
Real Estate Services, which was a HUD contractor on the Virgin
Islands. Mr. Hollis reportedly had no experience in public
housing, but a short time following his employment as the HUD
contractor Mr. Hollis was hired directly by HUD to be executive
director of the Virgin Islands Housing Authority, at a
compensation level that is reported to have exceeded a million
dollars.
Mr. Secretary, did you ever have a conversation with any
HUD contractor or any individual currently or formerly employed
at HUD regarding the merits of hiring Mr. Hollis for either the
position at Smith Real Estate Services or the position with the
Virgin Islands Housing Authority?
Secretary Jackson. Again, chairlady, I think it's best,
with all the misinformation that's being put out there right
now, to simply let the investigators do their job as quickly
and expeditiously as possible. Therefore, I'm going to let the
investigators complete their work before I make any public
comment.
Senator Murray. Did you have any conversations with your
Assistant Secretary, Orlando Cabrera, or anyone else currently
or formerly employed, or any HUD contractor, regarding the
compensation level that Mr. Hollis would receive?
Secretary Jackson. I think it is best, with all the
misinformation being put out there right now, to simply let the
investigators do their job----
Senator Murray. You won't comment on any conversations
regarding Mr. Hollis's contract?
Secretary Jackson [continuing]. Investigators do their job
as quickly and expeditiously as possible. Therefore I'm not
going to comment, any public comment, until they finish their
work.
Senator Murray. Well, Mr. Secretary, as you can imagine,
it's very difficult for this subcommittee. We have
responsibility to take care of our responsibility of oversight.
You control an agency that spends millions of taxpayer dollars.
Your agency's operating under a cloud at this point. I think
that it is imperative that you clear up these questions as
quickly as possible so that we can continue to serve our
taxpayers, and I hope that by submitting these to the record
that you will reconsider and answer the questions to the
committee.
Secretary Jackson. Thank you very much, chairlady.
Senator Murray. Thank you, Mr. Secretary.
Senator Bond?
Senator Bond. Madam Chairman, I would only say that with an
ongoing investigation, we sought to get information from the IG
about it. They told us this was an ongoing investigation and
they would not comment with it. When there is an ongoing
investigation, I would have to say that if potentially serious
charges may come out of it, was I representing someone in
Secretary Jackson's position I would have to tell him, instruct
him not to answer questions, to allow the investigation to be
finished.
Having said that, we will be, obviously, following very
closely the results of that investigation and what comes out.
When that investigation closes, then, if appropriate, I think
once that is resolved then we should have answers to all of
these questions. But given the circumstances, I, as an attorney
who's represented some people who were in trouble, I'd have to
tell you that I would have a strong edict not to get out ahead
of it.
Now----
Senator Murray. Senator, I totally understand your
statement. However, the IG has not told this committee that we
can't conduct our oversight.
SECTION 8
Senator Bond. Oh, no question about it, we can conduct our
oversight. But all I said was the IG, when we asked about it,
the IG said it's an ongoing investigation. The IG's office
would not tell us about this investigation. We have oversight
responsibilities and I have a whole bunch of serious questions
that go, not to these particular allegations.
For example, I am concerned about section 8. With $14.3
billion budgeted, what percent of the authorized vouchers will
this amount pay for? And how many section 8 funds are
available, but are unused because of the caps in place? If you
could prepare us a map showing where there has been more money
made available above the caps, that we can work with you to
figure out how to help you allocate those funds to make sure in
a shortfall of section 8 funds that they go where they are most
needed?
What's the situation with the caps, where some PHAs have
more money available than the caps?
Secretary Jackson. I will let Milan Ozdinec, who controls
the program, Senator, discuss that with you.
Mr. Ozdinec. Good afternoon, Senator. How are you? It's an
honor to be here.
As you may know, there is about $2.2 billion today sitting
in accounts called net restricted assets. These are funds that
were previously appropriated by this body as well as the House
to provide housing authorities with HAP payments as well as
administrative fees. Of that $2.2 billion, approximately $800
million of that are funds that are above the caps, that is
funds that housing authorities may not use because they're at
their authorized amounts of units.
We, as you may know, have advocated for the past 3 years to
having the caps removed and to allow housing authorities that,
for example, had done all the right things, reduced payment
standards, improved their utility allowances, provided minimum
rents, to reduce their costs so that they could serve more
families.
As you may also know, in last year's budget, in 2008, the
Congress instructed the Department to offset the appropriation
by $723 million of that unusable cap money. So housing
authorities that had been at their caps and have money in their
net restricted assets we will in fact offset in 2008.
FHA SECURE
Senator Bond. Well, it would be nice to be able to let the
PHAs have all the section 8 money they need. But given the
budget we've been presented, there is such a squeeze that we
may not have that luxury. It would be great to have the well-
performing PHAs rewarded, but the shortfalls we have are
serious.
Let me turn very quickly, Mr. Secretary, to the FHA, and
you may want to call up the FHA Commissioner. Number one, I
assume you'll be refinancing mortgages at their current value
only. What steps are you going to take to assure the appraisals
are accurate? Do you have the staff and expertise for FHA to
ensure that this program runs efficiency?
This is a big concern.
Mr. Montgomery. Absolutely, Senator, and we share in that
concern. With the FHA Secure product, again these are
conventional FHA refinances we're talking about here. Probably
95, 97 percent of those are subprime, subprime ARMs. We are
very aware of the declining housing markets in this country.
Therefore we require a new appraisal prior to the transaction
occurring to ensure that we have the best snapshot in time of
what that home is worth.
Moreover, in markets that are weak, that are called
declining markets, severely declining markets, we require two
appraisals, two appraisals, to make sure again that some of
what you see is happening in the subprime market does not occur
in FHA.
Senator Bond. Thank you, Madam Chairman.
ADMINISTRATIVE AND JUDICIAL RECEIVERSHIPS
Senator Murray. Mr. Secretary, the President's budget
includes $10 million to fund administrative and judicial
receiverships. HUD currently has six public housing agencies
under administrative receivership, in other words under your
control, complete control. The Department often uses these
funds to contract with outside vendors that, according to your
budget justification, have the specialized knowledge and
expertise needed to address specific deficiencies in housing
authority performance.
Can you give me examples of the types of contractors you're
looking for to assist a public housing authority under
receivership?
Secretary Jackson. Ms. Blunt will answer that for you.
Ms. Blunt. I'm sorry, the last time I did not identify
myself. I'm Paula Blunt, the General Deputy Assistant Secretary
for Public and Indian Housing.
When we go into, when we take over a housing authority that
goes into receivership, we usually do an assessment to see
where the needs are. Many times they vary from housing
authority to housing authority. The financial-related matters
is a big one, so usually many times we may have a contractor
come in that can provide financial assistance. Section 8 is
one. Many times if the housing authority is having severe
problems with their section 8 program, we may bring someone in
there to help with that.
But when we bring the contractors in, not only do they help
to fix the problem, but they train the staff also so that they
can eventually have those skills, be able to do that, so we can
return the housing authority to local control.
Senator Murray. Okay. Mr. Secretary, when you hire those
contractors do you set specific performance measures or
milestones, and how do you establish the value for the services
that they provide?
Secretary Jackson. That is done out of Public and Indian
Housing.
Ms. Blunt. Yes, we do establish standards----
Senator Murray. But it is under your control, correct, Mr.
Secretary?
Secretary Jackson. All of HUD is under my control.
Senator Murray. Right. So can you tell us how those
specific milestones are met?
Secretary Jackson. I think that Ms. Blunt can tell you,
because they're the persons who carry out the program.
Ms. Blunt. Yes. They are--when the contract is set, there
are specific standards, milestones that must be met. They are
part of the contract, and they will vary according to what the
needs of that housing authority and the expertise that we need.
Senator Murray. What safeguards do you have in place so
that those contractors actually have the experience?
Ms. Blunt. We do a review. We go through our Office of
Procurement and Contracts, which has review of the experience.
There are panels that review the applications that come in and
the panels actually make those decisions and they are forwarded
for signature, approval.
Senator Murray. So they are required to have experience
within the work frame of----
Ms. Blunt. Yes.
Senator Murray [continuing]. What you're contracting them
for?
Ms. Blunt. Definitely.
Senator Murray. Did you do that for the Virgin Islands?
Ms. Blunt. We do that for all of our contracts.
Senator Murray. Did you do it for the Virgin Islands?
Ms. Blunt. I specifically didn't, but yes, they are done
for all contracts. There's an established process in the
Department through our Office of Procurement and Contracts
where there are certain things that have to be met. If you
could look, think of it in terms of a job application. When
someone applies for a job, there are certain things, criteria--
--
Senator Murray. Did your Department do that for the Virgin
Islands?
Ms. Blunt. Yes, we did.
Senator Murray. Mr. Secretary, you have PHAs that have been
under HUD's control for years and years, a few of them for over
a decade. If a PHA has been under HUD's control for several
years, what would be the rationale for an emergency-based non-
competitive sole source contract?
Secretary Jackson. I think you'll have to ask, have to ask
the entity that gave the contract.
Ms. Blunt. Many times we may run--from time to time we run
into a situation like that, and it could be the emergency
situation. Without calling names, we have a situation that
recently came about where there was no staff left at a housing
authority to perform the functions and it was necessary to get
someone in there right away to take care of the needs of those
residents and that housing authority. So in that case you don't
have the time to go out for the long, lengthy contract process
in terms of bringing in competitive bids or whatever. We take
them off one of the lists that we have and give them, award the
contract to someone that has the expertise.
Senator Murray. And was that the case in the Virgin Islands
as well?
Ms. Blunt. I'm sorry?
Senator Murray. Was that the case in the Virgin Islands as
well?
Ms. Blunt. I'm not definitely sure. I would have to check
on that. I think it was a sole source contract, so that
probably is. If it was that kind of contract, that is what
would have happened.
MIAMI-DADE HOUSING AGENCY
Senator Murray. The Miami-Dade Housing Agency, Mr.
Secretary, has recently come under your control and we're
seeing news reports related to the mismanagement and wide scale
potential fraud of HUD funds. Can you tell us HUD's actions to
date with Miami, including what HUD staff you've placed on the
ground and who you've contracted with to assist in this effort?
Secretary Jackson. I can't tell you that. I'm sure Ms.
Blunt can.
Ms. Blunt. Yes. We've been working with the local
government there in Miami-Dade and others to take care of the
situation. That happened to be one of the ones I was referring
to where the staff had been pulled from the housing authority
and we had to do an emergency contract to get someone in there
that could take care of those needs. We're still in the process
of doing the things that need to be done to bring everything
together, but we do have a contract there, a contractor there.
We have HUD staff there. We have a HUD person there working
diligently on a day to day basis to do what needs to be done to
work with that housing authority.
Senator Murray. Senator Bond.
HOMELESS FACILITIES
Senator Bond. Thank you, Madam Chairman.
I have just three questions that I want to wind up my
formal questions, the rest for the record. I mentioned, Mr.
Secretary, the problem we were having with the underutilized
and unutilized public lands and buildings for the homeless. I'd
be interested to know what criteria you have for making these,
this housing available to the homeless or rejecting it. Do you
have standards about putting homeless shelters next to schools,
and how many people on your staff are responsible for
implementing this program?
Mr. Bregon. Good afternoon, sir.
Senator Bond. Good afternoon. It has not quite turned into
afternoon. We've been at this, but it's getting there.
Mr. Bregon. It seems like a long time.
Sir, the Department of Housing and Urban Development under
the McKinney-Vento Act, is responsible for looking at, under
the BRAC program, any military bases, any military properties
that are surplus properties, or any other Federal land that
becomes available.
What we do first is we publish a list in the Federal
Register, a notice that indicates to the public which sites are
available.
Senator Bond. Do you make any judgment about whether those
sites would be suitable before you publish the list?
Mr. Bregon. We do not. We just publish the list and then we
request proposals. Usually the local communities create a local
redevelopment authority and those agencies are the ones that
submit proposals to us saying, that land, we would like to use
it for a park, we would like to use it for a public facility.
In that process, the homeless providers also have an
opportunity to look at that facility. What we do is we look at
the need of the homeless in that particular area and make a
determination whether in fact there is a homeless need.
Senator Bond. Well, one of the things in the instances I
cited, this was something that the local authorities were very
dead set against, and they pointed out the lack of continuum of
care.
How many people are implementing that program?
Mr. Bregon. That is serviced out of our Special Needs
Office. We have one individual that looks at the plans and they
look at the data that we have available to determine what are
the housing needs for that jurisdiction.
Senator Bond. Do they look at whether that is an
appropriate selection, site for homeless?
Mr. Bregon. What they do is they work with the local
redevelopment authority and say, there is a housing need and
perhaps you can negotiate with that group.
Secretary Jackson. Let me say this, Nelson. I see what the
Senator is getting to.
Senator, let me go back and see how we can----
Senator Bond. I think on this one there's a little
disconnect between what I'm hearing and what we saw.
Secretary Jackson. I understand. I remember the incident
that was in the papers.
HECMS
Senator Bond. There are several incidents now. The
incidents are multiplying.
Let me jump to HECMs. I understand Australia is a year
ahead of us. They've addressed a number of predatory lending
issues. What are the key issues facing HECMs? HECM fees are
high. It seems to be perhaps unduly lucrative. Has HUD taken
any steps to reduce the cost of HECMs?
Mr. Montgomery. Brian Montgomery again, sir.
We've been working diligently with AARP, with the National
Reverse Mortgage Lenders Association, I daresay refereeing in
some cases those discussions about how we can bring down the
origination costs for reverse mortgages. While this product has
been around 20 years and it has seen its growth rise
dramatically of late, it is still a niche product by and large.
That may change in 5, 10, 15 years. So they are certainly more
time-consuming than a forward mortgage product.
I think there are some legislative remedies. We just want
to be mindful, though, that lenders--if you do low origination
costs, we don't want to make sure they try to make it up
somewhere else. So those discussions continue, and I think we
are in agreement that we need to bring those origination fees
down.
Senator Bond. Do you need legislation? Do you have
legislative recommendations, or do you have recommendations
against legislation that's being considered? Should we act?
What should we not do?
Mr. Montgomery. I just think we need to be mindful of the
teeter-totter effect, that if we lower the origination cost
lender, as they do, and that's the way business is, that
they'll drive up costs somewhere else.
But I do agree going forward as this product continues to
grow in popularity, this issue needs to be addressed, as it is
now. But I would like to share later on some requests and some
suggestions with this committee and how we could do that.
Senator Bond. I would hope you will. My cohort is--the
folks who are still alive at my reunions are all becoming more
and more interested in HECMs, and I wanted to make sure my
classmates are well served.
Thank you very much.
Mr. Montgomery. Thank you, sir.
Senator Bond. Mr. Secretary.
Secretary Jackson. Thank you.
HUD OVERSIGHT
Senator Murray. We all share that concern, Senator Bond.
Thank you.
Mr. Secretary, I do want to go back because again I do
believe this committee has oversight. I do have a question I
want to ask you regarding Philadelphia. You did answer Senator
Specter's question. It has been alleged that you personally
intervened on several levels to try to get a certain parcel of
land that's been controlled by the Philadelphia Housing
Authority to be sold to Mr. Kenny Gamble, an acquaintance of
yours. It's alleged you not only instructed your regional staff
to look into the matter, but you personally called Mayor Street
of Philadelphia to encourage him to force the Philadelphia
Housing Authority to sell that parcel to Mr. Gamble.
I want to ask you a separate question: What conversations
have you had with any HUD contractors or any individuals
currently or formerly employed at HUD regarding Mr. Gamble's
issues with the Philadelphia Housing Authority and whether or
not this parcel of land should be sold to Mr. Gamble?
Secretary Jackson. You know, chairlady, I think it's best,
with all this misinformation that's being put out right now, to
simply let the investigators do their job as quickly and
expeditiously as possible.
Senator Murray. I think I've heard that response, Mr.
Secretary.
Secretary Jackson. Therefore--therefore, I am----
Senator Murray. But I have to tell you, it is very
frustrating to me that you sat here and answered Secretary
Specter's question regarding the phone call forthrightly and
honestly. I have given you the opportunity to do that now on a
number of questions as well. Yet you refuse to answer me on
those questions. It's very frustrating when you did answer
Senator Specter.
Secretary Jackson. I think it is--I think it is very
frustrating to me. There's an ongoing investigation.
Senator Murray. Yet you answered Senator Specter's
question.
Secretary Jackson. And I think that we should simply let
them do their job, and once that's done----
Senator Murray. But this committee does have a
responsibility of oversight. We are responsible for doing that.
It's frustrating to hear no responses.
Secretary Jackson. And I respect you, chairlady, but I
don't think I can answer.
Senator Murray. Thank you, Mr. Secretary.
ADDITIONAL SUBMITTED STATEMENTS
The following statements from the National Association of
Housing and Redevelopment Officials and Hector Pinero before
the Committee on Banking, Housing, and Urban Affairs have been
submitted for inclusion in the record.
[The statements follow:]
Prepared Statement of the National Association of Housing and
Redevelopment Officials
Thank you for holding an oversight hearing on HUD's fiscal year
2009 budget. The 23,000 members of the National Association of Housing
and Redevelopment Officials (NAHRO) look forward to working with you
and the committee to ensure that our Nation's housing and community
development needs are adequately addressed as part of the fiscal year
2009 budget and appropriations process.
Following a detailed review of the administration's 2009 budget
presentation, we believe the request not only calls into question the
underlying justification for critical program funding cuts in fiscal
year 2009, but also raises a more fundamental question regarding the
administration's plans to address well-documented and long-deferred
housing and community development needs. A full listing of NAHRO's
funding recommendations to help address current needs is attached to
this letter. We have also attached several charts demonstrating the
impact of the president's budget on HUD programs. We hope you find this
information to be helpful.
Housing has taken center stage of late as many families face
foreclosure resulting from questionable, sub-prime lending practices.
As the ``first responders'' to local housing needs, local housing
agencies have already been called upon to assist families caught up in
this crisis. Community development agencies are already searching for
ways to help devastated neighborhoods to recover. Our members stand
ready to continue to assist families and communities in need. Going
forward, we welcome the opportunity to work with the committee to
design and later implement pragmatic responses to this crisis.
However, as the committee is also well aware, the Nation's housing
and community development needs are much larger than the mortgage
crisis we now face. Consider the fact that nearly 14 million American
families face severe housing needs, paying over 50 percent of their
incomes toward housing costs or living in substandard housing. In
communities nationwide, families face daunting waits for scarce rental
housing assistance. In fact, on any given night, nearly 750,000 people,
many of them children, are homeless.
In short, NAHRO believes that the administration's 2009 budget
request, if adopted, would continue a pattern of large scale
disinvestment in our Nation's irreplaceable inventory of affordable
housing and would undermine efforts to sustain vibrant communities by
cutting or eliminating programs to revitalize our Nation's community
infrastructure.
In recent years, we have made the committee aware of our questions
and concerns regarding significant funding reductions contemplated in
affordable housing and community development programs. These questions
are raised once again by the President's fiscal year 2009 proposal.
Going forward, we believe the larger question before the Congress is:
what resources are necessary to sustain current levels of assistance to
families and communities, and how as a Nation do we begin to make
progress toward addressing unmet needs? For example, how will we
preserve 1.1 million units of public housing, renew all vouchers,
maintain vital community and economic development services, and address
the millions waiting for some form of assistance to secure decent
housing? These are the questions your committee, along with your
colleagues on the Budget and Appropriations Committees in both houses,
must, in our opinion, resolve to address.
Among the more striking examples found in this budget which we
believe to be emblematic of the challenges and concerns noted above is
the administration's request for basic public housing operations. The
Department's own budget justification states that $5.3 billion is
necessary to subsidize the 1.1 million families living in public
housing, yet its budget request inexplicably asks for just $4.3
billion. We believe that the rationale for this and other
contradictions in the budget request is best explained by the
administration and we hope that more will be learned during your
hearing. It is safe to say, however, that the fiscal year 2009 budget
request, which would fund local agencies' public housing operations at
just 81 percent of need, would constrain local agencies' ability to
administer public housing in a responsible way and, as a result,
underserve those most in need. In sum, we believe this budget denies
residents the quality of life in public housing that they deserve.
There are several additional recommendations in this budget request
that merit reversal. For example:
--Disinvestment in Public Housing Infrastructure.--The budget
proposes $2.024 billion for the Capital Fund, a $415 million
(17 percent) decrease compared with the amount provided by
Congress for fiscal year 2008 ($2.438 billion). This
recommendation has been put forward for the second year in a
row despite the fact that the HUD's own estimates of long term
deferred maintenance are between $18 and $20 billion.
--No Disaster Planning for Public Housing.--Within the Capital Fund
account, the budget does not request funding for public housing
disaster relief. The budget narrative states that ``FEMA
disaster assistance is available for any needs that are not
covered by the required property insurance.'' Despite HUD's
assertion, however, disaster assistance from FEMA for PHAs has
not been forthcoming in recent years. Differing HUD and FEMA
interpretations of the agencies' Memorandum of Understanding
(MOU) have meant that neither agency has stepped in to provide
the funding necessary in a major disaster, save HUD's limited
allocation of emergency capital funds.
--HOPE VI Eliminated.--The President's budget proposes, once again,
to zero out funding for the HOPE VI program. Instead, the
administration intends to spend out the ``remaining balance''
in the program, which amounts to more than ``$1.4 billion as of
the end of 2006.'' Except for unawarded grants from fiscal
years 2007 and 2008, however, this $1.4 billion is already
committed to previously awarded grants. It is not available for
new projects and awards as the administration seems to imply.
--Deep Reductions in CDBG Formula Grants.--The President's fiscal
year 2009 proposal would fund Community Development Block Grant
formula grants at $2.934 billion, a $659 million (18 percent)
cut. This proposed cut is actually $865 million (24 percent) if
one considers the administration's unrealistic proposal to
offset fiscal year 2009 funding by rescinding $206 million in
prior-year, special-purpose grants. Amounts available to local
communities would be further reduced if Congress adopted the
administration's proposal to set-aside $200 million of the
remaining CDBG funding to support competitive ``challenge
grants'' for communities pursuing targeted neighborhood
revitalization.
--Elimination of Economic Development Programs.--The budget proposes
to eliminate the section 108 Community Development Loan
Guarantee program, the Brownfields Economic Development
Initiative (BEDI), and the Rural Housing and Economic
Development (RHED) program, arguing that ``these programs are
duplicative'' and that ``their activities are eligible to be
funded by CDBG and other Federal programs.'' Because they are
valuable components of the Federal community and economic
development toolkit and should remain available to States and
localities, NAHRO has consistently called upon Congress to
fully fund HUD's economic development programs. The section 108
program, for example, allows an entitlement community to borrow
up to five times the amount of its most recent CDBG formula
allocation in order to finance large-scale physical improvement
projects. HUD's own Office of Community Planning and
Development, during a recent briefing for public interest
groups, suggested that the section 108 program could be
valuable to communities as a ``source of funding to address
problems created by the sub prime crisis'' noted above. All
three programs received funding under the Fiscal Year 2008
Omnibus Appropriations Act.
--Insufficient Housing Voucher Assistance.--HUD's budget assumes
$14.161 billion in fiscal year 2009 appropriated funds for
rental housing assistance voucher renewals, to be augmented by
$600 million in agencies' net restricted assets, for a total of
$14.8 billion. NAHRO's preliminary estimate is that $15.4
billion will be needed to support the voucher program in fiscal
year 2009. When compared with PHAs' voucher expenditures in
calendar year 2008, HUD's budget request would leave the
program significantly under funded at levels insufficient to
cover inflation, let alone the renewal of approximately 14,000
incremental vouchers appropriated in fiscal year 2008.
--Underfunding Effective Administration of the Voucher Program.--
HUD's budget request includes $1.4 billion for Housing Choice
Voucher administrative fees, including $1.34 billion for
ongoing fees of existing vouchers and up to $40 million for
PHAs that need additional funding to administer new vouchers in
fiscal year 2009. The nominal increases in these accounts,
however, will be insufficient to fully pay for needs for both
ongoing and new vouchers, leading to likely downward prorations
of administrative fees. Without sufficient funding for
administration, local agencies will not be able to maximize the
efficiency of available rental assistance dollars, will not be
able to maintain program integrity, and will not be able to
provide families with the services and support necessary to
find appropriate housing.
--Short-funding Project-Based Section 8 Contracts.--HUD's budget
would provide $7 billion for the section 8 project-based multi-
family housing program for fiscal year 2009, representing a
$682 million increase (10.8 percent). In addition to the $7
billion, the budget proposes a $400 million advance
appropriation, which would become available on Oct. 1, 2009, to
bridge renewal funding into fiscal year 2010. Recent HUD
estimates of the amount needed to fully fund renewals for the
full 12 months of the contract term rather increments through
September 30, 2009, have cited the need as $8.1 billion. NAHRO
is concerned that the short-funding of contracts as proposed by
the Department may increase owner uncertainty and hasten the
loss of affordable housing.
Taken together, the budget request provides no assurance that well-
documented housing and community development concerns will be resolved
in fiscal year 2009. This, in our opinion, places our invaluable
affordable housing infrastructure at risk and thwarts our ability to
undertake necessary revitalization of our neighborhoods and
communities. Some will contend that larger, unrelated budget pressures
necessarily limit funding for these accounts. However, those familiar
with the Nation's housing and community development assets fear that we
will pay an even greater price for years of disinvestment in this
infrastructure if we fail to recognize the economic downside of our
inaction and continue to underfund these accounts.
Our public housing stock represents a 70-year commitment to provide
decent, safe, and affordable housing in this country. Local housing
agencies, with few exceptions, preserve this inventory in a responsible
and cost-effective manner. However, this is an older inventory that,
like any other form of real estate, will deteriorate if its needs are
unmet. The longer these needs are unaddressed, the more the cost of
repairing the infrastructure grows. If let go too long, the price tag
to sustain this inventory will become too great a burden on the Federal
budget. At that point, absent a plan to provide new affordable housing,
families will, quite possibly, be displaced.
Thank you for this opportunity to outline our concerns and advance
our recommendations on the fiscal year 2009 HUD budget. Under your
leadership, the committee has worked hard in recent years to improve
upon a series of bad HUD budgets. We look forward to working with you
once again this year to ensure that America's affordable housing and
community development needs are addressed in fiscal year 2009.
NAHRO FISCAL YEAR 2009 FUNDING RECOMMENDATIONS
[in millions of dollars]
----------------------------------------------------------------------------------------------------------------
NAHRO
Program 2008 Enacted 2009 Proposed Recommendation \1\
----------------------------------------------------------------------------------------------------------------
Public Housing Operating Fund............................. 4,200 4,300 \2\ 5,300
Elderly & Disabled Service Coordinators............... [15] [16] 50
Public Housing Capital Fund............................... 2,439 2,024 3,500
Resident Opportunity & Supportive Services............ [40] [38] 55
HOPE VI................................................... 100 ............... 800
Safety & Security......................................... ............... ............... 310
Tenant-Based Rental Assistance (Sec 8 Vouchers), Total.... \3\ 16,391 \3\ 15,881 ..................
Housing Asst. Payments................................ \3\ [14,695] \3\ [14,161] \4\ 15,400
Admin Fees............................................ [1,351] [1,400] 1,540
FSS Coordinators...................................... [49] [48] 72
Tenant Protection Vouchers and Administration......... [$200] [$150] ( \5\ )
Project-Based Section 8................................... 6,382 7,000 ( \5\ )
Community Development Fund................................ 3,866 \6\ 3,000 ..................
Community Development Block Grant formula grants...... [3,593] \6\ [2,934] 4,500
Brownfields............................................... 10 ............... 25
Rural Housing/Econ. Dev................................... 17 ............... 25
Sec. 108 Loan Guarantees.................................. 5 ............... 7
HOME...................................................... 1,704 1,967 ..................
HOME Formula Grants....................................... 1,628 1,901 2,000
ADDI set-aside in HOME................................ [10] [50] ..................
HOPWA..................................................... 300 300 300
Homeless Assistance Grants................................ 1,586 1,636 ( \7\ \8\ )
Affordable Housing Production ............... ............... \9\ 1 ,000
----------------------------------------------------------------------------------------------------------------
\1\ NAHRO requests are for stand-alone programs only. Blank indicates no position.
\2\ Reflects the administration's own estimate of need.
\3\ TBRA figures displayed on a program-year basis, consistent with appropriations bill language. HUD documents
display figures on a fiscal year basis, which blend program years.
\4\ Renewal of existing and incremental vouchers based on 2007 calendar year voucher leasing and cost data
through September 30, 2007, inflated by blended BLS Consumer Price Index, Urban (CPI-U), Rent of Primary
Residence component. Assumes a 96 percent utilization rate.
\5\ Fully Fund.
\6\ The President's budget nominally requests $3.000 billion for the CD Fund for fiscal year 2009. However, it
offsets this amount by presuming the cancellation of $206 million in fiscal year 2008 Economic Development
Initiatives and other earmarks within the fund. The combination of the request and rescission results in a net
fiscal year 2008 appropriations request of just $2.794 billion for the CD Fund.
\7\ NAHRO's proposed funding level for Homeless Assistance Grants is for existing McKinney-Vento programs and
does not include the administration's proposed $50 million set-aside for the Samaritan Initiative.
\8\ At least $1,636.
\9\ Affordable Housing Production should be derived from sources other than appropriations if possible.
______
Prepared Statement of Hector Pinero Before the Committee on Banking,
Housing, and Urban Development on Behalf of the National Leased Housing
Association, National Multi Housing Council, and the National Apartment
Association
Chairman Dodd, Senator Shelby and distinguished members of this
committee, my name is Hector Pinero and I am senior vice president of
Related Management Company. My firm manages 26,000 apartments of
affordable and market-rate housing in 135 locations in 13 States from
New York to California. I am responsible for the affordable housing
portfolio in the New York metropolitan area. Today I am representing
the National Leased Housing Association (NLHA) the National Multi
Housing Council (NMHC) and the National Apartment Association (NAA).
NLHA represents the interests of 600 member organizations involved
in federally assisted rental housing including developers, owners,
lenders, housing agencies and nonprofits. NLHA's members provide
affordable rental housing for over 3 million families.
NMHC represents the interests of the larger and most prominent
firms in the multifamily rental housing industry. NMHC's members are
the principal officers of these organizations and are engaged in all
aspects of the development and operation of rental housing, including
the ownership, construction, finance and management of such properties.
NAA is the largest national federation of State and local apartment
associations, with nearly 200 affiliates representing more than 51,000
professionals who own and manage more than 6 million apartments.
We commend you, Chairman Dodd, for your leadership, and we thank
the members of the committee for your valuable work addressing the
important issue of housing and the Federal budget.
FISCAL YEAR 2009 PROPOSED BUDGET
On February 4, the President unveiled his fiscal year 2009 budget.
The President's plan would fund the U.S. Department of Housing and
Urban Development (HUD) at $38.7 billion, which according to the Center
on Budget and Policy Priorities, is $330 million above current levels,
but insufficient in light of the housing affordability issues plaguing
this country. The HUD budget continues to strain efforts to provide
decent and safe affordable housing. Over the years, HUD spending has
declined significantly, illustrated by the fact that HUD's budget in
1974 was nearly $70 billion (in today's dollars) as compared to the
$38.7 billion being proposed for fiscal year 2009. Clearly, such cuts
are indicative of the reduced commitment of the Federal Government to
affordable rental housing in favor of failed homeownership policies.
We would like to focus our testimony on two programs that are the
cornerstone of federally assisted housing, the section 8 tenant-based
rental assistance program, also known as the Housing Choice Voucher
program and the section 8 project-based programs.
PROJECT-BASED SECTION 8
The project-based section 8 programs, enacted more than 30 years
ago, have provided effective and enduring shelter for millions of low-
income families. In addition to making possible the construction or
rehabilitation of housing units dedicated to low-income occupancy for
extended periods, the program reduces the rent burden for low-income
residents living in those properties.
My company, Related Management, has its headquarters in New York
City and owns and manages about 26,000 units of multifamily housing in
13 States from New York to California. Our section 8 project-based
inventory totals 11,287 units in 64 projects.
In our opinion, the section 8 subsidy mechanism is the most
effective housing subsidy ever devised by Congress. It is an elastic
subsidy that can reach the very poorest families and keep their rent
burden proportionately the same as the rent burden of families with
more income.
However, for section 8 to be an effective program, HUD must comply
with its contractual promise to housing providers to make timely
monthly assistance payments. These assistance payments cover the
difference between tenant rent contributions, generally set at 30
percent of a tenant's adjusted income, and the HUD-approved rents for
the property. The tenant rent contribution generally pays for only a
small portion of the costs of running a property, including debt
service payments. Without assistance payments from HUD a building
cannot continue to operate and serve its residents.
While HUD has been late sporadically in making payments over the
past several years due to its antiquated computer systems, it was not
until last summer that a major disruption in payments occurred. From
June through September, late payments were widespread over most of the
country. The negative impact of HUD being delayed in meeting its
contractual obligations has both short- and long-term consequences,
which we will discuss along with our recommendations to the committee
for addressing the problem.
In the case of our company, for example, we billed HUD in June 2007
for $9.8 million in assistance payments for the month of July. Almost
one-third of our bill, or $3.1 million, was not paid by July 31, and
about 20 percent or $2 million remained unpaid until November. One of
our properties, in San Diego, received no funds for the period of July
through November, for a total of $875,000. No doubt many other owners
have been hit harder than us, but any late payment at any time is
indefensible.
Owners do what they can to cope during these periods of nonpayment,
such as drawing funds from a replacement reserve and other reserves if
they exist, borrowing funds, delaying payments to vendors, and making
personal contributions. However, not all properties have the ability to
make ends meet when HUD fails to make timely payments, resulting in
notices of default, inability to pay operating expenses, deferred
maintenance, etc.
Late Housing Assistance Payments (HAP) not only affect the
operations of a project but also make more difficult the preservation
of these aging projects through sales, often to nonprofit or other
preservation purchasers that commit to long affordability periods, and
through rehabilitation, usually with proceeds from the low-income
housing tax credit.
Purchasers, lenders, and tax credit investors have been put on
alert that the Government may not perform under its contracts, and they
will act accordingly to protect their interests, assuming they continue
to participate at all. We have attached to our testimony a list of 19
adverse consequences of delayed or insufficient HAP funding. We think
it will be helpful to explain the circumstances that resulted in the
late HAP debacle.
In the mid-to-late 1970s and early 1980s, when the section 8
project-based programs were first developed, the monies for the HAP
contract (be it 20, 30 or 40 years) were funded up front. For example,
the costs of a 20-year contract were appropriated during the first year
of the contract. Further, the subsidy amounts were based on the total
rental costs at the time and did not consider the tenant contribution,
which left wiggle room for rent increases during the contract term.
When the first of the 20-year contracts started to expire around 1994,
it was the first time in 20 years that Congress needed to make an
appropriation to subsidize the properties. Congress agreed to fund the
renewals, but only at rents not to exceed comparable market rents
(hence the Multifamily Assisted Housing Restructuring Act (MAHRA),
which provided the Mark-to-Market program and ultimately the Mark-Up-
to-Market program).
As the number of HAP contracts renewing under MAHRA continued to
increase and more appropriations were needed, instead of HUD requesting
additional funds in its budget request, the Department chose to ask for
less funding than was actually required to renew the contracts. This
approach masked the true costs of contract renewals, but it was
successful for a number of years because HUD was able to recapture
previously appropriated funds remaining in HAP contracts that were
about to expire. When most of the 20-year contracts expired around 2001
and 2002, the availability of recaptured funds diminished. HUD's need
for increased funding for section 8 renewals should have been reflected
in its budget proposals around that time, but again HUD chose to mask
the true costs.
To enable the renewal of contracts without sufficient
appropriations, HUD chose to renew the HAP contracts with less than 1
year of funding. For example, if a contract expired in December 2005,
HUD would provide 9 months of funding until September 30 (the end of
the fiscal year) instead of providing the full 12 months of funding up
front. Essentially, it was bifurcating the 12 months of funding over 2
fiscal years. In this example the remaining funding for the contract
would have been provided after October 1 (the new fiscal year) at which
time 3 months of funding would be added to the contract for a total of
12 months. Until last year, this practice was invisible to the owners.
However, in the fall of 2006, HUD's Chief Financial Officer (CFO)
determined that such partial funding of contracts could not continue as
the CFO believed this approach to be a violation of the Antideficiency
Act (ADA), a law that is intended to ensure that appropriated funds are
not mishandled. This new interpretation of the law by the CFO (which,
incidentally, was not put into writing until requested by Members of
Congress more than a year later) resulted in HUD reverting to funding
renewals for the full 12 months in advance and not in increments.
Because the HUD fiscal year 2007 budget request was based on its
previous practice of partially funding contracts, there were
insufficient funds appropriated by Congress, thus creating a large
shortfall. The result of the shortfall was a delay in funding to
thousands of section 8 properties. When HUD realized in May 2007 that
it would not have sufficient funding to renew all of the contracts
expiring in fiscal year 2007, HUD's Office of Housing eventually
reached a compromise with its CFO office to revert to partial or
incremental funding of renewal contracts as long as the renewal HAP
contract was amended to reflect the fact that partial (and not 12-
month) funding was being provided at the time the renewal contract is
executed. In other words, if HUD disclosed to the owner that only
partial funding was being provided, the CFO deemed that HUD was not in
violation of the ADA.
HUD's policy of incrementally funding (or funding for less than 12
months) continues in the current fiscal year (fiscal year 2008) because
of insufficient appropriations. Further, the President's fiscal year
2009 request does not include sufficient monies to put section 8
contract renewals back on a 12-month funding track. Insufficient
funding coupled with HUD's inefficient payment process and questionable
disbursement systems is likely to create financial disruptions to
section 8 properties for the foreseeable future.
The perception a partially-funded contract creates is devastating.
It is of a government struggling to keep its financial house in order.
Until recently, several years of predictability and stability in the
section 8 renewal process have led purchasers, lenders and investors in
section 8 properties to rely on long-term section 8 renewal contracts,
even though they are subject to annual appropriations, as sufficient
backing for their investment. They assumed the appropriations risk in
these contracts because they thought the risk was minuscule. They are
not so sure anymore.
There are other more technical, but serious, concerns with short
funding commitments. These contracts purport to bind an owner to
providing section 8 housing for 1 year. If HUD funding stops after 4
months, is the owner bound to continue to comply with section 8 rent
and other rules without receiving assistance payments? If the owner can
get out of the contract will it be bound by the 1-year tenant notice
statute, which will prevent the owner from raising rents for 1 year
after an opt-out notice to the tenants? Will the tenants be eligible
for enhanced vouchers if the contract is abrogated? Will HUD wait until
the 1-year notice period has elapsed before awarding enhanced vouchers
to the tenants, as has been its recent policy? Will there be sufficient
funding for all enhanced vouchers?
All of these concerns will influence an owner's decision to remain
in the program or to opt out, as well as decisions about whether to
purchase and rehabilitate section 8 projects. At a minimum, owners will
more likely give routine notices to tenants that they intend not to
renew a section 8 contract, in order to reduce their exposure period
during which they do not receive assistance payments but cannot raise
rents. These opt-out notices will cause anxiety among tenants who will
be placed in a continual state of uncertainty as to whether they will
lose their homes or not.
Unless the industry has confidence that the Government is committed
to adequate and timely funding, the section 8 inventory is likely to
shrink in size. Nor will it get the new investment needed to preserve
these properties as affordable housing and to keep them affordable far
into the future.
What can this committee do to help rectify the damage done to the
section 8 inventory? First, it can exercise close oversight over the
process HUD uses to make section 8 assistance payments, as well as how
budgetary needs are calculated. The Secretary should be directed to use
a portion of the appropriated working capital funds for this purpose.
Second, legislation should be enacted to: impose a penalty on HUD when
its payments are more than 30 days late; remove any requirements that
owners receive HUD permission to use reserves to pay their mortgages
and employees when HAP payments are late; and require HUD to notify
owners when late payments are anticipated. Third, the committee should
urge that sufficient appropriations be provided for fiscal year 2009 to
avert the use of a succession of short-term funding obligations by HUD.
HOUSING CHOICE VOUCHERS
We would also like to express our strong support for the section 8
Voucher Program. Housing Choice Vouchers enable nearly 2 million
households of low- and very-low-income families and the elderly to
achieve decent, safe and affordable housing. The program has been
successful because it provides choice to families, allowing them to
rent decent and safe apartments in the communities that are near their
schools, churches and workplaces. It also has the benefit of reducing
the concentration of poverty. Vouchers also enable the private sector
to partner with housing agencies to improve the housing stock in
communities as well as protect tenants during market rate conversions.
Vouchers are an essential tool for the provision of housing assistance
and are supported by the owner community. Related Management is a
strong supporter of this program and currently leases to 1,600 voucher
holders.
We are concerned about the future of the program because HUD's
budget proposes to reduce funding for the voucher program by nearly
$500 million, offsetting the reduction by relying on unused reserves, a
move that the Center on Budget and Policy Priorities (CBPP) believes
will result in the loss of at least 100,000 vouchers. Further, the
proposed budget recommends using a funding formula that would base
fiscal year 2009 funding on the costs per voucher (plus inflation) from
fiscal year 2007 instead of the previous 12 months. This is
unacceptable to our members because such an approach will result in
additional shortfalls, jeopardizing housing assistance currently in use
by tens of thousands of low-income families. It is imperative that the
2009 funding cycle be based on leasing and cost data for the most
recent Federal fiscal year as provided for fiscal year 2008 by the
Omnibus Appropriations Act (H.R. 2764) that President Bush signed into
law on December 26, 2007. This is a fair formula that maximizes the
amount of dollars provided by the appropriations process and ensures
program stability.
THE BROADER NATIONAL HOUSING CRISIS
The current situation in the for-sale housing market is an
unfortunate turn of events that is made even more unfortunate by the
fact that it was completely foreseeable and preventable. For decades
the Government has pursued a ``homeownership at any cost'' housing
policy. Many Government officials, like other participants in the
housing sector, mistakenly assumed that house prices would always go
up. So they enticed people into houses they could not afford, and they
forgot the rarely spoken truth that there is such a thing as too much
homeownership.
Now we are seeing the consequences of that misguided policy. For
years, we and others have been predicting this meltdown. We have been
warning policymakers that pushing homeownership so aggressively could
be disastrous not only for the hard-working Americans lured into
unsustainable homeownership, but also for our local communities and our
national economy.
That is exactly what is happening now. People are losing their
homes, local communities are struggling with blight and crime, and our
national economic growth is at risk. We understand that policymakers
are worried that this situation might spill over into the broader
economy, and we support efforts to help our country avoid a housing-
induced recession.
The mortgage market meltdown represents a failure of Government
oversight and regulation. Despite repeated warnings, nothing was done
to prevent it. On the contrary, the Federal Government gave a ``green
light'' to this bubble by trying to push homeownership without limits
and even trying to create a federally insured no-downpayment mortgage.
Unfortunately, while there was much the Government could have done
to prevent this crisis, there isn't much it can reasonably do now to
alleviate it. What it can do, however, is recognize its own mistakes
and ensure that this doesn't happen again. And that means, among other
things, recognizing that homeownership isn't the right housing choice
for all households at all points in their lives. Housing our diverse
Nation well means having a vibrant rental market along with a
functioning ownership market. It's time we adopt a balanced housing
policy that doesn't measure success solely by how much homeownership
there is.
CONCLUSION
I thank you for the opportunity to testify on behalf of the
National Leased Housing Association, the National Multi Housing Council
and the National Apartment Association, and wish to offer our
assistance to the committee as you continue your important work.
SOME IMPLICATIONS OF INADEQUATE FUNDING OF PROJECT-BASED SECTION 8
CONTRACTS
NLHA
If Congress fails to appropriate sufficient funds for fiscal year
2008 to make all contractual section 8 payments, in original and
renewal contracts, this failure will be regarded by participants in the
section 8 program, other housing programs, other Federal programs, and
the capital markets as a default by the United States in its perceived
moral obligation. The section 8 contract has already been devalued even
without a default by sustained talk of inadequate funds, widespread
late payments in 2007, and the inability of HUD to provide 1-year
extension contracts because of insufficient funds. A quick and decisive
fix may salvage some of the damage.
The following are several specific adverse consequences:
--Lenders will be less willing to make long-term loans for
refinancings or purchases of section 8 projects, transactions
that help in the rehabilitation and preservation of the
projects.
--Investors and syndicators will be less willing to purchase low-
income housing tax credits, which are key to the sale and
rehabilitation of those projects.
--To the extent the above players continue to participate, it will be
on more onerous terms and with a more rigorous selection
process to assist only projects that would be viable if section
8 payments terminated.
--Owners who economically can opt out of the section 8 program will
plan to do so and will do so at the first opportunity.
--Owners can also stop providing section 8 housing even prior to
contract expiration if HUD fails to provide assistance
payments.
--Tenants will become anxious about the potential loss of their
subsidy and homes. The elderly are particularly susceptible to
those concerns. Some will move out and live with their
families, thus losing their eligibility for tenant protection
vouchers when an owner opts out.
--Owners will select the highest-income tenants they legally can
select in order to mitigate the impact of missed or reduced
assistance payments.
--The cost of enhanced vouchers and other tenant protection vouchers
will soar, or, alternatively, all tenants will not be protected
if there is an opt-out.
--There may be an increase in defaults on FHA-insured mortgages
covering section 8 projects.
--Affordability use restrictions for projects that have been
restructured in the mark-to-market program, which run 30 years,
would be converted to permit higher-income tenants to be
served.
--Fifty-year affordability use restrictions for LIHPRH projects and
existing use restrictions for ELIPHA projects would be
terminated and the projects rented to market tenants if HUD
cannot provide all the contractual section 8 payments.
--For those projects remaining in the program, there will be an
increase in deferred maintenance, depletion of replacement
reserves, and little likelihood of obtaining tax credits for
rehabilitation.
--Prices realized by HUD in selling foreclosed properties with
section 8 subsidies would decline.
--If Congress authorizes the conversion of rent supplement and RAP
contracts to section 8, there will be few takers.
--Participation and continued participation in other housing programs
involving multi-year subsidies, such as project-based vouchers,
tenant-based vouchers, and participation in the 202/811
programs would decline, or the quality of participants would
decline.
--The lack of sufficient section 8 funds will also thwart the
refinancing of older section 202 projects for the elderly and
disabled that have section 8 subsidies. Many of these projects
are 20 to 30 years old and can be preserved for another long
period with recapitalization and rehabilitation, but lenders
and investors would be wary of participating.
--The ability of public housing agencies (PHA) to borrow funds for
capital improvements, secured by future appropriations to the
capital fund, would be made more difficult and costly.
--Participation in non-housing Federal programs, dependant on ongoing
Federal subsidies, would be compromised if participants felt
the United States defaulted in the major section 8 program.
--There are broader implications in the capital markets. A default by
the United States in any area could send further shock waves to
the already shocked markets. Would this be the end of the
perceived Federal backing of Fannie Mae and Freddie Mac
obligations, and if so, would that increase borrowing costs for
home purchases and refinancing? Would the hint of default by
the United States raise borrowing costs for Treasury?
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. At this time, if the members have any
additional questions, please submit them for inclusion in the
record.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Richard J. Durbin
HOUSING DISCRIMINATION STUDY
Question. Historically, how has HUD funded the Housing
Discrimination Study? Why is HUD requesting funding for the HDS through
the Fair Housing Initiatives Program account?
Answer. Congress has appropriated the funding under the Fair
Housing Initiatives Program (FHIP) to support its housing
discrimination studies. Beginning in fiscal year 1999, Congress gave
HUD the authority to use the FHIP budget to support these studies. To
date, HUD has issued three decennial housing discrimination studies.
The first in 1977 was funded through non-FHEO program funds.
However, the Housing Discrimination Study (HDS) 2000 study, as
appropriated by Congress, was funded through FHIP. Specifically, $7.5
million, $6.0 million, and $7.5 million were appropriated in HUD's
fiscal years 1999, 2000 and 2001, budgets respectively. Consistent with
the 2000 study, in fiscal year 2009 HUD continues to use this funding
methodology in requesting funds for the 2010 HDS study.
HDS is a tool that HUD uses to make or change fair housing policy
by providing evidence of housing discrimination in America through a
comprehensive research approach that includes using standard testing
methods. HDS data helps HUD understand the nature of housing
discrimination and the extent of the problem, as well as to identify
the groups that are more impacted by acts of housing discrimination.
This data helps HUD in determining the most effective strategies in
meeting its fair housing mission. HUD has used the results of the
housing discrimination studies to design new education and outreach
initiatives and in making decisions for fair housing with most
activities funded with FHIP resources.
FHIP GRANTS
Question. Last year, how many private fair housing groups applied
for FHIP grants, how many received grant funding, and how many were
denied? Of those that were denied, what were the reasons for denial?
Answer. In fiscal year 2007, HUD made $18.1 million available under
the Fair Housing Initiatives Program (FHIP) Notice of Funding
Availability (NOFA). This funding was divided between two initiatives:
the Education and Outreach Initiative (EOI) and the Private Enforcement
Initiative (PEI). This broke down as $4.1 million for EOI and $14
million for PEI.
EOI provides funding for education and outreach programs to inform
the public about their rights and responsibilities under the Fair
Housing Act. HUD awarded the $4.1 million under EOI to 32 groups out of
127 groups who applied for grants under EOI. Of the 95 groups who did
not receive awards, 4 were ineligible for various reasons, and 36 had
scores below the threshold minimum established by the Office of
Management and Budget (OMB). The remaining 55 groups had qualifying
scores but did not receive funding either because their score was not
competitive enough for funding or because a higher scoring group in the
same geographic area received funding.
In order to achieve the broadest geographic scope with the
Department's education and outreach funding, the Department took into
consideration not only the applicant's scores, but also where the
applicant was located. This funding strategy allowed HUD to make EOI
awards in 32 different States.
In addition, the Department awarded $1 million for a national
education and outreach campaign on lending discrimination, which will
reach approximately 100 million people throughout the country. The Ad
Council reported that one-quarter of the public viewed one of the
Department's previous public service announcements.
PEI supports the investigation and resolution of housing
discrimination allegations handled by private fair housing
organizations. These organizations conduct testing where discrimination
is suspected and assist the public in resolving complaints through
informal means. When necessary these groups file complaints with HUD
and in Federal court on behalf of victims of discrimination.
In fiscal year 2005, at the urging of several fair housing
organizations, including the National Fair Housing Alliance, HUD added
the Performance-based Component to PEI. Performance-based funding
provides 3-year grants to top-performing enforcement organizations.
These organizations must have exceptional experience and excellent
performance reviews. The multiple-year funding encourages them to take
on larger cases of housing discrimination and allows for better
strategic planning by the organizations.
Funds to performance-based groups now account for 73 percent of PEI
funding. In fiscal year 2007, of the $14 million awarded under PEI, the
Department first had to reserve $6.5 million for 25 top-performing
groups who received a performance-based grant in fiscal years 2005 and
2006. That left $7.4 million to be awarded in new grants under PEI. The
Department received 101 applications for this PEI funding. Of these 101
applicants, 30 were ineligible, and 18 had scores below minimum
threshold level established by OMB. Of the remaining 53 applicants
qualified for the PEI funding available in 2007, 14 groups received
their first year allocation of performance-based funding, and an
additional 16 organizations received general PEI grants.
The 2007 PEI grants support fair housing enforcement in 25 States.
This includes four States where there is no substantially equivalent
State or local fair housing law---Nevada, Alabama, Mississippi, and
Wisconsin.
In addition to enforcement efforts, all PEI recipients are required
to use 10 percent of their funding for education and outreach efforts.
This leverages an additional $1.4 million in education and outreach
dollars on top of the $4.1 million the Department has already awarded
under EOI. Education and outreach by PEI groups is particularly
effective, because information about fair housing rights is provided by
the local group that someone can turn to if those rights are violated.
FHIP FUNDING
Question. Why has HUD requested less funding for FHIP in fiscal
year 2009 compared to the fiscal year 1994 funding level, even as
housing discrimination persists in this country? Please explain the
reasons for this diminished request and how HUD can expect to fulfill
the promise of the Fair Housing Act in light of the fact that the
number of complaints filed with HUD and its fair housing partners is
less than 1 percent of total fair housing violations; a HUD study shows
that knowledge of fair housing laws has not improved and is critical to
pursuing alleged violations; HUD is unable to fund private fair housing
centers who score highly on the agency's own performance scale; and the
predatory lending practices highlighted by the recent mortgage crisis
disproportionately victimize racial minorities, a class protected under
the Fair Housing Act.
Answer. For fiscal year 2009, HUD requested $26 million for Fair
Housing Initiatives Program (FHIP). In fiscal year 2009, $19.2 million
of this funding will be made available to fair housing organizations
through competition, with $6 million going to a study the Nation
conducts every decade to measure the level of housing discrimination.
All these funds go either directly to enforcement of the Fair Housing
Act, education of the public regarding their rights and
responsibilities under the Act, or research that will help best target
these funds in the future. Moreover, the 2010 Housing Discrimination
Study (HDS) will enlist and compensate private fair housing
organizations in conducting the proposed research. In the study
conducted in 2000, private fair housing groups received approximately
68 percent of the funding set aside for the study. The Department
expects the same with the 2010 study. Therefore, the study would
provide an estimated $4.08 million to fair housing groups, in addition
to the $19.2 million directly allocated to the groups.
HUD does not believe its fiscal year 2009 FHIP budget of $26
million is an inappreciable amount. The requested amount is
appropriately balanced to workload needs and continuing and evolving
fair housing efforts. We also do not think one can make an appropriate
comparison between this year's FHIP budget and one from 1994. First,
the funding amounts are roughly the same, and second, the overall
amount to fair housing organizations will likely exceed the 1994 level,
given the additional amount provided through research testing for HDS
2010.
Though housing discrimination continues to persist, the
Department's studies show that HUD, State, and local agencies, and the
private fair housing advocacy community, have also done a lot to
address the problem. HUD's HDS from 2000 shows that the overall level
of discrimination that African-Americans and Hispanics face has
declined from 1989 as a result of these efforts. Nevertheless, the
Department each year requests a budget that allows HUD, State and local
agencies, and private fair housing groups to tackle the evolving
problem and the new forms such discrimination takes. The fiscal year
2009 budget, we believe, will meet this challenge.
In addition to the support HUD's annual budget provides for the
short-term needs of fair housing groups, this budget also sustains the
long-term needs of existing groups through its Performance-Based
Component. Private fair housing groups, including the National Fair
Housing Alliance, advocated for this component, and HUD began funding
it in fiscal year 2005. In fiscal year 2007, this funding now accounted
for 73 percent of FHIP's $1.4 million enforcement budget, providing the
top-performing groups with 3 years of funding. This allows for broader
testing and more systemic investigations by these groups.
FHIP's enforcement budget promotes the activities of the private
groups, assists them in bringing in more allegations, and expands fair
housing outreach by requiring that enforcement grantees spend 10
percent of their grant on education activities. In fiscal year 2007,
this means that the groups will expend approximately $1.4 million
marketing their services and educating the housing industry. These
leveraged funds add to the $4.1 million in the budget allocated
strictly for education and outreach grants.
State and local agencies in the Department's Fair Housing
Assistance Program (FHAP) are also an integral part in the Nation's
fulfillment of its fair housing objectives. These agencies handle
approximately 75 percent of the complaints filed in the United States.
For fiscal year 2009, HUD has requested $25 million to support fair
housing investigations and education by its State and local partners.
This funding is tied largely to the complaints these groups receive
each year. As complaints to these agencies have increased, the
Department has had to increase the amount budgeted for these
organizations in order to keep pace.
In fiscal year 2008, HUD and State and local FHAP agencies received
more than 10,000 complaints under the Fair Housing Act or a
substantially equivalent State or local law. In almost one-third of the
complaints, whether at HUD, or at one of the 108 State and local
agencies, the agency obtains a positive result for the complainant,
either through a finding of discrimination or resolution between the
parties. In 2007, conciliation agreements and settlements provided more
than $4.76 million in monetary relief to victims of discrimination.
This is addition to other relief that agencies obtain for the
complainant, such as providing the victim with the desired unit or
accommodation, a reduction in the amount of rent or in the interest
rate on loans, and retrofits that make a property accessible to persons
with disabilities.
In addition to individual complaints, HUD has stepped up its use of
Secretary-initiated enforcement in its efforts to proactively address
and eliminate housing discrimination. This means if only a small share
of the public is filing complaints, the Department is not waiting to
receive a formal housing discrimination complaints but is vigorously
pursuing cases where there is reason to believe that a person or entity
has committed a discriminatory act. In fiscal year 2007, HUD filed 16
Secretary-initiated investigations or complaints. These addressed a
variety of issues including widespread race discrimination in the New
York rental market; housing providers who excluded families with
children; discrimination against African-American and Hispanic mortgage
applicants; and religious discrimination among real estate agents. The
Department has filed 4 Secretary-initiated complaints or investigations
in fiscal year 2008.
To further the Department's mission of ensuring fair housing, HUD
has taken a number of strategic initiatives to enhance fair housing
enforcement including creating a lending division to conduct fair
lending investigations. The division initiates investigations when
lending patterns or other information suggests discrimination by a
lender, but no individual has come forward to file a complaint. In
addition, the Department has reassigned to the division HUD's fair
lending oversight of Fannie Mae and Freddie Mac to ensure their
underwriting policies and practices comply with fair lending laws. The
Department is pursuing six nationwide Secretary-initiated
investigations into independent mortgage companies for discrimination
based on race or national origin in the making of loans, the pricing of
loans, and for policies that have a discriminatory effect.
FAIR HOUSING LAWS
Question. How does HUD plan to increase public awareness of
existing fair housing laws?
Answer. As explained in more detail below, HUD uses an array of
strategies, including print (e.g. posters, pamphlets and brochures) and
electronic media (e.g., internet, television, radio), advertisements in
movie theaters, on buses, taxis, public buildings, and meetings,
conferences, seminars, etc., to increase public awareness of the Fair
Housing Act. In fiscal year 2007, HUD, with its Fair Housing
Initiatives Program (FHIP) and Fair Housing Assistance Program (FHAP)
partners, conducted fair housing education and outreach programs and
activities that reached approximately 50 million people, which is about
16 percent of the population of the United States. Going forward, HUD
will continue to use these and other methods to promote its fair
housing mission.
--National Slogan.--HUD started to consistently use the slogan,
``Fair Housing It's Not an Option, It's the Law,'' in fiscal
year 2006. We determined that mixed messages and multiple
slogans confused the general public. Therefore, HUD has
utilized the same slogan in fiscal years 2007 and 2008 and will
continue to use it in fiscal year 2009.
--Fair Housing Initiatives Program (FHIP)--Education and Outreach
Initiative (EOI).--The FHIP was created under the Housing and
Community Development Act of 1987. One of the goals of the FHIP
is to educate the public and the housing industry on their
rights and responsibilities under the Fair Housing Act. Each
year since 1987, HUD has awarded funds to fair housing
organizations under EOI to meet this goal. In fiscal year 2007,
approximately $2.6 million was awarded to 32 fair housing
organizations to conduct fair housing education and outreach
programs and activities. In the fiscal year 2008 HUD budget,
Congress appropriated $24 million for the Fair Housing
Initiatives Program. For the EOI Awards, $2.8 million has been
set aside for EOI awards. In addition, Private Enforcement
Initiative-General Component ($19 million) has a requirement
that 10 percent of the funds, about $1.9 million, be used for
education and outreach activities. HUD has requested additional
funds for FHIP in fiscal year 2009.
--National Media Campaign.--In April 2002, HUD released a study of
fair housing laws, ``How Much Do We Know?'' The report gauged
what the public knew about fair housing laws. The Study found
general awareness, with one-half of the public able to
correctly identify six or more of the eight scenarios that
described illegal conduct. However, while many persons were
conscious of fair housing protections, 83 percent did nothing
about it when confronted with an act of housing discrimination.
Following this awareness study, HUD, in fiscal year 2003,
developed a national media campaign to educate the public on
fair housing. Since 2003, HUD has awarded funds for a national
media campaign. We believe that a national media campaign is an
effective mean of promoting the fair housing because it
provides a consistent message and it provides information to
the entire country. Our national campaigns have been
particularly effective. For example:
--In fiscal year 2006, HUD launched a national campaign to inform
individuals who were displaced by Hurricanes Katrina and
Rita of their fair housing rights and how to file housing
discrimination complaints. The message of the public
service announcement (PSA) was, ``the storm isn't over.''
This PSA encouraged hurricane evacuees and other members of
the public to call HUD's housing discrimination hotline if
they suspected they had been denied housing for
discriminatory reasons.
--In fiscal year 2007, HUD awarded a grant to Pacific News Service,
a not-for-profit organization with specialization in radio,
television, and print media for minority and ethnic
populations, to provide an education and outreach program
on fair lending, to education the public of the fair
lending requirements of the Fair Housing Act. Pacific News
Service partnered with the National Community Reinvestment
Coalition (NCRC), a Fair Housing Initiatives Program
recipient and a nationally recognized non-profit
organization with expertise in fair lending issues. A PSA
with actor Dennis Haysbert as the fair lending
spokesperson, has been distributed to all HUD Fair Housing
Assistance Program and Fair Housing Initiatives Program
partners and to approximately 1,800 national cable and
commercial television networks for airing. The PSA is
available in both English and Spanish and it is closed
caption. Additionally, fair lending posters have been
produced in English, Spanish, Russian, Arabic, Chinese,
Vietnamese, and Korean. The posters have been distributed
to our Fair Housing Initiatives Program and Fair Housing
Assistance Program partners. They will also be available
through HUD/Fair Lending Web site.
--In association with the fair lending media campaign, NCRC will
conduct 12 fair lending forums in the following cities:
Atlanta, Georgia; Boston, Massachusetts; Charlotte, North
Carolina; Chicago, Illinois; Columbus, Ohio; Denver,
Colorado; El Paso, Texas; Fresno, California; Philadelphia,
Pennsylvania; Washington, DC; Cleveland, Ohio; and Detroit,
Michigan. These 12 cities were selected because they were
identified as cities with high foreclosure rates. The first
forum begins in Atlanta, GA, on May 17, and the last 1
forum is scheduled for Detroit, MI, on September 20. We
estimate that the lending forums will reach approximately
6,000 households and will result in an increase of public
knowledge on the fair lending requirements of the Fair
Housing Act, how to avoid predatory loans, and what options
are available to homeowners facing foreclosures. In
addition to the NCRC staff, the forums will feature HUD
staff, and HUD approved HUD housing counseling agencies.
--In fiscal year 2008, HUD designated $1 million of the Fair
Housing Initiatives Program appropriation for a national
media campaign. The funds will be awarded through the FHIP
NOFA again to address discriminatory and predatory lending.
Consistent with is strategies since 2003, HUD, in its
fiscal year 2009 proposed budget, requested $1 million for
a national media campaign.
--Media Activities.--In fiscal year 2007, as detailed in HUD's fiscal
year 2007 Fair Housing Annual Report to Congress, HUD undertook
the following media activities to increase the public's
knowledge of fair housing laws:
--From April 6, through 12, 2007 and October 26, through November
2, 2007, HUD sponsored two fair housing advertisements that
appeared in over 100 movie theaters, on more than 1,000
screens throughout the country. HUD spent approximately
$17,000 in its movie theater advertisements that reached
approximately 1.5 million movie goers. This is at a cost of
about $0.011 per person. This marketing technique is a cost
effective method of informing the public about the Fair
Housing Act and HUD's toll free numbers. During June 2008,
HUD will place the lending PSA, described above, in movie
theaters across the Nation. Because HUD believes the use of
the movie theaters is a cost effective method to reach
large number of people, it will continue to utilize this
source of marketing during fiscal year 2009.
--Samples of news articles and interviews follow:
As a result of HUD's outreach efforts, the April 15,
2007, issue of Parade magazine contained an article on
fair housing. The article advised readers that housing
discrimination is illegal and provided several examples
of unlawful discrimination, such as charging higher
rent to tenants based on race or religion or refusing
to accept families with children. The article also
provided HUD's housing discrimination hotline, 1-800-
669-9777. Parade has a circulation of more than 35.5
million.
On September 28, 2007, Gannett News Service ran a
featured article on fair housing. USA Today had
multiple stories, including a prominent main story that
included quotes from Assistant Secretary Kim Kendrick.
The story was largely about HUD's education and
outreach efforts led to increased fair housing
complaints. The estimated circulation for Gannett
Newspapers is 7.2 million readers. For complete details
on the Gannett News Service on ``Closed Doors: Housing
Discrimination Complaints on the rise across the
country,'' please go to: http://gns.gannettonline.com/
apps/pbcs.dll/section?Category=HOUSING
On July 16, 2007, Assistant Secretary Kim Kendrick
was featured on ``The Federal News Drive'' with Mike
Causey and Jane Norris on Federal News Radio. Ms.
Kendrick discussed the fair lending provisions of the
Fair Housing Act.
On February 17, 2007, the CNN program Open House
aired a segment on housing discrimination. The segment
featured an interview with Nannatte Bishop, an African-
American woman who filed a complaint with HUD alleging
that Fifth Third Bank denied her application for
mortgage loan because of her race. Approximately
665,000 viewers watched this episode.
On a monthly basis, starting with the June 2006
through June 2007, Essence Magazine featured an article
on 12 steps of the home buying process. Assistant
Secretary Kim Kendrick served as one of 12 members of
an advisory board throughout the 12 steps. The name of
the Office of Fair Housing and Equal Opportunity
appeared in all 12 issues of Essence. Assistant
Secretary Kendrick was featured in three steps. For
instance, Step 3: Learn About the Mortgage Industry,
included information on the home buying process and
five ways individuals can protect themselves from
unfair lending practices and predatory lenders. On a
monthly basis, Assistant Secretary Kendrick provided
guidance to each of the three families. Essence has a
monthly circulation of approximately 1,066,000.
--One way to raise public awareness of fair housing laws is for HUD
to publicize cases that result in significant housing or
monetary relief on its Web site and through press releases.
By publicly announcing all of its charges and major
conciliations, we hope to re-enforce the public's trust of
HUD's fair housing enforcement mission. FHEO's Web site
statistics show that it receives from 4,000 to 20,000 hits
per day.
--Letters to the editors from Assistant Secretary Kendrick appeared
in the Sunday Los Angeles Times (approximately 1.2 million
readers) and Times Picayune (approximately 262,000
readers).
--Fair Housing Op-Ed. During April 2007, an op-ed piece written by
HUD appeared in four African-American newspapers. The op-ed
appeared in the Pittsburgh Courier, Dallas Examiner,
Louisville Defender, and East of the River newspaper, which
together reach more than 60,000 readers.
--Assistant Secretary Kim Kendrick appeared in an article in the
Federal Times which has an estimated circulation of 38,000.
In the article, Assistant Secretary Kendrick discussed her
role as the Administration's top enforcer of the Federal
fair housing laws.
--Fair Housing Month--2007, 2008, and 2009.--During the April 2007
Fair Housing Month, HUD and its FHIP and FHAP partners
sponsored and participated in over 250 events. Many of these
events will be duplicated in fiscal year 2008 and fiscal year
2009. Some of the more innovative events include:
--Charleston Human Rights Commission and the Huntington Human
Relations Commission--both FHAP funded agencies--erected
several Fair Housing Month billboards in their cities.
Also, the Charleston, WV, Human Rights Commission placed
advertisements on the tops of taxi cabs to raise awareness
of fair housing. It is estimated that approximately 51,000
people may have seen these taxi advertisements.
--For the second year in a row, Philadelphia skyline was lit by
HUD's Fair Housing Month slogan as it scrolled around the
top of the 28-story building of the Philadelphia Energy
Company (PECO). PECO displayed the slogan on the evenings
of April 13, 14, 15, and 16. In bright letters that are 38
feet high, Fair Housing: It's Not an Option; It's the Law
is scrolled around all four sides of the downtown
skyscraper.
--During the Fair Housing Month 2007, the LA Times and San Diego
Union Tribune each ran fair housing ads four different
times in their newspapers. Displaying HUD's Fair Housing
message, ``Fair Housing: It's Not an Option; It's the Law''
for free.
Additional information about HUD's 2007 Fair Housing Month events
may be found on the following website: http://www.hud.gov/offices/fheo/
FHMonth/2007FHM-Events.pdf
--Disaster Response.--HUD strongly believes that it has a
responsibility to ensure that persons affected by disaster are
not victimized when searching for a new place to call home. As
a measure of prevention and pro-action, FHEO collaborated with
a group of Fair Housing Assistance Program (FHAP) and Fair
Housing Initiative Program (FHIP) agencies and other fair
housing professionals to develop a fair housing toolkit for
emergency preparedness. Toward this end, FHEO engaged Emergency
Management and Special Needs Consultants to facilitate
roundtable discussions to define the role of fair housing in
disaster preparedness planning identify the challenges that
fair housing professionals face in responding to disaster
situations, develop disaster-related education and outreach
initiatives, develop communication strategies, and coordinate
enforcement efforts. The final result was a ``Fair Housing
Disaster Toolkit for Emergency Preparedness'' for fair housing
professionals. The toolkit was issued in July 2007 and was
distributed to over 800 participants of HUD's 2006 National
Fair Housing Policy Conference. A copy of the toolkit continues
to be available through the following website: http://
www.hud.gov/offices/fheo/library/FHEO-DisasterToolkit.pdf
--Fair Housing Exhibit Booth.--The purpose of the Fair Housing
Exhibit Booth is to provide fair housing information to the
general public, housing, real estate, lending, insurance, and
civil rights professionals at their national conferences and
meetings. In fiscal year 2007, HUD operated the Fair Housing
Exhibit Booth at 12 events throughout the country, including
national conferences held by the National Association for the
Advancement of Colored People, the National Association of Home
Builders, the National Council of La Raza, the National Bar
Association, National Black Family Reunion, and the
Congressional Black Caucus. It is estimated that approximately
500,000 people were reached through HUD's Fair Housing Exhibit
Booth.
--Participation in Conferences and Events.--Another way that HUD
increases the public's awareness of the Fair Housing Act is by
participating in conferences and other events held by HUD
offices, housing industry groups, and fair housing groups
throughout the Nation. For example, during fiscal year 2007,
staff has participated in the following conferences:
--Education Conference and Lone Star Expo sponsored by the Texas
Apartment Association in Houston, TX;
--National Community Reinvestment Coalition Conference, Washington,
DC;
--Housing and Development Law Institute's Conference, Washington,
DC; and
--National Coalition for Asian and Pacific Americans Community
Development Conference, Honolulu, HI.
Just recently, from April 8, through 11, 2008, HUD held its 2008
National Fair Housing Policy Conference in Atlanta, GA, to commemorate
the 40th anniversary of the Fair Housing Act. Approximately 1,000
people attended the Conference. The next national fair housing policy
conference will be held in June 2010.
--Accessibility First.--In January 2003, HUD launched Fair Housing
Accessibility FIRST, a FHIP-funded program that provides
training and technical assistance on the Fair Housing Act's
accessibility requirements to architects, builders, developers,
and other others involved in the design and construction of
multifamily housing. Approximately 7,500 people have attended
the training since 2003. In fiscal year 2007, when asked the
number of multifamily housing units on which the attendees were
working, the attendees reported a total of 329,543 multifamily
units in which they were assisting with the development,
design, or construction. As a result of the training, we expect
these units will be built in compliance with the accessibility
standards of the Fair Housing Act.
--40th Anniversary of the Fair Housing Act.--The Assistant Secretary
and FHEO senior staff were interviewed CNN Radio, with over
2,000 worldwide affiliates; CNN Espanol Radio (with over 9
domestic and 20 internationals bureaus); NPR--All Things
Considered (with 11 million listeners), and Fox News Atlanta.
During the separate interviews, Assistant Secretary Kendrick
and staff discussed the 40th anniversary of the Fair Housing
Act and the Reverend Dr. Martin Luther King, Jr.'s dream of an
``open society.''
--Fair Housing Education in America.--On April 16, 2008, HUD launched
a new initiative, ``Fair Housing Education in America Day.''
This national education project is designed for 4th through 6th
grade students for them to hear from fair housing experts who
present lessons on fair housing requirements. It gives
teachers, parents, and their children a basic understanding of
the Fair Housing Act. The goal of this initiative is to start
the conversation about fair housing opportunities at a young
age. It's critically important to teach future generations of
renters and home buyers about their rights under fair housing
laws. Over 50 schools nation wide registered to participate in
this inaugural event. Additional information on Fair Housing
Education in America Day may be obtained through the following
website: http://www.hud.gov/offices/fheo/fheducationday.cfm. As
this Initiative was successful, HUD plans to continue this
Initiative on the 3rd Wednesday of April for fiscal years 2009
and 2010.
HOUSING DISCRIMINATION
Question. What concrete steps will HUD be taking to increase the
percentage of persons who file complaints in response to the belief
that they have been victims of housing discrimination?
Answer. HUD's fair housing mission is to eradicate housing
discrimination. HUD plays several roles in this mission: (1) to
increase public awareness of the Fair Housing Act; (2) to educate
housing providers on their rights and responsibilities under the Fair
Housing Act to reduce the number of occurrences of housing
discrimination; and (3) to enforce the provisions of the Fair Housing
Act.
HUD believes that persons cannot report housing discrimination
unless they understand their fair housing rights and the recourse
available to victims of discrimination. In order to increase the
percentage of persons that report housing discrimination, HUD has
engaged in media campaigns and other activities to raise public
awareness of fair housing. These activities are described in the answer
responding to Senator Durbin's question, ``How does HUD plan to
increase public awareness of existing fair housing laws?''
Moreover, HUD has conducted many of these activities in languages
other than English in order to reach persons with limited English
proficiency. For example, in fiscal year 2004, HUD, in conjunction with
the Advertising Council, launched a fair housing education campaign
through a series of public service announcements. This campaign
consisted of two television advertisements, two radio advertisements
and two print advertisements, in English and Spanish.
Additionally, in fiscal year 2005, HUD produced five new fair
housing radio advertisements. Two of these advertisements were in
Spanish and two of these were in Cantonese, Hmong, Korean, and
Vietnamese. Starting in fiscal year 2005, HUD also produced fair
housing print advertisements in Arabic, Bengali, Cantonese, Hmong,
Khmer, Korean, Punjabi, Thai, Urdu, and Vietnamese.
Furthermore, HUD's 2005 Study--``Do We Know More Now?''--concludes
that unless a person who has been discriminated against can see
benefits in filing a complaint, he/she is unlikely to do so. Therefore,
HUD makes a conscious effort to publicize the outcomes of its fair
housing enforcement efforts to help encourage persons to report housing
discrimination. HUD believes that publicizing the results of its
enforcement efforts helps build public trust in its enforcement
efforts, and, in turn, increases the likelihood that persons will
report housing discrimination.
In February 2007, the CNN program Open House aired a segment on
housing discrimination. The segment featured an interview with
Assistant Secretary Kim Kendrick and Nannatte Bishop, an African-
American woman who filed a complaint with HUD alleging that Fifth Third
Bank denied her application for mortgage loan because of her race. HUD
negotiated a $125,000 settlement in this case. An estimated 665,000
people may have viewed this broadcast.
HUD is also building the public trust in its enforcement efforts by
training the approximately 500 full-time investigators employed by the
more than 100 State and local government agencies that are certified
through its Fair Housing Assistance Program (FHAP). In fiscal year
2004, HUD opened the National Fair Housing Training Academy (the
Academy) to provide training and certification to ensure that FHAP and
now HUD investigators have the necessary skills to conduct thorough and
timely investigations.
The Academy offers a 5-week program, which covers fair housing
laws, investigative skills, negotiation skills, litigating fair housing
cases, and many other topics. After completing the 5-week program, the
investigators must pass a comprehensive examination in order to receive
a certificate of completion from the Academy. At of the end of fiscal
year 2007, a total of 174 investigators have completed the 5-week basic
training course.
However, HUD is not simply waiting for persons to file complaints.
HUD has increased the use of its Secretary-initiated enforcement
authority to eliminate discriminatory housing practices. Under the Fair
Housing Amendments Act of 1988, the Secretary of HUD, in the public
interest, has the authority to conduct an investigation and file a
complaint when there is reason to believe that an alleged
discriminatory housing practice has occurred or is about to occur, even
when no aggrieved person has filed a complaint. HUD also uses its
Secretary-initiated enforcement authority when it receives an
individual complaint, but believes there may be additional victims of
the discriminatory act or wants to obtain broader relief in the public
interest.
Secretary-initiated enforcement authority allows HUD to take
proactive measures to eliminate housing discrimination and ensure equal
housing opportunity. In fiscal year 2007, HUD filed 12 Secretary-
initiated complaints and launched four additional Secretary-initiated
investigations. These investigations include a complaint against a
management company alleging that it refused to rent to African-
Americans, a complaint against brokerage organizations alleging that
they limited their membership on the basis of religion, and a complaint
against housing providers alleging that they prohibited families with
children.
At the same time that HUD is increasing public awareness of the
Fair Housing Act, HUD is taking steps to work with its housing industry
members to reduce housing discrimination. For example:
--In fiscal year 2000, HUD signed a memorandum of understanding (MOU)
with the Department of Justice and the Department of the
Treasury setting forth procedures each signatory agency would
follow in reporting Fair Housing Act violations. The MOU also
outlined options for fair housing education for those involved
in the financing, construction, and operation of low-income
housing tax credit properties. For example, to help ensure that
residential rental housing built with low-income housing tax
credit was accessible to persons with disabilities. Since the
implementation of this MOU, HUD staff members have participated
at numerous meetings of State housing finance agencies to
educate them on the accessibility requirements of the Fair
Housing Act. This MOU is still in effect.
--In fiscal year 2003, HUD signed an MOU with representatives from
the National Association of Realtors, the National Association
of Real Estate Brokers, the National Association of Hispanic
Real Estate Professionals, and the National Association of
Asian American Real Estate Professionals to work together to
increase minority homeownership and address housing
discrimination. As part of the MOU, the real estate
associations provide fair housing information to their members
and partner with HUD and private fair housing organizations to
distribute fair housing information to minority communities.
This MOU is still in effect.
--In January 2003, HUD launched Fair Housing Accessibility FIRST
(Fair Housing Instruction, Resources, Support, Technical
Guidance), a FHIP-funded program that provides training and
technical guidance on the Fair Housing Act's accessibility
requirements to architects, builders, developers, and others
involved in the design and construction of multifamily housing.
FIRST consists of a comprehensive training curriculum that is
accredited by the American Institute of Architects and various
local professional groups.
--In fiscal year 2007, FIRST training sessions were held in
Birmingham, AL; Tucson, AZ; San Jose, CA; Washington, DC;
Atlanta, GA; Boise, ID; Chicago, IL; Frankfort, KY; Lake
Charles, LA; New Orleans, LA; Portland, ME; Biloxi, MS;
Jackson, MS; Bismarck, ND; Buffalo, NY; Cleveland, OH; Eugene,
OR; Philadelphia, PA; Corpus Christi, TX; Houston, TX; and San
Antonio, TX. In total, FIRST conducted 22 training sessions and
trained 1,351 persons.
--HUD continues to fund the FIRST program at $800,000 in fiscal year
2008 and has requested $800,000 in its fiscal year 2009 budget
to continue this program.
--In fiscal year 2007, HUD and the Texas Apartment Association (TAA)
signed a Memorandum of Understanding (MOU) pledging to work
together to conduct fair housing training and outreach to
rental housing providers and renters in the State of Texas. As
part of the MOU, HUD's FIRST program has conducted two training
sessions on the accessibility requirements of the Fair Housing
Act to TAA members. This MOU is still in effect.
--In fiscal year 2008, HUD plans to negotiate an MOU with the
National League of Cities to collaborate to increase inclusive
and diverse communities and strengthening financial education
at the local levels. One of the goals of the MOU is to increase
understanding of the Fair Housing Act and how fair housing is
good business for local communities when dealing with unfair
lending and predatory lending practices. It is anticipated that
the MOU will be signed by the end of August 2008.
Complaint filing in fiscal year 2006 exceeded 10,000 for the first
time since HUD began to gather statistics. It is likely that the
increase was a direct result of these and other education and outreach
programs and activities. HUD expects that the number of complaints will
continue to grow as it carries forth education and outreach activities,
but at the same time acts of housing discrimination may decrease as a
result of HUD's partnerships with housing industry groups and
associations.
hopwa
Question. Why is HUD requesting the same level of funding for
fiscal year 2009 as in fiscal year 2008 for the HOPWA program, even as
demand for housing services among persons living with HIV/AIDS
increases?
The $14 million increase from fiscal year 2007 to fiscal year 2008
will help HOPWA city and State grantees expand the number of clients
assisted by an estimated 3,500 households, from 67,000 to 70,500. The
administration's fiscal year 2009 request proposes to protect this
increase in light of financial constraints which represents a high
priority over other pressing needs. HOPWA is a highly effective and
targeted program, and resources create and maintain stable housing for
very low-income persons and dramatically improve their access to the
available health-care and HIV treatments.
HOPWA FUNDING
Question. How many jurisdictions will be funded with fiscal year
2008 dollars, both nationwide and specifically in IL? How many
jurisdictions is HUD projecting to fund with fiscal year 2009 dollars,
both nationwide and specifically in IL? How will the change in the
number of jurisdictions affect the individual levels of funding for
jurisdictions?
Answer. The HOPWA program targets housing resources to States and
cities to address pressing needs for a vulnerable population, low-
income persons with HIV/AIDS and their families. Ninety percent of
HOPWA funding is distributed by formula to qualifying States and
metropolitan areas, and the remaining grant funds are distributed
through the competitive grant process.
Formula Grants.--The HOPWA formula grant allocations, which entail
90 percent of the program, are based on AIDS data provided annually by
the Centers for Disease Control and Prevention (CDC). For fiscal year
2008, the formula portion of the HOPWA program serves 127
jurisdictions: 40 States, 1 county, and 86 cities. Furthermore, four
new areas qualified for the fiscal year 2008 allocation: Bakersfield
(CA), Palm Bay (FL), Tulsa (OK), and the State of Nebraska.
Fiscal year 2008 grantees in Illinois are the State of Illinois and
the Chicago-Naperville-Joliet Metropolitan Statistical Area (MSA)
Division. The city of St. Louis, MO also provides HOPWA assistance in
Illinois parts of it's MSA.
Although the Department has not yet received CDC data for 2008, the
Department estimates that several new jurisdictions will become
eligible for HOPWA formula funding for fiscal year 2009. The
eligibility of jurisdictions is dependent up the application of CDC
data and the definitions of metropolitan statistical areas. We cannot
predict at this time how many, if any, of the new jurisdictions will be
in Illinois.
The addition of new formula areas does not have much of an affect
on funding levels overall as most of the new areas were already
included as part of the prior year allocations to their State. Of the 4
new areas in fiscal year 2008, the State of Nebraska was the only area
not previously part of the formula programs, and received $306,000, a
net impact of one-tenth of 1 percent on the overall formula.
Competitive Grants.--The HOPWA program's competitive grants have a
3-year duration and can be renewed if successful in providing permanent
supportive housing. Two grantees in Illinois received awards during the
fiscal year 2005 competition grant cycle and have indicated their
interest in renewing their grants during fiscal year 2008. The
Department is currently reviewing these and would expect to make
selection in the next few months in accordance with grant renewal
procedures. Additionally, there are five permanent housing grants in
Illinois that would be eligible for renewal in fiscal year 2009, as
these grants are now operating under 3-year awards made in the fiscal
year 2006 grant selection.
MOVING TO WORK
Question. Members of the Illinois congressional delegation sent you
a letter on December 11, 2007, requesting a minimum 5-year extension to
the Chicago Housing Authority's 10-year Moving to Work agreement with
HUD. Please explain why HUD has not responded to the December 11, 2007
letter, as of March 25, 2008.
Answer. The Department responded to the letter on February 19,
2008. Please see letter below.
U.S. Department of Housing and Urban Development,
Office of Congressional and Intergovernmental Relations,
Washington, DC, February 19, 2008.
The Honorable Richard J. Durbin,
United States Senate,
Washington, DC 20510-1304.
Dear Senator Durbin: On behalf of Secretary Alphonse Jackson, thank
you for your letter of December 11, 2007, requesting an extension of
the Chicago Housing Authority's (CHA) Moving to Work Demonstration
(MTW) agreement, which will expire in 2010. Since the demonstration was
authorized in 1996, the Department of Housing and Urban Development has
worked closely with the participants in the MTW demonstration to
provide the flexibility to design and test various approaches for
providing and administering housing assistance to achieve the three
objectives outlined in the authorizing statute.
Over the last year and a half, the Department has collaborated with
the MTW agencies, including CHA, to develop a standard Amended and
Restated MTW Agreement (Restated Agreement) for all MTW agencies. This
Restated Agreement will ensure both that the flexibility that MTW gives
is retained and that the demonstration provides the measurable outcomes
as required for those MTW agencies extended by the 2006 Appropriations
Act. Should Congress choose to expand the number of agencies eligible
to participate in MTW, the Restated Agreement would better enable the
Department to manage the larger number of agencies taking advantage of
MTW flexibilities.
The final version of the Restated MTW Agreement was mailed to CHA
and the other MTW agencies on January 4, 2008, and agencies have 120
days to execute the agreement. Under the Restated MTW Agreement, the
MTW demonstration will continue until 2018, which will allow the
Department to fully evaluate the impact of initiatives developed under
the demonstration.
Thank you for your interest in the Department's programs. If I can
be of further assistance, please let me know.
Mark A. Studdert,
General Deputy Assistant Secretary.
MOVING TO WORK AGREEMENT
Question. According to CHA, HUD has informally agreed to extend the
agreement in meetings. Can you confirm this understanding and provide a
timeline for formally extending the agreement?
Answer. The final version of the standard Moving-to-Work (MTW)
Agreement was mailed to the Chicago Housing Authority (CHA) and the
other MTW agencies on January 4, 2008, and agencies have 120 days to
execute the agreement. Under the standard MTW Agreement, the MTW
demonstration will continue until 2018, which will allow the Department
to fully evaluate the impact of initiatives developed under the
demonstration. CHA has advised us that it is considering the Agreement
and will act on it shortly.
HOMELESSNESS
Question. How does HUD expect to meet the administration's 2001
goal of ending chronic homelessness in 10 years given its funding
request for fiscal year 2009, which is inadequate to cover the cost of
permanent housing renewals let alone fund the addition of new projects?
Answer. HUD originally set forth a goal of ending chronic
homelessness by 2012. As we and the U.S. Interagency Council on
Homelessness worked with communities across the Nation, city after city
became engaged in taking on this challenge to end chronic homelessness.
Not all communities implemented their plan in the same year. To secure
political will and resources required more time for some communities
than it did for others. Every year additional communities commit to the
10 year goal. Significantly, there is Federal, State and local
commitment to achieve this bold goal. Communities are tracking the
number of chronically homeless so that they can measure their progress.
Communities are also securing Federal, State and local government and
private resources to develop housing for this population. As a result
of these efforts, nationally we saw an 11.5 percent reduction in
chronic homelessness between 2005 and 2006. The 2007 figure is
scheduled to be released in June and we expect to see further
reductions.
HUD has employed creative incentives to encourage grantees across
the country to use the limited HUD funds available for new units to
specifically target the chronically homeless and thereby help meet the
administration's goal. The Department has designated a portion of the
competitive funds to be awarded to Continuums of Care (CoC) that set as
their first priority, a permanent supportive housing project for the
chronically homeless. In addition, HUD has created a reallocation
process within the competition that allows CoCs to negotiate the
elimination or reduction of grants that either no longer serve the need
of the homeless in that community or have found alternative subsidy.
They are thereby enabled to use the newly available funds to create
additional new permanent support housing programs. These incentives
have an incremental but cumulative impact on these production goals.
Finally it is important to note that while we continue to make
progress in ending chronic homelessness, we also continue to provide
funding for renewal projects. HUD estimates that the 2009 homeless
assistance request is sufficient to fully fund all permanent housing
renewals and to provide a limited amount of funds to develop new
projects to help end chronic homelessness.
PERMANENT SUPPORTIVE HOUSING
Question. Please provide a status update on how close the agency is
to the benchmark of 150,000 units of permanent supportive housing.
Answer. Former HUD Secretary Mel Martinez set a goal that as a
Nation we create 150,000 permanent supportive housing units for
chronically homeless individuals. The definition of a chronically
homeless individual is a single, unaccompanied person with a disabling
condition who has either been continuously homeless for more than a
year or who has experienced at least four episodes of homelessness in 3
years.
While it is a challenging goal, HUD has instituted several
incentives to meet it, such as providing extra funding for Continuums
of Care that set as their first priority for funding a permanent
supportive housing project for the chronically homeless. This incentive
has led to a tremendous increase in the number of units for this target
population.
At the end of 2006, Continuums of Care reported that about 40,000
new permanent supportive units were in place for the chronically
homeless. In 2007, HUD funded approximately 4,000 additional permanent
supportive housing units for this same population. These units do not
include thousands of transitional housing units for the homeless
created with HUD funds since 2002. These units also do not include
funds awarded under the Emergency Shelter Grants program.
Moreover, in 2008, Congress appropriated the HUD VASH (HUD VA
Supportive Housing) program, which will create 10,000 more units for
homeless veterans, many of whom are chronically homeless. Finally, the
President has requested $75 million in the fiscal year 2009 budget
which would provide for approximately 10,000 additional HUD VASH
vouchers for homeless veterans.
Question. How does HUD plan to reverse the trend of fewer new
units? What plans are there to ensure HUD meets the 10-year goal of
establishing 150,000 units of permanent supportive housing?
Answer. The percentage of funds needed to operate renewal projects
increases each year. The renewal burden for fiscal year 2006 was 84
percent of funds awarded, and in fiscal year 2007 the renewal burden
was 86 percent of funds awarded. However, the administration has
requested and Congress has appropriated increased funding since 2001
for HUD's homeless programs, which has allowed HUD to continue to
increase the number of new units created each year. With continuing
appropriations increases, HUD will be able to continue to create even
more new units of permanent supportive housing as well as transitional
housing to help homeless families and individuals move to greater self-
sufficiency.
In order to meet the ambitious goal of establishing 150,000 new
units of permanent supportive housing for chronically homeless persons
that are to be developed by HUD and our State and local partners, HUD
focuses on this population in the (CoC) application by awarding
``bonus'' funds to communities that propose new permanent housing for
chronically homeless persons. In addition, HUD awards more points to
communities that demonstrate an emphasis on creating new housing units.
However, HUD is not working alone to meet this goal. In the annual
(CoC) application, HUD provides incentives for State and local
governments and the private sector to provide resources to develop
permanent housing for the chronically homeless and for other homeless
populations. Moreover, the Interagency Council on Homelessness has been
working to help communities create local 10-year plans to end chronic
homelessness. While many of the units created under these plans are
funded by HUD, States as well as local communities are working to find
additional funding sources to create new units of permanent supportive
housing.
RAPID RE-HOUSING
Question. Does HUD plan to continue the rapid re-housing
demonstration funded by Congress in fiscal year 2008? If not, please
explain.
Answer. The Rapid Re-housing initiative was funded in 2008 as a
one-time only demonstration program. The administration has not
requested additional funds for this demonstration in fiscal year 2009.
Included in the appropriation is funding to conduct a rigorous
evaluation to determine the effectiveness of different local programs
participating in the demonstration. The grant awards will be made later
this calendar year. Once awarded, selected demonstration sites will
begin collecting data on the homeless families. Our review of the
eventual study results should provide very useful insights as to which
interventions are actually effective. These findings will help inform
future programming and use of limited resources.
REDUCING HOMELESSNESS
Question. What is HUD's strategy for reducing the number of
homeless families?
Answer. HUD's performance objective related to homelessness
underscores our commitment to serving homeless families. It is to ``End
chronic homelessness and move homeless families and individuals to
permanent housing'' (emphasis added). We require each community to
annually enumerate and report to HUD on the size of their homeless
family population. To address this local established need and to
achieve HUD's performance objective, HUD provides each year significant
funding to communities to assist their homeless families. Approximately
half of all persons assisted by HUD homeless programs are persons in
homeless families.
With the recent expansion of the HUD VA Supportive Housing (HUD-
VASH) Program to sites across the Nation and the demographics of Desert
Storm era veterans, it is anticipated that many homeless military
families will be housed through this specialized HUD section 8 program.
The new $25 million Rapid Re-housing for homeless families
demonstration initiative will also provide valuable insights into how
communities and we as a Nation can most effectively help homeless
families.
HUD's commitment to improve its programming for homeless families
is reflected in the Department's efforts to better understand both the
particular needs of homeless families today and how to best serve them.
Several studies are underway or planned to help inform HUD and the
Nation on this important subject. For instance, a study to be conducted
by HUD's Office of Policy Development and Research entitled ``The
Impact of Various Housing and Service Interventions on Homeless
Families'' is in the early stages of being conducted. Once completed,
the results will help inform future homeless family housing and service
policies.
HOMELESS ASSISTANCE FUNDING
Question. What percentage of homeless assistance funding is
currently going directly to families?
Answer. Data on homelessness provided by each community to HUD
indicate that approximately 40 percent of all homeless persons are
members of homeless families. Significantly, just over 40 percent of
all of HUD's competitive homeless funds benefit homeless families. As
such, HUD resources are well aligned with meeting the needs of homeless
families.
FAMILY UNIFICATION PROGRAM
Question. How and when will the Family Unification Program vouchers
be issued?
Answer. We expect the Family Unification Program vouchers to be
issued between September and October 2008. HUD staff is currently
working on the Notice of Funding Availability, which will explain the
application procedures.
HUD-VA SUPPORTIVE HOUSING VOUCHERS
Question. How and when will the HUD-Veterans Affairs Supportive
Housing vouchers be issued?
Answer. We expect to provide funding to housing authorities by the
first week of May 2008. The actual issuance of the vouchers will depend
on the referral of homeless veterans to housing authorities by the U.S.
Department of Veterans Affairs. Eligibility for the program is
determined by the Department of Veterans Affairs and not the housing
authorities.
______
Questions Submitted by Senator Arlen Specter
MOVING TO WORK
Question. Secretary Jackson, I understand that the Department has
already informed the Philadelphia Housing Authority that it will not
extend its successful Moving to Work Demonstration program beyond March
31, 2008, under similar terms and conditions. Is it true that the
Department has granted similar extensions 30 times since 2000 and never
denied a request for an MTW extension until now?
Answer. On February 8, 2002, the Philadelphia Housing Authority
executed a Moving-to-Work (MTW) Agreement with the Department that
expired by its own terms on March 31, 2008. Starting in the first
quarter of 2006, HUD began the process of standardizing the MTW
agreements it had with the housing authorities participating in the MTW
program. In November 2005, Congress passed legislation that mandated
extensions of current MTW agreements that would otherwise expire by
September 30, 2006, and also called for data collection ``so that the
effect of Moving-to-Work policy changes on residents can be measured.''
(section 320(b) of the Transportation, Treasury, Housing and Urban
Development, the Judiciary, the District of Columbia and Independent
Agencies Appropriations Act of 2006) (Pub. L. No. 109-115, 119 Stat.
2396 (Nov. 30, 2005)) (``section 320(b)).
The Department's development of standardized agreements was
consistent with this Congressional mandate: one of the Department's
principal objectives in developing the standardized agreement was to
improve and reinforce requirements for tracking, reporting, and
evaluating the effectiveness of the MTW program in achieving the goals
of the MTW legislation. In addition, through the standardized MTW
agreement, the Department sought to clarify the submission and approval
processes, and to develop standard operating procedures for the
Department's interaction with all MTW agencies under the program.
The Department has extended MTW Agencies under their current terms
in 15 instances over the past 3 years, all involving PHAs in a
different position than Philadelphia Housing Authority. The Department
extended 13 MTW Agreements during the first 9 months of 2006 under the
mandate of section 320(b). Because the Philadelphia Housing Authority's
MTW Agreement did not expire during the period covered by section
320(b), the Philadelphia Housing Authority does not fall within the
category of PHAs that were to receive this statutorily mandated
extension.
In addition to the 13 PHAs covered by the 2006 extension provision,
the Department has extended MTW agreements for two other housing
agencies since September 30, 2006. Each of the PHAs in those instances
is in a different position than Philadelphia Housing Authority, as each
of those extensions was granted before the Department finalized and
adopted the new, standardized MTW agreement. In December 2006, the
Department extended the MTW for Pittsburgh, Pennsylvania for 3 years to
December 31, 2009. The Department also extended the MTW agreement for
Minneapolis, Minnesota for a 7-month period to allow for completion of
the standardized agreement. The Minneapolis Housing Authority has now
signed the new, standardized agreement. The Department has offered to
execute the standardized agreement with PHA, as with any other
participating housing authority, but Philadelphia Housing Authority has
refused that offer.
MOVING TO WORK EXTENSION
Question. Without the MTW extension, Philadelphia Housing Authority
understands that as of April 1, 2008, it will no longer be eligible to
receive as much as $50 million in Federal assistance, including
approximately $25 million in section 8/housing choice voucher funds. Is
that your understanding? Can you assure me that the Philadelphia
Housing Authority will continue to receive the same allocation of
Federal funds if its MTW designation is not extended?
Answer. The Department does not agree that the Philadelphia Housing
Authority would lose $50 million in funding because of this transition.
The Department has made a comparison of the Philadelphia Housing
Authority`s funding under both the MTW agreement and current
regulations and can find no basis for such a claim. Indeed, even the
legal declarations made by the Philadelphia Housing Authority as part
of its lawsuit against the Department only reference the $13,050,000
associated with the diversion of over 2,000 units worth of Housing
Choice Voucher funding (MTW Activity Vouchers) for other purposes in
support of the Philadelphia Housing Authority's public housing program.
Even as the Philadelphia Housing Authority makes the transition to
become a traditional non-MTW housing authority, it does not
automatically lose this funding. Rather, the $13 million would be
applied towards the Philadelphia Housing Authority's traditional
Housing Choice Voucher Program, allowing it to provide 2,000 units of
much-needed housing assistance to the low-income residents of
Philadelphia.
HOUSING DISCRIMINATION
Question. What concrete steps will HUD be taking to increase the
percentage of persons who file complaints in response to the belief
that they have been victims of housing discrimination?
Answer. HUD's fair housing mission is to eradicate housing
discrimination. HUD plays several roles in this mission: (1) to
increase public awareness of the Fair Housing Act; (2) to educate
housing providers on their rights and responsibilities under the Fair
Housing Act to reduce the number of occurrences of housing
discrimination; and (3) to enforce the provisions of the Fair Housing
Act.
HUD believes that persons cannot report housing discrimination
unless they understand their fair housing rights and the recourse
available to victims of discrimination. In order to increase the
percentage of persons that report housing discrimination, HUD has
engaged in media campaigns and other activities to raise public
awareness of fair housing. These activities are described in the answer
responding to Senator Durbin's question, ``How does HUD plan to
increase public awareness of existing fair housing laws?''
Moreover, HUD has conducted many of these activities in languages
other than English in order to reach persons with limited English
proficiency. For example, in fiscal year 2004, HUD, in conjunction with
the Advertising Council, launched a fair housing education campaign
through a series of public service announcements. This campaign
consisted of two television advertisements, two radio advertisements
and two print advertisements, in English and Spanish.
Additionally, in fiscal year 2005, HUD produced five new fair
housing radio advertisements. Two of these advertisements were in
Spanish and two of these were in Cantonese, Hmong, Korean, and
Vietnamese. Starting in fiscal year 2005, HUD also produced fair
housing print advertisements in Arabic, Bengali, Cantonese, Hmong,
Khmer, Korean, Punjabi, Thai, Urdu, and Vietnamese.
Furthermore, HUD's 2005 Study--``Do We Know More Now?'' concludes
that unless a person who has been discriminated against can see
benefits in filing a complaint, he/she is unlikely to do so. Therefore,
HUD makes a conscious effort to publicize the outcomes of its fair
housing enforcement efforts to help encourage persons to report housing
discrimination. HUD believes that publicizing the results of its
enforcement efforts helps build public trust in its enforcement
efforts, and, in turn, increases the likelihood that persons will
report housing discrimination.
In February 2007, the CNN program Open House aired a segment on
housing discrimination. The segment featured an interview with
Assistant Secretary Kim Kendrick and Nannatte Bishop, an African-
American woman who filed a complaint with HUD alleging that Fifth Third
Bank denied her application for mortgage loan because of her race. HUD
negotiated a $125,000 settlement in this case. An estimated 665,000
people may have viewed this broadcast.
HUD is also building the public trust in its enforcement efforts by
training the approximately 500 full-time investigators employed by the
more than 100 State and local government agencies that are certified
through its Fair Housing Assistance Program (FHAP). In fiscal year
2004, HUD opened the National Fair Housing Training Academy (the
Academy) to provide training and certification to ensure that FHAP and
now HUD investigators have the necessary skills to conduct thorough and
timely investigations.
The Academy offers a 5-week program, which covers fair housing
laws, investigative skills, negotiation skills, litigating fair housing
cases, and many other topics. After completing the 5-week program, the
investigators must pass a comprehensive examination in order to receive
a certificate of completion from the Academy. At of the end of fiscal
year 2007, a total of 174 investigators have completed the 5-week basic
training course.
However, HUD is not simply waiting for persons to file complaints.
HUD has increased the use of its Secretary-initiated enforcement
authority to eliminate discriminatory housing practices. Under the Fair
Housing Amendments Act of 1988, the Secretary of HUD, in the public
interest, has the authority to conduct an investigation and file a
complaint when there is reason to believe that an alleged
discriminatory housing practice has occurred or is about to occur, even
when no aggrieved person has filed a complaint. HUD also uses its
Secretary-initiated enforcement authority when it receives an
individual complaint, but believes there may be additional victims of
the discriminatory act or wants to obtain broader relief in the public
interest.
Secretary-initiated enforcement authority allows HUD to take
proactive measures to eliminate housing discrimination and ensure equal
housing opportunity. In fiscal year 2007, HUD filed 12 Secretary-
initiated complaints and launched four additional Secretary-initiated
investigations. These investigations include a complaint against a
management company alleging that it refused to rent to African-
Americans, a complaint against brokerage organizations alleging that
they limited their membership on the basis of religion, and a complaint
against housing providers alleging that they prohibited families with
children.
At the same time that HUD is increasing public awareness of the
Fair Housing Act, HUD is taking steps to work with its housing industry
members to reduce housing discrimination. For example:
--In fiscal year 2000, HUD signed a Memorandum of Understanding (MOU)
with the Department of Justice and the Department of the
Treasury setting forth procedures each signatory agency would
follow in reporting Fair Housing Act violations. The MOU also
outlined options for fair housing education for those involved
in the financing, construction, and operation of low-income
housing tax credit properties. For example, to help ensure that
residential rental housing built with low-income housing tax
credit was accessible to persons with disabilities. Since the
implementation of this MOU, HUD staff members have participated
at numerous meetings of State housing finance agencies to
educate them on the accessibility requirements of the Fair
Housing Act. This MOU is still in effect.
--In fiscal year 2003, HUD signed an MOU with representatives from
the National Association of Realtors, the National Association
of Real Estate Brokers, the National Association of Hispanic
Real Estate Professionals, and the National Association of
Asian American Real Estate Professionals to work together to
increase minority homeownership and address housing
discrimination. As part of the MOU, the real estate
associations provide fair housing information to their members
and partner with HUD and private fair housing organizations to
distribute fair housing information to minority communities.
This MOU is still in effect.
--In January 2003, HUD launched Fair Housing Accessibility FIRST
(Fair Housing Instruction, Resources, Support, Technical
Guidance), a FHIP-funded program that provides training and
technical guidance on the Fair Housing Act's accessibility
requirements to architects, builders, developers, and others
involved in the design and construction of multifamily housing.
FIRST consists of a comprehensive training curriculum that is
accredited by the American Institute of Architects and various
local professional groups.
--In fiscal year 2007, FIRST training sessions were held in
Birmingham, AL; Tucson, AZ; San Jose, CA; Washington, DC;
Atlanta, GA; Boise, ID; Chicago, IL; Frankfort, KY; Lake
Charles, LA; New Orleans, LA; Portland, ME; Biloxi, MS;
Jackson, MS; Bismarck, ND; Buffalo, NY; Cleveland, OH; Eugene,
OR; Philadelphia, PA; Corpus Christi, TX; Houston, TX; and San
Antonio, TX. In total, FIRST conducted 22 training sessions and
trained 1,351 persons.
--HUD continues to fund the FIRST program at $800,000 in fiscal year
2008 and has requested $800,000 in its fiscal year 2009 budget
to continue this program.
--In fiscal year 2007, HUD and the Texas Apartment Association (TAA)
signed a Memorandum of Understanding (MOU) pledging to work
together to conduct fair housing training and outreach to
rental housing providers and renters in the State of Texas. As
part of the MOU, HUD's FIRST program has conducted two training
sessions on the accessibility requirements of the Fair Housing
Act to TAA members. This MOU is still in effect.
--In fiscal year 2008, HUD plans to negotiate an MOU with the
National League of Cities to collaborate to increase inclusive
and diverse communities and strengthening financial education
at the local levels. One of the goals of the MOU is to increase
understanding of the Fair Housing Act and how fair housing is
good business for local communities when dealing with unfair
lending and predatory lending practices. It is anticipated that
the MOU will be signed by the end of August 2008.
Complaint filing in fiscal year 2006 exceeded 10,000 for the first
time since HUD began to gather statistics. It is likely that the
increase was a direct result of these and other education and outreach
programs and activities. HUD expects that the number of complaints will
continue to grow as it carries forth education and outreach activities,
but at the same time acts of housing discrimination may decrease as a
result of HUD's partnerships with housing industry groups and
associations.
SUBCOMMITTEE RECESS
Senator Murray. We will recess subject to the call of the
Chair.
[Whereupon, at 11:17 a.m., Thursday, March 13, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2009
----------
THURSDAY, APRIL 3, 2008
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:35 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Lautenberg, Bond, Alexander, and
Allard.
STATUS OF SURFACE TRANSPORTATION TRUST FUNDS AND IMPACT ON FEDERAL
SPENDING
DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
STATEMENT OF HON. JAMES S. SIMPSON, ADMINISTRATOR
Federal Highway Administration
STATEMENT OF JAMES D. RAY, ACTING ADMINISTRATOR
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. This subcommittee will come to order.
Today, we are addressing two different topics, the financial
health of the Highway Trust Fund and the financial health of
Amtrak, but in many ways, these two issues present this
subcommittee with the same question: Is the Federal Government
prepared to take the steps necessary to invest in our
infrastructure and in our people, and is it prepared to keep
people employed, to keep people and goods moving, and to keep
our economy moving?
The Highway Trust Fund has served us well since it was
first authorized in 1956, but today, the Trust Fund's Highway
and Mass Transit Accounts are rapidly nearing bankruptcy and in
Congress, this raises some critical questions in the short-term
and in the long-term about the future of transportation
funding.
The Bush administration has suggested some solutions, but
after examining its proposals, I find them unrealistic and
irresponsible, and I fear they would harm our highway system
and the citizens that depend on them.
For the short-term, the administration wants us to cut
highway funding by some $1.8 billion next year. It also wants
to allow the Highway Account of the Trust Fund to borrow
roughly $3.2 billion from the Transit Account.
The administration likes to call this unprecedented
transfer a loan even though it hasn't proposed a budget that
will guarantee the loan would ever be paid back. As I see it,
this loan will only bankrupt the Transit Account faster and
that is unacceptable.
For the long-term, the administration is proposing the
Federal Government slash investment for transportation
infrastructure in a number of areas. President Bush has claimed
that his budget proposals can reverse the deep deficits he's
built in the last 8 years and bring us to surplus by 2012, but
as always, the devil is in the details.
One of the ways he wants to do this is by cutting
transportation funding by 25 percent by 2012 and the largest
cut would come from the Highway and Transit Programs. He wants
to slash those by almost a fifth between 2009 and 2012.
To make up for the cuts, the administration has been
promoting alternative financing, such as privatization schemes
that involve charging new tolls to drive on existing roads. The
administration is advocating new tolls for the purpose of
relieving congestion, but they want to price working families
off the road.
I think tolling can be a successful way to build new
highway capacity. It makes sense when the public supports that
additional charge for the additional highway capacity that it
would provide. But, most working families can't be expected to
make up for Federal funding cuts by paying new tolls on
highways they have already paid for with tax dollars.
Especially while they are already struggling to keep up with
record high gas prices.
So, it's clear that there are no quick fix solutions that
will allow the kind of investments our highway and transit
systems increasingly need, but I think we can avoid President
Bush's drastic and damaging suggestions. I have been working on
a short-term solution with the Finance Committee to get enough
revenues into the Trust Fund to avoid painful cuts next year.
Chairman Baucus and Ranking Member Grassley have reported a
bill out of their committee that solves the problem for 2009
and we need to pass that bill and pass it soon.
For the long-term, however, Congress must begin the next
surface transportation reauthorization process with all
financing options on the table. Separate from these decisions
about transportation funding, this subcommittee must make
another short-term decision, whether to invest in highway and
transit construction to help stimulate our struggling economy.
I believe that with the economy on the verge of a recession
and with a growing number of construction workers facing
unemployment, now is the time to increase, not cut,
infrastructure spending, but I also believe the money must come
from the General Fund, not the Trust Fund.
I can say without hesitation that the next supplemental
appropriations bill will include funding for highways. The only
question is which highways.
The President's supplemental request for the wars in Iraq
and Afghanistan includes almost $777 million for improved
bridges and roads in Iraq and Afghanistan. Meanwhile, there are
21 States, including my State and Senator Bond's, waiting for
Federal funding that are owed for the repair of highways and
bridges damaged or destroyed in declared disaster areas, and
the administration hasn't requested one dime in the
supplemental for the Emergency Relief Highway Program to make
those States whole.
We also have billions of dollars in ready-to-go highway and
transit projects in every State of the Nation. Money in the
supplemental to finance those projects could help save
construction jobs and help our economy.
A couple months ago, we had the single largest reduction in
construction employment recorded in the last 14 years. So, I
hope that as our subcommittee convenes in the coming months to
mark up the supplemental appropriations bill, we will recognize
the critical infrastructure needs here at home, not just those
in Iraq and Afghanistan.
Now I want to spend a few moments talking about the second
subject of this hearing before we hear from Senator Bond.
Our second panel of witnesses this morning will discuss the
current status of Amtrak, our national passenger railroad. As I
mentioned earlier, the American public is facing record high
gas prices, the highest level in 18 years. The average gallon
of gasoline nationwide last week was $3.29. In my home State of
Washington, it was $3.46 and States like California are facing
gas prices of over $3.61 per gallon.
Partly as a result of those high gas prices, more people
than ever before have been using Amtrak across the country and
you would think with gas prices like these, even the Bush
administration might reconsider the merits of an energy-
efficient mode of travel like Amtrak. Unfortunately, it has
not.
For the second year in a row, the administration has
proposed cutting direct subsidies to Amtrak by almost 40
percent. For Amtrak's critical operating and debt service
subsidies, which keep the railroad out of bankruptcy, the
administration is proposing a cut of 64 percent.
Once again, the administration is proposing to decimate
inter-city rail transportation and once again, this
subcommittee will need to take a much more realistic look at
what Amtrak's genuine needs are and develop a budget for fiscal
year 2009 that maintains and hopefully improves rail service.
I'm pleased that we are now about to resolve a period of
very sour labor-management relations at Amtrak. I look forward
to a new era in which management and labor at Amtrak will work
side by side. We need a railroad that can focus on the
country's transportation needs without the constant distraction
of wage and workplace disputes.
President Bush's Emergency Board addressed all of the key
disagreements that kept Amtrak labor and management from
getting an agreement on their own. One particularly difficult
issue that President Bush's Emergency Board settled was the
issue of back pay. The PEB settled this by recommending two
separate payments to Amtrak workers for well-deserved moderate
wage increases that they did not receive over the last 8 years.
The first payment will be made shortly and the second one
will be made in 2009, but we have to decide whether we must
appropriate more resources to pay for it. Amtrak's management,
which is represented here today by their Board Chairman, is not
formally asking for this funding.
The DOT Inspector General's Office has regularly reviewed
Amtrak's books. They will testify that Amtrak can expect to
have adequate resources to make the second payment next year
without any support from the subcommittee.
At the same time, the subcommittee must be mindful that we
are unsure what will happen in the economy or Amtrak's revenue
in the next year. Over the next several months, this
subcommittee will have to monitor Amtrak's finances carefully
to see whether we will have to act to keep Amtrak running or
whether we will have to ensure that Amtrak's workers get the
back wages they have gone without for too long.
With that, I will turn it over to our subcommittee's
ranking member, Senator Bond, for his statement.
OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND
Senator Bond. Thank you very much, Madam Chair, and I
welcome our witnesses today. We have nine witnesses on two
panels, so it's going to be a long hearing, and in order to
save time, I will try to keep my opening comments brief, at
least by senatorial standards, which would not apply in any
other way, but first to answer the question a whole bunch of
people asked.
I'm a born-again safety advocate. I'm here today with a new
shoulder joint and my arm sewed back on as a result of a driver
turning right on red without looking last year. So count me as
a highway safety advocate from the word go.
Moving on to the direct subject of the hearing, I was one
of the key authors of the SAFETEA bill. It took us 3 long years
and two different bills to finally get an agreement with the
House and the White House on a bill that didn't raise taxes and
didn't quite spend the $300 billion in total.
At the time, we used Treasury and CBO projections on what
the Highway Trust Fund could sustain over the life of the bill,
realizing that we did have some balances available and that
forecasts were projections of what we believed would be coming
in to the HTF to be spent.
As I stated at our hearing with the Secretary of
Transportation on the overall budget, I had hoped that the
administration would have recommended--would have remained
committed to meeting the guaranteed funding levels for highways
and transits as authorized in SAFETEA. I understand from the
testimony today that you believe the administration lived up to
the terms by providing $286.4 billion over the life of the
bill, thereby fulfilling the commitment of the spending
agreement made with Congress when the President signed SAFETEA.
I disagree with your assessment and believe that Senator
Murray and I will continue to work to honor our commitment to
highways and transit.
I also hope that we can work with the Senate Finance
Committee and the House Ways and Means Committee, to fix the
current shortfall in the HTF to get us through fiscal year 2009
and beyond.
It appears to me that no one can really get a handle on the
Highway Trust Fund shortfall that we face this year and next.
Last year, last August, our staffs were briefed on the midyear
projections of revenue in the HTF and were told that a $4.3
billion gap would occur at the beginning of 2009.
As you know, this came about from lower anticipated gas tax
receipts into the Highway Trust Funds due to sharp downturn in
vehicle miles traveled and truck sales being down 20 percent.
It appeared then that high gas prices were having a major
impact on the traveling public and their willingness to drive
long distances.
It is true that the marketplace works and when prices go
up, people tend to use less, and in some respects, that's good
in terms of those who are concerned about global warming and
economy, but it is bad when you look at it from the Highway
Trust Fund side.
The budget you have before us today re-estimates that
shortfall to be $3.3 billion, based upon slower-than-expected
outlays on earmarks and projected negative RABA. To make up for
this shortfall in the budget, the administration calls for
other budget gimmicks, allowing the HTF to borrow up to $3.3
billion from the Mass Transit Account to cover the shortfall in
the Highway Account. That's what I'd call putting a small
bandaid on a bleeding wound.
What we really need is a solution to the problem to get us
through 2009 and beyond and get a comprehensive reauthorization
proposal that can be passed and signed into law, which, by
judging past experience, would be a very long time, given the
fact that there will be a new administration, insufficient
balance in revenue raisers in the Highway Trust Fund, and a new
Congress to contend with.
I understand the old rocker Jethro Tull once said,
``Nothing is easy.'' He probably didn't know much about
highways or at least highway funding, but he accurately and
succinctly characterized the problem.
SAFETEA guaranteed the States $41.2 billion for highways.
This budget provides $39.4 billion. This reduction comes in
part from a projected negative revenue aligned budget authority
of RAB, as we call it, of just over $1 billion, plus another
$800 million in other reductions.
Similarly, this budget proposes to fund the Federal Transit
Programs at a level which is $200 million below the SAFETEA-
authorized levels for new starts. These funds allow an
increased investment in key highway and transportation projects
to complement and assist the continuing growth of the U.S.
economy and I would hope we could live up to our commitments.
On Amtrak, once again the administration has forwarded a
budget proposal which is a non-starter. In 2008, Amtrak
received $1.325 billion, $850 million of that for capital debt
service and $475 million in operating subsidies. The budget
submission we have before us provides only $525 million for
capital and debt service and $275 million for efficiency
incentive grants that would take the place of direct operating
subsidies, placing more control in the hands of Secretary
Peters and Administrator Boardman rather than Amtrak.
I'm troubled that, while the administration seems to push
for lower subsidies to Amtrak, they are also losing sight of
reform initiatives that need to be part and parcel of a
lowering operating subsidy.
The Secretary of Transportation already has sole authority
to approve or disapprove Amtrak's request for funds to cover
capital needs and operating losses and to date, I am unaware of
how the Department has used its existing authority.
Are there any instances where DOT has denied funding to
Amtrak because Amtrak's grant request would not be the
efficient use of Federal funds? I understand that Mr. Boardman
voted no on the Amtrak grant legislative request for 2009 and
we'll want to know if that was solely because of the higher
numbers contained or the fact that there was no operating
reforms.
As the chairman has said, we are glad that the presidential
board did provide the appropriate wage increases and the back
pay, but as far as I can tell, none of the operating reforms
were addressed. They whiffed on perhaps what is one of the
significant long-term solutions for Amtrak's continued
viability.
Now, some have indicated an interest in potentially
reprogramming some of the efficiency grants of $66 million in
2006 and 2007 to fund a portion of the $114 million in 2009 for
the unbudgeted retroactive wage costs in the PEB labor
settlement. The IG for the Department will state that he
believes that these could be funded out of the $269 million in
end-of-the-year 2008 cash balances.
During the question period, I will ask you to describe how
you believe we should deal with the issue and what's the
sufficient level of cash balances for Amtrak.
FRA's priority appears to be the Intercity Passenger Rail
Grant Program, which in 2009 they requested $100 million for,
up from $30 million in 2008. I find it interesting that FRA
doesn't include the labor settlement agreement in the budget
and Amtrak does not include in its grant a legislative request,
the Intercity Passenger Rail Grant Program, each totaling
around $100 million.
We commend Amtrak for improved on-time performance,
revenue, ridership and cash operating losses. These are good
pieces of news. However, some of this can be attributed to
labor costs held down by the absence of a labor settlement over
the past 7 years that will now have to be addressed.
We had attempted to have a witness here today from the
Presidential Emergency Board (PEB) to describe what exactly
Amtrak received in work rule changes and the like through the
PEB settlement, but they declined to come and speak today
before this panel and as I look at what they did, I can see why
they wouldn't want to come and talk about it.
Regardless of Amtrak's success of late, Amtrak has made no
significant progress in restructuring operations to become less
reliant on Federal funds. This year in operations, they're
requesting a $50 million increase over last year. The IG will
testify that level funding at $475 million is sufficient to
meet the operating needs. The Graham legislative request for
2009 contains no operational reforms in 2009. The pace of
Amtrak's reform savings has slowed from $61 million in 2006,
almost $53 million the next year, and only $40 million in 2008.
There is little chance Amtrak will achieve anywhere near
the $500 million in annual reform savings it promised when it
adopted its 2005 plan. Is there a new plan or do the witnesses
feel there's no need for a plan to be in place as long as the
money keeps coming?
I look forward to the answers to these questions from the
panels.
Senator Murray. Thank you very much. Senator Allard.
STATEMENT OF SENATOR WAYNE ALLARD
Senator Allard. Thank you, Madam Chairman. Thank you for
holding this hearing.
I have two important hearings this morning and fortunately
I do want to make my opening statement and will have to go to
the other hearing since I am the ranking Republican on
Securities. It involves our housing and securities issues.
First of all, you know, these are some very important
matters for our surface transportation system, and I appreciate
the opportunity to be able to review the testimony after this
hearing.
Before I begin my remarks related to the hearing, I want to
take this opportunity to publicly commend Federal Transit
Administrator Jim Simpson. Administrator Simpson has been a
tireless advocate for public transportation and I especially
appreciate his efforts in Colorado.
RTD in Denver is currently in the midst of an aggressive
multiyear multicorridor package known as Fast Trax. The
successor in Fast Trax is closely linked to a close cooperative
relationship with FTA and we are lucky to have him as its head.
Both Administrator Simpson and Deputy Administrator Sherry
Little have gone out of their way to be helpful and supportive,
devoting significant time to RTD and the Denver corridors. I
especially appreciate their support for our public-private
partnerships and the value that they can bring, particularly
during these times of rapidly escalating materials costs. They
both bring a flexible, innovative, solution-oriented mindset
that has served the transit community well.
Jim, I offer my heartfelt thanks to you and Sherry for all
that you've done. Your public service is appreciated in public
transportation in Denver and across the country is better for
it. Thank you.
Because I've been very involved with Amtrak on the
authorizing side, I also wanted to make a few comments on that
topic.
While passenger rail has a significant role in an
efficient, modern transportation infrastructure, I'm concerned
about how Amtrak has performed in providing that service. As my
colleagues may know, I'm a strong proponent of results and
outcomes. Amtrak and other Government-funded entities should
not be judged based upon how much they receive in Federal
funding but the results that they can demonstrate with those
taxpayer dollars.
In the case of Amtrak, I'm afraid those results are not
very impressive. In the administration's Part Assessment, their
tool for evaluating the effectiveness of programs, Amtrak was
rated as ineffective. In fact, it was the only program in the
entire Department of Transportation to receive an ineffective
rating.
I want to be clear on what this rating means. From the
administration's description of ineffective, programs receiving
this rating are not using your tax dollars effectively. That
seems pretty clear to me.
I'm concerned, however, that we're not talking about real
changes to reform Amtrak. I'm unconvinced that Amtrak has
completely turned the corner and is solidly on the path to
financial soundness.
I look forward to the opportunity to hear from the
witnesses about this budget request and how it fits into
Amtrak's future. Their testimony will be helpful as we move
forward with the appropriations process.
Finally, I want to say a brief word on the Trust Fund. I
have been fortunate enough to serve on the authorizing
committee during drafting of the last two surface
transportation bills. While we struggled to complete action on
both T21 and SAFETEA and in fact produced both behind schedule,
in a sense, they were easy.
With significant funding increases, Congress was able to
avoid some of the more difficult choices about how we structure
and fund our surface transportation programs. With the Trust
Fund that is running on empty, those decisions can no longer be
avoided.
I regret that I won't be here to participate in the debate
for the next bill, but I look forward to today's discussion.
Thank you, Madam Chairman.
Senator Murray. Senator Alexander?
STATEMENT OF SENATOR LAMAR ALEXANDER
Senator Alexander. Thank you, Madam Chairman. I thank the
witnesses for coming. I only have one thing I'd like to say and
then I'll look forward to your comments.
Perhaps the greatest compliment I've been paid since I was
elected a few years ago was by one critic who said the problem
with Lamar is he hasn't gotten over being Governor, and I
consider that a big compliment, and one of the things I
insisted on as Governor was that if we raised money through the
gas tax to build roads, that we only spent it for
transportation projects and we did that year in and year out
and as Governor, I resisted every attempt to take that money
and use it for something else.
I want to be the same kind of United States Senator on that
score that I was as Governor. In Tennessee alone, more than
$237 million has been taken from transportation funds since
December 2005, and spent on other purposes, maybe worthy
purposes, but it's having a severe impact on our State
transportation system.
I've heard the chairman talk about the twin goals here of
dealing with traffic jams and highway safety. About one-half of
Tennessee's highway budget is funded by the Federal Government.
Well, when we take $237 million out of Tennessee's highway
budget, that means less money to relieve traffic jams and less
money for highway safety, so things don't happen to other
Americans like what happened to Senator Bond not so long ago.
So, we're upset about that in Tennessee and so what I want
to say today is that I intend to offer an amendment in the
appropriations process in the appropriate way that will exempt
transportation accounts from these raids by the rest of the
Federal Government to pay its other bills.
The American people and Tennesseans have a right to know
that if they pay gas taxes, that that money is used for
transportation purposes.
Thank you.
Senator Murray. Thank you very much. We will now hear from
our witnesses and we'll begin with Mr. Simpson who's speaking
on behalf of the Department of Transportation today as the
Administrator at the Federal Transit Administration.
STATEMENT OF HON. JAMES S. SIMPSON
Mr. Simpson. On behalf of Jim Ray, the Acting Administrator
of the Federal Highway Administration, good morning and thank
you, Chairman Murray, and members of the subcommittee for the
opportunity to be here today to testify, to discuss the
President's budget for the Department of Transportation's
Surface Transportation Programs for fiscal year 2009.
I am pleased to report to you that the President's budget
for all of the Department's programs is $68 billion. Of this,
76 percent or $51.7 billion is for our highways, highway
safety, and transit programs. Fiscal year 2009 is the final
year of the current surface transportation authorization known
as SAFETEA-LU. Our request fulfills the President's commitment
to provide the total 6-year, $286.4 billion investment that was
agreed to when SAFETEA-LU was enacted in 2005. It does so
without raising taxes or subsidizing transportation spending
with other tax dollars.
The President's request for the Federal Highway
Administration reflects the final installment of the total
agreement for SAFETEA-LU. It totals $40 billion in new
budgetary resources and reflects the downward adjustment of $1
billion in accordance with the statutorily-directed revenue-
aligned budget authority calculation.
The requested funding will be used to improve highway
safety and improve the Nation's highway system. The request
also encourages new approaches to fighting gridlock by
proposing to use $175 million of inactive earmarks and 75
percent of certain discretionary program funds to fight
congestion.
The President's request for the Federal Transit
Administration's fiscal year 2009 budget provides a record
level of funding, $10 billion, for the Federal public transit
programs. Funding will be used to increase transit system
capacity and improve safety. It will also leverage private
investment into public transit through joint development
activities.
FTA's request fully funds what is needed in 2009 for the
New Starts and Small Starts Programs. The request for major
capital investment grants of $1.6 billion includes funding for
15 existing and two pending full funding grant agreements. When
completed, these projects will encourage transit-oriented
development and promote new economic activity throughout the
Nation.
Receipts in the Highway Trust Fund have not kept pace with
SAFETEA-LU funding levels. This has resulted in the continual
decline of the cash balances of the Highway Trust Fund. During
fiscal year 2009, we are projecting a possible $3.2 billion
shortfall in the Highway Account. However, the Mass Transit
Account is expected to remain solvent through fiscal year 2009
with an estimated ending balance of $4.4 billion. This will
leave a combined total of $1.2 billion in the Highway Trust
Fund at the end of fiscal year 2009.
To ensure that the administration can continue to meet its
commitments to SAFETEA-LU, we are proposing new flexibility to
manage funds in the Highway Trust Fund by allowing repayable
advances between the Highway Account and the Mass Transit
Account. We will be able to support authorized funding levels
for surface transportation programs with the existing tax
structure.
Our proposal would not impact the transit program in fiscal
year 2009. The President's budget builds on the exciting things
we are doing at the Department of Transportation to help us
move forward on a new course, a course that provides high
levels of safety and mitigates congestion.
As we look to the next surface transportation
authorization, we have an opportunity to come together and
completely reassess our approach to financing and managing
these programs. The Department looks forward to working with
the Congress to address the challenges we face in
transportation and to meet our Nation's transportation
financing needs.
PREPARED STATEMENT
Thank you for the opportunity to appear today. Jim Ray and
I would be happy to answer your questions, I on the transit
portion and Jim Ray on the highway side.
Thank you.
[The statement follows:]
Prepared Statement of Hon. James S. Simpson
Good Morning. Thank you, Madam Chairman and members of the
subcommittee, for the opportunity to appear before you today to discuss
the President's fiscal year 2009 budget plan for the Department of
Transportation's surface transportation programs. I am pleased to
report to you that the President's fiscal year 2009 budget for the
Department of Transportation is $68 billion. Of this, 76 percent, or
$51.7 billion, is for our highway, highway safety, and public
transportation programs.
As you know, fiscal year 2009 is the final year of the current
surface transportation authorization--the Safe, Accountable, Flexible,
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU).
Our fiscal year 2009 request fulfills the President's commitment to
provide the 6-year, $286.4 billion investment in highway, highway
safety and public transportation programs that was agreed to when
SAFETEA-LU was enacted in 2005, and does so without raising taxes or
subsidizing transportation spending with other tax dollars. We are
working with the President to hold the line on spending, while giving
travelers and taxpayers the best possible value for their
transportation dollars by transforming the way our transportation
system works and is funded.
The President's budget builds on the exciting things we are doing
at the Department of Transportation to help us move forward on a new
course--a course that delivers high levels of safety, takes advantage
of modern technology and financing mechanisms, and mitigates congestion
with efficient and reliable transportation systems. However, it is
increasingly clear that America's transportation systems are at a
crossroads. Even as we continue to make substantial investments in our
Nation's transportation systems, we realize that a business-as-usual
approach to funding transportation programs will not work much longer.
Long-term, we need a serious reform of our approaches to both financing
and managing our transportation network. We need to not only maintain
our infrastructure, but also win the battle against congestion.
FEDERAL HIGHWAY ADMINISTRATION
The President's request for the Federal Highway Administration
(FHWA) in fiscal year 2009, $40.1 billion in new budgetary resources,
reflects the final installment to the $286.4 billion total agreement
for SAFETEA-LU. This level includes a Federal-aid highway obligation
limitation of $39.4 billion and $739 million in exempt contract
authority. The obligation limitation reflects a downward adjustment of
$1 billion from the base level in SAFETEA-LU, in accordance with the
statutorily directed revenue aligned budget authority (RABA)
calculation. The request supports the Department's goals and policy
initiatives, and FHWA's priorities including improving highway safety,
minimizing project delays, reducing traffic congestion, and promoting
environmental stewardship and streamlining.
Since the enactment of SAFETEA-LU in 2005, FHWA has implemented new
programs to improve highway safety, promoted innovative solutions to
reduce traffic congestion, worked with other Federal agencies and
States to streamline the project approval process, enhanced program
oversight and stewardship, and responded to unforeseen events such as
Hurricane Katrina and the collapse of the I-35W Bridge in Minneapolis,
Minnesota. Funding requested in fiscal year 2009 will enable FHWA to
continue to improve the Nation's highway system while looking ahead to
the next highway program authorization.
The budget request for FHWA will help address challenges that still
confront us, such as congestion mitigation. The fiscal year 2009 FHWA
budget would encourage new approaches to fighting gridlock by proposing
to use $175 million in inactive earmarks and 75 percent of certain
discretionary highway program funds to fight congestion, giving
priority to projects that combine a mix of pricing, transit, and
technology solutions. Congestion pricing of our highways will generate
funding that can be used locally for transit projects. While State and
local leaders across the country are aggressively moving forward,
Congressional support and leadership is critical. These projects will
help us find a new way forward as we approach reauthorization of our
surface transportation programs.
The FHWA budget includes $4.5 billion for the bridge program, as
authorized in SAFETEA-LU. In fiscal year 2009, FHWA will focus its
bridge program on decreasing the percent of deck area of our Nation's
highway bridges on public roads that are rated as either structurally
deficient or functionally obsolete.
The FHWA safety program will continue to concentrate efforts to
reduce the number of fatalities on our highways, focusing on four types
of crashes: roadway departures, crashes at intersections, collisions
involving pedestrians, and speeding-related crashes. The FHWA budget
includes more than $1 billion dedicated to safety purposes such as the
Highway Safety Improvement Program (HSIP), and funds utilized by States
to support safety infrastructure and operational improvements as part
of other Federal-aid highway programs such as the National Highway
System (NHS) and the Surface Transportation Program.
In fiscal year 2009, FHWA will continue to assist States with the
implementation of Strategic Highway Safety Plans and safety planning so
that safety funds will be used where they yield the greatest safety
improvement. The HSIP provides States with flexibility to use safety
funds for projects on all public roads and publicly owned pedestrian
and bicycle paths, and to focus efforts on implementation of a State
Strategic Highway Safety Plan.
Rural two-lane, two-way road fatality rates are significantly
higher than the fatality rates on the Interstate. To address these
higher rural road fatalities, and in support of our Rural Safety
Initiative, highway safety program funds will provide a foundation for
safety improvements in areas where the greatest need exists. The High
Risk Rural Road portion of the HSIP sets aside $90 million in fiscal
year 2009 to address safety considerations and develop countermeasures
to reduce these higher rural road fatalities.
FEDERAL TRANSIT ADMINISTRATION
The President's request for the Federal Transit Administration's
(FTA) fiscal year 2009 budget provides a record level of funding, $10.1
billion, for the Federal public transportation programs. This is an
increase of $643.8 million, or almost 7 percent above the Consolidated
Appropriations Act, 2008. At this level of funding, FTA will achieve
quantifiable and executable improvements that support the Secretary's
priorities--safety, system performance and reliability, and 21st
century solutions for 21st century transportation problems.
FTA's budget focuses on priorities such as increasing transit
system capacity and improving safety and performance with existing
infrastructure; leveraging private investment in public transportation
through public-private partnerships and joint development activities;
finding transit solutions to reduce traffic congestion; implementing
the President's ``Twenty In Ten'' plan by increasing the fuel economy
of transit buses; improving customer service through targeted program
delivery process improvements; and increasing productivity through an
agency-wide continuous improvement program that identifies new
opportunities for streamlining, efficiency, and performance
measurement.
Within the $10.1 billion, $8.4 billion is requested in fiscal year
2009 for transit services to provide stable, predictable formula funds
to urbanized areas and increase funding for underserved rural
communities. A total of $59.6 million is requested in fiscal year 2009
to support activities that improve public transportation through
research and technical assistance.
FTA's budget fully funds the annual cost of multi-year construction
projects under the New Starts and Small Starts programs, and is based
on actual project requirements. The fiscal year 2009 request for major
capital investment grants of $1.62 billion includes funding for 15
existing and 2 pending Full Funding Grant Agreements (FFGAs). The
request is about $52 million over the fiscal year 2008 enacted level.
When completed, these projects will encourage transit-oriented
development and related initiatives by improving mobility, reducing
congestion and pollution, and promoting new economic activity
throughout the Nation.
The fiscal year 2009 FTA budget will also provide financial support
and technology to further our Urban Partnerships. Transit is critical
to the success of the Urban Partners' efforts to reduce congestion.
Increasing the quality and capacity of peak-period transit service is
necessary in order to offer a more attractive alternative to automobile
travel and to accommodate peak-period commuters who elect to switch to
transit in response to congestion pricing.
STATUS OF THE HIGHWAY TRUST FUND
The Highway Trust Fund is the principal source of funding for our
Nation's highway, highway safety and public transportation programs.
The President's 2009 budget projections reflect a continuing downward
trend in the Highway Trust Fund cash balances. A fact sheet is attached
to this statement that displays the current status of the Highway Trust
Fund. The trust fund has two accounts--a Highway account that funds
FHWA, the National Highway Traffic Safety Administration (NHTSA), and
the Federal Motor Carrier Safety Administration (FMCSA) programs--and a
separate Mass Transit Account that funds FTA programs. By the end of
the SAFETEA-LU authorization period in 2009, the administration is
projecting a $3.2 billion shortfall in the Highway Account. The Mass
Transit Account is expected to remain solvent through fiscal year 2009,
with an estimated balance of $4.4 billion, leaving a net total of $1.2
billion in the combined Highway Trust Fund at the end of fiscal year
2009.
HIGHWAY TRUST FUND CASH BALANCES--FISCAL YEAR 2004-FISCAL YEAR 2013
[In billions of dollars as shown in the fiscal year 2009 Presidents budget]
----------------------------------------------------------------------------------------------------------------
Actual Estimated Repayable
------------------------------------ Balances Advances
------------------- Proposal
2004 2005 2006 2007 2008 2009 2009
----------------------------------------------------------------------------------------------------------------
Highway Account (HA):
Cash Balance (Beginning of Year).......... 13.0 10.8 10.6 9.0 8.1 3.0 3.0
Receipts.................................. 29.8 32.9 33.7 34.3 34.2 34.8 34.8
Outlays \1\............................... 32.0 33.1 35.3 35.2 39.3 41.0 41.0
Repayable advance from MTA................ ....... ....... ....... ....... ....... ........ 3.2
-----------------------------------------------------------------
Cash Balance (End of Year).............. 10.8 10.6 9.0 8.1 3.0 (3.2) .........
=================================================================
Mass Transit Account (MTA):
Cash Balance (Beginning of Year).......... 4.8 3.8 2.0 6.2 7.3 6.4 6.4
Receipts.................................. 4.9 5.0 4.9 5.1 5.0 5.1 5.1
Flex Funding Transfer \2\................. ....... ....... 1.4 0.2 0.3 0.2 0.2
Outlays................................... 6.0 6.8 2.0 4.2 6.3 7.3 7.3
Repayable advance to HA................... ....... ....... ....... ....... ....... ........ (3.2)
-----------------------------------------------------------------
Cash Balance (End of Year).............. 3.8 2.0 6.2 7.3 6.4 4.4 1.2
=================================================================
Highway Trust Fund End of Year Cash 14.6 12.5 15.2 15.4 9.4 1.2 1.2
Balance (Total)........................
----------------------------------------------------------------------------------------------------------------
\1\ Includes Flex Funding Transfer to MTA.
\2\ Flex Funding in fiscal year 2004 and fiscal year 2005 was fully outlaid to the General Fund.
Note: Totals may reflect rounding error.
Despite the anticipated shortfall in the Highway Account, the
administration retains its strong commitment to SAFETEA-LU programs. To
ensure that the administration can continue to meet its commitments,
the budget proposes a new flexibility to manage funds in the Highway
Trust Fund so the existing tax structure can continue to support
authorized funding for surface transportation programs. By requesting
temporary authority to allow ``repayable advances'' between the Highway
Account and the Mass Transit Account, the fiscal year 2009 President's
Budget will enable us to complete the current authorization without any
impact on transit programs in 2009. In addition to ensuring delivery of
both FHWA and FTA programs, this mechanism will ensure that the vital
safety programs funded through the Highway Trust Fund for NHTSA and
FMCSA will also be able to continue without disruption.
However, as we look to the future, the projected shortfall in the
Highway Account is evidence of the need to re-examine how surface
infrastructure is funded in this country.
FUTURE SURFACE TRANSPORTATION NEEDS
For the first time since the creation of the Interstate Highway
System, we have an opportunity to come together and completely reassess
our approach to financing and managing surface transportation systems.
For too long, we have tolerated exploding highway congestion,
unsustainable revenue mechanisms and spending decisions based on
political influence as opposed to merit.
Now, thanks to technological breakthroughs, changing public opinion
and highly successful real-world demonstrations, it is clear that a new
path is imminently achievable if we have the political will to forge
it. That path must start with an honest assessment of how we pay for
transportation, not simply how much (our current focus). In fact, our
continued transportation financing challenges are in many ways a
symptom of these underlying policy failures, not the cause.
In a report released in July 2007 entitled ``Surface
Transportation: Strategies Are Available for Making Existing Road
Infrastructure Perform Better,'' the Government Accountability Office
(GAO) cited existing revenue mechanisms as the culprit, stating:
The existing revenue-raising structure provides no incentive for
users to take these costs (delays, unreliability and pollution) into
account when making their driving decisions. From an economic
perspective, a mechanism is needed that gives users price incentives to
consider these costs in deciding when, where, and how to drive. Because
the existing structure does not reflect the economic, social, and
environmental costs of driving at peak periods, drivers who may have
flexibility to share rides, use mass transit, use more indirect but
less congested routes, or defer their trips to uncongested times have
no financial incentives to do so. Without such incentives, the
transportation system will be headed for more frequent occurrences of
congestion that last longer, resulting in more time spent traveling,
greater fuel consumption, and higher emissions in the long run.
We must decide what our national transportation priorities are, and
what roles are appropriate for Federal, State and local government as
well as the private sector, before we can adequately address our
Nation's infrastructure needs.
One of the biggest challenges we face is congestion. Technology
must play an important role in relieving traffic on our Nation's
highways. Nationwide, congestion imposes delay and wasted fuel costs on
the economy of at least $78 billion per year. The true costs of
congestion are much higher, however, after taking into account the
significant cost of transportation system unreliability to drivers and
businesses, the environmental impacts of idle-related auto emissions,
increased gasoline prices and the immobility of labor markets that
result from congestion, all of which substantially affect interstate
commerce. Through programs like our Urban Partnerships and Corridors of
the Future initiatives, we have been aggressively pursuing effective
new strategies to reverse the growing traffic congestion crisis.
However, our funding is limited and trying to be all things to all
people has proven to be an unsuccessful strategy. Options such as
direct pricing of road use, similar to how people pay for other
utilities, holds far more promise in addressing congestion and
generating sustainable revenues for re-investment than do traditional
gas taxes. Drivers have proven in a growing array of road pricing
examples in the United States and around the world that prices can work
to significantly increase highway speed and reliability, encourage
efficient spreading of traffic across all periods of the day, encourage
shifts to public transportation and encourage the combining of trips.
Direct pricing will also reduce carbon emissions and the emissions of
traditional pollutants. According to Environmental Defense, a nonprofit
environmental organization, congestion pricing in the city of London
reduced emissions of particulate matter and nitrogen oxides by 12
percent and fossil fuel consumption and carbon dioxide (CO2)
emissions by 20 percent; a comprehensive electronic road pricing system
in Singapore has prevented the emission of an estimated 175,000 lb. of
CO2; and Stockholm's congestion pricing system has led to a
10-14 percent drop in CO2 emissions.
The Department believes that the highest priorities for Federal
resources should be:
--Improving and maintaining the condition and performance of the
Interstate Highway System. Roughly one quarter of all highway
miles traveled in the United States takes place on the
Interstate System;
--Reducing congestion in major metropolitan areas and increasing
incentive funds to State and local officials that pursue more
effective congestion relief strategies. A more effective
integration of public transportation and highway investment
strategies is central to this challenge;
--Investing in and fostering a data-driven approach to reducing
highway fatalities;
--Using Federal dollars to leverage non-Federal resources;
--Focusing on cutting edge, breakthrough research areas like
technologies to improve vehicle to infrastructure
communications; and
--Establishing quality and performance standards.
A streamlined Federal role would allow the Federal Government to
ensure accountability for specific investments that are in the national
interest and give States greater flexibility to prioritize other
investments in their transportation infrastructure.
We look forward to partnering with the Congress to address the
challenges we face in transportation and to meet our Nation's
transportation financing needs. Thank you for the opportunity to appear
before you today. I would be happy to answer questions.
Senator Murray. Very good. Thank you very much. We will
move to Mr. John McCaskie, Chief Engineer of Swank Associated
Companies, who will speak on behalf of the Transportation
Construction Coalition.
NONDEPARTMENTAL WITNESSES
STATEMENT OF JOHN McCASKIE, CHIEF ENGINEER, SWANK
ASSOCIATED COMPANIES, ON BEHALF OF THE
TRANSPORTATION CONSTRUCTION COALITION
Mr. McCaskie. Madam Chairman, Senator Bond, and members of
the subcommittee, thank you for convening this hearing to
discuss the financial outlook for the Highway Trust Fund.
My name is John McCaskie, and I am chief engineer of Swank
Associated Companies, a highway and bridge construction firm
located in western Pennsylvania.
I appear today on behalf of the Transportation Construction
Coalition, a coalition of 28 national associations and labor
unions.
The Federal Highway Program is facing a potentially
devastating situation that, if not remedied soon, will impact
not only State transportation programs but the construction
industry and the economy in general.
SAFETEA-LU set guaranteed funding for the Federal Highway
Program at the highest annual levels that could be supported by
projected Highway Trust Fund revenues and existing balances at
the time. Since then, it's become evident that the revenue
projections Congress relied on at that time were overly
optimistic. As a result, projected highway account revenues are
$3.7 billion below the amount necessary to support the SAFETEA-
LU fiscal year 2009 highway investment level of $41.2 billion.
Based on the historic spend-out rate, the Highway Account
could support no more than $29.5 billion of new obligations for
fiscal year 2009. This is $13.7 billion less than the amount
appropriated in fiscal year 2008. Every State would be hit with
a 32 percent cut in Federal highway funds.
Our Nation already faces a transportation crisis. We are
not currently investing enough to address that crisis and
cannot afford to get further behind by cutting transportation
investment.
Some warning signs include 27 percent of the Nation's
nearly 600,000 bridges have structural problems, pavement
conditions on one-third of America's major roads are not up to
minimum standards, many of the 15,000 interchanges on the
interstate system are unsafe or create bottlenecks, and the
number of vehicles using our highways has nearly doubled in the
past 25 years while we have added less than a 7 percent
increase in lane miles.
The transportation construction industry is concerned we
may be facing the perfect storm set of conditions that could
lead to substantial downturn in construction of transportation
facilities. While public investment in transportation
infrastructure has remained relatively stable over the past
year, these numbers don't tell the full story.
Dramatic construction material cost inflation has reduced
the purchasing power of public works dollars. As a result,
fewer contracts are going to bid, which leads to less work for
contractors, fewer jobs for employees, and denial of
transportation improvements to the public.
An industry survey of States indicates that many DOTs have
cut back substantially in the number of highway projects going
to bid. The cutback in contracts being bid is already being
felt. Heavy and civil engineering construction employment
peaked in January 2007. Over the past 14 months, there has been
more than a 2.4 percent decrease in heavy and civil
construction employment over that period of time, which equates
to 24,400 construction employees out of work.
An industry survey of the transportation construction
businesses indicates that further layoffs are a looming
possibility.
Not addressing the Highway Trust Fund revenue shortfall and
the potential resulting cut of as much as 32 percent in highway
funding would result in further cutbacks in transportation
projects and lead to further job losses. While the situation
may seem bleak, there is hope. The Senate Finance Committee, as
you mentioned, Chairman Backus and Ranking Republican Grassley
have developed legislation that allows SAFETEA-LU highway
investment commitment to be met.
The Backus-Grassley plan would generate new Highway Account
revenues by crediting the account for currently unrealized
highway user fee receipts. Furthermore, the legislation is
fully offset.
Madam Chairman, failure to address this situation will
impede your ability to fully fund the Highway Program in fiscal
year 2009. The Transportation Construction Coalition urges this
subcommittee's support for the Backus-Grassley proposal and the
Transportation Construction Coalition is working diligently to
build broadbased congressional support for this measure.
PREPARED STATEMENT
Thank you again for the opportunity to appear before you
today and I would be happy to answer any questions that you
might have.
[The statement follows:]
Prepared Statement of John McCaskie
HIGHWAY TRUST FUND SOLVENCY
Madam Chairman, Senator Bond and members of the subcommittee, thank
you for inviting the Transportation Construction Coalition to testify
on the financial outlook for the Highway Account of the Highway Trust
Fund. What I would like to focus on this morning is how failure to
address the projected shortfall of Highway Account revenues could
affect Federal highway investment and highway construction in the
United States this year and next.
When Congress enacted the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users--or SAFETEA-LU--in August
2005, guaranteed funding for the Federal highway program was set at the
highest annual levels for fiscal years 2005 through 2009 that could be
supported by projected Highway Account resources. Not only did the bill
spend all of the projected revenues into the Highway Account through
2009, it also spent down the accumulated cash balance in the Highway
Account, envisioning virtually no cash reserve when SAFETEA-LU expires
on September 30, 2009.
Since then, it has become evident that the revenue projections
Congress relied on at that time were overly optimistic. Actual Highway
Account revenues in fiscal year 2007 were about $300 million less than
originally expected and the Treasury now projects about $2.7 billion
less Highway Account revenues in fiscal year 2008 and 2009, for a total
shortfall of about $3.0 billion. This, combined with higher outlays due
to positive RABA adjustments in fiscal year 2007 and 2008 and the extra
$1 billion bridge investment in fiscal year 2008, means that outlays
from the Highway Account are now projected to exceed revenues by $3.7
billion in fiscal year 2009 if the Federal highway program is fully
funded as enacted in SAFETEA-LU, as shown in Figure 1.
The Bush administration has proposed two measures for addressing
this shortfall. First, it proposes to limit Federal highway investment
in fiscal year 2009 to $39.4 billion rather than the $41.2 billion
guaranteed in SAFETEA-LU. Second, it proposes to let the Highway
Account borrow the necessary cash from the Mass Transit Account, which
will continue to show a positive balance through the end of fiscal year
2009.
The administration's proposal is a band-aid. Unfortunately the
patient needs surgery. Their plan fails to address the core issue of
insufficient Highway Account revenues. The Transportation Construction
Coalition opposes it because it perpetuates a zero-sum mentality by
transferring resources from one mode of transportation to another.
Madame Chairman, the reality is that greater resources are needed for
both the highway and public transportation programs.
We are happy to see that both Houses of Congress have passed budget
resolutions that assume the full $41.2 billion highway investment
guaranteed for fiscal year 2009. But Congress still has to address the
pending Highway Account insolvency to assure this recommendation can be
realized in this year's appropriations process. Other than borrowing
from the Mass Transit Account, there are only three options.
One is to cut highway funding in fiscal year 2009 to an amount that
could be supported by existing revenue projections.
Based on the historic spendout of Federal highway funds, the
Highway Account could support no more than $29.5 billion of new
obligations for the Federal highway and highway safety programs in
fiscal year 2009, as shown in Figure 2. This is $13.7 billion less than
the amount appropriated in fiscal year 2008. Every State would be hit
with a 32 percent cut in Federal highway funds. Washington State, for
example, would see its Federal highway funds cut from $573 million in
fiscal year 2008 to about $390 million in fiscal year 2009. Dozens of
planned highway improvements in the State would have to be postponed or
cancelled. Missouri would be hit with a $240 million drop in Federal
highway funds, from $762.5 million in fiscal year 2008 to about $518
million in fiscal year 2009. Other States would experience similar
cuts.
A second option would be to fully fund the Federal highway program
at $41.2 billion in fiscal year 2009 but not add revenues to the
Highway Account.
In this case, State departments of transportation (DOTs) could move
forward on Federal-aid highway projects, but the Federal Highway
Administration would not be able to pay the bills on time. Currently,
when a state DOT pays a contractor for work completed on a Federal-aid
project, the State invoices the Federal Highway Administration for the
Federal share and receives an electronic transfer of funds usually
within 24 hours. But when the Highway Account cash balance is
exhausted, FHWA can pay bills only as new revenues come in, which means
most bills will be days to weeks late.
With the economic downturn eroding State government revenues, many
States will have no option but to stop work on highway projects,
putting thousands of construction workers out of jobs. The reaction on
Wall Street and in international markets when investors in Treasury
bonds see a Federal agency failing to pay its bills on time can only be
imagined.
Furthermore, an unfunded highway program is a very dangerous and
disturbing precedent to set on the eve of a new multi-year
reauthorization of the Federal surface transportation program.
Congress has a third option for dealing with the projected Highway
Account deficit and that is to inject additional revenues. Senate
Finance Committee Chairman Max Baucus and Ranking Republican Charles
Grassley made a commitment to you last year to find the necessary
revenue to keep the Highway Trust Fund whole for the life of the
current authorization. They honored that commitment when the Finance
Committee developed a three-part plan--the American Infrastructure
Investment and Improvement Act, S. 2345--that would:
--Compensate the Trust Fund for emergency highway spending since
1998;
--Suspend exemptions from the Federal motor fuels taxes for 6 months;
and
--Reduce motor fuel tax evasion.
The proposal would generate an estimated $5.1 billion for the
Highway Account between now and the end of fiscal year 2009, which
would be sufficient to support a $41.2 billion Federal highway
investment in fiscal year 2009 as called for in SAFETEA-LU and possibly
provide a small cash cushion for the SAFETEA-LU reauthorization
process. We strongly support this proposal, even though it is
temporary, and urge all Members of Congress to support enactment of the
Senate Finance Committee proposal.
The transportation construction industry is concerned we may be
facing a ``perfect storm'' set of conditions that could lead to a
substantial downturn in the construction of highways, bridges, transit
and other transportation facilities. Dramatic construction material
cost inflation has reduced the purchasing power of public works
dollars. As a result, fewer contracts are going out to bid which leads
to less work for contractors and fewer jobs for their employees. Not
addressing the Highway Trust Fund revenue shortage would result in a
further cutback in transportation projects. This would heighten the
``perfect storm'' scenario and have a drastic effect on not only the
transportation construction industry but the U.S. economy as well. The
construction industry employs more than 7 million people (about 5
percent of total employment) and represents more than $1 trillion
annually in economic activity including the purchase of $500 billion in
materials and supplies and $36 billion in new equipment. Construction
represents over 8 percent of annual U.S. gross domestic product.
While economic data show that public investment in transportation
infrastructure has remained relatively stable over the past year, these
numbers do not tell the full story. An industry survey of States
indicates that many have cut back on the number of highway projects
going out to bid in the last year because of the significant increase
in highway construction material costs. Economic research shows that
the Producer Price Index (PPI) for highway and street construction rose
49 percent from December 2003 to February 2008. This compares to a 15
percent increase in the Consumer Price Index (CPI) over the same period
of time. The PPI reflects the dramatic increase in the cost of basic
building materials, including: steel, cement, asphalt, aggregate and
other materials. Diesel fuel price increases also impact this cost as
construction activity is energy intensive.
State and local budgets are also feeling pressure. At the beginning
of 2008, 13 States were facing severe budget deficits this year,
including multi-billion dollar deficits in: California, New York and
New Jersey. Six more States will be facing significant deficits. Local
governments, dealing with the ramifications of the housing crisis are
cutting budgets all across the country.
The impact from the cutback in contracts being bid by State DOTs is
already being felt. Heavy and civil engineering construction employment
peaked in January 2007 and has steadily decreased over the past 14
months. There was more than a 2.4 percent decrease in construction
employment over that time period, which equates to 24,400 construction
employees now out of work. An industry survey of transportation
construction businesses indicates that future lay offs are a very real
possibility if States continue to cut back on the number of contracts
going out to bid. This worrisome trend should not be allowed to
continue. The potential cut of as much as 32 percent in highway program
funding in fiscal year 2009 would lead to further job loss only making
this situation worse.
The fact that the pending highway trust fund insolvency won't occur
until fiscal year 2009 belies the fact that Congress cannot waste time
resolving the problem. This has to be addressed quickly or it will have
a serious negative impact on highway construction this year,
compounding the economic downturn and partially thwarting the recent
efforts of Congress to stimulate the economy.
As States face uncertainty about receiving their Federal
apportionment, they tend to take a conservative approach and cut back
on the number of contracts going out to bid. Since highway and bridge
projects take time to plan and construct, a reliable and predictable
flow of financing is essential to keep construction plans on schedule.
Whenever there is a disruption in Federal financing as often occurs
during reauthorization or uncertainty about Federal highway funding as
happened in fiscal year 2003, when this committee led the effort to
overcome a potential $8.6 billion cut in Federal highway investment--
and is facing us again in fiscal year 2009--State DOTs often hold back
on starting new projects. They simply cannot afford to commit money
they may not receive. And this becomes an even bigger problem when the
economy is in a recession and State governments have their own fiscal
problems. Uncertainty and disruptions in Federal funding for highway
and bridge construction is detrimental to the construction industry and
the economy because decisions about investing in equipment and hiring
and training employees are deferred. The public also suffers because
the long term capital investments funded by these dollars are deferred
and therefore transportation improvements that improve safety, ease
commutes, and promote economic development are delayed.
The last time we faced a situation of uncertainty about Federal
highway investment combined with pending reauthorization and an
economic recession was in 2002 and 2003. The combination forced many
States to cut back on highway construction. As Figure 3 shows, the
value of construction work put in place on the Nation's highways and
bridges actually fell in 2002 and remained flat until 2005. The same
forces are at work today, and there is the distinct possibility of a
similar downturn in the 2008 construction season.
With the economy facing a possible recession and Congress
committing $160 billion in tax rebates and incentives to stimulate the
economy, it makes no sense to worsen the economic situation by putting
thousands of highway construction workers out of jobs this summer.
Madam Chairman, we appreciate the efforts of this subcommittee to
draw attention to this critical issue during last year's appropriations
process. We recognize that failure to address this situation as soon as
possible will impede your ability to fully fund the highway program as
you move forward with the fiscal year 2009 transportation
appropriations bill. In this regard, we hope all members of this
subcommittee will support the proposal developed by Senators Baucus and
Grassley to ensure the highway investment commitment made in SAFETEA-LU
for fiscal year 2009 becomes a reality. Rest assured that the
Transportation Construction Coalition is working diligently to urge all
Members of Congress to resolve this issue.
Thank you very much for the invitation to testify and I am happy to
respond to questions.
Senator Murray. Thank you very much. Mr. Millar, if you
would speak to us? The President of the American Public
Transportation Association.
STATEMENT OF WILLIAM W. MILLAR, PRESIDENT, AMERICAN
PUBLIC TRANSPORTATION ASSOCIATION
Mr. Millar. Thank you, Madam Chair, and thank all the
members of the committee for the invitation to be with you.
Before I address the Highway Trust Fund, let me just second
something you said in your opening statement, Madam Chair.
We believe that an economic fiscal package needs to include
public transit and highway construction. Our own members have
said they have some $3.6 billion worth of ready-to-go projects
that could mean thousands of jobs for Americans. We would
strongly support that. So, thank you very much.
As you all know, the Highway Trust Fund was created in
1956. It was created primarily to provide a reliable and
adequate source of funds to build the Nation's interstate
highway system.
In 1982, the Congress amended that Trust Fund and President
Reagan signed into law a bill that would allow a portion of the
funds to provide funding for public transportation projects as
well.
The Highway Trust Fund has worked well. It has provided a
reliable and predictable funding mechanism both for highways
and for public transportation. It has been phenomenally
successful and therefore we must find ways to save it.
Now over the years, the Congress had periodically approved
modest increases in the user fees to fund increases in the
Trust Fund. Unfortunately, the Congress has not made such an
approval since 1993. As a result, and I completely agree with
Mr. McCaskie's statements there, the pure inflation as well as
the growing needs of our country has meant there simply is not
enough money for public transit or highway construction.
As things stand now, the Fund is scheduled to run--the
Highway Account is scheduled to run out of money next year,
fiscal year 2009, followed by the Transit Account shortly
thereafter. Therefore, there isn't a lot of time here. The
Congress must fix these problems.
If there's any doubt about it, only look at the collapse of
the I-35 bridge in Minnesota and then all the subsequent work
that was done to identify deficient transportation facilities
throughout the country. We're behind in what we should be
investing in and as the National Surface Transportation Policy
and Revenue Study Commission pointed out, the importance of
having a good transportation system because it is fundamental
to the growth of our economy, to the ability of our Nation to
meet its people's needs, to provide jobs and to provide for the
kind of life that all Americans want to have.
We certainly agree with that Commission's recommendation
that the Highway User Fee must be immediately raised to restore
purchasing power and to allow growth in highway and transit
investment.
For fiscal year 2009, we ask you to act quickly. We should
not accept the administration's proposal. We should reject the
administration's proposal. It makes no sense, as they say, to
rob Peter to pay Paul. Both highway investment is important,
public transit investment is important, and we need to make
sure there's adequate funding for both.
We do think that a temporary fix needs to be put in place
for 2009. We strongly support the work of the Finance Committee
and its leadership to try to identify a temporary fix. All of
us know it's only temporary and that by the next year, when
SAFETEA-LU is scheduled to be reauthorized, a long-term and
permanent fix will be necessary here.
I think it's important to point out that many associations
have come to agreement on this, besides my own APTA that deals
primarily in transit. Certainly the American Association of
State Highway and Transportation Officials, AASHTO, which deals
with all modes of transportation, the U.S. Chamber of Commerce,
Americans for Transportation Mobility, the American Road and
Transportation Builders Association, ARTBA, the Associated
General Contractors, AGC, to name just a few, have come
together in common interests and belief in this, and we
strongly urge you to work with the Finance Committee to find a
temporary fix, reject the administration's proposal. It would
not be appropriate. Then, finally, we need to work together on
a long-term fix.
PREPARED STATEMENT
So, in my remaining few seconds here, let me also say that
we certainly hope the subcommittee will work to restore the
proposed Bush administration cut in the Transit Program. We
need to make sure that the levels that the Congress set in
SAFETEA-LU are met and again we would ask you to reject the
administration's proposal.
Thank you, Madam Chair. I'd be happy to answer any
questions you might have.
[The statement follows:]
Prepared Statement of William W. Millar
INTRODUCTION
Chairman Murray, Ranking Member Bond and members of the
subcommittee, I thank you for the opportunity to testify today on
behalf of the American Public Transportation Association (APTA), to
provide the perspective of the public transportation industry on the
status of the highway trust fund. My name is Bill Millar, and I am the
President of APTA.
ABOUT APTA
APTA is a nonprofit international association of more than 1,500
public and private member organizations, including transit systems and
commuter rail operators; planning, design, construction, and finance
firms; product and service providers; academic institutions; transit
associations and State departments of transportation. APTA members
serve the public interest by providing safe, efficient, and economical
transit services and products. More than 90 percent of the people using
public transportation in the United States and Canada are served by
APTA member systems.
THE STATUS OF THE HIGHWAY TRUST FUND
Madam Chairman, the Highway Trust Fund was created by Congress in
1956 to provide a dedicated revenue source for the Federal Government
to build the interstate highway system. In 1982 Congress enacted
legislation that was singed into law by President Reagan that created
the mass transit account of the highway trust fund, which provides a
dedicated source of revenue for public transportation. Funded primarily
by the motor fuels user fee, the trust fund has provided a steady
stream of revenue to fund critical capital surface transportation
projects in America for more than five decades.
The Federal gas tax is currently set at 18.4 cents per gallon, and
of that, 2.86 cents is dedicated to the mass transit account. The mass
transit account of the highway trust fund has served as a dependable
funding source for the Federal transit program for over 25 years.
Revenues generated from the highway user fee have allowed for a steady
growth in Federal capital investment in public transportation.
Currently, approximately 80 percent of the Federal dollars invested in
public transportation come directly from the trust fund. This reliable
funding mechanism has provided predictable and guaranteed investment in
transit, allowing for not only large scale capital transit projects
throughout the country, but also important smaller scale transit
investments.
Unfortunately, the future of the highway trust fund is in jeopardy.
Receipts from the highway user fee are not generating sufficient
revenue to sustain the current level of Federal investment in the
surface transportation program. While Congress has periodically
approved modest increases for Federal investment in surface
transportation, it has not approved an increase in the user fee since
1993. Recent Congressional Budget Office projections show that by the
end of fiscal year 2009, without intervening action by Congress, the
highway account of the trust fund will no longer be solvent. Those same
projections show that the mass transit account will be insolvent by
fiscal year 2012. Without sufficient revenues in the trust fund,
Congress will not be able to continue to sustain current levels of
Federal investment in surface transportation, and insolvency will make
future growth in the Federal program impossible. This is bad news at a
time where increased investment in our Nation's transportation
infrastructure is critical. One only needs to look at the collapse of
the 1-35 bridge in Minnesota to realize the importance of maintaining
and growing Federal investment in the surface transportation program.
In its recent report on the status of the surface transportation
program in America, the National Surface Transportation Policy and
Revenue Study Commission noted that a good transportation
infrastructure is essential to the Nation's economic health, and we
need to invest more to both preserve the current aging system and to
expand and improve our transportation infrastructure to meet the
demands of our growing population. The report recommends that an
immediate increase in the highway user fee is necessary to restore the
purchasing power of the trust fund, and it should be indexed to account
for future inflation. APTA agrees with those conclusions, and calls on
Congress to make the necessary increase as it considers the next
surface transportation authorization legislation next year.
Since there has been no increase in the motor fuel tax since 1993,
inflation has steadily eroded the purchasing power of the highway trust
fund. In addition, recent studies by the U.S. Department of
Transportation on price trends for construction show that increases in
construction costs have outpaced inflation, further weakening the
ability of the trust fund to meet investment needs. The original
purchasing power of the gas tax must be restored to allow for growth in
the Federal investment in our Nation's surface transportation
infrastructure.
SHORT TERM SOLUTIONS
While Congress will have the opportunity to address the long term
stability of the trust fund in the next authorization bill, more
immediate action is needed to prevent the insolvency of the highway
account in fiscal year 2009. A short term solution is to ensure that
revenues are available for Congress to appropriate the guaranteed and
authorized levels in SAFETEA-LU for the highway program. APTA supports
full funding of the highway program in fiscal year 2009, but we
strongly oppose the administration's short sighted proposal to raid the
mass transit account to cover the short fall.
The President's budget, released in early February, proposes to
allow transfers of balances in the mass transit account into the
highway account to cover projected short falls that occur before the
end of fiscal year 2009. The administration estimates that this will
result in a transfer of up to $3.2 billion out of the mass transit
account. As I wrote to this subcommittee a month ago, we urge Congress
to reject the administration's proposal. Concern over the projected
insolvency of the highway account does not justify the proposed
transfer. Not only is this a temporary fix for the highway account, but
it jeopardizes public transportation investment by hastening the
insolvency of the mass transit account. Absent new revenues for
transit, this would preclude funding the transit program at even
current levels by fiscal year 2010. The tens of millions of Americans
who depend on public transportation should not be penalized, especially
when there are other alternatives to meeting highway funding needs in
fiscal year 2009. While it is important to fix the Federal highway
account, robbing Peter to pay Paul is not the way to go. The
President's short-sighted transportation policy ``fix'' is
irresponsible and flies in the face of common sense. With more than 10
billion trips taken on public transportation annually, public
transportation's growth rate outpaced the growth rate of the population
and the growth rate of vehicle miles traveled on our Nation's roads
over the past 12 years. This irresponsible proposal has also been
opposed by American Association of State Highway Transportation
Officials (AASHTO), the U.S. Chamber of Commerce's Americans for
Transportation Mobility (ATM), the American Road and Transportation
Builders Association (ARTBA), and the Association of General
Contractors (AGC), to name only a few.
The Senate Finance Committee has proposed legislation that would
prevent the insolvency of the highway account in fiscal year 2009,
without borrowing funds from the mass transit account. APTA supports
this proposal and we urge Congress to adopt it as soon as possible.
FISCAL YEAR 2009 TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT
APPROPRIATIONS BILL
I also want to take this opportunity to comment briefly on the
President's funding request for public transportation in fiscal year
2009. APTA is disappointed that the Bush administration's budget
request would fund Federal transit programs in fiscal year 2009 at
$202.1 million less than the levels authorized and guaranteed in
SAFETEA-LU. As your subcommittee works to adopt the fiscal year 2009
Transportation and Housing and Urban Development Appropriations bill,
we urge you to reject this proposed cut and to provide full funding for
the pubic transportation program at $10.3 billion, as authorized in
SAFETEA-LU. The $10.1 billion the president proposes for public
transportation does not come close to addressing current transit
capital needs, let alone the costs of a growing public transit system
that meets growing demands for more public transportation. Ironically,
failure to adequately fund the Federal transit program will push more
public transportation riders onto already congested roads making
matters worse for road users.
Adequately funding public transportation is an important action
that benefits all Americans and meets many of our Nation's national
priorities. Public transportation helps Americans save money and is a
key strategy in helping conserve energy, minimize climate change and
reduce highway congestion. A household that uses public transportation
saves more than $6,200 every year, compared to a household with no
access to public transportation. This amount is more than the average
household pays for food each year. Using public transportation is also
one of the quickest ways that people can help our country become energy
independent since using public transit saves 4.26 billion gallons of
gasoline every year (the equivalent of 324 million cars filling up or
almost 900,000 gallons per day). Using public transportation is also
more effective at reducing greenhouse gases than environmentally
friendly household activities which everyone should do, such as home
weatherizing, changing to efficient light bulbs, and using efficient
appliances.
The Bus and Bus Facilities Program and Urban Congestion Initiative
I would also like to express my gratitude to this subcommittee for
including a provision in the Fiscal Year 2008 Omnibus Appropriations
bill that limits the Federal Transit Administration (FTA) from spending
more than 10 percent of Bus and Bus Facilities Program funds on
congestion pricing initiatives. We urge the subcommittee to continue to
protect these funds by adopting a similar provision in the fiscal year
2009 THUD bill. As you know, in fiscal year 2007, Congress did not
allocate Bus and Bus Facilities Program funds, and instead gave the
funds to the FTA to distribute to transit agencies to address capital
needs. We were disappointed that the U.S. Department of Transportation
(U.S. DOT) decided to allocate virtually all of these funds to its
Urban Partnership Congestion Initiative (UPCI). While members of APTA
recognize the potential benefits of projects funded under the UPCI, we
do not believe that these projects should be funded at the expense of
much needed capital investment for buses and bus facilities across the
Nation. Numerous transit systems, both large and small, depend on this
Federal capital assistance to replace aging buses, expand bus fleets to
meet growing service demands, and address needs for vehicle maintenance
and fueling facilities.
New Starts Rule
We also appreciate the subcommittee's inclusion of language in the
Fiscal Year 2008 Omnibus Appropriations bill that from prohibits the
FTA from finalizing its Notice of Proposed Rulemaking (NPRM) for the
New Starts and Small Starts program. Simply put, the NPRM is
unacceptable to the transit industry, and does not sufficiently follow
guidance provided by SAFETEA-LU. For example, the proposed rule does
not sufficiently consider the benefits of economic development and land
use criteria in its project approval rating process, and does not
effectively simplify the Small Starts approval process. The provision
adopted by Congress to prevent FTA from finalizing this NPRM expires at
the end of the fiscal year on September 30, and we urge the
subcommittee to extend the prohibition prior to its expiration.
CONCLUSION
I thank the subcommittee for allowing me to share my views on the
status of the highway trust fund and fiscal year 2009 transit
appropriations issues. We look forward to working with the subcommittee
to take necessary steps to ensure the future solvency of the trust
fund, so that we can meet the investment needs of our surface
transportation system. We urge Congress to reject the administration's
short-sighted proposal to raid the mass transit account of the highway
trust fund to cover the projected short-fall in the highway account in
fiscal year 2009, and instead urge this subcommittee to support the
common sense proposal to solve this problem that is being advanced by
the Senate Finance Committee. Finally, we urge the subcommittee to
fully fund the transit program in fiscal year 2009 at the level
authorized and guaranteed in SAFETEA-LU, and to renew provisions that
ensure that transit funds are spent in accordance with the authorizing
statutes.
FEDERAL HIGHWAY BUDGET REQUEST
Senator Murray. Thank you very much. Administrator Ray, I'm
going to start with you. Your budget proposal would make
dramatic cuts to the Highway Program. Your request is $1.8
billion less than the level we appropriated for this current
year.
Using the most recent information on the impact of highway
funding on the economy, this cut to the Highway Program
represents a potential loss of over 54,000 well-paying jobs and
almost $2 billion of employment income. You know, few areas in
our economy have deteriorated as badly as employment in the
construction sector.
So, given the state of the economy, is this the right time
to cut back on infrastructure investments and worsen the job
losses in our construction sector?
Mr. Ray. Madam Chairman, thank you for the question. First
and foremost, let me say that we're, of course, very concerned
about the economy at the Department of Transportation. We
recognize that transportation in America is really the life
blood of the American economy, but let me say that the numbers,
the $1.8 billion reduction that you're talking about is an
effort to bring spending in line with the agreement made
between the administration and the Congress in the original
SAFETEA-LU agreement. Of that amount, $1 billion is the
negative RABA adjustment and the rest of it a step to bring
spending in line with SAFETEA-LU figures.
The true point of your question is, is this the appropriate
time to be cutting spending like that, considering the jobs?
Let me suggest that all of our estimates with regard to
spending a billion dollars of Federal funding plus the 20
percent State match supports 34,700 jobs. These are jobs that
are sustained by current funding levels. They are not jobs that
are created by funding levels and I think that's an important
distinction to make.
The other thing that is important to note about
transportation spending is that approximately only one-third of
the jobs created for every $1.25 billion, again that's the
Federal and the State investment into the transportation
marketplace, are actually construction-related jobs. The others
are more downstream.
Senator Murray. Well, I want Mr. McCaskie to comment on
that, but first, you claim your budget's just following
SAFETEA-LU, but in reality, your budget proposals over the last
couple years have sometimes honored the SAFETEA-LU law and
sometimes ignored it.
This year, more than half of the cuts you propose to take
out of the Highway Program is due to the revenue aligned budget
authority adjustment that's called for in SAFETEA-LU. That
provision adjusts highway funding up or down based on
projections of revenue to the Highway Trust Fund.
REVENUE ALIGNED BUDGET AUTHORITY
Last year, you asked this subcommittee to eliminate Revenue
Aligned Budget Authority (RABA) adjustment because it would
trigger increased highway spending. This year, you want us to
fully honor the RABA adjustment because it would cut highway
funding.
So, explain the discrepancy.
Mr. Ray. Madam Chairman, I appreciate the comment, and it
seems to be a particular note of interest. Of course, I'm sure
you know that my predecessor, Administrator Capya, was in this
position at the time. We'd be happy to respond on the record
for that.
Senator Murray. Do you have different philosophies?
Mr. Ray. It would be premature for me to say. I don't know
the specifics of what occurred last year. So again, I'd be
happy to respond on the record, but I don't have that
information in front of me at this time.
Senator Murray. Were you at the agency last year?
Mr. Ray. I was.
Senator Murray. Were you in any discussions about this?
Mr. Ray. I was not. I was in the role of Chief Counsel last
year, but again I would be happy to work with your staff,
respond on the record and get you a full answer on that in the
days and weeks to come.
[The information follows:]
In preparing its fiscal year 2008 budget, the administration
considered the projected shortfall in the Highway Account of the
Highway Trust Fund and determined that it would be prudent to begin to
address it in fiscal year 2008, and to not increase the discretionary
Federal-aid highway obligation limitation for RABA in fiscal year 2008.
The requested level would have been more effective in avoiding a cash
shortfall during the SAFETEA-LU authorization period than waiting until
fiscal year 2009 to control spending. Outlays from the Federal-aid
highway program take place over a number of years, with the highest
outlays in the second year (the year after an obligation is made).
Again mindful of the projected Highway Trust Fund shortfall, the
President's fiscal year 2009 budget proposes a $1.8 billion reduction
to the fiscal year 2009 Federal-aid highway obligation limitation that
incorporates the negative $1 billion RABA calculation authorized in
SAFETEA-LU.
Senator Murray. Okay, interesting. All right, Mr. McCaskie,
do you want to comment on the economy and jobs impact of
transportation funding?
Mr. McCaskie. I really don't view the Highway Trust Fund as
strictly a jobs situation. Yes, it employs a lot of people, but
my focus is on the condition of the highways because what we
are working on out there today is strictly catch-up maintenance
and we don't have enough people to do it or enough money to
keep even, but to cut highway funding, irrespective of
employment, is ludicrous.
I heard about Minneapolis. I think we all should feel that
we were extremely fortunate that Minneapolis was not much worse
and you say, well, we lost lives and so forth. I would repeat,
we were very fortunate.
In Pennsylvania, we have a bridge problem that some
advertise as the worst of any of the States. I think we have
competition. The problems that have developed lately, i.e., the
closing of I-95 for a couple of days to put some shoring under
it, the closing of the Birmingham Bridge in Pittsburgh, these
are just indications of the deterioration.
We bought an interstate system, a wonderful purchase, but
it's bordering on 50 years old and just like the 20-year roof
on your house, it needs repairs.
Thank you.
TRANSIT REQUEST BELOW SAFETEA-LU
Senator Murray. Thank you. Let me go back to SAFETEA-LU one
more time. Administrator Simpson, you request an increase in
funding for the Transit Administration over last year's level,
but you still don't request the $200 million in funds that were
authorized by SAFETEA-LU.
Why does the Transit budget ignore the SAFETEA-LU law?
Mr. Simpson. Well, I wouldn't say that we're ignoring it.
The shortfall, as you might call it, of $202 million, $188
million of which is from the New Starts Program, and the need
wasn't there. We looked at all the projects that we had in the
pipeline and the flow charts of demand for each project over
each fiscal year. Then we prepared the budget to meet the need
100 percent. There's not one project that we're not funding.
Had we other projects that were ready to go, we would have
asked for more money. So, we took a needs-based approach and
did not request the remaining portion of the authority, I would
hope that you would call that good government because while my
colleague to the left wants the full amount of SAFETEA-LU, I'm
sure he's also happy that we're trying to be good caretakers--
--
Senator Murray. Well, I'd like to ask Mr. Millar where the
needs are there. You just heard----
Mr. Simpson. Well, I'd like to finish my answer.
Senator Murray. Quickly, if you would.
Mr. Simpson. Yes, because the other part of it was
discretionary administrative funding. We held the line on
administrative expenses and we also reduced our discretionary
research a bit because we took a hard look at the research and,
like Senator Allard said, we looked for outcomes-based
solutions. We weren't satisfied with a lot of the outcomes that
we had in research, so we thought we'd hold back a little bit
on research and administrative expenses and try to do more with
less. But we fully fund the Formula Programs and we're fully
funding every New Starts/Small Starts project in the pipeline.
Senator Murray. Well, Mr. Millar, Mr. Simpson just
testified that many of those New Start Programs were not ready
to go. What is your information on that?
Mr. Millar. My information is that there are projects
across the country that could use additional funding, that
there are bus fleets that need to be replaced, that over the
years what this administration has done is squeezed the
pipeline. They have caused projects to be removed from that
pipeline, so there are many fewer projects in the pipeline
today.
Just because a project goes outside the Federal pipeline
doesn't mean the need isn't there. In fact, we're seeing
unprecedented in modern times the number of projects that are
moving forward outside the Federal process. It used to take 5
years to get through that process. It now takes 10 years. There
are many reasons for that. Not all of them can be laid at the
feet of the Federal Transit Administration, but it is a broken,
flawed process, and as a result, it needs to be fixed, and it's
our hope to work with the Congress to make sure that we can
move good projects along that will improve transit for
Americans.
At this time, with high gas prices, with the increasing
concern about global warming and climate change, Americans need
choice. That's what transit gives them.
Senator Murray. Okay. And my time is up. I will turn it
over to Senator Bond.
Senator Bond. Thank you very much, Madam Chair. Mr. Ray, I
don't want to influence the outcome of your review of RABA but
a little historical fact you may not be aware of.
RABA is in the law because of the Chafee-Bond proposal in
T21, now known as the Bond-Chafee proposals. So just keep that
in mind when you're looking at RABA, if you would.
Mr. McCaskie, I would say that Missouri may rival you in
bridge needs. We are now down to a maintenance-only status in
Missouri. So, we are up against the wall.
DULLES CORRIDOR METRORAIL PROJECT
But I want to address a very difficult question to Mr.
Simpson. You are faced with tremendous popular pull and appeal
in the Beltway for the Dulles Rail Project. On the other hand,
you have a responsibility to the taxpayers in Washington,
Missouri, and the rest of the Nation to spend the money wisely,
and I would like to know how the process, the review is
proceeding, when it will be completed. It continues month after
month, and it's my understanding that if these funds lapse,
they're 2-year funds, there will be--could be significant
funds, and I would be interested in knowing how you would
handle the reprogramming should the decision be made not to go
forward.
Mr. Simpson. The Dulles Project has been getting a lot of
attention, as you know, in the local area, more than we'd care
to read about, but in a nutshell, we are the last firewall, the
Federal Transit Administration, for the taxpayer's dollar.
This is a mega project. The first phase is $3 billion. The
second phase is $3 billion. That's $6 billion and that's before
you turn the key and start to operate the system. So, we want
to make sure before we make that kind of a commitment over a
10- or 20-year period that the taxpayer is getting the best
bang for the dollar.
We have numerous concerns, probably too many to enumerate
right now, but it's been part of the public record that we've
been working with the folks in Virginia, the Governor's office
and the congressional delegation. I was pressed by the
Commonwealth of Virginia and by the Metropolitan Washington
Airports Authority (MWAA) to give them an answer by January 31,
because of contracts that they had ready to proceed.
When we looked at that project, I guess it was January 23,
there was no way that I in good conscience could move that
project forward, given the complexities of the project, given
the unanswered questions, and also given the state of good
repair of the WMATA system.
It's like building a 25 percent addition on to your home.
The other witness talked about the house analogy. Let's say
you've got the roof collapsing and, you've got shorts in the
electrical system and you've got water in the basement and you
come to the bank, that is the FTA, and you're looking for a
loan to put this 25 percent addition on to your house. You've
got to stop and wonder, hey, wait a minute, what's going on
here?
So, we're in the process of working with the Commonwealth,
with WMATA, with MWAA and all the other stakeholders to try and
get the wheels back on the track to Dulles.
Senator Bond. If the funds were to lapse, how would they be
reprogrammed?
Mr. Simpson. Are you talking about the funds that have
already been committed to the project? It's about a $180
million left.
Senator Bond. Well, actually, there would be--there could
be. There was a tremendous impact. Would there be unspent funds
from the 180 or has that already been blown?
Mr. Simpson. No.
Senator Bond. Spent?
Mr. Simpson. The total Federal share is about $900 million
and approximately $200 million have been committed. About $153
million is still unobligated. I guess you'd have to ask the
congressional delegation what they would like to do with that.
I don't know, but I'll tell you the rest of that pot, that $750
and some odd million would be up for grabs for another project.
URBAN PARTNERSHIP AGREEMENTS
Senator Bond. Okay. Now let me ask you something on which I
have a rather strong opinion. You may have read about it some
place.
I'd like to ask you about the use of the 2007 bus facility
money, some $844 million, for five communities or urban
partners to ``incentivize'' the city councils and the State
legislatures to impose tolls and also we in Congress are owed a
3-day notice after the terms have been met before grants are
announced and I heard the Secretary may be preparing to
announce a major grant to one city before the tolls have been
implemented, and I'd like to know how that works.
Mr. Simpson. The Federal Transit Administration will follow
SAFETEA-LU to the letter of the law. We will give the three-day
notification before we at FTA make any sort of announcement.
I'm sure the Department will as well.
Senator Bond. And does that not require that the tolls be
implemented before they grant the money?
Mr. Simpson. That was a departmentwide initiative. Since
I'm on the transit side, I'm going to tell you what I've heard.
The cities have to have the legislative authority. They need
not have the toll booth up and running, but they have to have
the legislative authority. Right now, I believe Miami and San
Francisco are the only two cities right now that have the
legislative authority to move forward.
Senator Bond. Well, that's because we heard rumors there
was going to be an announcement of another city before they had
the legislative authority, and I'm glad you agree with us.
Mr. Simpson. What city would that be?
Senator Bond. New York.
Mr. Simpson. New York?
Senator Bond. Yes.
Mr. Simpson. I believe the deadline is April 7, on New York
to get their State legislation to vote. It's in the hands of
the State. The city council passed the resolution, I think it
was on Monday, and the State needs to vote before April 7.
Senator Bond. And if they don't vote, no announcement, if
they don't approve it.
Mr. Simpson. That's correct.
Senator Bond. Okay. I want to ask just quickly to Mr. Ray.
I have mentioned in the previous hearing, I'd asked Secretary
Peters about the rescission. SAFETEA requires an $8.5 billion
rescission on September 30, 2009.
EXCESS CONTRACT AUTHORITY
How much contract authority would be available for future
rescissions if we were to include the $3.89 billion that is in
your budget, along with the $8.5 billion rescission called for
in SAFETEA?
Mr. Ray. Senator Bond, that's a good question. I'm not
surprised that you asked it and actually did a little bit of
homework in advance of this hearing to look into it.
It is a fluid number, of course, it moves. So, it's based
completely on our estimates, but we believe there would be
approximately $5 billion in contract authority still available
in excess of the obligation amount that we would have available
to us at the end of that time period.
Senator Bond. There would be $5 billion on top of that?
Mr. Ray. Approximately $5 billion on top of that.
Senator Bond. We'd be interested to see the numbers. Thank
you, Madam Chair.
[The information follows:]
The Federal-aid highway program currently has $16.8 billion in
excess contract authority. Under the Safe, Accountable, Flexible,
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU),
$8.7 billion in contract authority will be rescinded in fiscal year
2009. If Congress were to also enact the $3.2 billion in rescissions
proposed in the fiscal year 2009 President's budget request,
approximately $5 billion in excess contract authority would remain at
the end of the current authorization.
REIMBURSEMENTS WHEN SHORTFALL
Senator Murray. Thank you, Senator Bond. Administrator Ray,
let me go back to you.
As much as we all want to prevent the Highway Trust Fund
from going bankrupt, I think it's still important that we all
understand what might happen if that Trust Fund's balance is
depleted.
Because the Highway Program operates on a reimbursable
basis, by the time States apply for funding from the Highway
Trust Fund, they've already spent their own funds completing
projects that they know are going to be eligible for Federal
assistance.
If the Trust Fund were to go bankrupt, States may find that
the money isn't there when they ask for reimbursement from the
Federal Government. How would you decide which States get
reimbursed first?
Mr. Ray. Well, that's an interesting question, Madam Chair,
and I appreciate it. It's something that we're looking at right
now and, as you already mentioned, we don't have the authority
to slow down or stop obligations. We will continue business as
normal. But bankrupt may not be the most appropriate word--
perhaps shortfalls is more accurate.
As you know, we get receipts from the Treasury into the
Highway Trust Fund twice a month, with the exception of
October, in which one deposit is made. Right now States can get
their reimbursements almost instantaneously.
Senator Murray. Correct.
Mr. Ray. What will happen is that we will experience fits
and starts, and so there could be a tremendous slowdown. We
have not actually decided what framework we would use.
Senator Murray. Are you looking at establishing criteria?
Will it be a first come/first serve basis?
Mr. Ray. We are looking into that issue now. We've not
decided. First come/first serve is certainly one potential
approach and we'd be happy to work with you in terms of how
we're going to do that, but we have not decided that framework
yet.
Senator Murray. What do you mean when you say fits and
starts in terms of reimbursement? Couple days? Few weeks?
Months? What?
Mr. Ray. We're estimating a $3.2 billion shortfall and that
is if Congress gives us the flexibility to borrow from the Mass
Transit Account. That's not going to occur in any 1 day. It
will build up over time.
So, in the early days, certainly there will be a gap,
possibly until the next receipts come in 2 weeks later or
potentially sooner than that. As that balance builds up, the
length of time will extend.
Senator Murray. Are you beginning to talk to States about
that possibility? Are you giving them any advice on managing
their funds?
Mr. Ray. Those conversations are just beginning, are
underway. In fact, I had one just last week with the Nevada DOT
and so those conversations are beginning.
Senator Murray. Mr. McCaskie, in your formal testimony, you
say that ``economic pressures have already forced States to
slow down their bids for contracts so that the impact is really
being felt across the industry,'' and you testified that
``States become even more conservative when they feel uncertain
about their highway grants.''
Have you started to see evidence of that at your own
company?
Mr. McCaskie. I cannot say that in Pennsylvania, which is
where Swank primarily operates, that we have seen a cutback in
highway spending at this point. However, going down the road,
there's a stonewall.
We face the same problem on State funding. We're right at
the edge. The Department of Transportation in Pennsylvania is
doing everything they possibly can with the money available to
maintain the roads. There is no expansion whatsoever with the
exception of the Pennsylvania Turnpike which is a separate
authority.
There's concern that--for instance, there is a lot of work
being done and the Department is asking contractors now can you
handle this and I've heard contractors say yes, we can handle
it. Well, you better build up; we're going to have more work.
They say no, we are not building up because we have had
promises in the past too many times.
The stability of funding is paramount. If a firm or an
individual is going to invest in equipment and develop people,
employ people, he has to have a long-range steady program that
he can depend upon and a lot of firms in the highway
construction industry are strictly in the highway construction
industry. They aren't into what's known as vertical
construction. They're heavy and highway contractors.
TRANSIT ACCOUNT REPAYABLE ADVANCE
Senator Murray. Thank you for that. Mr. Simpson, let me ask
you. The administration is asking this subcommittee to include
language in our appropriations bill that would allow the
Highway Account of the Trust Fund to borrow from the Transit
Account.
Even with the President's proposed cut in highway spending,
OMB is still estimating that the Transit Account would have to
borrow $3.2 billion from the Highway Account just to get
through the year.
Based on the President's anticipated levels of highway and
transit spending in our future years, is there any reason to
believe that this Transit Account would ever be repaid?
Mr. Simpson. I think the first answer is that we look at
the Highway Trust Fund as one entity, not as the Highway and
Mass Transit Account, and we know that the Transit Account
would probably go bankrupt as well around 2011 or 2012. One of
the concerns I had as the Federal Transit Administrator is that
if we left that shortfall in the Highway side, that about $1
billion a year in CMAQ and STP flexed from Highway into the
Transit Account. So, the concern that I had personally as the
FTA Administrator, is that's 10 percent of the Transit Program.
We've got about $10 billion in our own budget, plus another $1
billion is flexed from Highway. So that was an immediate
concern.
Second, we look at this as more of a mobility problem, one
problem that the entire Surface Transportation Program has, not
Highways versus Transit. When we talked about this as far as
our Department is concerned and the administration is
concerned, this was the best fix for now. For the long term, we
are looking to the reauthorization.
Senator Murray. Okay. I'm certain we'll have more
discussions about this. So, let me ask you one more question
and then I'll turn it over to Senator Bond for his questions.
CHARTER BUS RULE
Your agency, Mr. Simpson, has a new rule that is supposed
to come into effect at the end of April that restricts special
bus services that can be run by publicly-subsidized transit
agencies.
In Seattle, our city and our transit agency have made a
commitment to minimizing congestion during our Seattle Mariner
games and our University of Washington football games by
running free buses from all parts of the city to the ballparks.
That service, by the way, has made a huge difference in our
city, it keeps the city out of gridlock. However, there's
concern, I am told, that this new rule could cause part of that
service to be canceled.
Can you explain to me why you are working on a rule that
would really worsen the congestion problem in Seattle and
probably other cities?
Mr. Simpson. Madam Chair, are you talking about the new
charter rule that went into effect?
Senator Murray. Correct, yes.
Mr. Simpson. It's one of the few rules that both the public
and the privates are happy about, actually. That's been in
print. I don't know the specifics on the Seattle situation, but
I'd be more than willing to work with staff when we finish
here.
Senator Murray. Okay.
Mr. Simpson. People are still digesting the rule. It was
just published. As a matter of fact, Bill Millar and I spoke
earlier. There's a lot of confusion about the rule because it
is complex.
Senator Murray. Mr. Millar, have you heard similar
concerns?
Mr. Millar. Yes, there are concerns around the country that
what used to be classified as public transportation service is
now classified as charter service and so we have asked the
Federal Transit Administration to work carefully with us to
make sure our members understand how to comply with the new
rule and understand the best way to handle these situations.
Mr. Simpson. Since I worked on the rule myself, I know it
is very complex. But, there are opportunities now that the
public agencies never had before in order to provide charter
service, particularly for government officials on official
business.
Senator Murray. Well, this program, in our city, makes a
huge, huge difference, and so I would like my staff to work
with you on this issue.
Mr. Simpson. We will work with your staff today on it. If
they will call us any time after 12 o'clock today, we'll get
with them.
Senator Murray. So will everybody else now.
Mr. Simpson. That's all right.
Senator Murray. Okay. Thank you very much. Senator Bond.
Senator Bond. Thank you very much, Madam Chair. I think
you've asked the most important questions. There are many
questions remaining, but I believe we have significant
questions for our friends to speak about Amtrak. So, I will
pass on further questions and thank the witnesses for their
participation.
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. Thank you very much to all of our
witnesses. We will leave the record open for additional
questions for members who couldn't be here today. Thank you
very much, with that, if our next panel could come up and be
seated.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to Hon. James S. Simpson
Questions Submitted by Senator Patty Murray
APPROPRIATE BALANCE FOR THE HIGHWAY TRUST FUND
Question. As we talk about what needs to be done to fix the Highway
Trust Fund, we need a better understanding of what level of balances
would provide an adequate safety net for the Highway Trust Fund.
Administrator Simpson, as I have mentioned in the hearing, the
transit account of the Highway Trust Fund is also in a precarious
situation. Even without the borrowing authority requested by the
administration, the transit account is expected to go bankrupt over the
next few years.
What are your thoughts on the appropriate balance of the transit
account?
Answer. The appropriate balance in the Mass Transit Account depends
on many different factors, including forecasts of future revenue and
anticipated Federal funding for transit. One of the goals in the Safe,
Accountable, Flexible, Efficient, Transportation Equity Act: A Legacy
for Users (SAFETEA-LU) was to spend down the balances in the Highway
Trust Fund and Mass Transit Account. SAFETEA-LU also restructured
Federal Transit Administration programs to eliminate split funded
(trust fund and general fund) accounts, so that outlays from the MTA
are not premature.
Going forward and in general, projected spending levels should not
exceed projected receipts. A prudent balance in the MTA would fund
annual Federal Transit Administration programs over the course of the
next authorization, based on projected receipt levels, with a
sufficient cushion to keep the account solvent if receipts are below
projected amounts.
FEDERAL TRANSPORTATION OVERSIGHT
Question. This administration claims that the Federal Government
should play a reduced role in infrastructure investment. Given that
most Federal oversight is accomplished by requiring States to meet
certain standards in order to receive their highway grants, I would
like to know what reducing the Federal role means for continuing any
kind of meaningful oversight.
Recent GAO reports have indicated that there is already a lot of
room for the Federal Government to improve its oversight over our
highway system. Your agency currently has only a limited ability to
ensure that projects are completed efficiently, Federal dollars are
invested in projects with the greatest benefit, and complex projects
are built safely.
According to one GAO report, State departments of transportation
are increasingly using contractors to carry out what had been primarily
government jobs, such as engineering, inspection, and quality
assurance. As a result, staffs at the State level are finding it
difficult to oversee a growing number of projects, and they are losing
their in-house expertise.
Administrator Simpson, you provide a very high level of scrutiny
for transit projects that are applying for New Starts funding. Again,
this oversight is possible because project sponsors are very interested
in receiving a New Starts grant agreement from the FTA.
Do you believe that this oversight works in terms of improving the
quality of transit projects being built across the country?
Answer. In the early 1980s, several FTA-funded transit projects
suffered major setbacks due to problems with quality, cost overruns,
and delays in schedules. To safeguard the Federal investment and ensure
public safety, Congress directed FTA (then the Urban Mass
Transportation Administration) to establish the Project Management
Oversight (PMO) Program. The Program is financed by setting aside 1.0
percent of the funds available under 49 U.S.C., section 5309, Capital
Investment Programs, 0.75 percent of funds available from sections
5307, Urbanized Area Formula, and 0.05 percent from section 5311, Non-
urbanized Area Formula Program. Today, PMO contractors monitor projects
worth over $80 billion in a very effective and systematic manner and in
accordance with pre-established guidelines. PMO contractors serve as an
extension of FTA's technical staff in assessing grantees' project
management and technical capacity and capability to successfully
implement major capital projects. They also monitor the projects to
determine if they are progressing on time, within budget, and in
accordance with the grantees' approved plans and specifications. The
PMO program has repeatedly proven to be a very powerful, effective, and
efficient tool in monitoring major capital transit projects. We have
also witnessed some project sponsors incorporating some of the project
management oversight tools and principles into their project
development plans on non-FTA funded projects and believe FTA's project
management oversight is definitely helping improve the quality of
transit projects being built across the country.
BORROWING FROM THE TRANSIT ACCOUNT
Question. Mr. Simpson, the administration is asking this
subcommittee to include language in our Appropriations bill that would
allow the highway account of the trust fund to borrow from the transit
account in 2009. Even with the President's proposed cut in highway
spending, OMB still estimates that the transit account would have to
borrow $3.2 billion from the transit account just to get through the
year.
Administrator Simpson, based on the President's anticipated levels
of highway and transit spending in future years, is there any reason to
believe that the transit account will ever be repaid? If so, where will
the money come from and when will it happen?
Answer. As I stated our goal is to ensure the solvency of the
Highway Trust Fund through the current authorization period. The topic
and solution to the future solvency of the Highway Trust Fund,
including and the Mass Transit Account, will be addressed in the next
surface transportation reauthorization. The MTA remains solvent until
2010 with the proposed ``advanced payment'' provision in the
President's fiscal year 2009 budget. I believe that once the Highway
Trust Fund solvency issues are solved there is no reason to believe
that the MTA will not have sufficient resources to meet all future
commitments.
Question. My understanding is that this proposed transfer will just
speed up the date at which the transit account will go bankrupt from
2011 to 2010.
Mr. Simpson, why does the administration believe that the way to
solve the problem of a bankrupt highway account is to expedite the
bankruptcy of the transit account?
Answer. The administration estimate is that if the MTA transfers
funds to the Highway Account during fiscal year 2009, both accounts
will remain solvent until fiscal year 2010. This provision will fund
surface transportation programs at levels requested in the President's
fiscal year 2009 budget and delay the impending shortfall in the
Highway Account of the Highway Trust Fund until fiscal year 2010, past
the point when Congress is scheduled to enact the next surface
authorization. This mechanism has a precedent in the ``repayable
advances'' used during the early years of the Highway Trust Fund. The
mechanism was used in 1960, 1961, and 1966 and each time the advance
was repaid.
TOLLING AND PRIVATIZATION
Question. The Secretary has clearly stated in previous testimony,
as well as in her dissent from the Surface Transportation Policy
Commission Report, that she supports a greater role for tolling and
private investment in our highway infrastructure, and a reduced role
for Federal funding. Your testimony today also praises tolling, but
does not mention its close ties to privatization.
A GAO report released last month found that many existing road
privatization schemes are expected to short-change the public in the
long term and to restrict our ability to respond to changing
transportation needs.
The GAO study also found that public opposition to private toll
schemes has prevented several such projects from getting off the
ground. Opposition to proposals like the Trans-Texas Corridor shows us
that, even if we encourage privatization at the Federal level, many
State and local communities are unwilling to accept it. Just last year,
at the strong urging of all sides of the Texas delegation, we enacted a
provision that banned the tolling of certain highways in Texas.
You claim in your testimony that tolls collected on highways can be
used for local transit projects. This may be true for publicly-owned
toll roads, but a private toll road's purpose is to generate revenue
for investors, not for local governments, and certainly not for transit
agencies.
Administrator Simpson, how does private tolling of highways provide
for the Nation's rapidly growing transit needs?
Answer. Private tolling of highways involves the long term lease of
existing, publicly-financed toll facilities to a private sector
concessionaire for a prescribed concession period during which they
have the right to collect tolls on the facility. In exchange, the
private partner must operate and maintain the facility and in some
cases make improvements to it. The private partner must also pay an
upfront concession fee.
It is this upfront concession fee that enables States to address
longstanding transportation needs. It has been shown that the
facilities where tolls are used to manage traffic create free-flow
conditions that benefit transit vehicles by ensuring predictable travel
times.
The State of Indiana entered into a toll concession and lease
agreement with the ITR Concession Company for $3.8 billion. The receipt
of these funds enabled the State of Indiana to pay for longstanding
transportation improvements throughout the State. Similarly, the State
of Pennsylvania has accepted a bid of $12.8 billion to lease the
Pennsylvania Turnpike, providing the State with resources to repair
deteriorating transportation infrastructure and invest in new
construction.
Given the growing need for transit, it is the State's choice to use
concession fees from long term leases of highway facilities to invest
in transit as part of an overall strategy to improve their
transportation system.
______
Questions Submitted to James D. Ray
Questions Submitted by Senator Patty Murray
APPROPRIATE BALANCE FOR THE HIGHWAY TRUST FUND
Question. As we talk about what needs to be done to fix the Highway
Trust Fund, we need a better understanding of what level of balances
would provide an adequate safety net for the Highway Trust Fund.
Administrator Ray, what do you believe is the appropriate balance
to maintain in the highway account of the Highway Trust Fund?
Answer. The purpose of maintaining a positive cash balance in the
Highway Account is to provide a cushion in the event that Highway
Account tax receipts, obligations, and/or outlays are not as projected
at the time an authorization act is enacted. In addition to providing a
cushion from the normal economic ups and downs that impact Highway
Account receipts, maintaining a sufficient cash balance also provides
time for remedial Congressional action should a dramatic event occur,
such as an interruption of shipments of foreign oil, or a dramatic
downturn in revenue.
Factors to be considered in determining the minimum prudent balance
for the Highway Account are the size of the programs funded by the
Highway Account, historic errors in projecting receipts and outlays,
the time that would be needed for legislative action to correct any
imbalance between receipts and outlays, and the degree of risk of short
term insolvency that the Federal Government is willing to bear.
In recent years, receipt and outlay estimates have been within plus
or minus 2 percent, but secondary sources indicate that the receipt
projections were off by about 14 percent as the result of the 1973 oil
embargo. Risk assessment principles would suggest that the minimum
balance be based on likely estimation error rather than the maximum or
minimum error. Of course, the effect of a potential 2 percent error on
the need for a minimum cash balance depends on the size of the program.
Question. Administrator Ray, do you have a detailed reauthorization
proposal that will allow the Congress to see how you would address
these concerns?
Answer. The Department recently released a comprehensive and
fundamental reform proposal a copy of which can be found at http://
www.fightgridlocknow.gov/.
Question. Will the reauthorization proposal include legislative
language so that the Congress can see exactly how the administration
proposes to change current law?
Answer. The Department is working on legislative language, but has
not yet decided when or in what manner it would be released. The
Department may choose to submit some of the concepts as individual
components rather than as a complete proposed bill.
FEDERAL TRANSPORTATION OVERSIGHT
Question. This administration claims that the Federal Government
should play a reduced role in infrastructure investment. Given that
most Federal oversight is accomplished by requiring States to meet
certain standards in order to receive their highway grants, I would
like to know what reducing the Federal role means for continuing any
kind of meaningful oversight.
Recent GAO reports have indicated that there is already a lot of
room for the Federal Government to improve its oversight over our
highway system. Your agency currently has only a limited ability to
ensure that projects are completed efficiently, Federal dollars are
invested in projects with the greatest benefit, and complex projects
are built safely.
Question. Administrator Ray, do you agree that Federal oversight
over the Nation's highway system should be strengthened?
Answer. At its heart, the Federal-aid highway program is a
federally assisted State program. I believe that at the Federal level,
we have a responsibility to those who use our highways and pay for them
through their Federal highway fuel taxes to ensure that the funds are
effectively and efficiently invested to support the transportation
projects that promote national interests (e.g., interstate commerce,
defense and security and economic well being) and meet regional needs.
More rigorous, data-driven and mode-neutral transportation
decisionmaking by State and local officials is needed, including the
use of asset management techniques, benefit-cost analyses, and a focus
on improving the safety and performance of our transportation systems.
Question. Do you see a conflict between reducing the Federal role
in transportation investment and maintaining Federal oversight?
Answer. No. I do not equate achieving a better focused Federal role
in transportation investment with a reduced Federal role. The Federal
role in surface transportation policy should be better focused than it
is today to provide for surface transportation needs that are critical
to the Nation as a whole. The Federal role includes providing
leadership for, and stewardship of, the system with a focus on
enhancing system performance. This includes ensuring that the
Interstate System and other facilities of national significance, which
are critical to the Nation's interstate commerce, are maintained
properly, rebuilt as needed, and expanded when justified; maintaining
the productivity of our metropolitan areas, which are the economic
engines of the Nation's prosperity and which experience the
overwhelming share of congestion; and providing for safety on all our
Nation's roads. As described above, I believe that decisionmaking for
investment of Federal funds in these national priorities warrants
additional attention.
Question. According to one GAO report, State departments of
transportation are increasingly using contractors to carry out what had
been primarily government jobs, such as engineering, inspection, and
quality assurance. As a result, staffs at the State level are finding
it difficult to oversee a growing number of projects, and they are
losing their in-house expertise.
Do you believe that it would be easier for States to oversee
highway development that has been transferred to the private sector?
Answer. In general, because State DOTs are unlikely to serve as the
construction contracting entity when States enter into a highway
development agreement with a private sector partner, demands on State
employee resources are likely to be considerably lessened but clearly
not eliminated. The degree of State employee involvement in project
development is unique to the development agreement, the size and type
of project negotiated between the State DOT, and the private developer.
While there may be many routine oversight functions and tasks a private
sector partner may perform and certify to the State, State DOTs are
still ultimately responsible for the quality control and assurance
associated with how a project is designed, constructed, maintained and
operated. In some cases, the size and type of a project may still
require a State DOT to provide a substantial amount of staff and
resources to ensure it is suitably equipped to provide the appropriate
level of stewardship and oversight needed for each partnership with the
private sector. The commitment of the staff and resources that may be
necessary to ensure the public interests are represented in these
partnerships is typically not covered or funded through an agreement
with a private sector partner.
TOLLING AND PRIVATIZATION
Question. The Secretary has clearly stated in previous testimony,
as well as in her dissent from the Surface Transportation Policy
Commission Report, that she supports a greater role for tolling and
private investment in our highway infrastructure, and a reduced role
for Federal funding. Your testimony today also praises tolling, but
does not mention its close ties to privatization.
A GAO report released last month found that many existing road
privatization schemes are expected to short-change the public in the
long term and to restrict our ability to respond to changing
transportation needs.
Administrator Ray, do you agree that encouraging the privatization
of our highway infrastructure on a grand scale is a responsible
decision?
Answer. Increased involvement and investment in the development,
maintenance and operation of our highway system is a necessity if we
are to resolve the current imbalance among the needs of our system,
funding availability and the need to deliver projects in a more timely
manner whether that investment is derived from public sector resources
or the private sector. In this era of fiscally constrained budgets,
private investment in State transportation assets permits States to
target public sector funds on projects that are not able to be
supported by user fees.
The great majority of goods and services produced in our economy
are provided by the private sector, including telecommunications,
electricity, and freight rail transportation. Given that we trust the
private sector in these and other essential areas, there is no reason
that the private sector cannot play a major role in serving all surface
transportation infrastructure needs. An increased private sector role
does not connote privatization. In virtually all highway public private
partnerships, the public sector owns the roads and is able to establish
performance standards governing their use.
I would also note that the GAO report (page 19) cited above also
found: ``Highway public-private partnerships have resulted in
advantages from the perspective of State and local governments, such as
the construction of new facilities without the use of public funding
and extracting value--in the form of up-front payments--from existing
facilities for reinvestment in transportation and other public
programs. In addition, highway public-private partnerships can
potentially provide other benefits to the public sector, including the
transfer of project risks to the private sector, increased operational
efficiencies through private sector operation and life-cycle
management, and benefits of pricing and improved investment
decisionmaking that result from increased use of tolling.''
The GAO study also found that public opposition to private toll
schemes has prevented several such projects from getting off the
ground. Opposition to proposals like the Trans-Texas Corridor shows us
that, even if we encourage privatization at the Federal level, many
State and local communities are unwilling to accept it. Just last year,
at the strong urging of all sides of the Texas delegation, we enacted a
provision that banned the tolling of certain highways in Texas.
Question. Administrator Ray, given the public's hostility to road
privatization, how can we rely on private capital to replace Federal
funding in providing critical highway infrastructure?
Answer. One reason some oppose public-private partnerships is that
they believe ownership of facilities will be turned over to the private
sector and the public sector will lose all control over the facility.
This, however, is not how public-private partnerships are being pursued
in this country or in other countries around the world. Other reasons
that public-private partnerships are opposed include fears that the
private sector will be free to set whatever toll rates they choose, and
concern about the private sector not maintaining the condition and
performance of facilities they operate. These concerns result primarily
from a lack of information about how public-private partnerships
operate or misinformation spread by opponents of public-private
partnerships. In some States, opposition to public-private partnerships
stems from a more general opposition to tolls, not from the fact that
facilities would be operated by the private sector.
We are not proposing that public-private partnerships replace all
Federal funding, and in States where they are implemented, public-
private partnerships replace not only a portion of Federal funding, but
State fuel tax revenues as well. Polls have shown that when given a
choice, more highway users would prefer to fund new highway
improvements from tolls than from general increases in the gas tax.
When presented with the facts concerning public-private partnerships
and when presented with the options available to fund needed highway
improvement programs, we believe users in more and more States will
support the use of private capital to fund new highway improvement
programs rather than increases in their fuel taxes.
Again, I would cite the aforementioned GAO study (page 72):
``Highway public-private partnerships show promise as a viable
alternative, where appropriate, to help meet growing and costly
transportation demands. The public sector can acquire new
infrastructure or extract value from existing infrastructure while
potentially sharing with the private sector the risks associated with
designing, constructing, operating, and maintaining public
infrastructure.''
FUTURE OUTLOOK AND BUDGETARY NEEDS FOR AMTRAK
DEPARTMENT OF TRANSPORTATION
Federal Railroad Administration
STATEMENT OF HON. JOSEPH H. BOARDMAN, ADMINISTRATOR
Senator Murray. Okay. As our panelists take their seat, no
one in the audience needs panic. There are five witnesses but
two of them are going to combine their 5-minute time, Donna
McLean and Mr. Kummant. So, I appreciate that.
We will hear first from Joseph Boardman, who's the
Administrator at the Federal Railroad Administration. Then
Donna McLean, Chairman of the Board of Amtrak, and Mr. Kummant,
President and CEO of Amtrak, will share 5 minutes. Then we will
here from Mr. David Tornquist, Assistant Inspector General, and
then Joel Parker, the International Vice President and Special
Assistant to the President on Transportation and Communications
International Union.
So, we'll begin with Mr. Boardman.
Mr. Boardman. Chairman Murray and Ranking Member Bond, I
appreciate the opportunity to appear before you today on behalf
of Secretary of Transportation Mary Peters and the Bush
administration to discuss the president's budget proposal for
fiscal year 2009 as it relates to the FRA and Amtrak.
Safety remains FRA's mission, essential activity and
strategic performance objective. You'll find in my written
testimony and our fiscal year 2009 budget request that provides
a greater detail about the FRA essential safety initiatives.
However, given today's hearing, I'll limit my comments to the
largest portion of our request, our intercity passenger rail
funding.
In 2009, FRA requests $800 million in direct assistance for
Amtrak and a $100 million to expand the new Intercity Passenger
Rail Grant Program, which Congress appropriated $30 million for
in 2008.
The 2009 Amtrak request is intended to encourage the
corporation to continue to implement meaningful reforms and
control spending. I would note that while Amtrak has made
progress in certain reform initiatives, significant progress
remains to be achieved. In particular, the corporation's 2009
grant request does not articulate how it will achieve
operational savings necessary to meet its growing labor and
fuel costs in 2009 and beyond.
As you know, we have requested $100 million to expand the
Intercity Passenger Rail Grant Program, which awards
competitive matching grant, capital grants to States for
intercity passenger rail services. This program truly
represents the single most important initiative to spur
corridor development and create market pressure, to drive
reform and service improvements at Amtrak.
After just one week of accepting applications, we received
three applications and expressions of strong interest from 13
other States. The request includes $525 million in direct
Federal subsidies for Amtrak capital costs and this amount
allows Amtrak and its State partners to continue to address the
most pressing investment needs in the Northeast corridor
infrastructure as well as essential equipment investments.
I commend Amtrak on its efforts to seek a more
collaborative investment process by engaging in a multi-State
Northeast corridor user planning group.
I would note, however, that the corporation has further
work to do in developing long-term capital investment
strategies for other assets, particularly fleet and stations.
PREPARED STATEMENT
The administration's request also includes $275 million for
operating expenses that are to be made available to Amtrak as
they demonstrate and achieve efficiencies. Under this account,
the 2009 request proposes establishing a new competitive pilot
program that would allow the Secretary to test the viability of
using non-Amtrak operators on selected routes to provide
passenger rail services.
I appreciate your attention and yield back my time.
[The statement follows:]
Prepared Statement of Hon. Joseph H. Boardman
Chairman Murray, Ranking Member Bond, I appreciate the opportunity
to appear before you today on behalf of Secretary of Transportation
Mary Peters and the Bush administration to discuss the President's
budget proposal for fiscal year 2009 as it relates to the Federal
Railroad Administration (FRA) and Amtrak.
This budget request continues to support the administration's
commitment to ensuring that the Nation's rail transportation system is
safe, secure, and efficient. The requested $1.1 billion will sustain
and advance FRA's mission to improve railroad safety, while providing
valuable resources to ensure the continuation of intercity passenger
rail operations.
As you are aware, safety remains FRA's single most mission
essential activity and strategic performance objective. The fiscal year
2009 request includes $185 million in funds to directly support the
agency's core safety assurance, oversight and enforcement activities,
to achieve our goals of preventing and reducing railroad accidents and
incidents and contributing to the avoidance of serious hazardous
materials incidents in rail transportation. Included within FRA's
safety budget is $1.2 million to expand the implementation of the Close
Call Confidential Reporting Pilot (C3RP) program. This initiative
allows FRA to more effectively leverage its resources by expanding its
partnership with industry to promote risk reduction programs on the
Nation's railroads.
With regard to FRA's Railroad Research and Development activities,
the fiscal year 2009 request includes $34 million to support our
Railroad Safety efforts. Of note are new initiatives that fund research
in the area of ``level boarding'' to support further access and
compliance with the Americans with Disabilities Act; the development of
new Joint Bar Inspection technology; and procurement of a high-speed
ultrasonic rail flaw detection system.
By far, the largest portion of FRA's fiscal year 2009 request
provides $900 million in financial assistance for intercity passenger
rail services. This total includes $800 million in direct subsidies to
Amtrak and $100 million to expand the current $30 million Intercity
Passenger Rail Grant Program that was appropriated for the first time
in fiscal year 2008. In total, this funding level will support
continued intercity passenger rail service, while Amtrak's management
team continues to make progress in reshaping the company. This funding
level encourages Amtrak to continue to undertake meaningful reforms and
control spending.
The administration remains steadfast in its desire to improve the
manner by which intercity passenger rail services are provided. This,
of necessity, also includes improvements to how Amtrak provides such
services and laying the groundwork for the States to have a stronger
role in determining the important characteristics of services that they
support financially and for the participation of other entities in the
provision of intercity passenger rail service under contract to States
and/or Amtrak.
The fiscal year 2009 budget request marks part of a multi-year
effort to reduce, and eventually eliminate, federally funded operating
subsidies for Amtrak. Overall, this level of subsidy is appropriate as
it provides Amtrak continuing incentive to more effectively manage
costs, rationalize its services, and pursue innovations. It also
expands State support for intercity passenger rail, thus putting more
of the decisions on what should be operated with public subsidies in
the hands of those who know best what intercity passenger needs exist
and how best to meet those needs.
AMTRAK CAPITAL GRANTS
The request includes $525 million in direct Federal subsidies for
Amtrak capital costs. This amount allows Amtrak and its State partners
to continue to address the most pressing investment needs on the
Northeast Corridor infrastructure as well as essential equipment
investments.
INTERCITY PASSENGER RAIL GRANT PROGRAM
In addition, the budget includes the aforementioned $100 million to
expand the new Intercity Passenger Rail Grant Program, which awards
competitive grants to States to finance the cost of State driven
capital improvement priorities associated with intercity passenger rail
services. This program encourages State involvement in planning and
decisionmaking for intercity passenger rail service, allowing them to
identify where mobility needs justify public investment. Additionally,
State involvement in planning and decisionmaking helps prioritize
infrastructure improvements, such as stations, and lets States assure
connectivity to other forms of transportation supporting intermodalism
within the State. State involvement in funding intercity passenger rail
service also provides an added discipline on Amtrak to continually seek
ways to provide the highest quality of service. A ``Notification of
Funds Availability'' for this program was published in the Federal
Register earlier, and we anticipate awarding the first grant under this
program later this fiscal year.
AMTRAK EFFICIENCY GRANTS
The administration's request also includes $275 million for
operating expenses that are to be made available to Amtrak as they
demonstrate and achieve efficiencies. Under this account, the fiscal
year 2009 request proposes establishing a new competitive pilot program
that would allow the Secretary to test the viability of using non-
Amtrak operators on selected routes to provide passenger rail services.
RAIL LINE RELOCATION AND IMPROVEMENT PROGRAM
Finally, I'd like to offer a brief update on the Rail Line
Relocation and Improvement Program. As you know, just over $20 million
was appropriated for this new program in fiscal year 2008. FRA is
taking aggressive steps to implement the program, and has developed
regulations governing its implementation. These regulations are
currently being cleared within the administration. We expect to issue
them this spring, with the first grant awards under the program
beginning in fiscal year 2009.
I appreciate your attention and would be happy to answer questions
that you might have.
Senator Murray. Thank you very much. We will move to Donna
McLean and Mr. Kummant.
AMTRAK
STATEMENT OF DONNA McLEAN, CHAIRMAN, BOARD OF DIRECTORS
Ms. McLean. Thank you. Good morning, Chairman Murray and
Senator Bond. Thanks for the opportunity to testify before the
committee this morning.
I am the Chairman of the Board of Amtrak, a position I
assumed in November 2007.
I'd like to thank the Senate for the recent confirmation of
our new Board members, Nancy Naples of New York and Tom Carper
of Illinois.
As Chairman, I envision the Board as functioning as a
governing body, one that provides a combination of oversight
and guidance. The Board should be in the business of setting
goals and monitoring and assessing performance, but the day to
day management of the company is the responsibility of Alex
Kummant and the Executive Committee.
Alex has assembled an excellent team, and I'm very pleased
with the progress of Amtrak under Alex's guidance.
The Board and the Executive Committee are currently
refining our corporate strategy. We are developing a strategy
that's multiyear and provides detail and specific guidance for
the next 5 years.
One of our key questions, though, is how do we measure
success at Amtrak? As Alex will report, our ridership and
ticket revenue are up. They're increasing in almost all of our
markets and that's success, right? Well, Amtrak's corporate
debt is decreasing. That's good as well, but our operating
subsidy needs are increasing, but at the same time, our subsidy
per passenger mile is declining.
Our fiscal year 2007 on-time performance was around 82
percent in the Northeast corridor and our capital needs are
growing. We collect a lot of great data, but our real challenge
is going to be analytical. We've often looked at ridership and
revenue and stopped.
The Amtrak team understands that we have to rely on some
additional measures, such as revenue per available seat mile,
load factor, on-time performance, and customer satisfaction
indicators which are a leading indicator in revenue. These
measures are going to be key components to both our day to day
operations and for planning in the long term.
PREPARED STATEMENT
As we set out to define success at Amtrak, we'll strive to
be increasingly transparent in all of our areas of business,
and I feel very strongly that it's our responsibility to
provide information to Congress and our other stakeholders and
that information should be clear and easy to understand.
Thank you.
[The statement follows:]
Prepared Statement of Donna McLean
Good morning Chairman Murray, Senator Bond, and members of the
committee. Thank you for the opportunity to testify before your
committee this morning. My name is Donna McLean, and I am the Chairman
of the Board of Amtrak, a position I assumed in November 2007. I was
confirmed as a member of the Board of Directors in late July of 2006.
Prior to that, I worked as Chief Financial Officer of the Department of
Transportation and as the Assistant Administrator for Financial
Services at the Federal Aviation Administration. Presently, I work as a
consultant and an adjunct professor, and I am based here in Washington,
DC.
The Amtrak Board of Directors is a seven-person body, and includes
the Secretary of Transportation; currently, five of those seats are
filled and two are vacant. I would like to thank the Senate for the
recent confirmation of our new board members, Nancy Naples O'Neill of
New York and Thomas C. Carper of Illinois. As Chairman, I envision the
Board functioning as a governing body, one that provides a combination
of oversight and guidance to ensure that the company is working toward
the attainment of its strategic objectives. The Board should be in the
business of setting goals and monitoring and assessing performance. The
day-to-day management of the company and the setting of specific
policies within the overarching framework of our strategic goals are
going to be the responsibility of Alex and our Executive Committee.
We are currently refining our corporate strategy. We have had a
provisional strategy since last summer, and it is included in the
business plan we have just published, since it guided the development
of our fiscal year 2008 budget. Currently, we are developing a strategy
that is multi-year but provides detailed and specific guidance for the
next 5 years. Our strategic priorities must reflect the dual nature of
Amtrak, which combines the goals of a private company with the
obligations of a public service provider.
MEASURING SUCCESS AT AMTRAK
To succeed, this company must be a safe, convenient and affordable
transportation choice for travelers. We recognize that we can't be
everywhere, and we know that there are markets where we will not have a
competitive advantage. But where we do provide service, it must be
professionally operated and as responsive as possible to the needs of
the traveling public.
So how do we measure success? As Amtrak's management team and I
have been working on our multi-year strategic plan, this is the central
question that the Board and I have to answer. As Alex will report, our
ridership and ticket revenue numbers are increasing in almost all of
our markets. That is success, right? Amtrak's corporate debt is
decreasing, which is also good. Our operating subsidy needs are
increasing. But at the same time, our subsidy per passenger mile is
declining. Our fiscal year 2007 on time performance was around 82.3
percent in the Northeast Corridor and our share of the air/rail market
has also improved, but our capital needs are growing. Our average on-
time performance on our long distance train routes in fiscal year 2007
varied from a low of 10.2 percent to a high of 86.2 percent.
The good news is we do a pretty good job of tracking and collecting
the basic data we need to inform our analysis. The real challenge is
going to be analytical--we are going to need to produce answers that
matter to us and are useful to other stakeholders. In other words, we
are going to have to do some thinking about what we want to know, why
we want to know it, and what it's telling us about consumer demand,
about the health of our business, and about our internal efficiency. We
will have to rely on some additional measurements such as:
--Operating ratio
--Revenue per available seat-mile
--Cost per available seat-mile
--Load factor
--On-time performance
--Customer satisfaction indices
--Partner (state and commuter authority) satisfaction
--Employee satisfaction
--Safety ratio
--Ridership growth
These measures will be key components of both our day-to-day
operations and for planning for the long term.
In my written statement I am submitting several charts and graphs
that will give you a better understanding of some of the metrics that
we rely on to monitor our performance. It is important for you to know
that I am asking the questions of the Board, the management, and the
employees of Amtrak--how do we measure ourselves? How can we best
position ourselves for the future, and how can we meet the growing
demand for our services, given our challenges? As we set out to define
success at Amtrak, we will strive to be increasingly transparent in all
areas of our business. I feel very strongly that it is our highest
responsibility to provide information to Congress and our other
stakeholders, and that information should be clear, easy to understand,
and transparent.
INTERMODAL CONNECTIONS
As we strive to provide a service that is increasingly transparent
and successful, as transportation providers, we have a couple of
important competitive advantages that we can offer travelers that
increase their range of choices. We are trying to think of travel not
just in terms of a rail trip, but in terms of the passenger's journey.
People don't wake up at 5 in the morning to ride an Amtrak train; they
wake up early to get to a meeting in Philadelphia which they just
happen to do via Amtrak. We must take into consideration the
passengers' need to get to and from the train station, a need that
intermodal planners will need to satisfy if we are to provide those
essential and convenient connections.
In fiscal year 2007, Amtrak carried 56 percent of what we call the
``New York to D.C. air-rail'' market--the people who either flew or
took the train. That number has been trending generally upward since
2000, when we had 37 percent of the market share. The Acela service has
been a big contributor to our market share growth. We believe our
market advantage is three fold; our service is frequent and reliable;
our service is between city centers; and our stations include
intermodal connections to the subway, bus, or taxi. That intermodal
connection is key to getting our passengers to their final destination.
This is an important advantage--and one that is not limited to the
Northeast Corridor. The Bureau of Transportation Statistics recently
studied the connectivity of intercity rail and airport facilities, and
concluded that while only 34.5 percent of airports in the 48 contiguous
States included connectivity with another mode of mass transportation,
about 54.3 percent of intercity rail stations did. I think that's an
important statistic. The ability to offer travelers a range of choices
is vital to Amtrak's appeal, and we consider the development of those
connections to be a high priority. This connectivity is currently most
marked on the east and west coasts. This is a pattern not just
associated with the Northeast Corridor, but in California, Washington,
and Oregon, over 85 percent of the stations have some kind of
connectivity, usually bus service. That's a real benefit to travelers,
and we want to work on developing that elsewhere.
And as road congestion grows, I think the ability to travel without
having to drive a car is going to be increasingly popular, and we need
to be poised to provide consumers with that alternative. We are
particularly interested in the possibility of offering connections to
airports, and we currently have direct connections with five airports:
Newark, Baltimore-Washington International, Burbank, Oakland, and
Mitchell Field in Milwaukee. While these are all traffic feeders for
Amtrak, they offer the promise of an essential component of an
intermodal national transportation policy--the prospect of a system
that allows the various modes to provide the transportation services
that maximize the consumer's utility.
In conclusion, I hope that you are satisfied with the knowledge
that Amtrak is moving forward with a strategic vision that should make
sense to most people who understand Amtrak's mission. Our strategy will
provide a realistic assessment of what we can do as a transportation
provider, of the opportunities we see, and of the types of events and
trends that could be obstacles to success. We are committed to
measuring our performance, continuous improvement, and defining the
true meaning of success. And each step of the way, we will do our level
best to provide the transparency that is essential to the policymakers,
taxpayers, and passengers that provide the resources for Amtrak's
nationwide service.
This concludes my opening statement. I will be happy to answer any
questions you might have.
STATEMENT OF ALEX KUMMANT, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Mr. Kummant. Madam Chairwoman, ranking member, thanks for
the opportunity today.
I would just ask that my full statement be submitted for
the record and I'll quickly summarize much of what's in there.
We ended fiscal year 2007 with a set of strong numbers and
we are now, as we sit in April, halfway through our fiscal year
and feel good about the progress, certainly on a revenue and
ridership basis. On ridership, we're up another 11 percent year
over year and almost 14 percent in revenues.
One of the key issues we have going forward and you will
hear in strategy discussion later in the year is we're working
on a plan for equipment procurement in the coming years. That
will be especially critical given the aging of the entire
fleet. It will also be an opportunity to really recast and to
generate everything we can out of the Northeast corridor, both
in terms of efficiencies and the fact that new equipment will
be much cheaper to maintain. I believe you have probably a good
sense of what it takes to maintain our aging fleet.
On the core operating numbers, again those numbers have
been submitted and discussed. Let me make one comment on the
debt service, a number we're requesting. We've requested $345
million. Our core debt service needs are $285 million. We
believe there are some opportunities there to retire debt early
and in fact generate significant savings over the next couple
of years if we do that. So that's the nature of that request.
We are really in an inflationary environment that we have
not seen probably for a decade and a half, and I think that is
one of the core issues that are reflected in the numbers next
year. All the commodities are up dramatically. So, if you look
at just core materials, cost of tie, rail, copper, anything
material we put in the system, we're seeing dramatic
inflationary effects, and there's some obviously effect, as
we'll discuss, cost of the PEB.
Let me get to that point and talk directly about that.
Obviously there will be some discussion about the second
installment of back pay and there will be some discussion, as
there was a year ago, about our ability to pay or not pay that.
I would just suggest, first of all, that we're still 6
months away from the end of the year, in a pretty complicated
environment and strong inflationary pressures. So, I think
before we get too definitive on what the year-end cash balance
will look like, we need to be careful there.
I'd also suggest we had this discussion a year ago where it
was suggested that we had a lot of cash on hand and after the
CR was signed in December and we got our first installment of
cash in February, we were a little over 3 weeks from running
out of cash. So, I would suggest we continue having that
discussion through the year but take some care on a longer-term
cash plan rather than thinking about it as a point in time.
PREPARED STATEMENT
That being said, I think we're enjoying a relative period
of stability. I'm happy with the management team and we're
working hard to make the operation better every day.
Thanks.
[The statement follows:]
Prepared Statement of Alex Kummant
Good morning, Madame Chairwoman, and thank you for the opportunity
to testify before your committee this morning on Amtrak's financial
needs for fiscal year 2009. As you may know, fiscal year 2007 finished
as a strong year for Amtrak, and fiscal year 2008 has gotten off to a
good start as well. We set an annual ridership record of 25.8 million
passengers, the largest in the company's history. We had record summer
months and a record Thanksgiving, which are important indicators of the
traveling public's preferences and confidence. Our ridership and
revenue for fiscal year 2008 have also been strong; we carried 11.7
percent more riders between the beginning of the fiscal year and the
end of February than we carried in fiscal year 2007, and those riders
brought us 14.8 percent more revenue. Finally, we have concluded
agreements with most of our unions after years of negotiations. Of the
unions before our recent PEB, the members of 9 groups ratified their
tentative agreements on March 10, one additional group has ratified an
agreement, and we expect the remainder to be complete soon. These
agreements follow the recommendations of the Presidential Emergency
Board in providing wage increases and retroactive pay to our employees,
and our employees will also be making contributions to health care.
With this performance as background, I think it's safe to say that
passenger rail service has a bright future. To help shape the next few
years, Amtrak is focusing its efforts on a set of key strategic
priorities. We are working on increasing revenue, reducing costs, and
improving both trip times and systemwide on-time performance. We are
also in the process of developing a comprehensive plan for equipment
procurement in the coming years; the acquisition of additional
equipment is a small component of the fiscal year 2009 capital request,
but we expect it to grow as our electric engines and Amfleet cars
approach the end of their useful lives. We are also working with a
number of States to develop and augment short-distance corridor
operations. We are, however, quickly bumping up against the limits of
our existing equipment capacity at a time when States are seeking new
service. To address this problem, we are going to need to begin a new
equipment procurement cycle.
To realize these strategic priorities, Amtrak will continue to
require a certain core level of operating assistance and capital
investment from the Federal Government. In fiscal year 2009, Amtrak
will need a total of $1.671 billion in Federal assistance. Of this
total, $506 million will be required to meet operating costs, $801.4
million will be invested in capital projects, $19 million will be
required for the funding of Amtrak's Office of the Inspector General,
and $345 million will be spent on debt service. All of these numbers
represent increases over our fiscal year 2008 spending levels, and I
will give you some background on them. We have provided additional
detail in our fiscal year 2009 legislative and grant request, which I
would ask to have made a part of the record.
We foresee significant cost inflation in several important areas in
fiscal year 2009. The most significant costs will be increases in
wages, benefits, and fuel. Wage increases will be a byproduct of the
labor agreement, and will add about $27 million to the fiscal year 2009
budget, but the largest single category of cost increases is going to
be benefits. This is principally a reflection of the growing cost of
health care. We expect our total benefits costs to rise by $50 million
in fiscal year 2009, and the expenses associated with medical treatment
and drugs are at the core of it. We expect that the cost sharing
provisions in our labor agreements will to some degree restrain medical
cost growth, but that growth is still going to be substantial.
I think it's also important to mention at this point that we have a
single additional expense that will come due in fiscal year 2009. As
you may know, from 2002 until early this year, this company and many of
its unions were unable to agree on the terms of contracts for our
employees. In November 2007, the administration appointed a
Presidential Emergency Board (or PEB) under the terms of the Railway
Labor Act to hear the dispute and recommend a settlement, which it did
in early January. The management of Amtrak has accepted this
recommendation, as have nine of our labor groups; we expect that groups
whose ratifications and negotiations are ongoing will likewise accept
the contract pattern the PEB recommended. The recommended agreement
pattern included a pair of lump sum retroactive payments to Amtrak's
employees to effectively extend the raises it offered back to the
beginning of the negotiating period, and Amtrak accepted the
recommendation. Amtrak believes at this time that it has the financial
wherewithal to meet our fiscal year 2008 wage and retroactive pay
obligations, as well as its wage obligations in fiscal year 2009 and
fiscal year 2010. However the 60 percent (or $114 million) of the one
time ``back pay'' payment the PEB recommended be made in fiscal year
2009 is noted separately in the fiscal year 2009 grant request summary
table on page 3 of the leg and grant request, and is not contained in
Amtrak's fiscal year 2009 operating costs. The PEB was aware that
Amtrak did not have the means to pay the additional $114 million and
recommended that the decision to fund this amount lies with Congress.
To fund our fiscal year 2009 capital programs, Amtrak is asking for
a total of $801.4 million. Of this total, we intend to use $506.9
million to pay for ongoing ``state of good repair'' (or SOGR) programs
dedicated to the rehabilitation of our plant and equipment. In addition
to meeting day to day SOGR requirements, we are undertaking an
ambitious capital program in fiscal year 2008. The replacement of the
lift span on the Thames River Bridge in New London, Connecticut will be
the centerpiece, and we are planning a large scale repair ``blitz'' on
our New England Division in June to undertake repair and replacement
work on the electric catenary, several interlocking plants, and a host
of smaller projects. We intend to continue our capital investment
program effort in fiscal year 2009, when our program to replace the
lift span on the Niantic River Bridge will hit its stride. Big projects
like lift bridge replacement are expensive but enduring--we expect the
completed span to last for a lifetime. Though we have an aging fleet,
we will also be spending significant capital on bringing it into SOGR.
We are also working to comply with the Americans with Disabilities
Act, and our 2009 budget includes $68.5 million for that effort. ADA
compliance is going to be a significant challenge, and Amtrak is
seeking an extension of the current compliance deadline of July 26,
2010, because, even if we had the regulatory guidance and resources to
comply, it would still be impossible to achieve compliance by that
date. Amtrak is fully focused on making its service accessible, and we
are pursuing compliance under the terms of the ADA, but we will need
additional time to accomplish that. New rules proposed nearly 2 years
ago by the DOT would materially change the standards for compliance
under the Act with respect to station platform level requirements,
would add millions of dollars to the compliance cost, and would deprive
that aspect of compliance of any clarity and certainty. Even under the
current law, Amtrak will need more time and more resources to achieve
full ADA compliance.
On the whole, I think our projections for the upcoming year are
responsible, realistic, and attainable. There are a lot of points that
must be considered, and the rising costs of fuel, which now hovers at
$4.00 a gallon and health care and the condition of the economy will
all have a bearing on our plans. We're going to need new equipment,
both to modernize our fleet and have equipment available for expansion.
But from where I sit, the leading indicators continue to trend in the
right direction. I believe there is a latent demand for intercity
passenger rail service in the United States. In the coming year we will
work to inform this discussion and to meet the expectations and needs
of our customers. Let me conclude by saying we are going to have some
big opportunities ahead, and we will need a strong, skilled and well-
trained workforce with high morale if we're going to make the most of
them. To that end, these new labor agreements will help. I appreciate
all of the hard work our employees put in every day, sometimes in
difficult or trying situations, and I am glad that we have been able to
conclude a workable settlement and trust that our employees will
embrace it. I also want to thank our Board of Directors, and
particularly Donna, for their ongoing support and their wise counsel.
This concludes my opening statement. I will be happy to answer any
questions you might have.
Senator Murray. Mr. Tornquist?
DEPARTMENT OF TRANSPORTATION
STATEMENT OF DAVID TORNQUIST, ASSISTANT INSPECTOR
GENERAL, OFFICE OF THE INSPECTOR GENERAL
Mr. Tornquist. Chairman Murray, Ranking Member Bond, I
appreciate the opportunity today to present the views of the
Office of the Inspector General on Amtrak's fiscal year 2009
financial needs.
Let me start by saying that Amtrak has benefited from the
strong leadership provided by Chairman McLean and CEO Kummant
and Alex's executive team. The results of that leadership have
been borne out in Amtrak's recent operating and financial
statistics, many of which I've cited in my written statement.
Regarding fiscal year 2009 needs, we believe that Amtrak
requires only a modest funding increase. Specifically, we
recommend $475 million for operations, $675 million for
capital, and $266 million for debt service.
In addition, we believe the fiscal year 2009 share of the
retroactive wages that would result from the pending labor
agreement can be accommodated within Amtrak's projected end of
fiscal year 2008 cash balances without additional
appropriations.
Our recommended grant level would allow Amtrak to run a
nationwide system and when combined with Amtrak's likely
increase in fiscal year 2009 revenues would allow for an
approximately 3.5 percent increase in operating expenses.
Of particular concern to us is that Amtrak's request does
not include any operating reform savings in fiscal year 2009.
We feel Amtrak can do more to minimize its costs and dependence
on Federal operating subsidies.
The $675 million we recommend for capital would allow
Amtrak to fund its legal, safety and security requirements, and
continue to make progress to a state of good repair. The $266
million we recommend for debt service is the minimum that we
believe is needed to meet Amtrak's fiscal year 2009 debt
obligations.
Looking to the future, I'd like to draw the subcommittee's
attention to a report we issued last week which concluded that
``Amtrak would receive a significant financial benefit by
improving its on-time performance.'' Specifically, we found
that ``improving on-time performance to 85 percent on all
routes outside the Northeast corridor in fiscal year 2006 would
have generated a net gain of a $136 million for Amtrak.''
However, there's little agreement between Amtrak and the
host railroads, on whose track Amtrak operates, regarding the
causes of this poor on-time performance and therefore little
consensus on how to improve it.
We expect to report shortly on work we have ongoing at the
request of this subcommittee regarding the root causes of these
delays. Our preliminary findings indicate that Amtrak trains
are delayed by a combination of insufficient track capacity,
host railroad operating practices, and external factors beyond
the host railroad's control.
Determining who is responsible for delays is made difficult
by the disagreement that exists among the stakeholders
regarding the exact nature of Amtrak's statutory right to
preference.
We believe the issue of improving Amtrak's on-time
performance can best be addressed through collaboration between
Amtrak, the host railroads and the executive branch which
balances the enforcement of Amtrak's rights with incentives to
the freights for cooperation, and we think that the State
capital matching grant program can play an important role in
this effort.
PREPARED STATEMENT
As we testified previously, we believe that Amtrak's long-
term outlook would be improved through a reauthorization. We
look forward to seeing the results of the ongoing strategic
planning process that the Board has underway and believe it can
be an important tool in guiding Amtrak's decisionmaking.
That concludes my statement. I'd be happy to answer any
questions.
[The statement follows:]
Prepared Statement of David Tornquist
Chairman Murray, Ranking Member Bond, and members of the
subcommittee: I appreciate the opportunity to present the views of the
Office of the Inspector General on Amtrak's fiscal year 2009 financial
needs and the future of intercity passenger rail. My statement today
will draw upon the work we have ongoing for your subcommittee on
Amtrak's financial performance and labor agreement costs, its efforts
to achieve operating reform savings, and the causes of its on-time
performance (OTP) problems, as well as other work we have ongoing on
Amtrak's capital plan.
Despite Recent Progress, Amtrak Still Faces Challenges.--Once
again, Amtrak's 2007 ridership and ticket revenue records set new
records. Amtrak also improved its OTP on about two-thirds of its
routes, implemented an expanded capital program, and continued to pay
down its debt. In addition, the labor agreement now in the ratification
process holds the promise of allowing both Amtrak management and
employees to focus on the business of running a passenger railroad.
At the same time, Amtrak is seeking to increase its Federal subsidy
by 35 percent in a very difficult budget environment while continuing
to incur unsustainably large and potentially growing operating losses.
We believe Amtrak can do more to minimize its costs and dependence on
Federal subsidies and that its spending initiatives need to make a
demonstrable contribution to its bottom line.
Amtrak Requires a Modest fiscal year 2009 Funding Increase.--We
believe that Amtrak's fiscal year 2009 legislative and grant request
understates Amtrak's likely fiscal year 2009 revenues, overstates its
costs, and ignores its significant cash balance. As a result, we
believe that Amtrak needs $475 million in fiscal year 2009 for
operations, $675 million for capital, and $266 million for debt
service. Furthermore, the fiscal year 2009 share of retroactive wages
included in the pending labor agreement \1\ can be accommodated within
Amtrak's projected cash balances without additional appropriations.
---------------------------------------------------------------------------
\1\ This agreement would grant full retroactive pay raises back to
2002 to all agreement employees onboard on December 1, 2007. The
payment would be split, with 40 percent being paid in fiscal year 2008
and 60 percent in fiscal year 2009.
---------------------------------------------------------------------------
Our recommended operating grant level would allow Amtrak to operate
a nationwide system. When combined with Amtrak's likely increase in
fiscal year 2009 revenues, our recommendation would cover an
approximately 3.5 percent increase in Amtrak's operating expenses.
Regarding these revenues, we believe that Amtrak's forecast is
understated because it was arbitrarily reduced below the levels
projected by its econometric models. The expense forecast is likely
overstated because it includes the cost of significant hiring in fiscal
year 2008 and 2009 and other cost increases which Amtrak need not
incur, and no additional operational reform savings.
TABLE 1.--FEDERAL APPROPRIATIONS
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal Year Fiscal Year 2008 Fiscal Year 2009
2007 ---------------------------------------------------------------
Appropriated Appropriated Forecasted Use Request Recommend
----------------------------------------------------------------------------------------------------------------
Operating....................... 485 475 454 525 475
Capital......................... 495 565 564 801 675
Debt service.................... 277 285 285 345 266
Retroactive wages for labor .............. .............. .............. 114 ..............
settlement.....................
-------------------------------------------------------------------------------
Total Table................. 1,257 1,325 1,303 1,785 1,416
----------------------------------------------------------------------------------------------------------------
Source: Amtrak data and OIG analysis.
The $675 million for capital would allow Amtrak to fund legal,
safety, and security requirements and continue to make progress towards
a ``state of good repair''. The $266 million for debt service is the
minimum needed to fund Amtrak's fiscal year 2009 debt obligations.
Amtrak's proposal to pay off debt early is linked to a plan to borrow
funds in the future for rolling stock replacement. However, significant
issues still need to be resolved regarding States' willingness to pay
the full costs of State services not covered by ticket revenues which
may impact the overall demand for new rolling stock.
Finally, Amtrak could fund the unbudgeted $114 million in fiscal
year 2009 retroactive wage costs and $11.3 million in other planned
pay-related costs within its anticipated $269 million end of fiscal
year 2008 cash balance. The resulting $119 million cash balance would
be less than Amtrak's preferred $150 million level, but consistent with
the $103.9 million cash balance that would have resulted in fiscal year
2007 from Amtrak's spending decisions.
Achieving Reliable On-Time Performance Could Substantially Improve
Amtrak's Finances.--We recently reported that improving OTP to 85
percent on all routes outside the Northeast Corridor in fiscal year
2006 would have generated a net gain of $136.6 million for Amtrak.
However, there is little agreement between Amtrak and the host
railroads on whose track Amtrak operates regarding the cause of this
poor OTP, and, therefore, no consensus on how to improve it.
In work we have ongoing at the request of this subcommittee, we
have found that Amtrak trains are delayed by insufficient track
capacity; host railroad operating practices, including dispatching; and
external factors beyond the host railroads' control, such as weather
and derailments. Amtrak's data on delays does not allow us to quantify
the relative share each cause contributes to delay. Disagreement also
exists regarding the precise nature of Amtrak's right to ``preference
over freight transportation in using a rail line, junction, or
crossing''.\2\ We believe the issue of improving Amtrak's OTP can best
be addressed through collaboration between Amtrak, the host railroads,
and the executive branch which balances the enforcement of rights with
incentives for cooperation. The State capital matching grant program
can play an important role in this effort.
---------------------------------------------------------------------------
\2\ Section 24308c of title 49 of the United States Code.
---------------------------------------------------------------------------
Reauthorization Remains Key to Amtrak's Long-Term Outlook.--As we
have testified previously, we believe that Amtrak's long-term outlook
would be improved through a reauthorization that focused on three
goals: (1) continuous improvements in the cost-effectiveness of
services provided; (2) devolution of the power to determine those
services to the States; and (3) adequate and stable sources of Federal
and State funding.
Absent a reauthorization, it will continue to fall to the
Appropriations Committee to maintain fiscal discipline at Amtrak while
providing the tools to improve their performance. At the same time, as
we reported last year in our audit of the Amtrak Board's activities,
the Board plays a key role in setting a strategic direction for Amtrak
within the statutory parameters set by Congress. The Board and Amtrak
management currently are developing a new strategic plan, which, if
accompanied by implementation plans, will be very helpful in guiding
Amtrak's decisionmaking.
I will now discuss these issues in greater detail.
DESPITE RECENT PROGRESS, AMTRAK STILL FACES CHALLENGES
Operating Losses
Amtrak ended fiscal year 2007 with a net operating loss of $1.0
billion and a cash operating loss, excluding interest and depreciation,
of $486.3 million.\3\ Amtrak currently projects a cash operating loss
of $454.3 million in fiscal year 2008,\4\ $21 million below its
original budgeted loss, and $525 million in fiscal year 2009. The
increase in fiscal year 2009 is due largely to fuel, benefits, and
labor settlement costs, and the impact of a projected economic slowdown
on revenues.
---------------------------------------------------------------------------
\3\ Amtrak's fiscal year 2007 cash operating loss includes $190
million in accrued expenses from the pending labor settlement.
\4\ Amtrak originally budgeted for a $475 million cash operating
loss in fiscal year 2008. However, based on actual revenues and
expenditures through January, this loss has been revised downward by
$21 million to $454.3 million.
Based on the information available today, we believe Amtrak could
manage with $475 million for its fiscal year 2009 operating subsidy
instead of the $525 million requested. We differ with Amtrak's
estimates of likely fiscal year 2009 revenues, expenses, and operating
reforms. Our recommended operating grant level would provide Amtrak
with an increase of almost $100 million and cover an approximately 3.5
percent increase in operating expenses as a result of likely revenue
increases. We strongly urge the subcommittee to reexamine Amtrak's
funding requirements after Amtrak completes its more detailed, bottom
up budget projection in July.
We are concerned about the seemingly arbitrary manner in which
Amtrak management revised its fiscal year 2009 revenue estimates
developed using their econometric models to reflect a potential
recession. While we understand the desire to be conservative in light
of economic uncertainty, we believe that the tight budget environment
calls for a more scientific and supportable approach to revenue
forecasting.
In this regard, we note that both the Federal Reserve's Federal
Open Market Committee and the Blue Chip consensus forecast call for
economic growth in fiscal year 2009 at a level commensurate with that
in fiscal year 2007, not a decline as Amtrak projects. Growth in the
gross domestic product, a measure of overall economic activity, began
to slow in 2007, and projected to slowdown further in 2008 before
picking up in 2009. Despite the current slowdown, Amtrak's fiscal year
2008 passenger related revenues are projected to be $170 million above
fiscal year 2007 and $71 million above the level Amtrak originally
projected in its fiscal year 2008 budget.
In addition, we believe that Amtrak should take a more restrained
approach regarding expenditures given the large uncontrollable cost
increases Amtrak anticipates for wages, benefits, and fuel costs.
Amtrak's budget estimates anticipates hiring about 200 employees which
might be aggressive considering the tight budget environment. Finally,
since Amtrak forecasts its fiscal year 2008 cash operating loss will be
about $21 million below the amount it used as a starting point to build
its fiscal year 2009 request, its fiscal year 2009 expenses are likely
to be less than reflected in Amtrak's budget request.
Finally, Amtrak anticipates achieving no savings from operating
reforms in fiscal year 2009. Amtrak saved $61.3 million from operating
reforms in fiscal year 2006, $52.8 million in fiscal year 2007, and
anticipates saving $40.3 million in fiscal year 2008. The current
estimate of fiscal year 2008 savings is just half of the amount Amtrak
originally anticipated it would save. The Amtrak Board of Directors, in
the fiscal year 2008 Action Plan, established as one of its seven
corporate goals, to ``contain cost growth through productivity and
efficiency improvements''. We strongly support this goal and believe it
should be reflected in the fiscal year 2009 budget.
As shown in Table 2, Amtrak anticipates achieving $17.0 million in
fiscal year 2008 savings through revenue enhancements and $23.3 million
through expense reductions. The revenue enhancements include
improvements to both Acela and long-distance services and additional
food and beverage sales. The expense reductions include reducing energy
costs, increasing use of credit cards on-board trains, and implementing
several productivity improvements in Amtrak's Environment,
Transportation, Mechanical, and Engineering departments. Through
January, Amtrak has achieved $6.3 million of these projected savings.
TABLE 2.--AMTRAK'S FISCAL YEAR 2008 COST SAVINGS FROM REFORM
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
YTD
Annual Budget YTD Actual YTD Variance
----------------------------------------------------------------------------------------------------------------
Revenue Enhancements............................................ 17.0 4.5 4.4 (0.1)
Food and Beverage........................................... 0.9 0.9 0.5 (0.4)
Overhead Functions.......................................... 2.4 0.4 0.4 ..........
Customer Service............................................ 1.3 0.4 0.9 0.5
Marketing and Sales......................................... 1.8 1.2 0.2 (1.0)
NEC Operations.............................................. 7.6 1.4 2.3 0.9
Long Distance Services 3.2 0.2 0.2 ..........
===============================================
Expense Reductions.............................................. 23.3 5.3 1.9 (3.4)
Mechanical.................................................. (7.2) (2.1) (1.7) 0.4
Overhead Functions.......................................... 11.0 0.7 (0.1) (0.8)
Customer Service............................................ 17.7 6.2 4.9 (1.3)
Ongoing Efficiencies........................................ 1.8 0.5 (1.2) (1.7)
===============================================
Total..................................................... 40.3 9.8 6.3 (3.5)
----------------------------------------------------------------------------------------------------------------
Columns may not sum due to rounding.
Source: Amtrak.
Labor Settlement Costs
Amtrak anticipates the fiscal year 2008 and fiscal year 2009 cost
of the labor agreement currently in the ratification process will be
$412.2 million for both the operating and capital accounts. As shown in
Table 3, Amtrak's estimate of $148.9 million in fiscal year 2008 costs
includes $52.4 million for the prospective fiscal year 2008 pay raise,
$94.4 million for the fiscal year 2008 share of the retroactive fiscal
year 2002-2008 pay raise, and $2.1 million for management pay raises to
supervisors to maintain an appropriate pay differential relative to
their employees. The $263.3 million in fiscal year 2009 costs include
$117.4 million for the prospective fiscal year 2009 pay raise, $141.6
million for the fiscal year 2009 share of the retroactive pay raise,
and $4.3 million for management pay raises.
We believe that Amtrak does not require a separate $114 million
appropriation in fiscal year 2009 to cover the partial costs of the
retroactive wages resulting from the pending settlement ratification.
Based on actual revenues and expenditures through January, Amtrak
forecast that its cash balance at the end of fiscal year 2008 would be
$268.7 million. According to Amtrak, paying off the unbudgeted labor
settlement costs would reduce this cash balance to $118.7 million.
While this cash balance is below the $150 million level Amtrak stated
they prefer to have on hand, it is 14 percent more than the $103.9
million cash balance that would have resulted in fiscal year 2007 from
Amtrak's spending decisions. Amtrak is currently refining these
estimates as it determines the amounts due on an employee-by-employee
basis.
TABLE 3.--ESTIMATED LABOR SETTLEMENT COSTS
[In millions of dollars]
------------------------------------------------------------------------
Due in Due in
Fiscal Year Fiscal Year Total
2008 2009
------------------------------------------------------------------------
Retroactive Wage Payment (2002- 94.4 141.6 236.0
2008)...........................
Management Pay Raise............. 2.1 4.3 6.4
Prospective Pay Raises........... 52.4 117.4 169.8
--------------------------------------
Total........................ 148.9 263.3 412.2
------------------------------------------------------------------------
Source: Amtrak.
Capital
Amtrak's infrastructure continues to suffer from the effects of
years of underinvestment, and its estimated backlog of infrastructure
projects needed to attain a ``state of good repair'' \5\ is $4.8
billion. The $675 million recommended for capital would allow Amtrak to
fund legal, safety, and security requirements and continue to make
progress to achieving a ``state of good repair.''
---------------------------------------------------------------------------
\5\ Amtrak uses a component life cycle replacement approach to
defining ``state of good repair''. Amtrak defines being in a ``state of
good repair'' when each of its infrastructure assets is maintained and
replaced within the design life of that component.
---------------------------------------------------------------------------
Amtrak initiated a new capital planning process in fiscal year 2008
that prioritizes capital projects across different departments. We
believe this planning process is an important step forward. As it
matures, we would like to see greater reliance on return on investment
analyses for projects, when appropriate. This analysis would facilitate
the comparison and prioritization of projects and would demonstrate how
projects contribute to meet Amtrak's business goals, i.e., increasing
ridership and revenues, reducing costs, improving OTP, and reducing
trip times.
Debt Service
The $266 million for debt service is the minimum needed to fund
Amtrak's fiscal year 2009 obligations. This amount reflects Amtrak's
minimum debt payment schedule adjusted for Amtrak's pre-payment of the
$21 million on its Railroad Rehabilitation and Improvement Financing
(RRIF) loan. Amtrak's proposal to pay off debt early is based on the
economic benefits of paying off higher interest debt and a desire to
reduce its overall debt burden to facilitate new borrowing in the
future for rolling stock replacement.
We have previously testified that from an economic standpoint, the
taxpayer would benefit by the Federal Government paying off Amtrak's
$3.3 billion in long term debt and capital lease obligations.
Currently, this debt is being paid off with Federal appropriations.
Because portions of Amtrak's debt were financed at higher interest
rates than what the Federal Government can borrow, it would be less
costly for the Federal Government to payoff the entire debt at once.
However, in this tight budget environment, we believe Amtrak has higher
funding priorities at this time than repaying debt, such as
infrastructure investment.
In addition, significant issues still need to be resolved which
will affect Amtrak's rolling stock needs. In particular, Amtrak needs
to develop a more equitable method of charging States for State
corridor services and determine whether the States will pay the fully
allocated operating costs and, over time, a growing contribution to
capital costs for new and existing service. In addition, the higher
labor rates resulting from the pending labor agreement will increase
State costs and may affect their willingness to pay for current
services, let alone expand into new services. The impact these issues
will have on States' demand for new service and the need for additional
rolling stock needs to be incorporated into a comprehensive fleet plan.
Revenue and Ridership
Passenger revenues increased to a peak level of $1.52 billion in
fiscal year 2007, primarily as a result of revenues from Acela service
that were $56.7 million above budget projections. Amtrak attributed
increases in Acela revenues and ridership to reduced trip times,
improved OTP, deteriorating airline service, increased highway
congestion, and higher gasoline costs. Systemwide ridership increased
to 25.8 million in fiscal year 2007. For the first 4 months of fiscal
year 2008, passenger revenues were $71.1 million higher than the same
period in fiscal year 2007, supported by strong demand for corridor
trains, particularly for Acela and Regional services. Ridership grew
11.2 percent during this period.
ACHIEVING RELIABLE ON-TIME PERFORMANCE COULD SUBSTANTIALLY IMPROVE
AMTRAK'S FINANCES
Amtrak's OTP had been declining steadily since fiscal year 2002,
from 77 percent to 68 percent in fiscal year 2006. However, the OTP
increased in fiscal year 2007 to 69 percent and to 72.7 percent through
January 2008. In fiscal year 2006, average OTP across Amtrak's long-
distance routes was only 30 percent. For Amtrak's corridor routes,
average OTP was much higher, but still only 67 percent (excluding the
NEC). In fiscal year 2007, the OTP of a number of long-distance routes
increased substantially, but only enough to raise the average for long-
distance routes to 42 percent. Through January 2008, long-distance OTP
increased to 59.7 percent.
We recently reported that improving OTP to 85 percent on all routes
outside the Northeast Corridor (NEC) in fiscal year 2006 would have
generated a net gain of $136.6 million for Amtrak. This total net gain
includes increased Amtrak revenues of $111.4 million and reduced fuel
and labor costs of $39.3 million. Revenue would increase as customers
become more confident in Amtrak's ability to arrive on time. Labor
expenses would be reduced in part by fewer overtime hours required to
staff late trains. Fuel costs would also fall with a reduction in
delays as less time would be spent idling or accelerating and
decelerating. The improved OTP would also require an increase in net
performance payments paid to the host railroads. We estimated these
would total $14.1 million. Achieving an OTP of 75 percent outside of
the NEC in fiscal year 2006 would have generated a net gain of $122.1
million and an OTP of 100 percent would have generated a net savings of
$136.4 million. This latter estimate reflects higher performance
payments that exceed the revenue increase and cost reductions.
However, there is little agreement between Amtrak and the host
railroads on whose track Amtrak operates regarding the cause of this
poor OTP, and, therefore, no consensus on how to improve it. In work we
have ongoing at the request of this subcommittee, we have found that
Amtrak trains are delayed by insufficient track capacity; host railroad
operating practices, including dispatching; and external factors beyond
the host railroads' control, such as weather and derailments. The
available data does not allow us to quantify the relative share each
cause contributes to delay.
The capacity of the freight rail network is insufficient to handle
the mix of fast (passenger and inter-modal freight) and slow (bulk
commodity freight) trains operating according to different business
models, i.e., scheduled versus unscheduled or loosely scheduled
service. In this network, passenger trains frequently catch up with
slower moving freight trains, or other passenger and commuter trains.
In addition, most Amtrak trains outside the NEC operate over single
tracks with bi-directional traffic, which requires trains to be held on
sidings until they can pass each other. Capacity is also reduced by
temporary speed restrictions, or slow orders.
Host railroad operating and dispatching practices also can delay
Amtrak trains. Dispatch operations are focused on maintaining network
fluidity, sometimes at the expense of Amtrak's OTP. It is difficult to
determine how individual dispatching decisions impact delays simply by
observing day-to-day dispatching operations. Nevertheless, we found
certain practices intentionally delay Amtrak trains. In addition, a
lack of management attention by a host railroad to Amtrak's performance
can increase delays. Amtrak and the host railroads largely attribute
recent OTP improvements on the Auto Train and other Florida services,
the California Zephyr, Crescent, Capitol Limited and Lake Shore Limited
trains to more focused and cooperative management efforts. Each of
these root causes contributes to Amtrak's delays, often in combination
with each other. As delays accumulate, it can be difficult to separate
the relative impact from each other.
Disagreement also exists regarding the precise nature of Amtrak's
right to ``preference over freight transportation in using a rail line,
junction, or crossing''.\6\ Amtrak views the legislation as granting an
absolute right to run unimpeded on the freight network and, as such,
considers all freight train interference a violation of its right of
preference. In Amtrak's view, host railroads need to proactively manage
operations on their rail lines to avoid interference-related delays.
The host railroads we met with did not offer us a legal definition of
preference, but generally viewed their responsibility to grant
preference relative to their ability to manage congestion levels and
maintain ``fluidity'' in the overall system.
---------------------------------------------------------------------------
\6\ Section 24308c of title 49 of the United States Code.
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We believe the issue of improving Amtrak's OTP can best be
addressed through collaborative interactions between Amtrak, the host
railroads, and the executive branch which balances the enforcement of
rights with incentives for cooperation. The State capital matching
grant program can play an important role in this effort in terms of
providing an incentive to freight railroads for cooperation. In
addition, the quarterly reporting requirements regarding host railroad
OTP Congress established last year will also focus the Department and
host railroad management's attention on this issue.
REAUTHORIZATION REMAINS KEY TO AMTRAK'S LONG-TERM OUTLOOK
As we have testified previously, we believe that Amtrak's long-term
outlook would be improved through a reauthorization that focused on
three goals: (1) continuous improvements in the cost-effectiveness of
services provided; (2) devolution of the power to determine those
services to the States; and (3) adequate and stable sources of Federal
and State funding.
Absent a reauthorization, it will continue to fall to the
Appropriations Committee to maintain fiscal discipline at Amtrak while
providing the tools to improve their performance. At the same time, as
we reported last year in our audit of the Amtrak Board's activities,
the Amtrak Board of Directors plays a key role in setting a strategic
direction for Amtrak within the statutory parameters set by Congress.
The previous Board set a strategic direction for Amtrak with its April
2005 Amtrak Strategic Reform Initiatives and fiscal year 2006
Legislative Grant Request. However, this plan's broad long-term
objectives were not fully translated into a detailed plan with
outcomes, milestones, and performance measures. As a result, the Board
and Amtrak management lacked a comprehensive standard against which to
evaluate how Amtrak's day-to-day activities are addressing the Board's
strategic vision for Amtrak.
The current Board and Amtrak management are developing a new
strategic plan, which if accompanied by implementation plans, will be
very helpful in guiding Amtrak's decisionmaking.
Madam Chairman, this concludes my statement. I would be happy to
answer any questions at this time.
Senator Murray. Thank you very much. Mr. Parker.
NONDEPARTMENTAL WITNESS
STATEMENT OF JOEL PARKER, INTERNATIONAL VICE PRESIDENT
AND SPECIAL ASSISTANT TO THE PRESIDENT,
TRANSPORTATION COMMUNICATIONS INTERNATIONAL
UNION
Mr. Parker. Good morning. Thank you very much. I'm an
International Vice President and Special Assistant to the
President of Transportation Communications Union, TCU, which is
affiliated with the International Association of Machinists.
I've been renegotiater for TCU on Amtrak since 1984. TCU
represents the most unionized workers on Amtrak, approximately
7,500. In the just-completed bargaining round, I served as
spokesman for a coalition of shop craft unions. I was also lead
witness for all 8 unions that were before PEB 242 representing
about 11,000 Amtrak workers.
I've submitted written remarks that cover the relevant
issues in greater detail, particularly Amtrak's overall funding
needs and labor's belief that only a permanent funding source
for Amtrak will make it possible for Amtrak to fulfill its
promise as a truly national rail passenger service.
Today, I will focus only on the recent labor settlements. I
want to begin by thanking this committee for including forceful
report language in last year's appropriation bill calling on
Amtrak to negotiate fair and equitable collective bargaining
agreements.
We have now succeeded in that task. Contracts have been
ratified covering the 10-year period from 2000 through the end
of 2009 by all eight unions that were before PEB 242 and four
other unions who were not.
For the first time in a very long time, I am pleased to say
that labor peace is a real possibility on Amtrak. For that to
happen, Amtrak must live up to the one item left hanging in all
the contracts, payment of the second retroactive pay
installment that the unions agreed to defer to 2009.
To understand why the unions agreed to defer this payment,
I want to review the negotiations briefly and especially the
PEB recommendations that served as a basis for the contracts
that were reached.
Negotiations opened on January 1, 2000. From almost the
first day, Amtrak stated no contract was possible without far-
reaching unprecedented concessions. Amtrak never wavered from
that position. While making take-it-or-leave-it demands that it
knew the unions would never voluntarily accept, Amtrak also
pronounced another departure from traditional bargaining. It
would never agree to a dime of back pay.
Under this strategy, the longer negotiations dragged on,
the more money Amtrak saved. Amtrak had no incentive to
compromise to reach a negotiated deal, and let me just say that
the reason we now are before you for this extra money is
largely a result of the negotiations going on so long.
As you know under the Railway Labor Act, there's no time
limit for negotiations. The parties can't resort to self-help
until released by the NMB. Repeated requests over the years by
several of the unions for release for mediation were opposed by
Amtrak. Finally, in October 2007, the NMB proffered binding
arbitration to the eight unions who were then in mediation.
Following the rejection of that proffer, President Bush created
PEB 242.
President Bush appointed the following individuals to serve
on the PEB. As Chairman Peter Tredick, as members, Ira Jaffe,
Joshua Javits, Annette Sandberg and Helen Witt. Chairman
Tredick was a long-time management side attorney, specializing
in labor disputes. Joshua Javits and Helen Witt were former
Chairmen of the NMB, appointed by President Reagan. Annette
Sandberg had recently served as Administrator of the FMCSA to
which she had been appointed by President Bush.
No one could possibly accuse this Board of harboring a pro-
labor bias, yet their report overwhelmingly adopted labor's
proposals for settlement. Many outside observers professed
surprise at this result. I was not surprised. The unions
proposed to follow the contracts that had traditionally served
as a pattern for settlement on Amtrak, the National Freight
Agreements. Those agreements were hardly extravagant. The wage
increases, 2.6 percent a year net of employee health
contributions, were far less than national outside industry
averages and than those, for example, of Federal employees
during the past 8-year period.
A strong case could have been made that Amtrak employees
had more in common with much higher-paid commuter workers who,
like them, work on passenger carriers that require public
subsidy, but we elected to present the conservative proposal
based on historic pattern considerations.
Amtrak, on the other hand, proposed radical departures from
pattern in the areas of back pay and work rules. The Board
rejected Amtrak's non-traditional approach.
On back pay, the Board recommended that the wage increases
be effective on the same dates they were effective in the
pattern agreements, the National Freight Contracts.
I'm going to run out of time. I would beg your indulgence
to go a little beyond. Thank you very much.
To address Amtrak's argument that Congress had not
appropriated enough funds to allow them to pay retroactive
wages, the Board recommended two divergencies from their
National Freight Agreements.
First, it recommended that the back pay component be paid
in two installments, 40 percent at the time of signing the
remaining 60 percent 1 year later. Secondly, the Board limited
back pay to employees in service on December 1, 2007, which was
the day the Board was established. By doing that, the Board
eliminated all employees who had retired or died before
December 1, 2007, from receiving any compensation for the 7
years of work they had performed.
Upon issuance of the report, negotiations between Amtrak
and each of the eight unions immediately began. Contracts were
reached on January 18, 2008. The contracts followed almost to
the letter the PEB's recommendation.
However, there was one significant departure. Amtrak
insisted it would not agree to the second back pay payment
until sufficient funds were appropriated by Congress. In order
to avoid a strike, the unions agreed to a contingency
provision. If Amtrak determined it lacked the money to pay the
second back pay installment, it would notify the unions in 2009
and after a 60-day negotiation and cooling-off period, the
unions would be free to strike.
In summary then, what has been the most difficult and
contested negotiations in Amtrak history are finally on the
verge of being resolved with a fair outcome. Only one
outstanding issue remains, the payment of the second back pay
installment. Amtrak estimates it requires an additional
specific appropriation of $114 million to be able to pay that
installment.
As you consider this request for appropriation, I believe a
few facts should be front and center. First, the agreements
reached with Amtrak are modest, 2.6 a year net in wages is by
no means an extravagant settlement. Most importantly, the
contract is a product of recommendations by a well-respected
group of neutral experts that concluded there could be no
rationale for Amtrak workers to be paid less than their
counterparts in the rail industry simply because the company
they work for receives public subsidies.
Senator Murray. Mr. Parker, if you could summarize for us.
We will submit all of your testimony for the record.
Mr. Parker. I will. Let me end on a positive note. I felt
compelled to bring the issue of retirees to you but that is in
my written statement and it's in the oral statement that I
didn't get to.
We believe there are valid reasons for optimism going
forward. Amtrak President Alexander Kummant has said he wants
to establish a new partnership with Amtrak workers. He was not
there when this bargaining strategy was devised nor were most
of the current Board of Directors.
PREPARED STATEMENT
We wholeheartedly seek a cooperative relationship with Mr.
Kummant and his management team. We want to strive together to
work for the best possible service to the riding public. We can
accomplish much for the public good. It's time to embark on
that journey and to put the strains of the past behind us. That
will require the payment of that $114 million back pay
installment.
[The statement follows:]
Prepared Statement of Joel Parker
Thank you for your invitation to testify this morning about
Amtrak's budgetary outlook, and specifically about the recent labor
settlements on Amtrak and their impact on Amtrak's financial needs.
I am testifying on behalf of the Transportation Communications
Union, TCU, an affiliate of the International Association of
Machinists. TCU is the union which represents the most workers on
Amtrak, approximately 7,500 clerks, carmen, on-board service workers,
mechanical supervisors, maintenance of way supervisors, and product
line supervisors.
I have served as lead negotiator for TCU on several contracts with
Amtrak since 1984. In the just-completed bargaining round I served as
spokesman for a coalition of Shopcraft unions, which included the
International Brotherhood of Electrical Workers, the International
Association of Machinists, the Transport Workers Union and TCU. I was
also the lead witness for all eight unions that were before
Presidential Emergency Board 242.
I want to begin by thanking this subcommittee for its historic
support for Amtrak funding. The members we represent have had to endure
the uncertainty of working for a company whose survival was never
assured beyond the upcoming year. Every year we faced a serious attempt
to underfund Amtrak, or in the case of the current administration, to
zero fund it. This funding uncertainty not only fostered job insecurity
and concomitant low morale, but also was a direct contributor to the
unprecedented nadir in collective bargaining that marked the last 8
years on Amtrak.
The administration has attempted every year to dismantle Amtrak by
starving it of the Federal resources it needs or pursuing risky
privatization initiatives. Through those efforts the White House
demonstrated its complete lack of understanding of the importance of
Amtrak to our national economy and our competitiveness. It also
demonstrated the administration's disregard for the growing
transportation needs of cities and States that are on the front-lines
of addressing major congestion and environmental challenges. And by
pursuing a reckless funding plan for Amtrak every year, the Bush
administration exacerbated Amtrak's already enormous backlog of much
needed equipment, infrastructure and safety and security upgrades.
Fortunately, each year this subcommittee has stepped to the plate
and funded Amtrak at levels adequate to keep a national system running.
You have done this even though Congress as a whole has failed to pass
an authorization bill since 2002. For that steady support I again want
to thank you on behalf of all of the men and women we represent.
I am especially appreciative of you, Madame Chair, for calling an
early hearing last year to highlight the plight of Amtrak employees who
had worked for up to 8 years without new contracts and a general wage
increase. And I want to thank you and your committee colleagues for
including forceful Report Language in last year's appropriations bill
that called on Amtrak to negotiate fair and equitable collective
bargaining agreements.
Amtrak's accomplishments have been remarkable given its year to
year funding scramble for survival. Ridership records continue to be
set, and service levels continue to improve. This is largely due to the
dedication and professionalism of Amtrak workers, who have refused to
let adverse working conditions and terribly bitter labor negotiations
deter them from their work of making sure train sets, even terribly
antiquated ones, run safely and efficiently, and that service to the
passenger be of the highest caliber possible.
But year to year funding can never be the real answer to this
Nation's need for a technologically advanced coast to coast rail
passenger system. The greatest obstacle to Amtrak's long term success
is the absence of a permanent funding source. At this time of soaring
gas prices, energy dependence, and the need for environmentally
friendly modes of transportation, there is a growing public consensus
that Amtrak can play a major positive role in all three areas. Amtrak
President Alexander Kummant has laid out an exciting vision of growth
in those markets where Amtrak service is now woefully inadequate but
where the demand for decent speed rail passenger service clearly
exists. To realize that vision will take consistent investment and
planning, which is contingent on long term funding certainties.
That is why TCU and the rest of rail labor wholeheartedly endorses
a multi-year funding plan that provides no less than $2 billion a year
with adequate allocations for both capital and operating needs. We will
work with Senators and House Members to achieve long-term financial
stability permitting Amtrak and its workers to produce the first-class
national rail passenger system Americans deserve.
It is our sincere hope that the Senate and House will not only fund
the current needs of Amtrak including the costs associated with newly
signed collective bargaining agreements, but will adopt a multi-year
blueprint for a truly national Amtrak system. Hopefully, a
congressional blueprint for Amtrak will:
--provide multi-year Federal funding of at least $2 billion a year;
--restructure and pay-down Amtrak's debt, which is a product of 30
years of under-funding and neglect;
--reform the make up of Amtrak's Board to include a rail labor member
and to ensure it is comprised of strong advocates of the
company and its mission; and
--fund critically important security and safety upgrades.
But while we work to see a long term authorization passed, we must
necessarily also focus on making sure Amtrak receives an adequate
appropriation to not only fund next year's operations, but also to live
up to the settlement terms of the just-negotiated contracts that ended
an unprecedented 8 years of negotiations without a strike. On the first
count, TCU and rail labor support the $1.8 billion for fiscal year 2009
that the House and Senate Budget Committees provided. On the second, we
strongly urge the Senate to appropriate an additional $114 million that
is needed to fulfill the economic terms of the recent contracts.
It is to that issue that I will devote the balance of my testimony.
To understand the need for the additional $114 million, it is first
necessary to understand why negotiations dragged on for 8 long years,
why a Presidential Emergency Board appointed by President Bush
overwhelmingly decided on recommendations that were largely consistent
with labor's proposals, and why the unions agreed to allow Amtrak to
pursue additional funding to meet its contractual obligations rather
than striking when the law permitted.
Negotiations for contracts opened on January 1, 2000. From almost
the first day, Amtrak stated that no contract was possible without far-
reaching, unprecedented concessions. In the 8 years that followed,
Amtrak never wavered from that position. While making take-it-or-leave-
it demands that it knew the unions would never voluntarily accept,
Amtrak also pronounced another departure from traditional bargaining:
it would never agree to a dime of back pay. Under this strategy, the
longer negotiations dragged on, the more money Amtrak saved. Amtrak had
no incentive to compromise to reach a negotiated deal. As months turned
into years, the ever-growing amount of back pay due itself became an
obstacle to settlement.
Under the Railway Labor Act, there is no time limit to
negotiations. The parties cannot resort to self-help until released by
the National Mediation Board (NMB). Repeated requests over the years by
several of the unions for release from mediation were opposed by
Amtrak, and ignored by the NMB.
Finally, on October 18, 2007, almost 8 full years since bargaining
began and in some cases 7 years after the NMB had assigned mediators to
the disputes, the NMB proffered binding arbitration to the eight unions
who were then in mediation. (Four unions had elected not to be in
mediation and they were therefore not subject to the proffer of
arbitration.) The involved unions were: the Brotherhood of Maintenance
of Way Employes--Teamsters; the International Brotherhood of Electrical
Workers; the International Association of Machinists & Aerospace
Workers; the Brotherhood of Railroad Signalmen; the Joint Council of
Carmen, comprised of the Transport Workers Union of America and TCU;
the American Train Dispatchers Association; the National Conference of
Firemen & Oilers/Service Employees International Union; and two ARASA
(Supervisors) crafts of TCU.
After the involved unions all rejected the proffer of arbitration,
President Bush, on November 28, 2007, created Presidential Emergency
Board (PEB) 242. Under the Act, the Board had 30 days to investigate
the dispute and issue non-binding recommendations, after which there
would be a 30 day cooling off period at the end of which the parties
would be free to exercise self-help.
President Bush appointed the following individuals to serve on the
PEB: as Chairman, Peter Tredick; as Members, Ira Jaffe, Joshua Javits,
Annette Sandberg, and Helen Witt. Four of the five had previously
served on other PEB's appointed by President Bush. Chairman Tredick had
served as Chairman of PEBs 240 and 241, which made recommendations in
2007 to settle disputes on Metro North Commuter Railroad and several of
its unions. Joshua Javits and Helen Witt were former Chairmen of the
National Mediation Board, appointed by President Reagan. Annette
Sandberg had been an official in the Department of Transportation under
President Bush.
The Board held 3 days of hearings in December 2007, at which the
parties fully presented their positions. All eight unions presented a
common position to the Board.
The Board issued its Report to the President on December 30, 2007.
The Report for the most part recommended the proposals for
settlement that had been advanced by the unions. It advocated adoption
of the wage terms of the last two national freight railroad settlements
to cover the period January 1, 2000 through December 31, 2009. Wages
would be increased by approximately 28 percent over the 10 year period,
or about 2.6 percent a year. As in the freight agreements, employee
health insurance contributions would be retroactively increased from
zero to $166 a month this year, and $200 a month by the end of the
agreement. Employees would also have to pay significantly higher copays
for doctor visits and prescription drugs, and deductibles were also
increased. Wages would be paid retroactively to the dates the increases
in the freight contracts were effective, to be offset by retroactive
health insurance contributions and COLAs already paid. There would be
no changes in work rules.
To address Amtrak's argument that Congress had not appropriated
enough funds to allow them to pay retroactive wages, the Board
recommended two divergences from the national freight agreements.
First, it recommended that the back pay component of the settlements be
paid in two installments: 40 percent at the time of signing, and the
remaining 60 percent 1 year later. Second, the Board limited back pay
to employees in service with Amtrak on December 1, 2007, the day the
Board was established. By doing so, the Board eliminated all employees
who had retired or died between January 1, 2000 and December 1, 2007
from receiving any compensation for the work they had performed. The
Board stated it did this in response to Amtrak's inability to pay
argument as a way to ``reduce somewhat the cost of the retroactivity
pay . . .'' (P. 40 of Report of PEB 242).
Upon issuance of the Board report, negotiations between Amtrak and
each of the eight unions immediately commenced, and contracts were
reached with each union on January 18, 2008. The contracts followed
almost to the letter the recommendations of the PEB. However, there was
one significant departure. Amtrak insisted that it could not agree to
the second back pay payment until sufficient funds were appropriated by
Congress. In order to avoid a strike, which would have been legally
permissible on January 30, 2008, the unions agreed to a contingency
provision. Under that provision, the 60 percent second retroactive
payment would be due 1 year from the first retroactive payment, which
will occur within 60 days after contract ratification. If Amtrak
determined that it lacked the money to pay that installment, it would
notify the unions and, after a 60 day negotiation and cooling off
period, the unions would be free to strike.
All of the contracts involving the eight unions before the PEB have
now been ratified by their memberships. The four unions who also had
not reached agreements since 2000 but were not before the PEB have also
reached agreements that mirror the Board's recommendations. Those
contracts have either been ratified or are in the process of being
ratified. Three crafts (clerks, on-board service workers, and product
line supervisors) reached agreements in 2003 for the period January 1,
2000 through December 31, 2004, but are without agreements for the
period 2005 through 2009. They are now in negotiations with Amtrak, and
I am confident agreements will be reached in the immediate future.
In summary, then, what has been the most difficult and contested
negotiations in Amtrak's history are finally on the verge of being
resolved with a fair outcome. Only one outstanding issue remains, and
that is payment of the second back pay installment. Amtrak estimates
that it requires an additional specific appropriation of $114 million
to be able to pay that second back pay installment.
I am here today on behalf of all of rail labor to urge this
subcommittee, and Congress as a whole, to bring this bargaining round
to a fair conclusion by appropriating the $114 million to allow Amtrak
to fulfill its back pay obligation to its employees.
As Congress considers this request for appropriation, I believe
certain facts should be front and center. First, the agreements reached
with Amtrak are modest in their terms, 2.6 percent a year in wages is
by no means an extravagant settlement. The $114 million needed for back
pay covers an 8 year period, which amounts to less than $15 million a
year.
Most importantly, the contract is the product of recommendations by
a well-respected group of neutral experts, none of whom could be
accused of harboring a pro-labor bias or background. They were guided
by the evidence before them, and concluded there could be no rationale
for Amtrak workers to be paid less than their counterparts in the rail
industry simply because the company they worked for received public
subsidies. The Board adopted the traditional pattern for Amtrak
workers--the national freight agreements.\1\ In doing so, the Board
noted that had it looked at contracts of rail workers that worked for
other subsidized carriers, namely commuter rail workers, its
recommendations on wages would have been significantly higher.\2\
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\1\ ``There is no dispute that . . . the Freight Agreements have
served over the years as the historical pattern referenced for
establishment of wages, benefits, and working conditions, at Amtrak.''
(P. 14 of Report of PEB 242.)
\2\ The Board found that if the freight pattern was not used as the
basis of settlement, ``One would then be compelled to more closely
examine similarities between Amtrak's operations and those of Commuter
Rail and Urban Transit in which wages and benefits are significantly
higher.'' (P. 23 of Report of PEB 242.)
---------------------------------------------------------------------------
As to the prolonged nature of negotiations, the Board found the
blame lay squarely at Amtrak's door. ``. . . the evidence paints a
fairly clear picture that places much greater responsibility on Amtrak
for the failure to ink a deal over the prolonged period since December
31, 1999, than on the Organizations.'' (P. 37 of Report of PEB 242.)
In fashioning its recommendations, the Board noted the ``tremendous
gains in productivity in recent years by the employees represented by
the Organizations.'' (P. 30 of Report of PEB 242.)
On the back pay issue, the Board unequivocally wrote, ``We are
persuaded that, in this case, nothing short of full retroactivity is
fair and equitable and appropriate to begin to restore to employees the
lost wages that resulted from their inability to obtain a successor
agreement over the unprecedented 8 year period that these employees
have continued to work without a new agreement. Even an award of full
retroactivity will result in Amtrak having had the benefit of an
interest-free `loan' of the pay that would have been granted on an
ongoing basis if the Freight or other applicable pattern had been
timely incorporated as part of an Agreement.'' (P. 38 of Report of PEB
242.)
Because Amtrak could not credibly point to collective bargaining
settlements in the rail industry, freight or commuter, to justify its
no back pay position, it relied principally on an argument that it
simply could not afford to pay retroactive wages without jeopardizing
its operations.
Amtrak failed to mention that not once over the course of the 8
years had it asked Congress to appropriate money to fund an eventual
settlement, including back pay. In the absence of such a request, I
submit it was disingenuous for Amtrak to suggest that Congress' failure
to appropriate such money in advance as evidence of congressional
intent that Amtrak workers should work for lower wages than comparable
workers in the rail industry.
In fact, the PEB cited this very committee as evidence that
Amtrak's arguments on this score were remiss. On page 11 of their
Report, the Board wrote that ``the Senate Committee on Appropriations
recently noted that most of Amtrak's employees have gone more than 7
years (now eight) without a general wage increase, and that
consequently many craftsmen have fallen further and further behind
craftsmen conducting identical work for freight and commuter railroads.
This report went on to State that `Amtrak's failure to reach a labor
settlement is not a result of inadequate Federal funding.' ''
The PEB also referenced your counterpart committee in the House who
in 2007 reported that ``Amtrak's wages, in many cases, are well below
market . . .''
Labor did not rely on those reports to make our economic case to
the PEB. The facts of the wage comparisons spoke for themselves. But
the reports did demonstrate that underpayment of Amtrak workers was not
necessarily congressional intent, as Amtrak tried to suggest.
But in fashioning what they considered a fair settlement based on
traditional comparators such as pattern settlements in the industry,
wages paid for comparable work, and economic trends such as inflation,
the Board did in effect punt one part, albeit a small part, of the
settlement to Congress: the second back pay installment.
In doing so, the Board wrote that its ``role is to find a fair and
reasonable basis for agreement. We must consider traditional factors
relevant to the collective bargaining process but cannot tailor those
recommendations to a prediction of Congressional action. We are
cognizant of the political and financial constraints facing Amtrak, and
have recommended adoption of contractual terms that are reflective, in
part, of those realities. But we agree with PEB 234 (the last Amtrak
PEB) that Congress should be informed of the `true cost' of Amtrak's
service. It is then for Congress to determine whether to provide the
funding necessary for passenger train service.'' (P. 11 of Report of
PEB 242.)
Labor believes that it was never Congressional intent to base
Amtrak's survival on having Amtrak workers endure substandard wages and
working conditions. Just as Amtrak suppliers, vendors and contractors
expect to be fully compensated, Amtrak workers deserve to be treated
fairly, and to not have to discount their labor as the price of keeping
a national rail passenger service funded.
Now the decision is squarely in Congress' hands. Appropriating the
$114 million will bring this round of bargaining to a long overdue
conclusion. Failure to appropriate will foment another year of labor
unrest, at the end of which once again Amtrak workers will have to
contemplate a strike as the only legal means to obtain the settlement
that the Board recommended and to which Amtrak agreed.
Amtrak admits that the lion's share of the settlements is payable
based on current and anticipated funding action--that is, Amtrak is not
requesting additional funds to pay the wage increases over the 10 year
life of the agreement, nor the 40 percent of the back pay due payable
in 2008. The only piece that Amtrak says it requires additional funding
for is the 60 percent back pay component payable in 2009, which Amtrak
calculates as $114 million.
All of labor on Amtrak strongly urges this subcommittee, and
Congress as a whole, to appropriate that additional $114 million.
There is one other issue I would like to address before concluding.
I mentioned before that in an attempt to reduce the amount of back pay
due, the PEB recommended that employees who retired and the estates of
employees who died between January 1, 2000 and December 1, 2007 would
not be eligible for any back pay. All of the unions vigorously
disagreed with this recommendation, but Amtrak would not agree to
ignore it without funding to pay for it. Amtrak estimates the cost of
funding the back pay for retired and deceased employees as between $13
and $14 million. We do not have the data necessary to verify those
figures, so for purposes of this discussion I will rely on them as
accurate.
We believe that it is extremely unfair that these employees who
contributed so much to Amtrak's success be arbitrarily excluded from
any consideration for the time they worked during the 7 year period.
Amtrak didn't even propose this as a resolution. The Board came up with
it out of thin air, arbitrarily picking the date of its appointment as
the cut-off date for back pay. Its only stated reason was to reduce
costs. Many of the affected workers had been there from Amtrak's
creation. Excluding them is both inequitable and bad public policy. As
a result of this action, their railroad retirement annuities were
permanently reduced. We don't believe that Congress ever intended that
retirees be treated in such a manner. For an additional $13 to $14
million, this unfair situation could be rectified. We urge Congress to
give it serious consideration.
In conclusion, it is time to move beyond the bitter labor relations
of the past 8 years. That will be impossible until the issue of funding
the second back pay installment is resolved, since a lack of resolution
will throw the parties back into impasse and a possible strike. We
believe that it was never congressional intent to embark on such a
course, and past Amtrak management used it as a smokescreen to justify
their confrontational agenda.
But we believe that there are valid reasons for optimism going
forward. Amtrak President Alex Kummant has said he wants to establish a
new partnership with Amtrak workers and their unions. He was not there
when Amtrak's bargaining strategy was devised. Nor were most of the
current Board of Directors. Amtrak unions wholeheartedly seek a
cooperative relationship with Mr. Kummant and his management team. We
want to work together to strive for the best possible service to the
riding public and the expansion of service to new areas and along
existing routes so that Amtrak fulfills its promise as a major
transportation alternative. Working together, we can accomplish so much
for the public good.
It is time to embark on that positive journey, and to put the
strains of the past behind us. That must begin with fulfillment of the
contractual terms just agreed to, which includes the second back pay
installment. I urge Congress to appropriate the necessary $114 million
to finally bring this round to a fair and equitable conclusion. Thank
you.
Senator Murray. Thank you very much, and all of the
testimony will be included as part of the record.
Mr. Parker. Thank you.
Senator Murray. The President's budget cuts direct
subsidies to Amtrak by about 40 percent, and when you look at
the direct subsidies for Amtrak's operating losses and required
debt service payments, the cut proposed by the administration
for fiscal year 2009 is 64 percent.
Mr. Tornquist, let me start with you. Your office has been
reviewing Amtrak's books every quarter for some time now. Do
you believe there is any way possible for Amtrak to avoid
bankruptcy if they absorb a 64 percent cut at this time?
Mr. Tornquist. No, we don't see a way forward with that
level of reduction that would avoid bankruptcy.
Senator Murray. Mr. Kummant?
Mr. Kummant. Excuse me. It would take just a complete
radical reconfiguration of what's there. It would not resemble
what's here today.
Senator Murray. Ms. McLean?
Ms. McLean. I agree with what Mr. Kummant said, that it
would be very difficult.
Senator Murray. Mr. Boardman?
Mr. Boardman. I wondered if I would be last.
Senator Murray. You are.
Mr. Boardman. I think $900 million is the number that has
probably been dealt with here since 2004. The years 2004, 2005,
and 2006 were zero years, it was $360 million at that time. It
was $900 million in 2007 and $900 million in 2008, and when you
look at that number, what you find is that on all the requests
of all administrations back as far as I could look is the
highest number that's been requested, and you ask yourself how
do you deal with a trap that you continue to seem to be in here
between what is asked for, what is appropriated, what is spent,
and I think it partly has to do with the fact that there is no
request of the administration from Amtrak in the budget
process.
They aren't part of the budget process, we never receive
anything from them, and so you wind up with a number that goes
in and if you look over the years, those numbers sometimes have
been more realistic than other times, but what Amtrak has
instead is a legislative and grant request which I see as a
board member right before it comes here as a request for----
Senator Murray. Well, you are on the Amtrak Board?
Mr. Boardman. Yes.
Senator Murray. You know what their expenses are,----
Mr. Boardman. Yes.
Senator Murray [continuing]. Their operating expenses are?
Mr. Boardman. Yes.
Senator Murray. You sent the request to us?
Mr. Boardman. Yes, we sent the request to you. We do our
budget in the July beforehand. We provide and lock down the
budget by the end of the year and by that point in time, we
have not yet had an estimate from Amtrak. Doesn't mean I don't
have reality of understanding what the number is.
Senator Murray. Well, in that reality, hearing what you
just heard, do you think the budget request, 64 percent cut, is
going to----
Mr. Boardman. I don't know what the percentage is, Senator.
I trust your----
Senator Murray. Okay.
Mr. Boardman [continuing]. Your numbers.
Senator Murray. Sixty-four is----
Mr. Boardman. The $900 million that we propose----
Senator Murray. The question is do you realistically
believe that the budget request you sent in your position and
in your capacity as a Board Member will allow Amtrak to
continue without going bankrupt?
Mr. Boardman. Not in the system that they currently
operate.
Senator Murray. And what miracle will occur in the next 6
months to have that change?
Mr. Boardman. Well, there's no miracle. I'm not talking
about any miracle, but there are hard business decisions that
could be made that would reduce the need for that Federal
assistance substantially.
If you look at the fare box going back to 1995, they
covered approximately----
Senator Murray. As a Board Member, have you proposed those
changes?
Mr. Boardman. Yes.
Senator Murray. And the Board has said?
Mr. Boardman. The Board itself has had those discussions.
Management has had those discussions. We have not had action on
those changes.
Senator Murray. Well, can you describe for us what those
detailed changes are?
Mr. Boardman. One of the changes could be that New York
could start paying for the services that are provided and it
was a fairly fun discussion that we had at the time since I'm
the former New York Commissioner and they said to me and
management said to me and the Board, well, you could have paid
us then.
Senator Murray. Okay. So, first of all, New York sends us a
big check. Then what?
Mr. Boardman. Well, I think that's part of it. I think it's
a lot of different things that would need to happen and change
for the future, and I think the administration has said from
the beginning, if it sees those changes, it sees those reforms
then we can talk about what additional incentives could be
provided to Amtrak for the future.
Senator Murray. Mr. Kummant, do you want to comment on
that?
Mr. Kummant. The reality is that Mr. Boardman and I are not
really that far off. In fact, this feels a little bit like a
board meeting with Mr. Tornquist who sits in on all of ours and
Donna McLean as well.
But if you look, it's really a question of timing. I think
there are a lot of things we agree on. In fact, one of the
first things I did when I arrived was to reconfigure our
organization to be able to go and gauge the State DOTs more
effectively. It was one of the strategic reform initiatives to
recoup more overhead and equipment money from the States and
that, as you all know, is easier said than done given the state
of the State budgets as well.
But we are in very active discussions and strategic
planning with States everywhere to say how can we reconfigure,
make this far more transparent.
To your question, will that happen in the next 6 months,
no.
Another example we're very much together on is working very
hard on our mechanical operations. That's a $500 million
operation. It needs to be modernized. We're doing that. We
also--we have choices to also even attract outside business in
order to leverage those assets more effectively. Again that
will all take time.
Senator Murray. Well, let me jump to one other question
before I turn it over to Senator Bond.
Ms. McLean, I want to ask you. The budget submission by
your board of directors is really confusing. It acknowledges
the requirement to pay an additional $114 million for the
second installment on back pay, but it doesn't actually request
the funding of this committee.
Mr. Tornquist has testified that if Amtrak receives the
current year's level of operating support again in 2009, then
the railroad can be expected to have sufficient cash on hand to
make the $114 million payment without an explicit appropriation
from our committee.
What is the formal position of the Amtrak Board on this?
Ms. McLean. If I can step back for one second on our
request for our operating, we've got a $50 million increase and
what it represents is we have agreed that we can absorb the
$127 million in 2009 for additional wage increases as a result
of the PEB.
We are saying we're going to absorb the anticipated
increase in fuel costs, deal costs, et cetera, et cetera, but
what hit us unexpected was a $50 million increase in our health
benefits, our estimated costs for health benefits. We could not
absorb that, so that's most of our request for an increase in
operations in 2009.
Then on top of that, you've got the PEB back pay. We went
into the PEB negotiations offering as much as we could afford,
which stopped short of the 100 percent back pay. After
accepting the PEB, the PEB's recommendation is based on
historic patterns. They looked to what happened in the past.
That was their recommendation. We accepted it, but we also
looked to the past and in previous negotiations where there had
been additional requests and the PEB stated this in their
recommendation, it's the decision of Congress on meeting those
requirements.
So, our request does not include the $114 million. It is
the decision of Congress on whether or not that's going to be
funded. We have worked with your staff on other ideas, some
alternative funding. The efficiency grants is something that
was brought up. That's not something we can do, but it's
something that can be changed in law and offset that $114
million.
We have come to the table paying and offering that within
our budget request, we are able to afford 81 percent of this
PEB, but the $114 million is dependent on Congress and the
ratification clearly states that if Congress gives us the
money, then we will be paying that 100 percent back pay.
Senator Bond. Thank you very much, Madam Chair. As the
Inspector General pointed out, there's a great big black hole
in the presentation of Amtrak that I didn't hear either the
Chair or the Chief Executive Officer address.
Mr. Tornquist noted the commitment to savings. I believe in
2005, the goal was set for $500 million savings. Well, the next
year they got 61.3 in operating reforms, 52.8 in 2007, 40.3 in
2008 planned, and then it's disappeared. The funding requests
go up, the operational reforms disappear.
What happened to them? Where are the operating reforms?
Mr. Kummant. Well, I'll start. First, I'm not entirely sure
what the genesis of that figure is. All of our internal numbers
are based on an additional $40 million in savings, so that
continues. The food reforms continue. We continue to
reconfigure the mechanical operations. We continue having fuel
savings work.
As I alluded to, the State partnership work is very
difficult and is a very heavy lift. We have a whole group of
people working on that. So, the operating reforms certainly are
continuing, sir.
Senator Bond. There were no work rules changes. Are you
considering those?
Mr. Kummant. We're considering every day to make the
operation more efficient, but as you well know, we are
constrained in what we can do on work rules, given the PEB.
Senator Bond. And there were no--the Emergency Board
completely--did they completely ignore the work rule changes?
Mr. Kummant. Well, in terms of any forward deal, we are
going to continue to pursue the rights that we do have, but
there are no reforms contractually agreed to.
Senator Bond. Mr. Tornquist, you said there are no savings
from operating reforms in 2009. Do you have a different view of
the budget from Mr. Kummant?
Mr. Tornquist. I think it's a question of definitions. The
$40 million that I think Alex is referring to is the fiscal
year 2008 reforms and to their credit, Amtrak in the previous 3
years has had significant reforms. Our definition of reforms is
a change in business practices that is recurring into the
future, so that we are lowering their ongoing core operating
costs.
So, there have been significant reforms. There are no new
reforms in that area in the 2009 request as it was presented to
us.
Senator Bond. Do you have suggested reforms that you would
offer to them?
Mr. Tornquist. I think they have reforms that are on the
table in terms of their long distance service. I think they
have reforms that they have proposed in the past regarding
State payments, and I would encourage them to look in those
areas.
Senator Bond. Mr. Boardman, do you know of any instances
where the DOT has denied funding to Amtrak because Amtrak's
grant request would not be the most efficient use of Federal
funds?
Mr. Boardman. No. When we looked at the efficiency
requirements itself, we made sure that the kinds of things that
Amtrak was talking about would provide efficiencies.
Senator Bond. You voted against Amtrak's grant legislative
request for 2009 and the basis for that vote?
Mr. Boardman. So that the chairwoman wouldn't ask me why we
submitted $900 million and voted for $1.6 billion --what is it?
I'm just kidding.
Senator Bond. Just wanted to get that on the record. It was
rather obvious.
Mr. Boardman. Yes, sir.
Senator Bond. Are you concerned there are no operating
reforms proposed? What do you see for operating reforms in----
Mr. Boardman. Well, I think that operating the train
reforms, there are some things that are going on that I see as
a Board Member. I think there's been a strong effort to reduce
the amount of debt, and I think that has been important in this
process and that Amtrak, as you know, was in trouble with that
debt, and when you look back again at this whole history of the
appropriation levels, it was when they got in debt back in 2000
and 2001, when the really big debt came along, it was because
appropriation levels partly were much, much lower, $520 million
on 1 year and $726 million on the next, which was substantially
lower than they had been, and you look at the consistency of
the revenues, you look all the way along the process, they also
began to drop between 2002 and 2004 on their revenues for
ancillary business about 8 percentage points.
I guess what I'm trying to look at here is I've been trying
to look at the whole consistency of how you fund Amtrak and I
think that they are making changes, whether it's in the
mechanical side of things or whether it's in the back shop
where they're really changing today, E-ticketing, for example,
and some of the things, business practices, that have come
about and they've gotten a focus on.
As we measure those, I think you're going to see
improvements, but how you adjust in the middle of the changes
that Alex talked about with fuel costs and other costs that are
going up has been particularly difficult.
Senator Bond. Let me just have one last question for you,
Mr. Boardman and for Mr. Kummant and Ms. McLean.
In 2006 and 2007 a total of about $66 million was
appropriated for efficiency grants. I understand that Amtrak
has only sent in $15 million in receipts, leaving about $47.5
million remaining.
What's going on with the efficiency grants? Would Amtrak
like to use these funds in part for labor settlement? I'd also
like to know Mr. Boardman's position on use of those funds for
that purpose. So, let me ask Amtrak first on the efficiency
grants.
Ms. McLean. We are not opposed to using it, but like I
stated before, it's not something that we can do. It has to be
legislatively changed. We would have used those funds for a
variety of activities and which Alex can probably go through.
That's obviously a lost opportunity but, you know, we have
immediate needs as well.
Mr. Kummant. A key point to be made, though, on how the
efficiency grant functioned and why those funds don't disappear
quickly is we have to spend the money first and then we're
reimbursed. So, we don't have enormous other reserves to draw
on. It's not like we have a lot of excess cash to go work
projects and then come to the FRA for reimbursement, but there
are projects identified, such as really modernizing our
dispatch system and consolidating other backroom functions, but
it's a slow process, given the mechanism that we have to fund
it ourselves first, and we're all here today because we're not
a cash-rich organization.
Senator Bond. Mr. Boardman.
Mr. Boardman. We've obligated the funds. They would have to
be deobligated. We would look at the expenses that Amtrak has
already incurred on them, but I think Alex said it the right
way and that is, that these are things that still need to be
done.
Senator Bond. Thank you, ladies and gentlemen. Thank you.
Senator Murray. Thank you. I just have a few more
questions. I wanted to go back to the PEB recommendations right
now because Amtrak is signing those contracts right now, and as
I understand it, if Amtrak does not make the $114 million
payment for back pay next year, then Amtrak's unions are free
to strike 60 days after the decision is made.
Under those new contracts, who decides if Amtrak has the
resources to make the payment or not?
Mr. Kummant. It's the sole discretion of the Board.
Senator Murray. So that's strictly your decision?
Mr. Kummant. I'm a non-voting member of the Board. I
actually should perhaps look at Donna and Joe, but it's the
sole discretion of the Board to look at our cash balance and
make the decision whether or not we can manage that.
Senator Murray. Is that correct, Ms. McLean?
Ms. McLean. Yes, that's how I understand it.
Senator Murray. Mr. Parker, would you like to comment on
that?
Mr. Parker. That is correct. In the negotiations, we
decided we didn't want to get hung up on whether this amount of
money was appropriated or not. Obviously revenue is either
sufficient or not. They can do it without. So, the issue to us
was payment, period.
Senator Murray. Let me move on to another happy topic, on-
time performance. When we had the hearing last year, we spent a
lot of time talking about the very poor on-time performance of
Amtrak trains outside of the Northeast corridor, and when you
look at Amtrak's most recent data, things have improved
slightly but certain trains, including those that are
subsidized by the States, still have a pathetically poor record
of getting to their destinations on time.
Amtrak services in Indiana are on time less than a quarter
of the time. I'm afraid the record is worse when it comes to
State-supported services in Senator Bond's State, for example.
Certain services, like Vermont are not doing well. In fact, it
is much worse than last year. In Amtrak's long distance
network, more than 40 percent of the trains do not arrive
within a half hour of scheduled arrival time and a lot of them
arrive later than that.
Mr. Boardman, actually you testified last year that
improving on-time performance was one of your top priorities.
Can you tell us what you've done in the past year to work on
that?
Mr. Boardman. I think what we've mostly done is work with
Amtrak. We think Amtrak's done a good job, for example, with
CSX and the Auto Train and some of the other improvements that
are out there.
I think that David Tornquist, in the study that they did,
did point out some of the real difficulties here, the capacity
issues. I think that by proposing last year and starting to
fund the grants programs with the State, the idea was that we
could get some passing sidings and we could make some
improvements in the longer term.
We have included in our annual review of every one of the
railroads now a document that begins to measure for us what the
on-time performance is on that particular segment that would be
on that railroad, regardless of what the railroad itself has as
capacity problems and we've set up--in a couple of weeks from
now, the Secretary will meet with the chief executive officers
of all the freight railroads and the Amtrak Board and one of
the subjects or topics will be on-time performance. So, we're
trying to make sure we're raising that to a level of
importance.
Senator Murray. You probably know that I included a
provision in the 2008 appropriations bill requiring some
quarterly reports from you on on-time performance. The first
one was due in January 1. The second one was due in April 1. We
have not seen either one of those.
Can you tell me what you're doing to meet those statutory
requirements?
Mr. Boardman. You will get it right away because I thought
that we had some time yet.
Senator Murray. Okay. One was due January 1, another is
due. When can we expect that?
Mr. Boardman. Right away. I will get staff. If you need a
date on it, it will be done by the end of this month.
Senator Murray. Right away, like in on-time performance
right away or right away like in right away?
Mr. Boardman. Yes, ma'am. I deserved that.
Senator Murray. Thank you. One more question and then I'll
turn it over to Senator Lautenberg.
Mr. Tornquist, your agency has been doing an audit of this
on-time performance and its causes. The law that established
Amtrak granted passenger trains priority over other traffic
when operating on track owned by freight railroads. That
priority was part of the deal in exchange for the Federal
Government taking passenger trains off the books of the freight
railroads that used to run them.
Have you found that there's any consistency among the major
freight railroads on what they consider to be their obligations
under this provision of the law?
Mr. Tornquist. That actually has been one of the
difficulties in determining the exact cause of the delays that
Amtrak trains experience. There's both a lack of agreement
between Amtrak and the freights in regarding the freights'
obligations under the preference requirements. The freights as
a whole place a different emphasis on on-time performance of
Amtrak trains within their own operations.
So, Amtrak has a very black and white definition of
preference which is that their trains should run unimpeded
along the host railroad tracks. The freights did not give us a
legal definition of their preference obligations. By their
practices, they are in fact defining Amtrak's preference rights
since they control the dispatching. They view their dispatching
responsibilities, as they describe it to us, more in terms of
giving Amtrak priority while maintaining the flow of traffic
across their networks.
Senator Murray. Okay. I have a number of other questions
that I will submit for the record.
Senator Lautenberg, who's been a major player in this area,
I know as well, has some concerns, has a comment. I will give
you your time to ask questions.
Senator Lautenberg. Thank you very much, Madam Chairman,
for holding this hearing.
With gas prices as they are, greater delays at the
airports, the train is becoming ever more popular, and I can
attest to it directly. Coming down on Amtrak last night from
Newark, the place was busy and so it's been, I'm told by the
people who work in Newark Penn Station that, they're continuing
to see ever-larger crowds, and people seem to be content to
take a little bit longer, or in reality maybe some time less.
Effectively once you look at the delays getting into the
airport, the distance from city-centers and so forth, the train
is the way to go. I've even seen an improvement in the quality
of the food. So, I wanted to tell you things are picking up at
Amtrak and over 26 million people having taken the train in the
last year and again literally clamoring for more space and for
more opportunity for improving schedules and service.
So, I thank you, Madam Chairman, and I wanted to just get a
couple of questions in place here, and I ask for Mr. Tornquist.
The recent audit that you completed at my request estimates
that in fiscal 2006, late trains cost Amtrak $137 million or
about 30 percent of its Federal operating subsidy.
How can Amtrak recover some of these costs, especially when
most of these delays are caused by private freight rail
companies?
Mr. Tornquist. That's a very good question. The $137
million was tied to an on-time performance off the NEC of 85
percent which is an ambitious target. We would view it would
require a combination of effort, both clarifying Amtrak's
preference and the enforcement of those rights. S. 294 includes
provisions in those areas.
But we also think it has to be a collaborative effort
between Amtrak, the freights and the administration, that
simply standing over the freights' shoulders as they dispatch
trains is not a very good or efficient way of ensuring that the
desired result will be achieved.
We look to the State capital grant program that Mr.
Boardman has referred to as a way of bringing some capital into
the problem. In addition, a portion of the $137 million that
could be derived by improving Amtrak's on-time performance
could possibly be used to further incentivize the host
railroads to improve their dispatching of Amtrak trains.
Senator Lautenberg. Have the incentive opportunities moved
the freights along at all, Mr. Boardman, do you think?
Mr. Boardman. We have--in the $30 million, we do have 3
applications and 13 States that have serious interest in it and
yes, we think that it does help with the freights because in
some cases, the freights are talking about providing that local
share, so they can make improvements in the railroad.
Senator Lautenberg. Is there--how else might we enforce the
development of the relationship between the two? I mean, in
law, it says that the freights are to give consideration, the
preference to the rail service.
Can you think of what else we might do to make this a
reality?
Mr. Boardman. Well, I think--I was instructed or, I mean,
it was instructed to me to read David's report and his
testimony and the different definitions that there are out
there for what a railroad or what their dispatchers, what their
operators really think the obligation is, along with listening
to management at some of the board meetings at Amtrak, which I
think has taken a pretty aggressive approach in dealing with
the freight railroads, especially the ones that really aren't
coming up to the plate on these kinds of things.
I answered the question earlier and got myself in hot water
because I should have written it as a quarterly report, but we
have had regular meetings now with the freight railroads where
we're identifying for them and beginning to measure their on-
time performance in our safety review. The Secretary will be
meeting with the CEOs and the Amtrak Board this month, on the
16th of this month, together as a group for the first time and
one of the key elements of the discussion will be on-time
performance.
So, we're going to try to get to the bottom of what the
definition is, what the expectation is, and we think that's the
way to go, both in terms of talking to them, having Amtrak be
more aggressive about it and continuing to measure that
performance.
Senator Lautenberg. Mr. Kummant, do you want to tell us
what Amtrak is doing for their share of the problem?
Mr. Kummant. We have some good examples. I think we've done
very well with CSX on the Auto Train, for example, and when
they have serious maintenance issues, we need to be flexible in
schedules.
I do think that going forward to have the opportunity to
offer them capital for siding extensions or sidings to work
with them. Some of the best examples are with strong State
DOTs. If you look at BNSF's relationship on the west coast,
there's a lot of capital that flows into their systems. That's
related to passenger rail. That helps clear bottlenecks. So,
there are capital solutions.
Other than that, I do think visibility is important. I
mean, it's clear that the political environment is
significantly different, but just to scope the magnitude, only
four times really since the founding of the company has the OTP
been over 75 percent and that was as far back as 1985 and if we
recall, in this period of time, freight volume on the railroad
has doubled while mainline track capacity has probably dropped
by 30 or 40 percent.
So, it's a tough problem and in the end, yes, I do think
working on dispatching is maybe 5 or 10 points, but in the end,
it's about capital and it's about the way the States, the
freights and Amtrak come together as a coalition to solve each
individual problem. They're all different. That's what makes it
hard. Every single challenge is different on every different
corridor.
Mr. Boardman. Can I add to that? One of the other things
that's been a particular difficulty for us is to figure out how
to manage the slow order difficulties that are out there, that
a freight is just fine with the slow order because of their
demand for their particular service, but it's not an acceptable
deal for the passenger railroad because it really does hang
them up and slow them down.
So, we're trying to figure out how do we get the freights
to pay attention to that issue and move slow orders and take
care of things quicker.
Senator Lautenberg. Well, we have a bill that's passed
through the Senate, as you know, that will provide more capital
and perhaps can help us deal with this particular problem. It's
an important thing. We want freight to continue to be able to
have the capacity that they need, but we also have to make sure
that we encourage people to use the rail system and one way to
do it is to make it more reliable and the appetite is there. We
should try to fill it.
I want to ask Ms. McLean. Amtrak has now been given a $114
million for the resolution of the retroactive employee pay.
Does Amtrak have the $114 million or will it have now or next
year?
Ms. McLean. The $114 million is the back pay dollar amount
for fiscal year 2009. That is not something that we can absorb
and one thing that was brought up earlier in the hearing was
whether or not our cash balance would at the end of the year,
which we tend to have $200 million to a $180 million at the end
of the fiscal year, could that--could we just pick that up and
pay for the $114 million?
Well, that's what the IG David Tornquist is saying we could
do. Our experience at Amtrak is that we need a cash balance
around a $180 million because as our funds come in slowly at
the beginning of the fiscal year, you know, we need a cash
balance to be able to run our business, be able to pay your
basic requirements, and if we run down into about a $100
million, which we did in fact last year with the continuing
resolution situation, we get in a position where we are going
to have to start, you know, calling our company bankrupt, quite
honestly, because we cannot operate on a cash flow of nothing.
We have--we basically lose $40 million a month and that's
just, you know, the facts. So, we can't take our cash balance
and just pay for the $114 million out of that.
Senator Lautenberg. Mr. Tornquist, should they have--Amtrak
have that money available?
Mr. Tornquist. The point that we were making in our
testimony is that when looking at how to pay all of Amtrak's
bills, we think it's important to look at all the resources
that are available to Amtrak, and the cash balance that Amtrak
expects to have on hand at the end of fiscal year 2008 is a
resource that they have available.
We understand the concerns about cash flow that Amtrak has
expressed. I think Chairman Murray and Mr. Kummant both have
talked about how we're dealing with forecasts and we need to
keep an eye on how the economy is doing and how the
expenditures are doing. But based on the information we have
right now, there is almost $270 million that will be on hand at
the end of the year. Amtrak has expressed a need to have $150
million on hand at the time. I recognize the cash flow issues
are tied to when they'll get their appropriation in the next
fiscal year, but there are ways to address that problem in the
CR. However, it is a resource that we think just needs to be
considered in calculating their ultimate appropriation needs.
Senator Lautenberg. Madam Chairman, you've been patient.
May I ask one more question? One or two short ones?
Mr. Kummant, as we look at stimulus packages, opportunities
I'll call them, are there any capital projects in which Amtrak
could begin in let's say a 90-day period, if you had additional
funds?
Mr. Kummant. I think we could, we certainly could find work
on the Northeast corridor. The problem and the reason I need to
be hesitant and there's probably some people behind me grinding
their teeth, depending on how I answer it, is, I mean, material
is tight. With commodity markets, I mean that's difficult.
I can think of all kinds of expenditures, if you broaden
the 90 days to, you know, 6 or 9 months. The 90-day provision
is a tough one, but, I mean, I'm sure we could find a few
things, but material availability is difficult outside of our
core planned efforts that we have today.
I might just--I have to turn around and look and see if
there's a nod. I mean, we certainly have a backlog of projects,
but again we have to review what we can do on material.
Senator Lautenberg. Thanks very much, Madam Chairman. I
appreciate the courtesy.
Senator Murray. Thank you very much, and before I recess, I
just want to ask Mr. Kummant. In terms of on-time performance,
I noticed that one of the biggest problems is in my own
backyard with the Empire Builder going from 80 percent
performance to less than 45.
Do you know what is going on in that case?
Mr. Kummant. Yes. That was--we had a lot of weather, a lot
of slides. I think that was very much a seasonal issue over the
winter. Generally, Empire Builder does well and BNSF does well
with the Empire Builder. That's--obviously we're concerned
about that, but that should be improving.
Senator Murray. So that was mostly due to the snow that we
had?
Mr. Kummant. Yes. We had a very difficult winter in your
backyard.
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. At this time I would like to remind the
members that we will leave the record open for additional
questions they have for the second panel.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to Alex Kummant
Questions Submitted by Senator Patty Murray
STATE SUPPORTED SERVICES
Question. Mr. Kummant, in your testimony and budget submission, you
stated that additional States are interested in expanding Amtrak's
services with State subsidies.
At the same time, we have heard that new costs associated with the
labor agreement will have to be covered by States that support Amtrak
services, and that some of these States may not be in a position to
cover those costs.
What should we expect to see in the coming years as far as the
expansion or contraction of State supported Amtrak trains?
Answer. Amtrak is currently working with more than two dozen States
on proposals for new or increased State-supported intercity rail
services. However, due to a lack of available passenger rail equipment
and Federal matching capital funds for intercity rail investments, near
term expansion will be limited. As evidence for the need of such a
program, 22 States have applied to the Federal Railroad Administration
for a portion of the $30 million in Federal matching grant funds that
Congress appropriated this year. The Amtrak reauthorization legislation
approved by both houses of Congress would at least in part address this
need by creating a multi-year Federal matching capital grant program
for intercity passenger rail development, modeled on the Federal
programs that provide funding to States for other transportation modes.
We believe that enactment of a Federal capital matching grant program
would allow States and Amtrak to bring many of the proposals mentioned
above to fruition, and would encourage additional initiatives to expand
Amtrak service.
Question. Do you foresee any States dropping rail service because
of their inability to pay their portion of the cost?
Answer. While many States are seeking to start or expand existing
intercity passenger rail services, increased operating expenses
associated with higher labor rates resulting from the recent settlement
and increased fuel costs (which for many routes have been largely
offset by higher demand) have negatively impacted some routes. Coupled
with lower than expected tax revenue several States may be forced to
consider reducing or eliminating service over existing State-supported
routes. Amtrak is working closely with each of these States to seek new
efficiencies and/or increase passenger revenue through fare adjustments
or service improvements. We remain confident that these actions and
continued strong demand will avoid service cuts. However, a reduction
or elimination of service remains a possibility in at least four and
perhaps more States.
Question. What communities do you think are poised to expand to
rail service even at these increased costs?
Answer. Despite higher operating, costs strong demand driven by the
safety, affordability, comfort and convenience of rail travel has
driven many communities to seek new or expanded service. Major routes
where equipment has been identified and service expansion is currently
underway or in advanced planning phase include the Downeaster Service
(expansion to Brunswick, Maine), Cascades Service (additional service
between Bellingham, Washington and Vancouver, British Columbia) and the
Piedmont service (additional service between Raleigh, North Carolina
and Charlotte, North Carolina). In addition, routes where planning
efforts are underway and near term expansion (2 to 3 years) is possible
include the Northeast Regional Service (between Washington, DC and
Lynchburg, Virginia and between Washington, DC and Richmond, Virginia);
addition of an eighth daily roundtrip of the Hiawatha service operating
between Chicago and Milwaukee; new service between Chicago and the Quad
Cities; and new service on the Chicago-Rockford-Dubuque route. However,
Amtrak's inventory of available equipment is nearly depleted and
therefore not all of these routes will be implemented in the near term.
Amtrak is working with our State partners to standardize equipment
templates in an effort to reduce the cost and lead time necessary to
secure new equipment in the event that Federal capital matching funds
are made available.
HEALTH INSURANCE COSTS
Question. Mr. Kummant, in your grant request for next year, you
state that you expect a very large increase in expenditures for health
insurance. However, health insurance is one area where the expenditures
for the current year to date are below your projections.
What is the realistic outlook for your health insurance costs next
year?
Answer. The grant request for next year projected a large increase
in employee benefit costs that included taxes and pension costs as well
as insurance. Health insurance costs are not expected to grow
significantly over the current year's forecast as a result of favorable
lower claims experience. Taxes will increase due to higher wages paid
and higher tax ceilings. Pension costs are expected to rise as our
workforce ages. The combined increase is about $20 million less than
what was projected in the grant request.
DEBT
Question. When it comes to Amtrak's appropriations request for debt
service payments, there is a dramatic difference between the level
sought by the Amtrak Board and the level recommended by the Inspector
General. Ms. McLean, the Board is recommending that we increase your
appropriations for debt service payments by $60 million next year in
order to allow you to buy down some of your outstanding debt. Mr.
Tornquist, the IG is actually recommending that we cut debt service
payments by $19 million next year.
Could each of you explain the rationale behind your recommendation?
Answer. The current budget proposal before the Amtrak Board of
Directors is $264 million in order to satisfy all required debt service
payments. This is lower than fiscal year 2008 due to the repayment of
the RRIF loan. The additional $60 million requested was proposed in
order to buy down approximately $120 million of debt at a discount.
DEFECTIVE CONCRETE TIES
Question. Mr. Kummant, Amtrak owns much of the Northeast Corridor.
I was disturbed to learn that Amtrak has repeated a past problem of
purchasing defective concrete ties for the Northeast Corridor. Your
grant request for 2009 points out that the vendor is covering only the
cost of the new ties, but that Amtrak has to bear the cost of
installing those new ties.
Why isn't the vendor covering the entire cost of replacing its
defective ties? How much is this problem likely to cost the corporation
this year and in the years going forward?
Answer. Amtrak's purchase of the defective ties is subject to a
contract which generally governs Amtrak's rights and remedies. Amtrak
is currently reviewing available options to recover as much as possible
for the defective concrete ties. At the present time the vendor, ROCLA,
is supplying the necessary new ties to Amtrak at cost, but Amtrak has
not waived any of its rights with respect to the defective ties.
We have spent $37.4 million in fiscal year 2008 and have budgeted
$38.0 million in fiscal year 2009 for concrete tie mitigation. Our
present estimates anticipate a cost of $150 to $200 million over the
next 5 to 6 years to complete the replacement of the defective concrete
ties.
CONCLUSION OF HEARINGS
Senator Murray. Thank you very much. With that, we will
conclude this hearing and this subcommittee is in recess until
Thursday, April 10, when we will take the testimony in the
housing crisis with the Federal Housing Commissioner and
outside witnesses.
[Whereupon, at 11:40 a.m., Thursday, April 3, the hearing
was concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2009
----------
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
NONDEPARTMENTAL WITNESSES
[Clerk's note.--The following testimonies were received by
the Subcommittee on Transportation and Housing and Urban
Development, and Related Agencies for inclusion in the record.
The submitted materials relate to the fiscal year 2009 budget
request.
The subcommittee requested that public witnesses provide
written testimony because, given the Senate schedule and the
number of subcommittee hearings with Department witnesses,
there was not enough time to schedule hearings for
nondepartmental witnesses.]
Prepared Statement of the City of San Marcos, Texas
san marcos municipal airport
Madam Chairman and members of the subcommittee: On behalf of the
city of San Marcos, Texas, I am pleased to submit this statement in
support of our request for project funding for fiscal year 2009.
The city of San Marcos requests Federal funding for the San Marcos
Municipal Airport to accomplish improvements that are in the public
interest. The improvements are described in the three specific project
components listed below:
------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Northside Infrastructure Development.................... $2,021,250
New Terminal Building................................... 4,725,000
Fixed Base Operator (FBO) Facility...................... 1,575,000
---------------
Total Request..................................... 8,321,250
------------------------------------------------------------------------
The San Marcos Municipal Airport is a public general aviation
classified as a reliever airport within the National Plan of Integrated
Airport Systems. The airport is owned and operated by the city of San
Marcos, Texas. It is located just east of Interstate Highway 35 on
Texas Highway 21 approximately 30 miles south of Austin and 45 miles
north of San Antonio in one of the fastest growing corridors in Texas.
The airport is part of a closed military base; the remainder of the
former Air Force Base is occupied by the United States Department of
Labor's Gary Job Corps Center. When the base was closed and divided in
1966, the Job Corps retained the portion of the property with the
buildings and other amenities, while the city of San Marcos was given
the aeronautical facilities consisting of runways, taxiways, and the
parking apron.
This arrangement has resulted in a ``bare bones'' airfield that
lacks the support structure to sustain an economically viable modern
airport. We have adequate aeronautical facilities and real estate, but
few other vital facilities. In addition, current legislation provides
for airport capital improvement funding assistance through the Federal
Aviation Administration for aviation infrastructure, but not for the
type of improvements that this airport needs.
The city of San Marcos requests assistance to transform the airport
into a modern, self-sustaining enterprise benefiting not only the local
community, but the region as well. After analysis and master planning,
we have determined that the three project components herein described
will produce the ``biggest bang for the buck.'' These components
represent our highest priorities and most immediate needs, and they
will be a highly visible indicator that the San Marcos Municipal
Airport is on the move. We are firmly convinced that these improvements
will initiate further development and attract private investment that
will far surpass the amount that we are seeking in Federal support.
The following program descriptions outline our three-part request:
North Side Infrastructure Development--$2,021,250
The layout of the former Gary Air Force Base is such that all the
buildings and developed area of the base are to the south of the
airfield. When the base was divided between the Gary Job Corps Center
and the San Marcos Municipal airport, the airport was given only a thin
sliver of land on the south side to provide access and support the
airfield. There is not enough room for all the support facilities such
as hangars, maintenance shops, and terminal buildings that an active
airport requires.
However, on the north side of the airfield is real estate that has
never been developed. One prime piece of this area consists of
approximately 40 acres of very desirable airport land that fronts Texas
Highway 21 and borders an existing taxiway that will become the main
taxiway for the entire north side development. Except for the absence
of infrastructure, it is the prime location on the airport. The area
requires access roads, including a main airport entrance, drainage
improvements, aircraft ramps and aprons, existing taxiway pavement
reconstruction, and utilities. It also needs a seed project to
stimulate private investors to move into the area.
Our plan proposes to construct the infrastructure and then to build
approximately 50 nested T-hangars in two or three city-owned buildings.
Our planning estimate for the cost to implement this project is
$2,021,250. San Marcos Airport received $1,575,000 in appropriations
funding for fiscal year 2008, leaving $2,021,250 needed to complete the
infrastructure project. We are also convinced that once this north side
development ball starts to roll, the future of the new San Marcos
Municipal Airport will shift from the current limited and constrained
south side to the several hundred acres of prime undeveloped land
available on the north side.
New Terminal Building--$4,725,000
The commercial, economic, and public service hub of a modern
airport is the public terminal building. The terminal building provides
public amenities such as a waiting room or lounge, airport
administration offices and public meeting rooms, restrooms, flight
planning facilities and communications links to obtain flight planning
information, commercial lease space for on-site businesses such as
restaurants, retail shops, rental car facilities, and other aviation-
related commercial activities.
An airport's facilities will be the first thing a business traveler
will see, and it is those facilities which represent the city of San
Marcos. These facilities are sorely lacking in our present airport
configuration, and the existing terminal building is undersized to meet
existing demand, much less provide room for growth. The planned
terminal building planning concept is for a modern, state-of-the-art
building of approximately 10,000 square feet first floor and total cost
estimated at $4,725,000. This terminal building will be the seed
project to stimulate private investors and other commercial and
corporate business to move into the area. Lease payments and other
airport fees would offset this investment; and the investment is
calculated to be a profitable enterprise for the airport in the long
term.
Fixed Base Operator (FBO) Facility--$1,575,000
For general aviation operations, airport activity centers on the
Fixed Base Operator (FBO). This facility is where the transient and
airport-based pilots and aircraft operators buy fuel and obtain direct
support for their flights. It is also a place where transient and
airport-based pilots can arrange to have their aircraft serviced,
repaired, and hangared overnight or longer when required.
It is again opportune that the San Marcos Municipal Airport has an
established FBO that is capable of accomplishing these vital services
if a facility were available for them to lease. We propose that a
modern, state-of-the-art FBO facility be constructed to meet the
airport's present and future commercial requirements. The approximately
30,000 square foot structure would be primarily hangar space with an
attached business, repair shop, and office area. Cost is estimated at
$1,575,000. Lease payments and other airport fees would offset this
investment; and the investment is calculated to be a profitable
enterprise for the airport in the long term.
The 1,356 acre San Marcos Municipal Airport is a potential economic
dynamo for this region of Central Texas. The three airport improvement
components that we are proposing will result in an increase in activity
and private investment. This is a good investment of public revenue
that will result in more high-paying aviation jobs, an increased tax
base, and more direct revenues in the form of airport fees and rents.
Our airport will also better serve the aviation needs of the region and
spur further growth, development, and prosperity for our citizens.
These projects are grounded in sound public policy principles. They
will result in excellent value for the American taxpayer and for the
traveling public that will utilize the facilities.
Cost-Sharing
The city of San Marcos will contribute real estate on the north
side of the airport for the three components of the airport project.
The value of the local municipal government in-kind share is estimated
at $832,125. Additionally, our development code will require new
developers to share the costs for infrastructure extensions (water
lines, waste water lines, roadways, etc.) We estimate this cost share
value to be approximately $1,500,000.
The city of San Marcos sincerely appreciates your consideration of
these requests for funding in the fiscal year 2009 cycle and
respectfully requests your support.
LOOP 82 RAILROAD OVERPASS PROJECT
On behalf of the city of San Marcos, Texas, I am pleased to submit
this statement in support of our request for project funding for fiscal
year 2009.
The city of San Marcos requests an appropriation of $10 million
from the Transportation, HUD & Related Agencies Subcommittee to
complete the funding for a vitally needed $25 million railroad overpass
on Aquarena Springs Drive (Loop 82), a major State highway in San
Marcos, Texas.
Background
San Marcos has 50,371 residents, plus an estimated 13,000 commuting
students who are part of our 28,500 student campus at Texas State
University, all within the city limits. The city is located in the
heart of the Interstate 35 corridor halfway between Austin and San
Antonio, Texas.
Aquarena Springs Drive (Loop 82) is a major entryway into San
Marcos and the primary access point for Texas State University from
Interstate 35. In addition to traffic generated by commuters and
residents, Aquarena Springs Drive carries heavy traffic from numerous
university housing and large apartment complexes located along this
busy thoroughfare. Aquarena Springs Drive averages an estimated 32,000
vehicles per day.
San Marcos has an elevated railroad crossing on only one State
highway and 20 at-grade railroad crossings throughout the city. Union
Pacific Railroad tracks completely bisect San Marcos, with most
crossings located within 1 mile of downtown, including the Aquarena
Springs Drive crossing. An average of 47 trains travel through San
Marcos every 24 hours. The existing at-grade crossing on Aquarena
Springs Drive results in increased risk for automobile/railroad
conflicts and significant trip delay.
In February 2005, a freight train transporting hazardous materials
derailed in the center of San Marcos near a heavily populated
neighborhood about 1.6 miles from Aquarena Springs Drive. While no one
was injured and no hazardous materials were spilled, the incident
raised the level of concern about the lack of safe passage at railroad
crossings along major thoroughfares in San Marcos.
Cost Sharing
The Loop 82 Aquarena Springs Drive overpass project has been
approved by the Texas Department of Transportation (TXDOT) and Union
Pacific Railroad, and preliminary design has begun. Approximately $15
million in railroad safety funds have been allocated to this $25
million project. As of October 2007, design was scheduled to be
completed by April 2011, with construction to begin in August 2011.
The city of San Marcos has received voter approval to allocate
$932,800 in tax-supported general obligation bonds as our local share
to pay for the realignment of local roadways associated with the
railroad overpass. As noted, the Texas Department of Transportation has
set aside $15 million in railroad safety funds for the bridge. However,
the recent financial shortfalls at TXDOT have caused the State agency
to halt all work on this important project.
Community Safety Issue
The $10 million shortfall has effectively stopped a project that
addresses a critical issue of health, safety and welfare in our
community. Loop 82 was identified by the Texas Department of
Transportation as the only other State highway on which a railroad
overpass can be constructed in San Marcos. In December 2006, the city
of San Marcos and TXDOT opened the first railroad overpass on Wonder
World Drive (FM 3407) on the south end of San Marcos, a project that
took us more than 25 years to achieve.
Design, right-of-way acquisition and construction of a 4-lane
railroad overpass on Aquarena Springs Drive (Loop 82) with associated
frontage roads will improve railroad safety, traffic safety, mobility
and air quality in San Marcos. We believe that it is a matter of safety
and community health and welfare to build this overpass and create an
unobstructed access to Texas State University and downtown San Marcos.
The city of San Marcos sincerely appreciates your consideration of
this request for funding in the fiscal year 2009 cycle and respectfully
requests your support.
______
Prepared Statement of the Institute of Makers of Explosives
INTEREST OF THE IME
The IME is the safety and security association of the commercial
explosives industry. Commercial explosives are transported and used in
every State. Additionally, our products are distributed worldwide,
while some explosives, like TNT, must be imported because they are not
manufactured in the United States. The ability to transport and
distribute these products safely and securely is critical to this
industry.
BACKGROUND
The production and distribution of hazardous materials is a
trillion-dollar industry that employs millions of Americans. While
these materials contribute to America's quality of life, unless handled
properly, personal injury or death, property damage, and environmental
consequences can result. The threat of intentional misuse of these
materials also factors into public concern. To protect against these
outcomes, the Secretary of Transportation (Secretary) is charged under
the Hazardous Materials Transportation Act (HMTA) to ``provide adequate
protection against the risks to life and property inherent in the
transportation of hazardous materials in commerce by improving''
regulation and enforcement.\1\ The Secretary has delegated the HMTA
authorities to various modal administrations, with primary regulatory
authority resting in the Pipeline & Hazardous Materials Safety
Administration's (PHMSA) Office of Hazardous Materials Safety (OHMS).
How OHMS has handled and proposes to handle these responsibilities is
the focus of this statement.
---------------------------------------------------------------------------
\1\ 49 U.S.C. chapter 51.
---------------------------------------------------------------------------
FISCAL YEAR 2009 BUDGET REQUEST
Staff and Program Resources
We understand that this is an unusually tight budget year. While
OHMS is level funded, it is technically adsorbing a $1.3 million cut
from the adjusted fiscal year 2008 base. It is able to sustain those
cuts because it has automated some activities, streamlined some
regulatory processes, leveraged other agency resources, and made
efforts to fully staff up to allowable FTE. At the same time, however,
PHMSA leadership has charted an aggressive program of work for OHMS
that is risk-based, compliance-oriented, and stakeholder-focused. We
believe OHMS is operating at capacity. Any additional cuts would
compromise the agency's role to ensure the reliability of commercial
hazardous materials transportation.
We are concerned that ``over one-third of [OHMS] employees will be
eligible to retire within 5 years.'' \2\ Essential programmatic
knowledge may be lost with turnover of this magnitude. We urge Congress
to ensure that adequate transition plans are in place.
---------------------------------------------------------------------------
\2\ Fiscal Year 2009 PHMSA Budget Submission, page 50.
---------------------------------------------------------------------------
Regulatory Backlog
This year OHMS has designated four rulemakings as ``significant,''
the same number as last year. However, two from the old list were
completed and two new ones have been opened.\3\ In addition to these
four priority rulemakings, OHMS is assisting the Federal Railroad
Administration with a priority rulemaking and working on 17 additional
dockets. These rulemakings do not take into account rulemaking
petitions, which OHMS has accepted but has not yet assigned to a
specific rulemaking action. OHMS has pending 24 such rulemaking
petitions.\4\ In addition, OHMS is in the 10th of a 10-year cycle to
review the impact of its regulations on small entities pursuant to the
Regulatory Flexibility Act (RFA).\5\
---------------------------------------------------------------------------
\3\ DOT Rulemaking List, Fall 2007. http://www.reginfo.gov/public/
do/eAgendaMain.
\4\ http://dms.dot.gov/reports/PHMSA_report.cfin, February 13,
2008.
\5\ Public Law 96-354, section 610 as amended.
---------------------------------------------------------------------------
Since the enactment of the 2005 HMTA amendments, OHMS' special
permit workload has decreased because permits may now be issued for
periods up to 4 years, rather than the previous 2 year limitation.
Still, OHMS processes nearly 200 special permit requests annually--a
commendable effort. However, this does not reveal how timely the
special permit workload is handled. OHMS is under a statutory mandate
to process special permits within 180 days. Yet last year, ``lack of
staff resources given other priorities or volume of applications'' was
the reason given 81 percent of the time that special permit
applications were delayed. A helpful workload indicator may be the
actual number of special permit requests received, the actual number
processed, and of that number, the actual number processed within the
statutory 180-day deadline set by Congress.
One aspect of the hazmat regulatory workload that continues to
present concern is the processing of petitions for preemption. This
activity is managed by the PHMSA Office of Chief Counsel. Six petitions
for preemption determinations are currently pending. There has been no
change in the status of these petitions during the last year. Neither
these, nor any prior petition for preemption, have been processed
within the congressionally mandated 180-day turnaround.\6\ PHMSA's
ability to swiftly deal with petitions for preemption is essential to
the purpose Congress hoped to achieve in granting administrative
preemption to DOT, namely that the preemption determination process
would be an alternative to litigation.\7\
---------------------------------------------------------------------------
\6\ 49 U.S.C. 5125(d).
\7\ In authorizing the preemption determination process, Congress
found that ``the current inconsistency ruling process has failed to
provide a satisfactory resolution of preemption issues, thus
encouraging delay, litigation, and confusion.'' H. Rept. 101-444, part
1, page 21.
---------------------------------------------------------------------------
Hazmat Registration and Fees
We have appreciated the oversight the House and Senate
Appropriations Committees have provided to ensure that fee collections
have not been spent on activities above authorized amounts. The 2005
amendments to the HMTA nearly doubled the fees to be collected in
support of the Emergency Preparedness Grant Program (EPGP), ``train-
the-trainer'' grants for first responders, publication of the Emergency
Response Guide, and, for the first time, grants to train hazmat
employees. At the same time, the statute requires OHMS to adjust the
amount of the fees charged to account for unexpended balances that
accrue to the fund. In the past, OHMS failure to adjust fees due to
over-collection resulted in litigation.\8\ OHMS finds itself again with
a substantial $18 million over-collection. As a result, OHMS is not
proposing to increase hazmat registration fees for the 2008-2009
registration year to cover the increases authorized by the 2005
amendments.\9\ But, we expect a rulemaking to increase fees in fiscal
year 2009.
---------------------------------------------------------------------------
\8\ Hazardous Materials Advisory Council, Inc. et al. v. Mineta,
No. 02-01331, (D.D.C., filed July 1, 2002).
\9\ The 2005 amendments were enacted too late to appropriate
increases to the fiscal year 2006 EPGP. Fiscal year 2007 was funded on
a continuing resolution. Fiscal year 2008.
---------------------------------------------------------------------------
Our concern about over-collection of hazmat fees stems from the
statutory provision that allows OHMS to transfer fees ``without further
appropriation'' from the Hazardous Materials Emergency Preparedness
Fund (HMEPF).\10\ It is important, therefore, that the subcommittee
continue to scrutinize the amount of hazmat fees that can be
transferred from the HMEPF and to cap transfers at levels the
subcommittee believes will be appropriately spent.
---------------------------------------------------------------------------
\10\ 49 U.S.C. 5116(i).
---------------------------------------------------------------------------
OHMS is authorized to assess a separate fee to process registration
submissions. Currently, that fee is $25 per registration. The fiscal
year 2009 budget request cuts the amount needed to cover the costs of
registration processing from $1.2 million to $765,000. OHMS has been
able to reduce costs through system automation, bringing the
registration program in-house, and by eliminating costly 24/7 emergency
registration processing. We fully support the registration program
whose purpose is to provide OHMS information on the community it
regulates, and have no objection to paying fees for this function.
Thirty percent of the $13.5 million fee increase provided by the
2005 amendments is earmarked to train trainers of private sector hazmat
employees or hazmat employees themselves.\11\ This program is of
questionable benefit because the training provided is limited to that
offered by non-profit hazmat employee organizations that are unlikely
to be relied upon to provide the specific and specialized training each
``hazmat employer'' is required by law to provide to address its own
unique hazmat environment. Any potential hazmat employee who availed
themselves of such training from a third-party non-profit training
organization would still have to be trained in his employer's hazmat
operations. The program amounts to double taxation for hazmat employee
training. The real issue with private sector training is assessing the
quality of the training that is available. Given the millions of
dollars in fees industry is already paying to fund other aspects of the
EPGP, this program cannot be justified. If fee revenue will be
allocated for hazmat employee training, OHMS is proposing some creative
options to make the program more palatable. First, OHMS is committed to
competitively award the hazmat employee training grants, a good
Government decision that should be supported.\12\ Second, OHMS is
proposing to limit the hazmat employee grant program to $2 million.
With this allotment, OHMS could still train 50,000 employees.\13\
Third, the agency is proposing to redirect $1.5 million of the
remaining fees to fund its authority to establish grants and
cooperative agreements.\14\ This initiative proposes to create a data
repository of training materials developed using EPGP funds. Fourth,
OHMS is proposing to develop training competency standards and
instructor guidelines and to offer instructor certification as a way to
improve the quality of training available to the hazardous materials
community.\15\
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\11\ 49 U.S.C. 5107(e) & 5128(c).
\12\ Fiscal Year 2009 PHMSA Budget Submission, page 129.
\13\ OHMS estimates that training will cost $40.00/employee. OHMS
estimates that only 25,000 will be trained. However,
2,000,00040=50,000. See fiscal year 2009 PHMSA Budget Submission, page
52.
\14\ 49 U.S.C. 5121(g). Fiscal year 2009 PHMSA Budget Submission,
page 131. These grant funds are in addition and not to be confused with
the $1.25 million OHMS receives from the Federal highway trust fund to
support research projects identified by the National Academy of
Sciences. See. Public Law 109-59, sec. 7131, and fiscal year 2009 PHMSA
Budget Submission, page 43.
\15\ Fiscal Year 2009 PHMSA Budget Submission, page 42.
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Emergency Planning and Training Grants
The purpose of the Emergency Preparedness Grants Program (EPGP) is
to cover the ``unfunded'' Federal mandate that States develop emergency
response plans and to contribute toward the training of emergency
responders. Industry has contributed, through hazmat registration fees,
nearly $199 million during the life of the grants program. More
accountability is needed in the EPGP and more evidence of coordination
among other similar Federal initiatives to ensure that all resources
are used as efficiently and effectively as possible. Congress directed
OHMS to submit annual reports to Congress on the allocation and uses of
the grants, the identity of the ultimate recipients, a detailed
accounting of all grant expenditures, as well as an evaluation of the
efficacy of the programs carried out.\16\ No reports or information
have been forthcoming. The subcommittee is best suited to insist on
this level of oversight.
---------------------------------------------------------------------------
\16\ 49 U.S.C. 5116(k).
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As an indication of congressional concern that the LEPC set-aside
may not be the best use of the new $9 million fee increase in the EPGP,
the 2005 HMTA amendments provide OHMS discretion to limit or deny new
funding. Yet, OHMS has not exercised this discretionary authority, nor
does it describe any sort of analysis that would justify ignoring this
funding opportunity. OHMS should be asked to prioritize the needs and
value of the planning and training portions of the EPGP to the safety
and security of hazardous materials transportation. The subcommittee
should use this information to redirect the new $9 million allocation
up to the maximum extent allowed.
While the law provides that OHMS can expend industry's hazmat
registration fees for the EPGP ``without further appropriation,'' we
would encourage the subcommittee to exercise its oversight to address
programmatic issues and concerns before handing over a blank check. The
subcommittee has established congressional precedent in this area,
setting caps on the amount of the fees that may be expended for the
EPGP.
Program Priorities
OHMS lays out an aggressive array of priorities for the fiscal year
2009 funding request. In particular, we are particularly pleased to see
plans to charter a Hazardous Materials Technical Advisory Committee
(HMTAC). The HMTAC would be modeled after successful advisory
committees currently serving the Federal Motor Carrier Administration
and the Federal Railroad Administration, with representation from the
regulated community, State and local government and the public
sector.\17\ Likewise, we support several training initiatives OHMS
outlines to address the needs of the agency for a skilled workforce, to
improve the competency of Federal and State hazmat investigators, and
to promote professionalism throughout the regulated community.\18\ We
are particularly enthused by OHMS' proposal to develop curriculum for
the regulated community and to establish an exclusive authority to
certify hazmat professionals.
---------------------------------------------------------------------------
\17\ Fiscal Year 2009 PHMSA Budget Submission, page 47.
\18\ Fiscal Year 2009 PHMSA Budget Submission, page 50.
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OHMS also proposes to establish a Integrity Management Program.\19\
This type of initiative is a hallmark of the pipeline regulatory
program. However, we are approaching this initiative for the hazmat
community with a degree of caution. The hazmat community is so diverse
that relatively few entities have systemwide control of a hazmat
shipment. Typically, a hazmat shipment will involve multiple offerors
and carriers as a package transits from the manufacturer to the end
user. OHMS has suggested that some form of regulatory relief will be
the reward of those that employ a IMP approach. However, the one factor
that underpins the undisputed success of the Federal regulatory program
is the very uniformity of its requirements. It remains to be seen how
IMP relief will translate into a regulatory environment dependent on
uniformity to function safely and efficiently.
---------------------------------------------------------------------------
\19\ Fiscal Year 2009 PHMSA Budget Submission, page 49.
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CONCLUSION
The transport of hazardous materials is a multi-billion dollar
industry that employs millions of Americans. This commerce has been
accomplished with a remarkable degree of safety, in large part, because
of the uniform regulatory framework authorized and demanded by the
HMTA. Within the Federal Government, OHMS is the competent authority
for matters concerning the transportation of these materials. Finally,
we note that OHMS intends to kick-off a number of innovative
initiatives with a flat-lined budget and in the face of unprecedented
staff turnover, largely due to retirements. We, therefore, strongly
recommend full funding for OHMS.
______
Prepared Statement of the Capital Metropolitan Transportation
Authority, Austin, Texas
Mr. Chairman and members of the subcommittee: On behalf of the
Capital Metropolitan Transportation Authority in Austin, Texas, I am
pleased to submit this statement for the record in support of our
fiscal year 2009 funding requests from the Federal Transit
Administration and the Federal Highway Administration for Capital
Metro--the transportation provider for Central Texas. I hope you will
agree that the appropriating of funds for these Central Texas projects
warrants serious consideration as Austin and the surrounding Texas
communities plan for our region's growing transportation needs.
First, let me thank you for your past financial support for
transportation projects in Central Texas. Your support has proven
valuable to Capital Metro and to our Central Texas community as we face
new challenges.
As you know, Interstate 35 runs from Canada to Mexico, and along
the way it also runs through the city of Austin and Capital Metro's 600
square mile service area. While traffic in this important corridor has
always been a challenge, the North American Free Trade Agreement has
resulted in increased traffic and congestion for our region. In fact, a
2002 study by the Texas Transportation Institute determined Austin,
Texas to be the 16th most-congested city nationwide.
Also, Central Texas' air quality has reached near non-attainment
levels. Together, our community has developed a Clean AirForce, of
which Capital Metro is a partner, to implement cooperative strategies
and programs for improving our air quality. Capital Metro has also
unilaterally implemented several initiatives such as converting its
fleet to clean-burning Ultra Low Sulfur Diesel (ULSD), becoming the
first transportation authority in Texas to introduce environmentally-
friendly hybrid-electric buses, and creating a GREENRide program to
carpool Central Texas workers in low emission hybrid gas/electric
automobiles.
To address these transportation and air quality challenges as well
as our region's growing population, in 2004 Capital Metro conducted an
extensive community outreach program to develop the All Systems Go
Long-Range Transit Plan. This 25-year transportation plan for Central
Texas was created by Capital Metro, transportation planners, and local
citizens. More than 8,000 citizens participated in the design of the
program that will bring commuter rail and rapid bus technologies to
Central Texas. The plan will also double Capital Metro's bus services
over the next 25 years.
By a vote of over 62 percent, this long-range transportation plan
was adopted by the Central Texas community in a public referendum on
November 2, 2004. The plan received bipartisan support, along with
endorsements from the business community, environmental organizations,
neighborhood associations, and our community leaders.
An important component of the All Systems Go Long Range Transit
Plan is the creation of an urban commuter rail line along a 32-mile
long freight rail line currently owned and operated by Capital Metro.
The proposed starter route would provide urban commuter rail service
extending from downtown Austin (near the Convention Center) through
East and Northwest Austin and on to Leander. This project was entirely
financed with local funds and will open in late 2008.
To implement the community's All Systems Go Transit Plan, Capital
Metro is seeking $10 million for fiscal year 2009 for three projects of
importance to our Central Texas community. Each of the three projects
is contained in the community-designed All Systems Go Long Range
Transit Plan, and each will be funded by Capital Metro with a
significant overmatch of local funds.
enhancement and improvement of buses and bus facilities--$5 million
Capital Metro has embarked on a long term plan to improve and
expand bus service. In addition to improving bus routes, the agency is
investing in critical park and ride facilities, transit centers and
enhanced bus stop locations and amenities. As Capital Metro's service
area and the population we serve continue to grow, we will continue to
enhance our system and facilities while addressing traffic congestion
and air quality concerns. In the next 3 years, Capital Metro has
planned to invest nearly $300 million in capital projects to better
serve our growing population. Capital Metro seeks $5 million from the
appropriations process for these improvements and expansions of our bus
service and facilities.
HIKE AND BIKE TRAIL--$3 MILLION
During Capital Metro's 2004 All Systems Go open houses, workshops
and briefings, the Central Texas community encouraged Capital Metro to
begin planning for bike and pedestrian trails along rail lines. Capital
Metro has coordinated local efforts to plan for pedestrian and bicycle
trails along several rail corridors in Capital Metro's service area.
Capital Metro is seeking $3 million for its planned pedestrian and
bicycle trail located in the right of way of its 32-mile Urban Commuter
Rail line from Austin to Leander.
PARATRANSIT SERVICE VEHICLES--$2 MILLION
Pursuant to, and in accordance with, the Americans with
Disabilities Act, Capital Metro provides door-to-door van and sedan
paratransit service throughout Central Texas for persons with
disabilities and senior citizens. This $11.7 million fiscal year 2008
program provides more than 500,000 rides each year. Capital Metro will
be replacing many of the vans and sedans that serve this program, as
they are retired during fiscal year 2009. This crucial funding will
assist Capital Metro in ensuring the accessibility of transportation
services for all Central Texans.
I look forward to working with the Committee in order to
demonstrate the necessity of these projects. Your consideration and
attention are greatly appreciated.
______
Prepared Statement of the National Association of REALTORS
THE FEDERAL HOUSING ADMINISTRATION`S ROLE IN ADDRESSING THE HOUSING
CRISIS
The mortgage crisis continues to grow--homeowners continue to face
foreclosure, and housing markets are in turmoil. For all these reasons,
I and the 1.3 million members of the National Association of REALTORS
thank you for holding this hearing on ``The Federal Housing
Administration`s Role in Addressing the Housing Crisis.''
In 1934 the Federal Housing Administration was established to
provide consumers an alternative during a similar lending crisis. FHA
served as the foundation for our housing market, which has served our
citizens and our economy well for more than 70 years.
However, as private mortgage markets evolved, FHA remained
stagnant. Because FHA was unable to serve its core constituency, other
mortgage providers stepped in to fill the gap. Without another
alternative, many homebuyers were lured into these more exotic mortgage
options, which fueled our current crisis. Even after all of this
evidence, the need for a viable FHA remains unmet. Despite the best
efforts of you and others, FHA reform has yet to be achieved.
We urge you and your colleagues in the Senate to continue to work
towards FHA reform. Permanent, realistic increases in the FHA loan
limits; lowered FHA downpayment requirements; and new opportunities for
condominium purchases are needed to create safe and affordable mortgage
options for homebuyers and those wishing to refinance. These changes
will also provide much needed stability to our local housing markets
and economies.
We also believe that the FHASecure program has been, and can
continue to be a valuable tool for homeowners in crisis. This program,
introduced in September 2007, gives credit-worthy homeowners who were
making timely mortgage payments but are now in default, a second chance
with a FHA insured loan product. We believe enhancements to this
program can help an even greater number of borrowers without negatively
impacting the sovereignty of the FHA insurance fund.
As you know, through FHASecure, lenders and homeowners may
refinance mortgages that, due to the increased mortgage payment
following the interest rate reset have become delinquent. However, in
many cases, subprime borrowers are becoming delinquent for reasons
other than an interest rate reset meaning a rate reduction alone will
not help borrowers avoid default or foreclosure.
Specifically, we believe that where prudent, FHA should modify
underwriting criteria in return for a lower loan-to-value ratio thereby
assuring the lenders share risk. Changes include:
--Permit late payments on fixed-rate and on conventional adjustable-
rate mortgages without regard to interest rate reset or higher
DTI ratios.
--Create a sliding scale whereby the number of late payments allowed
for qualification is dependent on the LTV ratio. For example,
LTV = 90 percent, with several late payments = 80 percent LTV.
--Permit second mortgage with CLTV treatment like FHASecure.
A borrower would only be permitted to utilize one of the program
changes mentioned above for their mortgage. Loans that qualify for
FHASecure under these changes could be placed into a special risk
insurance fund to further protect FHA.
We submitted these recommendations to HUD on February 15, for their
consideration. Based upon testimony given by the FHA Commissioner on
April 9, 2008 before the House Financial Services Committee, we are
hopeful that these changes will be implemented. The enhancements
proposed will allow a greater number of borrowers to avoid foreclosure
and reduce their burden of debt. Risk to FHA will continue to be
mitigated by traditional FHA underwriting standards beyond the
recommended enhancements to the FHASecure Program.
The National Association of REALTORS thanks you for your efforts
to help stem the housing crisis. Congress must act expeditiously to
help our Nation's homeowners, communities, and local economies recover.
We applaud you efforts and stand ready to work with you on solutions.
______
Prepared Statement of the University Corporation for Atmospheric
Research (UCAR)
On behalf of the University Corporation for Atmospheric Research
(UCAR) and the university community involved in weather and climate
research and related education, training and support activities, I
submit this written testimony for the record of the Senate Committee on
Appropriations, Subcommittee on Transportation and Housing and Urban
Development, and Related Agencies.
UCAR is a consortium of 71 universities that manages and operates
the National Center for Atmospheric Research (NCAR) and additional
research, education, training, and research applications programs in
the atmospheric and related sciences. The UCAR mission is to serve and
provide leadership to the atmospheric sciences and related communities
through research, computing and observational facilities, and education
programs that contribute to betterment of life on Earth. In addition to
its member universities, UCAR has formal relationships with over 100
additional undergraduate and graduate schools including several
historically black and minority-serving institutions, and 40
international universities and laboratories. UCAR is supported by the
National Science Foundation (NSF) and other Federal agencies including
the Federal Highway Administration (FHWA), and the Federal Aviation
Administration (FAA). I would like to comment on the fiscal year 2009
budgets for these agencies.
THE FEDERAL HIGHWAY ADMINISTRATION
The fiscal year 2009 budget request for the FHWA should support the
administration's and the country's commitment to a safe, efficient, and
modern surface transportation system. Weather research and intelligent
transportation system (ITS) technology significantly contributes to
this commitment. According to the National Academy of Sciences, adverse
weather conditions obviously reduce roadway safety, capacity and
efficiency, and are often the catalyst for triggering congestion. In
the United States each year, approximately 7,000 highway deaths and
450,000 injuries are associated with poor weather-related driving
conditions. This means that weather plays a role in approximately 28
percent of all crashes and accounts for 19 percent of all highway
fatalities.
Road Weather Research and Development Program--Request: $3.3 Million
Bad weather contributes to 15 percent of the Nation's congestion
problems; the economic toll of weather-related deaths, injuries and
delays is estimated at $42 billion per year. The Road Weather Research
and Development Program (section 5308 in the SAFETEA-LU authorization
bill) funds the collaborative work of surface transportation weather
researchers and stakeholders. This work is potentially life saving for
the users of the national surface transportation system. Much has been
accomplished already in understanding and developing decision support
systems to address the impact of poor weather on the surface
transportation system including congestion. For example, State
Departments of Transportation (DOTs) have already benefitted from the
development and implementation of real world decision support
solutions, including the Winter Maintenance Decision Support System
which has been successfully demonstrated by 23 State DOTs, and the
Clarus System, a research and development initiative to demonstrate and
evaluate the value of integrating and processing data from State DOT
weather observation systems across the Nation. However, additional
resources are required to develop technologies that will support
improvements in traffic and emergency management to develop, test, and
implement solutions nationally that will reduce congestion and save
lives.
A fully funded Road Weather Research and Development Program could
support such activities as developing technologies that would integrate
weather and road condition information in traffic management centers,
improved understanding of driver behavior in poor weather, developing
in-vehicle information systems and wireless technologies that provide
warnings to drivers when poor weather and road conditions exist,
improving the understanding of the impact of weather on pavement
condition, and developing new active control strategies (e.g., signal
timing and ramp metering) optimized for poor weather and road
conditions.
SAFETEA-LU (section 5308) contains language that established the
Road Weather Research and Development Program within the FHWA ITS
Research and Development Program, with annual authorized funding at
$5.0 million (significantly less than the National Research Council's
recommendation of $25.0 million). This road weather research program is
well supported by numerous organizations including the American
Association of State Highway and Transportation Officials (AASHTO), the
Intelligent Transportation Society of America (ITSA), the
Transportation Research Board (TRB), the National Research Council
(NRC), State Departments of Transportation (DOTs), numerous commercial
weather service companies, and the American Meteorological Society
(AMS). Improved safety, capacity, efficiency and mobility, of the
national roadway system will benefit the general public, commercial
trucking industry, State DOT traffic, incident and emergency managers,
operators and maintenance personnel. Environmental benefits will be
realized due to improved efficiency in the use of anti-icing and
deicing chemicals for winter maintenance, reduced congestion, and
improved mobility. I urge the subcommittee to fund the Road Weather
Research and Development Program at the authorized level of $5.0
million, at a minimum, in fiscal year 2009.
FEDERAL AVIATION ADMINISTRATION (FAA)
Fliers nationwide are stuck in an air traffic jam. Famous for
delays, Chicago, New York, and most recently, Newark airports, have all
reached travel capacity, forcing them to reduce the number of flights
in and out. To make matters worse, it is estimated that by 2025 U.S.
air transportation will increase two to three times. Today's existing
air traffic control system will not be able to manage this staggering
growth rate. Fortunately, the Federal Government has proactively
responded by undertaking an unprecedented initiative: the Next
Generation Air Transportation System (NextGen). While a joint effort
involving a number of agencies, the FAA has taken the lead by
developing a budget that truly supports developing and implementing
NextGen. The FAA accounts mentioned in this testimony all support the
much-needed transformation of the National Airspace System.
RESEARCH AND ENGINEERING DEVELOPMENT ACCOUNT (RE&D)
The following programs can be found within the RE&D section of the
fiscal year 2009 FAA budget request.
Weather Program--Request: $16.9 Million
According to the FAA, 70 percent of flight delays are caused by
weather. A key area for NextGen is using advanced forecasting
techniques and shared information among all system users--dispatchers,
pilots and controllers. FAA's Weather Program is a research program
focused on improved forecasts of atmospheric hazards such as
turbulence, icing, thunderstorms and restricted visibility. Improved
forecasts enhance flight safety, reduce air traffic controller and
pilot workload, and enable better flight planning and productivity. The
request of $16.9 million, however, is essentially flat; in real terms,
it is down. To truly reduce delays associated with weather, it is
essential this program be provided at least $20 million. Enhanced
research and improved technologies will result in longer forecast lead
times, increased accuracy and ultimately, more efficiency and safer
skies. Two years ago, the request for the Weather Program was $19.5
million, but has declined since. I urge the subcommittee to support the
goals of NextGen and provide the Weather Program $20.0 million, at a
minimum, in fiscal year 2009.
Weather Technology in the Cockpit--Request: $8 Million
Weather, according to the FAA, is more than twice as likely to
cause general aviation fatalities as any other factor and is also the
largest cause of general aviation fatalities in the United States,
equating to 200 deaths annually. Weather uplinks in the cockpit, when
combined with a thorough preview of the weather during pre-flight
planning and other cockpit weather avionics, will help ensure that
general aviation pilots increase awareness and reduce accidents.
Weather Technology in the Cockpit, a new and innovative program, will
provide a common weather picture to pilots, controllers, and users, and
will expedite flight planning and decisionmaking. ``Cockpit weather''
applied research will focus on hardware and software standards,
integrate weather information, and prototype forecasting products for
the flight deck. I urge you to support the fiscal year 2009 request of
$8 million, which will revolutionize the way pilots and controllers
receive and use weather information in real-time.
Joint Planning and Development Office (JPDO)--Request: $20 Million
The multi-agency Joint Planning and Development Office (JPDO) has
accomplished much since its inception 5 years ago. The JPDO has a
challenging mandate: to coordinate and manage six agencies focused on
bringing NextGen online by 2025. It has completed its integrated work
plan on how NextGen will improve safety, security, mobility,
efficiency, and capacity to transform the Nation's air transportation
system. Recently, the Secretary of Transportation tasked the JPDO to
develop an action plan that would accelerate implementation of NextGen.
The plan will address constraints and opportunities in both the near-
and mid-term. After the action plan is approved, the intent is for the
partner departments and agencies to start immediate implementation. In
order to move forward with this directive, I urge the subcommittee to
fund the Joint Planning and Development Office at the fiscal year 2009
request of $20 million.
Wake Turbulence--Request: $10.1 Million
Aircraft in flight create wake turbulence, dangerous swirling air
masses that trail from aircraft wingtips. Better detection and
forecasting of wake turbulence is a key element in the FAA's safety
program. Research results and technologies derived from the Wake
Turbulence program will allow airports and airlines to operate more
efficiently, increasing capacity and safety, by providing a better
understanding of this phenomenon. I urge the subcommittee to support
the fiscal year 2009 request of $10.1 million for the wake turbulence
program.
Atmospheric Hazards/Digital System Safety--Request: $4.8 Million
The Atmospheric Hazards/Digital System Safety Research Program
focuses on reducing the number of accidents or potential accidents
associated with aircraft icing. The program promises to develop and
test technologies that detect icing, predict anti-icing fluid failure,
and ensure safe operations both during and after flight in icing
conditions. To prevent the number and severity of icing-associated
accidents, I urge you to support the fiscal year 2009 request of $4.8
million for this life-saving program.
within faa's air traffic organization--capital programs, i would ask
that you pay particular attention to the following critical programs
NextGen Network Enabled Weather (NNEW) and Reduced Weather Impact
Request: NNEW: $20 Million Reduced Weather Impact: $14.4
million
The current weather dissemination system is inefficient to operate
and maintain. Information gathered by one system is not easily shared
with other systems. This leads to redundant and inconsistent
information, and in many cases information not being universally
available or used leading ultimately to suboptimal decisions. The
complementary goals of NNEW and RWI are to integrate tens of thousands
of global weather observations and sensor reports from ground-,
airborne-, and space-based sources into a single national (eventually
global) weather information system, constantly updated as needed. This
integration will be enabled by system-wide availability of
observational and forecast weather information to all NextGen users,
service providers, military planners, security personnel, and the
flying public. The key word is ``information.'' No longer will it be
necessary to manually gather and integrate diverse weather data to
realize a coherent picture of the weather situation--that will be
accomplished with automation assistance prior to dissemination to
interested parties. This will enable ``common situational awareness''
of the weather, and rapid dissemination of any changes.
The request of $20 million for NNEW is significantly more than the
fiscal year 2008 enacted level of $7 million, which illustrates the
FAA's commitment to NextGen. Because NextGen Network Enabled Weather
and the Reduced Weather Impact Program are directly aligned with the
goals of a flexible, safe, efficient air traffic system, I urge you to
support the fiscal year 2009 request of $20 million for NNEW and $14.4
million for Reduced Weather Impact.
Wind Profiling and Weather Research-Juneau--Request: $1.1 Million
In the late 1990s, after two 737s encountered severe turbulence
during departure from the Juneau Airport, the FAA mandated a system be
developed to provide high-wind alerts to pilots at the airport. The
Wind Profiling and Weather Research-Juneau program supports the design
and development of the Juneau Airport Wind System (JAWS), an
operational system designed to detect and warn of wind and airport
turbulence hazards. This will result in reduced severe delays and
flight cancellations. The fiscal year 2009 request of $1.1 million,
however, is a dramatic cut, which is extremely disruptive to the
research program. In order to complete the work of developing this
turbulence alerting system, I urge the subcommittee to support the
fiscal year 2008 enacted level of $4.0 million for Wind Profiling and
Weather Research-Juneau.
On behalf of UCAR, as well as all U.S. citizens who use the surface
and air transportation systems, I want to thank the subcommittee for
the important work you do that supports the country's scientific
research, training, and technology transfer. We understand and
appreciate that the Nation is undergoing significant budget pressures
at this time, but a strong Nation in the future depends on the
investments we make in research and development today. We appreciate
your attention to the recommendations of our community concerning the
fiscal year 2009 FHWA and FAA budgets and your concern for safety
within the Nation's transportation systems.
______
Prepared Statement of the Coalition of Northeastern Governors
The Coalition of Northeastern Governors (CONEG) is pleased to share
with the Subcommittee on Transportation, Housing and Urban Development,
and Related Agencies this testimony on fiscal year 2009 appropriations
for transportation and community development programs. The CONEG
Governors appreciate the subcommittee's longstanding support of funding
for the Nation's highway, transit, and rail systems and critical
community development programs. We understand the particularly
difficult fiscal challenges and complex, interlocking issues that the
subcommittee faces in crafting this appropriations measure. We urge the
subcommittee to continue the strong Federal partnership so vital for a
national, integrated, multi-modal transportation system. This network
underpins the competitiveness of the Nation's economy, broadens
employment opportunities, and contributes to the efficient, safe,
environmentally sound, and energy smart movement of people and goods.
TRANSPORTATION
Surface Transportation
The Governors recognize the impending shortfall in the Highway
Trust Fund and the still-uncertain outcome of proposed short-term
solutions. However, we urge the subcommittee to fund the combined
highway, public transit, and safety programs at the fiscal year 2009
levels authorized in the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users (SAFETEA-LU). This level
of Federal investment is necessary to sustain the progress made under
SAFETEA-LU to improve the condition and safety of the Nation's
highways, bridges, and transit systems.
Continued and substantial Federal investment in these
infrastructure improvements--in urban, suburban, exurban, and rural
areas--is necessary to safely and efficiently move people and products
and support the substantial growth in freight movement projected in the
coming decades. A significant increase in public investment is needed
to keep America competitive in a global economy. According to the
majority report of the National Surface Transportation Policy and
Revenue Study Commission, at least $225 billion annually is needed from
all sources--public (Federal, State and local) and private--for the
next 50 years to upgrade the existing infrastructure system to a state
of good repair and to create the advanced system that can sustain and
ensure strong economic growth nationwide.
Specifically, the CONEG Governors urge the subcommittee to:
--support a Federal aid highway obligation limit at the authorized
level of $41.2 billion; and
--fund public transit at the authorized funding level of $10.3
billion, including full funding for Formula and Bus Grants, the
Capital Investment Grants, and the Small Starts Programs.
The Governors also urge the subcommittee to fund the Transit
Security Grant program at the full $750 million as authorized in Public
Law 110-53 (Implementing Recommendations of the 9/11 Commission Act of
2007). This critically needed funding makes the Federal Government a
partner with State and local governments and public transportation
authorities in enhancing the security of the Nation's public
transportation systems and their tens of millions of riders.
While recognizing the difficult decisions facing the Congress, the
Governors are also concerned about several techniques--actual or
proposed--to manage the Highway Trust Fund and appropriations outlays.
For example, the recent practice of mandating how to rescind
unobligated highway funding is now cutting into the States' ability to
make planned investments and deliver much needed transportation
improvements.
The Governors also oppose the administration's proposal to cover
the projected shortfall in the Highway Account of the Highway Trust
Fund by transferring $3.2 billion from the Mass Transit Account to the
Highway Account. This proposal would jeopardize the future of public
transportation funding while sidestepping the underlying problem facing
the Highway Account. A more appropriate short-term solution is timely
action on the proposals to secure additional revenues to the Highway
Account contained in title II of the American Infrastructure Investment
and Improvement Act of 2007 (S. 2345) currently pending in the Senate.
Rail
Rising fuel prices and congested highways and airways make
intercity passenger rail an ever more vital component of a national,
balanced transportation system. Increasing market demand for intercity
passenger rail travel is creating unique opportunities for growth in
Amtrak's revenue. Amtrak's ability to respond to these opportunities
requires substantial and on-going maintenance and ``state of good
repair'' capital investments essential for the reliable, on-time
service that attracts and retains ridership.
The Governors request that the subcommittee provide $1.78 billion
in fiscal year 2009 Federal funding for Amtrak, with specific funding
levels provided for operations, capital, and debt service. We recognize
that Amtrak faces a one-time need for additional funding in fiscal year
2009 to meet its legal obligations for ``back pay'' as part of the
Presidential Emergency Board recommendations, which are close to final
ratification.
A funding level of $801.4 million in fiscal year 2009 for capital
improvements is critically needed for the ``state of good repair''
improvements to aging infrastructure and equipment. These capital
investments are vital to Amtrak's ability to deliver efficient,
reliable, quality service nation-wide. We particularly encourage the
subcommittee to ensure that Amtrak can continue bridge repair projects
underway on the Northeast Corridor, as well as the system-wide security
upgrades and the life-safety work in the New York, Baltimore, and
Washington, DC tunnels as authorized under Public Law 110-53 (sections
1514 and 1515).
The Governors recognize that the subcommittee has initiated
internal Amtrak reforms while intercity passenger rail authorization
legislation is pending. We welcome the subcommittee's consistent
commitment to continued transparency and accountability in Amtrak's
financial and data systems, and to meaningful collaboration in its
dealings with State partners. This guidance, including the requirement
that Amtrak consult with its State partners and report to the Congress
on the results of those discussions, has set the stage for productive
coordination and information-sharing, particularly on the future of the
Northeast Corridor Network.
The CONEG Governors appreciate the subcommittee's leadership in
creating and providing initial funding for the State Intercity
Passenger Rail Grant Program. This program provides an important
foundation for a vibrant Federal-State partnership that will bring
expanded, enhanced intercity passenger rail service to corridors across
the Nation. We urge the subcommittee to provide the requested $100
million for this program, and to ensure that 10 percent is directed to
corridor development planning and that an additional 5 percent to
essential education and outreach initiatives.
A number of other national rail programs are important components
of the evolving Federal-State-private sector partnerships to enhance
passenger and freight rail across the country. We encourage the
subcommittee to provide funding for the Rail Relocation Program, the
Swift High Speed Rail Development Program, the Next Generation High
Speed Rail program, and the Nationwide Differential Global Position
System effort--all of which benefit passenger rail and freight rail
systems. In addition, initial funding for the Advanced Technology
Locomotive Grant Pilot Program, created in section 1111 of the Energy
Independence and Security Act of 2007, would be an important first step
to assist the railroads and State and local governments in a transition
to energy-efficient and environmentally friendly locomotives for
freight and passenger railroad systems.
The CONEG Governors also support a modest increase in funding for
the Surface Transportation Board (STB) above the overall $26.3 million
provided in fiscal year 2008. This funding level will allow the STB to
provide critical oversight as the Nation's rail system assumes
increasing importance for the timely, efficient, and environmentally
sound movement of people and goods across the Nation.
COMMUNITY DEVELOPMENT
The CONEG Governors urge the subcommittee to provide at least $4.1
billion for the Community Development Block Grant (CDBG) program. The
CDBG program enables States to provide funding for infrastructure
improvement, housing programs, and projects that attract businesses to
urban, suburban, exurban, and rural areas, creating new jobs and
spurring economic development, growth and recovery in the Nation's low
income and rural communities.
The CONEG Governors thank the entire subcommittee for the
opportunity to share these priorities and appreciate your consideration
of these requests.
______
Prepared Statement of the National Congress of American Indians
On behalf of the National Congress of American Indians, we are
pleased to present testimony on the administration's fiscal year 2009
budget request for transportation and housing programs. We look forward
to working with this subcommittee to ensure that the critical programs
and initiatives funded are at levels which will ensure their long term
effectiveness.
BACKGROUND
Housing
A successful start in life depends on safe, quality and affordable
housing, which helps to prevent and alleviate other physical and social
problems from occurring, including lack of educational achievement and
poor health. These types of problems make it difficult to obtain and
maintain employment, creating further economic hardship for Indian
families. The Native American Housing and Self-Determination Act
(NAHASDA) allowed tribes to be more resourceful in creating homes for
their members. NAHASDA modernize how Native American housing funds are
provided by recognizing tribes' authority to make their own business
decisions. Tribes have been able to increase capacity housing and
improve infrastructure conditions in Indian Country. However, housing
need continue to rise as do the maintenance needs of Housing and Urban
Development (HUD) homes.
Because of NAHASDA, tribes are better able to address the needs of
their communities. In 1995, 20 percent of tribal residents lacked
complete plumbing. This number was reduced to 11.7 percent by 2000,
although it is still far higher than the 1.2 percent for the general
population. In 2000, 14.7 percent of tribal homes were overcrowded, a
drop from 32.5 percent in 1990. Despite improvements, severe conditions
still remain in some tribal homes, with as many as 25-30 people living
in houses with as few as three bedrooms. Native Americans are also
becoming homeowners at an increasing rate, 39 percent more from 1997 to
2001. Fannie Mae's investment in mortgages increased exponentially,
from $30 million in 1997 to more than $640 million in the most recent 5
year period.
Although tribes have the desire and potential to make headway in
alleviating the dire housing and infrastructure needs of their
communities, tribes' housing needs remain disproportionately high and
disproportionately underfunded. Due to funding levels and population
growth tribal housing entities are only able to maintain the status
quo.
Transportation
The nearly 56,000 mile system of Indian Reservation Roads (IRR) is
the most underdeveloped road network in the Nation \1\--yet it is the
primary transportation system for all residents of and visitors to
American Indian and Alaska Native communities. Over two-thirds of the
roads on the system are unimproved dirt or gravel roads, and less than
12 percent of IRR roads are rated as good.\2\ The condition of IRR
bridges is equally troubling. Over 25 percent of bridges on the system
are structurally deficient.\3\
---------------------------------------------------------------------------
\1\ Bureau of Indian Affairs, Transportation Serving Native
American Lands: TEA-21 Reauthorization Resource Paper (2003).
\2\ Id.
\3\ Id.
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Building a transportation system that allows for safe travel and
promotes economic expansion will help us strengthen our tribal
communities while at the same time making valuable contributions to
much of rural America. Surface transportation in Indian Country
involves thousands of miles of roads, bridges, and highways. It
connects and serves both tribal and non-tribal communities.
Tribal communities share much the same obstacles as rural
communities in addressing how to improve transportation needs. NCAI has
diligently worked with tribal governments to find solutions for
improving the transportation infrastructure of Indian Country. Tribes
are pro-active in this effort through the legislative process, by
building partnerships with other entities, and by generating revenue to
assist in financing their transportation projects.
Even though great strides have been made, there is still a
tremendous need to address the terrible conditions of surface
transportation on tribal land. These conditions significantly impact
the daily lives of tribal members and the entire governments of tribal
nations. Tribal communities as well as rural America require a proper
infrastructure if they are both to become thriving hubs of economic
growth and opportunity.
Economic development cannot occur without a solid foundational
infrastructure that must involve adequate surface transportation.
Improving transportation systems sets the stage for economic
development. Connecting people within tribal communities and to the
areas and communities that surround Indian Country is vital for
business, industry, and labor. Sustaining both the tribal communities
and surrounding communities through viable surface transportation
systems improves the lives of all involved.
Another important reason for improving transportation systems is to
enhance public safety. Insufficient transportation systems increase the
risk factor for law enforcement and emergency personnel in responding
to emergency situations. The fatality rate on roads on the Indian
Reservation Road (IRR) System has the highest national average.
Inadequate roads are a major contributor to vehicle crashes. These
emergencies cost tribes millions of dollars each year in lost
productivity, property damage, higher insurance premiums, medical and
rehabilitative treatment. And that still does not factor in the human
suffering of victims and their families. The poor condition of many
tribal roads and bridges jeopardizes the health, safety, security and
economic well-being of our tribal members. This environment creates
dangerous and deadly situations for all who drive within Indian
Country.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
The President proposed increased funding for the Indian
homeownership program; however he proposed decreases in other Indian
programs in the HUD. The section 184: Indian Housing Loan Guarantee
Program, $420 million for fiscal year 2009, is an increase of over $53
million over the enacted fiscal year 2008 amount. This increase is to
promote homeownership and to address the lack of mortgage capital on
tribal lands. The President's request for fiscal year 2009 proposes the
amount of $627 million for the Native American Housing Block Grant, an
amount similar to his request for fiscal year 2008. In addition, the
President's budget for fiscal year 2009 requests $57 million for the
Indian Community Development Block Grant, a decrease of $5 million from
the enacted fiscal year 2008 amount.
Native American Housing Block Grant.--The President's request for
fiscal year 2009 proposes the amount of $627 million for the Indian
Housing Block Grant.
--NCAI recommends $750 million, which would maintain funding at the
fiscal year 2002 level adjusted for inflation.
Indian Community Development Block Grant.--These funds are
dedicated to improve not only housing but the overall economy and
community development of tribal communities. Community development
includes a variety of commercial, industrial and agricultural projects.
--This budget area has faced numerous and devastating reductions over
the last few years and its funding needs to be increased to a
more realistic level of $77 million.
Section 184 Program.--Created in 1992, the section 184 program
provides 100 percent reimbursement to private lenders in case of
default. Tribes have been successful in participating in this program
with little to no defaults. Under section 184, tribes or tribal members
can purchase an existing home or obtain single-close construction loans
for a stick-built or a manufactured home on a permanent foundation,
rehabilitation loans or a purchase and rehabilitation loan. This
underutilized program continues to grow as TDHEs expand their housing
programs beyond low-income programs, tailoring them to meet the needs
of their people.
--NCAI recommends $420 million for section 184.
DEPARTMENT OF TRANSPORTATION
Federal-aid Highway Program.--The President proposed essentially
flat funding for Indian programs in the Department of Transportation.
The President has proposed for the Federal-aid Highway Program $39.6
million, a slight increase from the $39,585,000 for enacted fiscal year
2008. Indian tribes receive funding under the Federal Lands Highway
Program (FLHP), which improves the access to and within Federal lands
such as Indian reservations.
--NCAI recommends the authorized amount of $450 million for Indian
Reservation Road Programs.
Pipeline and Hazardous Materials Safety Administration-Emergency
Preparedness Grant.--The Pipeline and Hazardous Materials Safety
Administration provides funding to Indian tribes, States, and local
governments under their program. This program primarily focuses on
reducing serious hazardous materials and pipeline transportation. This
agency provides training and planning grants to Indian tribes to
improve hazardous materials emergency preparedness. The funding request
for fiscal year 2009 is leveled for this program in the amount of $28
million.
--NCAI recommends the $28 million for the Emergency Preparedness
Grant.
Highway Traffic Safety Grant.--The National Highway Traffic Safety
Administration (NHTSA) which gives grant funding to Indian tribes,
States, and territories under their Highway Traffic Safety Grant,
includes; the supports for highway safety initiatives; to improve
traffic records and other data systems for safety traffic information;
and alcohol-impaired driving countermeasures incentives for addressing
alcohol driving incidents. For fiscal year 2009, the funding level for
this program is elevated from the enacted fiscal year 2008 in the
amount of $599 million. According to USC, tribes receive 1\1/2\ percent
of the total allocation amount. Statutorily, Indian tribes are eligible
to receive 2 percent of the total appropriation authorized amount from
the NHTSA funding amount.
--NCAI recommends that authorized amount of $4.3 million for Indian
tribes from NHTSA.
______
Prepared Statement of the Council of Large Public Housing Authorities
Chairwoman Murray, Ranking Member Bond and members of the
subcommittee, on behalf of the Council of Large Public Housing
Authorities (CLPHA), thank you for the opportunity to submit testimony
for the record on the administration's proposed fiscal year 2009 public
housing budget. CLPHA members represent virtually every major
metropolitan area in the country and on any given day, they serve more
than 1 million households. Together, they manage approximately 40
percent of the Nation's multi-billion dollar public housing stock, and
administer over 30 percent of the section 8 voucher program.
Last year, a first-ever national study measuring the economic
impact of public housing concluded that public housing is an essential
part of the housing market and makes significant contributions to local
economies. The Econsult study showed that direct spending by public
housing authorities on capital improvements, maintenance and operations
generates additional dollar-for-dollar indirect economic activity in
local communities.
Given the uncertain economic conditions of today's housing market--
with record-setting foreclosure rates among homeowners, a crisis in the
credit and home mortgage lending industries, and an insufficient supply
of rental housing nationwide--the housing crisis we are facing will
place even greater pressure on the type of decent, safe, and affordable
housing provided by public housing communities. Regrettably, this
administration's proposed fiscal year 2009 budget is a continuation of
a now 8 year effort to cripple, dismantle, devalue, and under fund
public housing as we know it.
OPERATING FUND
The administration's proposal of $4.3 billion for the Operating
Fund is a paltry increase of $100 million over last year's
appropriation. HUD's own budget justifications indicate that $5.3
billion is needed to fully fund the Operating Fund in fiscal year 2009.
Furthermore, the Operating Fund has not been fully funded since 2002
and estimates show that during those years, public housing lost nearly
$3 billion in operating subsidies alone. At 81 percent funding, in
essence, this budget proposal fails to fund 19 percent of--or
approximately 227,000--public housing units. Housing authorities will
cope with this low proration by reducing services to residents. Also,
with insufficient resources to properly maintain existing units, the
problem becomes cyclical, with more units becoming severely distressed.
Coupled with the under-funding is HUD's problematic implementation
of asset management and the restrictions HUD placed on management fees
that prevent housing authorities from charging reasonable fees for
administration. These continued shortfalls in annual public housing
funding will make the transition to asset management needlessly
difficult, if not impossible to achieve, and will result in negative
consequences for resident services.
--CLPHA requests the Senate Appropriations fully fund the Operating
Fund at the industry recommended level of $5.3 billion in
fiscal year 2009.
CAPITAL FUND
The administration's proposal for $2.024 billion is approximately
$415 million less than the amount appropriated in fiscal year 2008.
This funding request is considerably lower than annual accrual needs
and therefore, funding at this level would severely under-fund accrual
needs by more than $700 million in fiscal year 2009. Furthermore, it
completely ignores the backlog of modernization needs, which could be
in the tens of billions.
The negative impacts of under-funding the Capital Fund will have
harmful trickle down effects on private sector investments. Housing
authorities are currently able to raise private capital by pledging
their future Capital Funds toward the repayment of bonds and loan. To
date, housing authorities have borrowed $3 billion through the Capital
Fund Financing Program (CFFP) and have used the money creatively to
make large-scale comprehensive improvements to their developments.
Thus, under-funding the Capital Fund will create uncertainty for
private investors. Similarly, private lenders will avoid future
investments in public housing neighborhoods. As a result, housing
authorities who borrow against their future years' Capital Fund
allocations will be unable to address future years' annual capital
needs. This will result in the delay of necessary services and
upgrades, inevitably leading to future higher costs for essential
repairs. Thus, if the Capital Fund is fully funded in fiscal year 2009,
housing authorities will be able to meet accrual needs, begin to
address the modernization backlog, and continue to encourage private
sector investment in public housing neighborhoods.
--CLPHA requests the Senate Appropriations fully fund the Capital
Fund at the industry requested level of $3.5 billion in fiscal
year 2009.
HOPE VI
In fiscal year 2009, for the third consecutive year, the
administration is proposing to end HOPE VI. HOPE VI is an essential
tool for public housing authorities and has leveraged more than $12
billion in additional private and public investment since the program
began in 1993. HOPE VI has transformed communities of despair and
unrelenting concentrations of poverty into mixed-income communities
that will serve as long-term assets in their neighborhoods. In 1993,
when the program was first authorized, the stated goal was to demolish
severely distressed public housing, estimated at that time to be
100,000 units. Today, 15 years later, we are still faced with a
substantial number of severely distressed public housing units and
estimates show there may be an additional 82,000 units. The work of
HOPE VI is not yet over as there is still much work to be done.
--CLPHA requests the Senate Appropriations reauthorize, expand and
provide adequate funding of $800 million for the HOPE VI
program.
TENANT-BASED HOUSING CHOICE VOUCHER PROGRAM
In fiscal year 2009, the administration is proposing $14.3 billion
and an offset of $600 million for renewals under the Tenant-Based
Housing Choice Voucher Program. However, the industry estimates that
$15.4 billion is needed for tenant-based renewals. Therefore, HUD's
request would fail to support between 55,000-100,000 vouchers currently
in use. HUD proposes that public housing authorities be funded ``based
on the amount public housing agencies were eligible to receive in
calendar year 2008 and by applying the 2009 annual adjustment factor.''
This budget based approach does not account for significant changes in
local housing markets, nor does it reward housing authorities for
improved utilization costs. Funding for the housing choice voucher
program should continue to be funded by using actual leasing and cost
data, as it has for the past two funding cycles. Even though HUD and
OMB recognize the voucher program as one of the most effective
Government programs, this proposed budget does not provide the full
funding required for continued success.
--CLPHA requests the Senate Appropriations fully fund the renewal of
the Tenant-Based Housing Choice Voucher program at the industry
requested level of $15.4 billion.
TENANT PROTECTION VOUCHERS
This year, the Tenant Protection account is cut from $200 million
in fiscal year 2008 to $150 million in fiscal year 2009. HUD claims
additional costs for tenant protection vouchers may be obtained by
using un-obligated balances from funds in the Housing Certificate Fund
or from Annual Contributions for Assisted Housing. HUD also proposes
removing the requirement that a tenant protection voucher be provided
for all units that were occupied in the previous 24 months that cease
to be available for occupancy. Here again, HUD will attempt to limit
affordable housing opportunities for low-income families.
--CLPHA requests the Senate Appropriations fully fund Tenant
Protection Vouchers in fiscal year 2009.
ADMINISTRATIVE FEES
HUD proposes $1.4 billion for administrative fees in fiscal year
2009, a $49 million increase over fiscal year 2008. This amount is
insufficient. The fiscal year 2008 administrative fees were prorated at
86 percent so if they were fully funded, the fees would require over
$1.5 billion in fiscal year 2009.
--CLPHA requests the Senate Appropriations fully fund Administrative
Fees at the industry recommended level of $1.54 billion.
SAFETY AND SECURITY
Since 2002, the administration's budget provides no specific
funding for safety and security in public housing through the Public
Housing Drug Elimination Program (PHDEP). It fails to see the
widespread, positive impact the program has gained and its strong
support from PHAs, residents, local law enforcement and other concerned
parties. Since PHDEP's termination, housing authorities have had to use
their already scarce operating subsidies to combat crime and drugs, and
ensure safety in their units.
--CLPHA requests the Senate Appropriations fully fund Safety and
Security at the industry recommended level of $310 million.
RESIDENT OPPORTUNITY SERVICES
For fiscal year 2009, the administration recommends $38 million for
supportive services, service coordinators, and congregate services.
This is a $2 million reduction from fiscal year 2008 and is budgeted in
the Public Housing Capital Fund, which has the effect of further
reducing the total funding for capital needs. CLPHA strongly supports
and urges separate funding for the ROSS program in order to address the
critical, on-going need for supportive services among our most
vulnerable residents, including the elderly and persons with
disabilities.
--CLPHA requests the Senate Appropriations fully fund Resident
Opportunity Supportive Services as a separate program at the
industry recommended level of $55 million.
OTHER SET-ASIDES
This year, HUD proposes $48 million for Family Self-Sufficiency
coordinators, $1 million less than the fiscal year 2008 appropriation.
HUD also proposes $39 million to prevent displacement of the elderly
and disabled families who receive assistance by the Disaster Assistance
Program, and $75 million for incremental vouchers administered in
conjunction with the Department of Veterans Affairs.
--CLPHA requests the Senate Appropriations fully fund Service
Coordinators for the Elderly and Disabled at the industry
recommended level of $50 million.
CLPHA members remain committed to providing quality housing and
management services in public housing. However, without adequate
funding, public housing authorities cannot ensure that housing is
properly maintained or needed services are available. Given increasing
housing costs and struggling housing markets across the country,
protecting and preserving public housing has proven ever more critical
to low-income families. We appreciate the opportunity to submit our
comments and public housing funding requests to the subcommittee. We
look forward to continuing to work with the subcommittee in our joint
efforts to advocate for, and deliver, safe and affordable public
housing to our Nation's most disadvantaged and vulnerable persons.
______
Prepared Statement of the American Association of Service Coordinators
(AASC)
The American Association of Service Coordinators (AASC) appreciates
the opportunity to share our views on the fiscal year 2009
appropriations for the Department of Housing and Urban Development
(HUD). While we have funding concerns with a number of programs
contained in the THUD fiscal year 2009 appropriations bill, we will
focus our comments on resources needed for the staffing of service
coordinators in federally assisted and public housing.
Service coordinators have helped thousands of low-income elderly,
persons with disabilities, and others with special needs to link with
community-based health and supportive services. While most local
communities may have available the various services needed, they are
highly fragmented, not well known, and/or have complexities that have
hindered easy access. By providing timely assistance, service
coordinators have enabled many frail and vulnerable older persons to
achieve their preference to remain in their home for as long as
possible. Without the benefit of service coordinators, many vulnerable
persons have been forced to move prematurely into more costly settings,
such as nursing homes.
Service coordinators in federally assisted housing are funded
through a number of sources, including national competitive grants
funded through the section 202 Elderly Housing Program. However, since
the service coordinator grant program was established there have been
insufficient funds available to enable service coordinators to be
staffed in most eligible federally assisted housing. Findings of a
recent HUD survey revealed that there are about 1,500 service
coordinators funded through the competitive grant program which
represents less than one-third of the more than 12,000 eligible housing
facilities. Current eligible facilities for these grants are those
funded with: section 202 without PRACs; HUD insured section 221d3, some
section 236s, and project based section 8 rent subsidies. In addition,
nearly 2,000 service coordinators are funded through project
operations, and over 200 service coordinators are funded through
project residual receipts and excess revenues. Unfortunately, many
facilities do not have sufficient funds to absorb service coordinators
into their operating budget; and it is very difficult to secure the
necessary rent increase to enable staffing as a routine part of the
operating budget.
In addition to federally assisted housing, there are 1.3 million
households living in public housing and almost half of all residents
are elderly or persons with disabilities, including more than 50,000
seniors age 83 and older. Service coordinators are needed not only to
assist frail elderly to remain in their home, but also to provide
assistance to many low-income families in public housing or using
Housing Choice Vouchers to become more self-sufficient and economically
independent through employment and homeownership. Service coordinators
have been funded to assist public housing residents through short-term
competitive grants with the Resident Opportunities and Self-Sufficiency
program (ROSS), the Housing Choice Vouchers Family Self-Sufficiency
(HCV-FSS) program; or through public housing Operating Funds.
Unfortunately, over the past few years there have been significant cuts
and shortfalls in Federal funds needed for the sound operation of
public housing, including the routine staffing of service coordinators.
Despite the critical need and cost-effectiveness of service
coordinators in assisting frail and low-income elderly and others with
special needs to access supportive services or the need to assist
families to become more self-sufficient, funding for service
coordinators remains very limited. While the administration's fiscal
year 2009 budget provides a slight increase for service coordinators in
section 202 and other federally assisted senior housing, yet funding
for service coordinators in public housing remains essentially flat.
AASC would urge the subcommittee's support for the following:
--$100 million in fiscal year 2009 for service coordinators in
federally assisted housing, particularly to ensure adequate
funds for expiring contracts of existing service coordinators;
--Full funding for section 8, Project Rental Assistance Contracts
(PRAC), other rent subsidies and project operating funds to
permit the staffing of a service coordinator as a routine part
of the project's operating budget;
--A separate add-on of $75 million in Public Housing Operating Funds
for service coordinators;
--$55 million for the Resident Opportunities for Self-Sufficiency
(ROSS) program; and
--$85 million for the Housing Choice Voucher Family Self-Sufficiency
Program.
FEDERALLY ASSISTED HOUSING--$100 MILLION
The administration's fiscal year 2009 budget requests $80 million
for service coordinators, an increase over the $71 million budget
requested in fiscal year 2008 and the $60 million appropriated as part
of the consolidated fiscal year 2008 appropriations bill enacted
December 26, 2007 (Public Law 110-161). Unfortunately, the $60 million
appropriated for fiscal year 2008 is insufficient even to extend
contracts of existing service coordinators; and will provide no funds
for any additional service coordinators. In fact, it is anticipated
that there will be no funds for service coordinators in the fiscal year
2008 Notice for Funds Available (NOFA) when it is issued (anticipated
by the end of April). This will be the first time since the service
coordinator grant program was established that no funds will be
available for additional service coordinators. In fiscal year 2007, HUD
awarded nearly $3.5 million for 21 grants in 11 States (2,064 units);
$12 million was provided in fiscal year 2006; and $30 million in fiscal
year 2002.
The shortfall of fiscal year 2008 appropriations for the staffing
of service coordinators in federally assisted senior housing has
contributed to several months delays in HUD allocation of fiscal year
2008 funds to extend existing contracts for service coordinators. In
order to extend all contracts, it is anticipated that HUD will make
proportional cuts to all existing contracts. This action may seem
equitable in sharing the shortfall; however, it may also have an
unintended consequence of reducing needed assistance to many low-
income, frail and vulnerable elderly and others with special needs and
jeopardize their well-being as a result of anticipated reduced hours
and capacity of existing service coordinator programs. While HUD may
allow service coordinators to be funded through project reserves or to
be incorporated into project operations; most federally assisted and
public housing facilities do not have sufficient resources in their
operating budgets to staff service coordinators. Given the shortages
for section 8, HAPs, PRACs and other operating funds and critical
competing needs, it is unlikely that projects will be able to secure
necessary rent increases to allow the staffing of service coordinators.
AASC would recommend several actions: first, there is a need for
$20 million in fiscal year 2008 supplemental funds in order to extend
contracts at full funding for existing service coordinators to ensure
there are no cuts in hours, elimination of service coordinator
positions, or cuts in quality assurance and other aspects of the
service coordinator program; second, to provide $100 million in fiscal
year 2009 for service coordinators in federally assisted housing to
ensure full funding with the renewal of existing contracts, as well as
to expand service coordinators in federally assisted housing for
elderly or persons with disabilities that currently do not have them
(two-thirds of eligible facilities do not have service coordinators);
and to expand eligibility for service coordinators to section 515 rural
housing and for Low-Income Housing Tax Credits (LIHTC) projects that
involve non-profit organizations.
There is also a need for a dual strategy for funding service
coordinators that includes maintaining the service coordinator grant
program, and also increasing the routine staffing of service
coordinators within the facility's operating budget. While statutory
authority exists to allow HUD to fund coordinators, many senior housing
facilities have not been able to secure the necessary rent adjustments
to accommodate them. AASC would recommend that sufficient section 8,
PRAC, or other operating funds be increased to allow routine staffing
of service coordinators, as well as to direct HUD and their field
offices to provide necessary budget adjustments and regulatory relief
to remove any barriers restricting the staffing of service coordinators
through the project's operating budget. There is also a need to expand
the funding for housing-based service coordinator to assist frail
elderly in the facilities' surrounding community. While there is
existing statutory authority to enable service coordinators to assist
residents in the surrounding community, there are insufficient funds to
enable service coordinators to reach out to assist these surrounding
residents.
PUBLIC HOUSING: COMPLEXITY AND INADEQUATE FUNDS FOR SERVICE
COORDINATORS
Elderly and other residents with special needs living in public
housing and those using Housing Choice Vouchers (HCV) have been denied
full access to the valuable and cost-effective assistance provided by
service coordinators. Over one-third of residents in public housing are
elderly residing in various settings such as senior housing, family
housing, and mixed-population housing with younger persons with
physical and mental disabilities. Unfortunately, funding for service
coordinators in public housing is very limited, complex, and has
experienced a steady reduction in funds over the past few years, both
with specific grant programs for service coordinators, as well as with
the public housing operating budget.
A number of local housing authorities have funded service
coordinators through competitive short-term grant programs, such as
those under the Resident Opportunities and Self-Sufficiency (ROSS) or
Family Self-Sufficiency (FSS) programs. Unfortunately, over the past
few years, there have been funding cuts and a lack of program
consistency contributing to disincentives for PHAs to participate in
these grant programs. For example, the Elderly and Persons with
Disabilities Service Coordinator program (EDSC) funded at over $15
million as part of the ROSS program was shifted to the Public Housing
Operating Fund, but with no additional funds. Therefore, coordinators
that once were funded through the EDSC program now need to compete with
other funding priorities and are subjected to the same proportional
cuts with Public Housing Operating Funds. Because of funding cuts in
their operating budgets and other competing needs, a number of public
housing authorities have been forced to lay-off or reduce their service
coordinator program. Service Coordinators have also been essential in
facilities that have a mix of older residents and non-elderly persons
with disabilities. Therefore, it is necessary to ensure that there are
adequate funds available in the fiscal year 2009 Public Housing
Operating funds to accommodate service coordinators. AASC recommends
that $85 million be provided as a separate add-on to Public Housing
Operating Funds to ensure that PHAs can include service coordinators as
a routine part of their operating budget.
RESIDENT OPPORTUNITIES AND SELF SUFFICIENCY (ROSS)--$55 MILLION
The Resident Opportunities and Self Sufficiency (ROSS) program
provides grants to public housing agencies, tribal housing entities,
resident associations, and nonprofit organizations for the delivery and
coordination of supportive services and other activities designed to
help public and Indian housing residents attain economic and housing
self-sufficiency. There are several separate programs within the ROSS
program that were appropriated at $40 million in fiscal year 2008,
including: (1) Family and Homeownership ($33.4 million funded in fiscal
year 2007), (2) Elderly and Persons with Disabilities ($16.6 million
funded in fiscal year 2007; and (3) Public Housing Family Self-
Sufficiency ($12 million in fiscal year 2007 NOFA). Despite the
demonstrated need and effective results, the administration's fiscal
year 2009 budget seeks $37.6 million for these three ROSS programs, and
no additional funds for Neighborhood Networks (funded earlier at $15
million), a slight reduction from the $40 million appropriated in
fiscal year 2008. AASC recommends that ROSS be funded at $55 million,
as it had been prior to fiscal year 2005.
housing choice voucher/family self-sufficiency (hcv/fss)--$85 million
The HCV/FSS program allows participants in the section 8 Housing
Choice Voucher program to increase their earned income, reduce or
eliminate their need for welfare assistance, and promote their economic
independence. Funds are used to provide for FSS program coordinators to
link participants with supportive services they need to achieve self-
sufficiency and to develop 5-year self-sufficiency plans. The HCV/FSS
program currently assists over 63,000 families and 8,300 families in
public housing. In fiscal year 2004, HUD made a number of changes in
the program that led to a number of technical errors and elimination of
nearly one-third of the existing grants. The administration's fiscal
year 2009 budget requests $48 million for HCV/FSS, slightly less than
the $49 million appropriated in fiscal year 2008 and essentially the
same since fiscal year 2005. AASC recommends $85 million for HCV/FSS
funding in order to restore funds to PHAs that were cut in fiscal year
2004 and to expand the number of FSS participants. In addition, we
support administrative changes for up-front funding of HCV/FSS escrow
accounts, and to streamline the staffing of service coordinators.
CONCLUSION
While we understand the difficult funding choices that the
subcommittee needs to make with limited resources, we would urge your
support for the funding of service coordinators as a cost-effective
means to assist the low-income elderly and other residents with special
needs and as a means to save public funds by promoting economic self-
sufficiency for low-income families and options for frail elderly to
delay or avoid premature admission into costly nursing homes.
______
Prepared Statement of Easter Seals
Chairman Murray, Ranking Member Bond and members of the
subcommittee, Easter Seals appreciates this opportunity to share the
successes of Easter Seals Project ACTION and the National Center on
Senior Transportation.
PROJECT ACTION OVERVIEW
Project ACTION was initiated during the appropriations process in
1988 by funding provided to the Federal Transit Administration to
undertake this effort with Easter Seals. We are indeed grateful for
that initiative and the ongoing strong support of this subcommittee in
subsequent years.
Following its initial round of appropriations, Congress authorized
assistance to Project ACTION in 1990 with the passage of ISTEA and
reauthorized the project in 1997 as part of TEA-21 and in 2005 as part
of SAFETEA-LU. The strong interest and support of all members of
Congress has been greatly appreciated by Easter Seals as it has pursued
Project ACTION's goals and objectives.
Since the project's inception, Easter Seals has administered the
project through a cooperative agreement with the Federal Transit
Administration. Through steadfast appropriations support, Easter Seals
Project ACTION has become the Nation's leading resource on accessible
public transportation for people with disabilities. The current project
authorization level is $3 million, and Easter Seals is pleased to
request the appropriation of that sum for fiscal year 2009.
The strength of Easter Seals Project ACTION is its continued
effectiveness in meeting the congressional mandate to work with both
the transit and disability communities to create solutions that improve
access to transportation for people with disabilities of all ages and
to assist transit providers in complying with transportation provisions
in the Americans with Disabilities Act (ADA).
NATIONAL CENTER ON SENIOR TRANSPORTATION OVERVIEW
The National Center on Senior Transportation (NCST) was created in
SAFETEA-LU to increase the capacity and use of person-centered
transportation options that support community living for seniors in the
communities they choose throughout the United States. The center is
designed to meet the unique mobility needs of older adults and provide
technical assistance and support to older adults and transit providers.
The NCST is administered by Easter Seals in partnership with the
National Association of Area Agencies on Aging (N4A) and involves
several other partners including the National Association of State
Units on Aging, The Community Transportation Association of America,
The American Society on Aging, and The Beverly Foundation. The
Cooperative agreement forming the NCST was developed in August 2006 and
the Center was officially launched in January 2007.
The goals of the NCST are:
--Greater cooperation between the aging community and transportation
industry to increase the availability of more comprehensive,
accessible, safe and coordinated transportation services;
--Increased integration of provisions for transportation in community
living arrangements and long-term care for older adults;
--Enhanced capacity of public and private transportation providers to
meet the mobility needs of seniors through available,
accessible, safe and affordable transportation;
--Enhanced capacity of human service providers to help seniors and/or
caregivers individually plan, create and use appropriate
transportation alternatives;
--Increased knowledge about and independent use of community
transportation alternatives by seniors through outreach,
education and advocacy;
--Increased opportunities for older adults to obtain education and
support services to enable the individuals to participate in
local and State public and private transportation planning
processes.
The tools and resources being developed to achieve these goals
include:
--Technical assistance extended through cross-agency and public/
private collaboration to improve and increase mobility
management for older adults through new or existing local and
State coalitions;
--Technical assistance and other supportive services extended to
communities, seniors, transportation and professional agencies
and organizations, government, and individuals so they can
effectively address barriers and/or respond to opportunities
related to senior transportation;
--Creation and dissemination of products and training programs (e.g.,
brochures, workbooks, best-practice guides and self-
assessments) to help transportation providers, human service
agencies and older adults and their caregivers understand their
roles and/or opportunities for increasing senior mobility
options;
--Use of an 800-telephone line, website, visual exhibit, newsletters
and other communication tools;
--Implementation of communication strategies to increase the profile
of senior transportation on topics such as emerging best
practices, advances in public policy, success stories and more;
--Facilitation and testing of new ideas to increase and improve
community mobility for seniors through the administration and
management of demonstration projects.
In SAFETEA-LU, the NCST is authorized at $2 million for the first
year of the project and $1 million for years after that. Easter Seals
respectfully requests an appropriation of $3 million for the NCST in
fiscal 2009. The additional $2 million included above the authorized
level in this request would allow the center to fund local community's
efforts to demonstrate creative, unduplicated and effective solutions
to increasing mobility for older adults. This funding will allow us to
support local communities' efforts to put the tools and resources
developed by the NCST into practice.
HIGHLIGHTED ACTIVITIES OF PROJECT ACTION AND THE NATIONAL CENTER ON
SENIOR TRANSPORTATION DURING THE LAST YEAR
Both Project ACTION and the NCST are working at the State, local
and national level to achieve the goal of greater mobility for all
Americans. The past year has been an exciting one and the role of
Project ACTION and the NCST as productive, highly trustworthy,
innovative resources to the Federal Transit Administration has
continued to grow.
In late 2007, the NCST released an RFP to local communities to
undertake demonstration projects that will work creatively to meet the
transportation needs of older adults living in the community. More than
300 public, private and faith-based aging/human services and
transportation organizations from 46 states plus the District of
Columbia applied. Eight community organizations have been selected to
receive grants from the National Center on Senior Transportation. The
grants range from $35,000 to $90,000. The sites will also receive 24
months of tailored technical assistance. A panel of external reviewers
selected these organizations: Human Services Council, Vancouver, WA;
Jewish Family and Children's Services of Minneapolis, Minnetonka, MN;
Knoxville-Knox County Community Action Committee, Knoxville, TN;
Leslie, Knott, Letcher Perry Community Action Council, Inc., Jeff, KY;
Meadowlink Commuter Services, Rutherford, NJ; Mid County Senior
Services, Newtown Square, PA; Southwest Michigan Planning Commission,
Benton Harbor, MI; ACCESS Transportation System, Pittsburg, PA.
A highly promising new tool that both Project ACTION and the NCST
are accessing to achieve their missions is distance learning. Distance
learning has proven to be a highly effective method to reach an
exponentially greater number of stakeholders to educate and inform them
about activities that will increase the mobility of older adults and
people with disabilities. For instance, over 800 people have
participated in technical training offered by Project ACTION and the
NCST with approximately 120 people signing up for each event on
average. This has allowed approximately 5 times as many people to be
trained by project staff. The experience has been so positive that the
FTA has requested that the project triple their distance learning
activities over the next 3 years contingent on funding. An additional
training success was the presentation of the Project ACTION ``People on
the Move'' program in New Orleans, LA to help assure that
transportation options for people with disabilities were part of the
rebuilding efforts in that city. Project ACTION was also proud to
introduce a new course this year to increase the skills, knowledge and
abilities of travel training professionals. Within 3 months following
each of these three trainings being offered this year, participants
will submit a report detailing how they used the curriculum materials
to train people with disabilities to use public transportation, improve
policies and practices, educate colleagues and increase their own
knowledge.
Both projects have also instituted an on-line technical assistance
tracking process that will help identify geographic and issue area
trends in our technical assistance efforts so that broader training and
technical assistance tools can be targeted at specific needs.
There are currently three ongoing studies that will result in new
tools being added to the resource clearinghouse for both projects. The
first is in the area of accessible taxi service and is critical to
meeting the needs of both older adults and people with disabilities,
particularly in rural areas. The other two are in the areas of bus stop
accessibility and accessible pathways. In addition Project ACTION just
released a report on wheelchair mobility that addresses the growing
need to address larger wheelchairs in vehicles.
FISCAL 2009 REQUEST
In order to continue the outstanding work of Easter Seals Project
ACTION and the NCST, Easter Seals respectfully requests that $3 million
be allocated for Project ACTION and $3 million be allocated for the
National Center on Senior Transportation in fiscal 2009 to the
Department of Transportation for project activities.
Mr. Chairman, thank you for the opportunity to present this
testimony to the subcommittee. Your efforts have improved the
accessibility of transportation for persons with disabilities and older
adults and the ability of the transportation community to provide good
service to all Americans. Easter Seals looks forward to continuing to
work with you toward the pursuit of these objectives.
______
Prepared Statement of the National Association of Railroad Passengers
The National Association of Railroad Passengers strongly supports
$1.785 billion as a minimum appropriation for Amtrak for fiscal year
2009 in the absence of a responsible request by the Bush
administration. There are two caveats below regarding rolling stock and
infrastructure (sections II and IV) which justify additional funding.
Looking forward, we strongly urge the next Congress and
administration to take seriously the $9 billion a year recommendation
of intercity passenger train investments contained in the report of the
National Surface Transportation Policy and Revenue Study Commission.
STRONG RIDERSHIP GROWTH
Americans are turning to trains. Demand for all types of services
is growing rapidly--long distance, corridor, commuter rail and local
transit. At Amtrak, ridership for the first 6 months of fiscal year
2008 (October-March) was up 12 percent compared with the same period of
fiscal year 2007. And ridership for all of fiscal year 2007, which
Amtrak said marked ``the fifth straight year of gains,'' was 6.3
percent higher than in fiscal year 2006.
Sold-out trains on Amtrak means we don't have enough capacity to
meet current demand, and certainly not the larger demand that is likely
in the future as more people seek alternatives to high and rising
gasoline prices and airline fares. As explained below, from a public
policy standpoint, the increased popularity of energy-efficient trains
is good.
HOW TO KEEP RIDERSHIP GROWING
Amtrak has about 100 cars that need repairs before they can be
returned to service. The fiscal year 2008 budget apparently would
accomplish very little in this regard. Similarly, it appears that
little could be accomplished within what Amtrak has requested for
fiscal year 2009, since they are showing a significant drop in capital
spending on both ``passenger cars'' and ``locomotives.'' Passenger cars
would drop $40.1 million or 22.5 percent, from $178.0 million this year
to $137.9 million next year.
This issue also is complicated by the fact that, as a result of
leaseback deals in the pre-Gunn years, Amtrak does not own many of
``its'' cars and the law, as we understand it, prohibits Amtrak's use
of capital dollars to repair such cars.
With passenger demand already exceeding what Amtrak can supply
today, we urge the subcommittee to sort through the above and take the
necessary steps to maximize the number of cars Amtrak can operate,
including--if needed for this purpose--adding additional funding.
New Equipment.--We appreciate that Amtrak is working on developing
a program to secure new equipment in cooperation with the States, and
is working with them to standardize equipment design as much as
possible. However, we are concerned at the lack of action with regard
to equipment for the national network (long-distance) trains, where
demand also is strong and growing, and cars also are aging. It is
essential that the Federal funds become available to move both of these
programs forward; with States partnering on ``State corridors''
equipment.
STATE GRANT PROGRAM
The Association appreciates the fact that, for the first time,
Federal funds are available to match State investments for intercity
passenger trains, and not just as a by-product of commuter rail or
intermodal terminal programs. The $30 million approved for fiscal 2008
is significant as a start; we urge the subcommittee to expand this
program as rapidly as possible--and not at the expense of Amtrak
funding--ideally at $100 million in fiscal year 2009, and including a 5
percent set-aside for education and outreach.
SERVICE RELIABILITY
While some on-time performance issues result from problems with
railroad operating practices, substantial delays also are caused by
genuine track capacity issues. One of the biggest problems involves the
Norfolk Southern mainline between Porter, Indiana, 26 miles east of the
Illinois State line, and Chicago. This segment handles Amtrak's five
daily Michigan round-trips as well as Amtrak's four Chicago-Cleveland
trains (Lake Shore Limited serving New York State, New York City and
Boston; Capitol Limited serving Pittsburgh and Washington).
Paralleling this mainline is the abandoned former New York Central
right-of-way (and associated drawbridges, still in place). Putting this
back into service would improve both passenger and freight operations.
This is one major example of the sorts of projects that could blossom
under an adequately funded Federal program to jointly fund railroad
projects with States.
IT IS SOUND PUBLIC POLICY TO SUPPORT TRAINS
Fuel efficiency offers the most immediate and biggest potential for
reducing CO2 emissions from transportation over the next 3
decades, partly because we are so far from developing radically
advanced, low-carbon technologies to replace oil-based transportation
energy. The emissions reduction policy measure that will have the most
immediate impact is the one that will make greater use of the most
fuel/carbon efficient forms of transportation.
It is in that context that we present the most recent data from the
annual Transportation Energy Data Book (Edition 26, released in 2007),
published by Oak Ridge National Laboratory, under contract to the U.S.
Department of Energy. The following table shows 2005 data; the five
modes shown are listed from most to least energy efficient:
------------------------------------------------------------------------
BTUs per psgr-
Mode mile \1\
------------------------------------------------------------------------
Amtrak.................................................. 2,709
Commuter trains......................................... 2,743
Certificated air carriers............................... 3,254
Cars.................................................... 3,445
Light trucks (2-axle, 4-tire)........................... 7,652
------------------------------------------------------------------------
\1\ BTU = British Thermal Unit; passenger-mile = one passenger traveling
one mile.
The aviation figure shown above is straight energy consumption; no
multiplier is added although there is evidence that ``radiative
forcing'' increases the negative environmental impacts of high altitude
emissions.
HUDSON RIVER TUNNELS
One other geographically specific project demands comment: the
current plan of New Jersey Transit to build two tunnels under the
Hudson River which would not connect with existing New York Penn
Station and which would lead to a dead-end, deep cavern station so far
under 34th Street as to render questionable the ability to extend
tracks to Grand Central. Moreover, we understand that the tunnels are
designed in a way that prohibits additional intercity capacity in the
future.
We cannot support or justify a $7.6 billion expenditure on new
tunnels that, in 2017, will find existing Penn Station and all
intercity service under the Hudson just as dependent as today on two
century-old tunnels. Moreover, these new tunnels will block future
investments to expand intercity capacity, violating a basic rule: do no
harm. As we have testified to New Jersey Transit and written to the
Governors of New York and New Jersey, it is inconceivable that the
continent's strongest market opportunity for rail to ameliorate
aviation congestion could remain one incident away from rail paralysis.
Even without an incident that closes those tunnels for any length of
time, basic track maintenance needs are increasingly in conflict with
growing demand for both commuter and intercity weekend services.
BACK PAY
Our $1.785 billion request includes both the $1.671 billion that
Amtrak formally requested and the additional $114 million to fulfill
the new contracts.
The alternative approach of relying on an end-of-year cash balance
to cover the $114 million would be unwise because the remaining cash on
hand would be inadequate for responsible management of a $3+ billion
corporation like Amtrak. While it is unfortunate that Amtrak did not
forthrightly request the $114 million, we agree that the board arguably
would be failing in its fiduciary responsibility to recommend
``swallowing'' the $114 million. As Alex Kummant testified before your
subcommittee on April 3, ``it's early to project end-of-year cash. Last
year, we came within 3 weeks of running out of cash by the time we got
our first grant in February.''
WORK RULES
We have supported reasonable efforts to improve productivity,
believing that such efforts will facilitate service expansion that
provides services travelers need while increasing the number of good
jobs on and related to passenger trains. It is widely known that the
PEB ``does not recommend any of Amtrak's requested changes.'' However,
rail labor submissions to the PEB noted that Amtrak can increase
productivity within the scope of existing contracts. Also, the new
contracts become amendable in just over 19 months which leaves room for
hope that all parties, informed by the recent process, can approach the
issue more effectively.
______
Prepared Statement of the Railway Supply Institute, Inc.
Dear Mr. Chairman, the Railway Supply Institute (RSI) appreciates
the opportunity to provide this subcommittee with our views on
important transportation funding policy.
Established in 1908, RSI is the international association of
suppliers to the Nation's freight, passenger rail systems, and rail
transit authorities. The domestic railway supply industry is a $20
billion a year business with some 500 companies employing 150,000
people. Approximately 25 percent of sales involve Amtrak, commuter
railroads and transit authorities. A strong national freight and
passenger rail system will not only continue to sustain good paying
domestic jobs but will lead to future job creation as well.
RSI supports both our Nation's freight and passenger rail
operations. Today we will focus on passenger rail service.
Unfortunately, in our view, our transportation policy places entirely
too much emphasis on those modes of transportation that have the
inverse effect on the issues mentioned above.
We need a strong, national railroad passenger system that
contributes to reducing dependence on foreign oil; reducing carbon
emissions into the atmosphere; reducing congestion on our highways;
improving transportation safety; reducing airport congestion; and that
will enhance our ability to move vast numbers of people in emergency
evacuation situations (i.e. 9/11, Katrina, etc).
As representatives of those who supply our Nation's railroad
industry, we submit that a more balanced national transportation policy
that places more emphasis on rail will significantly contribute to
meeting our Nation's stated policy objectives that are designed to make
this Nation stronger.
That is why we urge this subcommittee to reject the
administration's proposed cuts in rail passenger service and support
Amtrak's fiscal year 2009 appropriation request of $1.671 billion.
However, if policy makers are truly serious about achieving the above
stated objectives, then we need to do much more than just allowing
Amtrak to survive on a year to year basis. And, certainly get away from
the annual starvation budget for rail passenger service.
Last August, the Wall Street Journal wrote that just the increase
in ridership alone on the Acela's on Amtrak's Northeast Corridor was
``enough new passengers to fill 2,000 Boeing 757 jets''. Just imagine
running more corridor operations that would do more of that and the
impact that could have on fuel consumption and carbon emissions. Amtrak
needs more equipment and investment in railroad infrastructure so it
can expand capacity allowing it to move more people by rail. By doing
that, it will help reduce short distance flights and auto trips.
At a time when we are considering capping air traffic in some of
our busiest airports, wouldn't it make more sense to have a Federal
policy that encourages the development of rail corridors that will
reduce the need for short distance air travel and free up valuable air
slots at airports? Such a policy would not only reduce airport
congestion but would aide in reducing fuel consumption.
In addition:
--Air transportation produces significant levels of CO2.
Air emissions effects are greater at high altitudes.
--Airliner fuel use triples during the takeoff climb, and sometimes
in descent, making short distance trips inefficient and adding
unnecessarily to airport congestion.
--Rail travel could efficiently replace short distance air travel and
longer distance highway trips, while reducing greenhouse gas
emissions if we had a policy that encouraged more rail
passenger corridor development.
Former airline executives, (Gordon Bethune-Continental/Robert
Crandall-American) have publicly stated that the United States should
do what governments in Europe and Asia have long done--building high
speed rail lines for short distance travelers and freeing up runway
space for long distance flights. States all over this country are
interested in adopting policies that reward and encourage energy
efficient, low-emissions transportation modes like passenger rail and
corridor development. The Federal Government needs to be a partner with
those States.
Mr. Chairman, we are here to urge you and the members of this
subcommittee to focus your attention on the benefits of rail passenger
service and, perhaps, even follow some of the recommendations of the
National Surface Transportation Commission which clearly states that
``intercity passenger rail is . . . more energy efficient than many
other modes of passenger transportation.'' That same report goes on to
say that the average intercity passenger rail train produces 60 percent
lower carbon dioxide emission per passenger mile than the average auto,
and half the carbon dioxide emission per passenger mile of an airplane.
These facts suggest that Federal transportation policy should do
more to develop those modes of transportation that we already know are
efficient. Perhaps our policy should measure the value of rail
passenger service in a way that will reflect its overall value and
enhance other policy objectives rather than only measuring the pure
cost of the service as we do today.
Instead of measuring the ``loss-per-passenger-mile'' on Amtrak
trains maybe this subcommittee should entertain other measures like
``carbon emission reduction per-passenger-mile'' or ``reduction in
VMT'' (vehicle miles traveled).
Why not require a Fuel Efficient/Carbon Emission Impact Statement
similar to the Environmental Impact Statement that will give
transportation policy makers a different measurement tool that will
actually help to gage the progress (or lack of it) in reducing fuel
consumption and carbon emissions.
Above all, we would urge the subcommittee and Congress to provide
full funding for Amtrak and to resist micro-managing their activities.
If Congress wants Amtrak to operate more like a business, it should
treat it like a business and have an arms-length relationship allowing
the Board of Directors to be responsible for setting management
objectives.
Clearly there are things Amtrak can do to be more efficient but
dictating operational reforms for specific on-board services or a
marketing strategy should be left to the Board of Directors and its
management oversight and not spelled out in statutory language. Allow
the Amtrak Board to be responsible and accountable for the actions of
the corporation. The whole purpose for having a Board of Directors is
to provide management with a general direction and hold management to
the policies it sets.
Once Congress begins to dictate policies to management, it becomes
part of the problem. We believe that the appropriate role of Congress
should be to make policy, provide funding, and engage in oversight. The
Appropriations Committees have a responsibility to work in the best
interests of the Nation, making funding decisions that can set the
foundation for a strong economy and a brighter future for all
Americans. Support for rail passenger service is part of the solution
for many of our Nation's concerns over congestion and pollution.
We applaud the subcommittee for its wisdom in providing the initial
funding for the Intercity Passenger Rail Grant Program last year. In
addition, Federal Railroad Administrator Joseph Boardman deserves
credit for proposing this concept and for recommending an additional
$100 million to expand the current program to assist the States in
being more aggressive in improving intercity rail passenger service.
This is one of those areas where Amtrak, the States, Congress and the
administration can all agree needs to move forward and we hope this
subcommittee will do its best to fully fund this proposal.
Your continued support for rail passenger service is good public
policy and good for the Nation.
Thank you for the opportunity to present our views.
______
Prepared Statement of Foothill Transit
Mr. Chairman and members of the subcommittee, my name is Doran
Barnes and I serve as the Executive Director of Foothill Transit in
West Covina, California. Thank you very much for the opportunity to
submit testimony to this subcommittee.
Mr. Chairman, I recognize the difficult tasks before this
subcommittee and commend your leadership in determining the allocation
of available transportation resources during this congressional budget
period. We are very appreciative of the strong support provided to
Foothill Transit by this subcommittee over the past 13 years. The
support of this subcommittee has enabled Foothill Transit to construct
two operating and maintenance facilities and to initiate replacement of
our aging bus fleet with new compressed natural gas coaches, as well as
to embark upon providing commuter parking to encourage transit
ridership. These initiatives have greatly enhanced our service to our
riders, and continue to do so.
WHY THIS BUS CAPITAL REQUEST?
Thanks to the unwavering support of our Congressional delegation,
Foothill Transit has been extremely successful in achieving its capital
goals. Our fiscal year 2009 funding request is for $5 million in
Discretionary Bus Capital funding to assist Foothill Transit in our
aggressive efforts to continue the conversion of our entire 314-bus
fleet to cleaner burning compressed natural gas (CNG) buses. To date,
Foothill Transit's fleet consists of 232 CNG buses and 82 diesel buses.
The funds requested here would be utilized for the purchase of both 40-
foot buses, and additional 60-foot articulated buses to add to the new
``Silver Streak'' service just introduced in March 2007. This
successful new service includes 58-passenger buses which board faster,
save riders substantial commuting time, have state-of-the-art safety
features, and offer onboard WiFi (Internet) service.
The conversion of transit fleets to alternative fuel sources
multiplies the benefits that transit service already contributes to our
national energy conservation goals. The Federal Government has
recognized the importance of such energy-saving initiatives by
providing Federal matching funds and incentives to assist local
agencies, such as Foothill Transit, with the procurement of alternative
fuel buses.
The agency's Pomona Operations Yard is now running a 100 percent
CNG fleet with 170 buses. Diesel fueling infrastructure has been
dismantled at this yard as the use of diesel fuel buses has been phased
out at this facility.
Foothill Transit's Arcadia/Irwindale Operations Yard runs the
remaining 144 buses, with the goal of converting to a cleaner burning
CNG facility as soon as possible. This funding request will enable the
retirement of a portion of the older diesel-fueled vehicles and advance
the ``green'' goals of the agency, furthering its role in improving
regional air quality through the cleaner fuel technologies and
congestion reduction in Los Angeles County.
Since its introduction in March 2007, the Silver Streak service
mentioned above has become a great success. The service saves riders
approximately 40 minutes of commute time from one end of the county to
the other. Ridership has increased rapidly since its inception and has
improved overall system access on connecting lines. This funding, if
approved, will enable the purchase of an additional 10 60-foot CNG
``articulated'' buses, as well as additional 40-foot CNG buses.
ABOUT FOOTHILL TRANSIT
Foothill Transit was created in 1987 as an experiment to determine
the effectiveness of competitively bidding for transit service
operations. A public/private partnership, Foothill Transit is governed
by an elected board comprised of mayors and council members
representing the 21 cities and 3 appointees from the County of Los
Angeles who are members of a Joint Exercise of Powers Authority. The
agency provides public transit service over a 327-square-mile service
area. Foothill Transit is one of the best investments of taxpayer
dollars in these times of limited funds.
Foothill Transit has established a reputation of providing
outstanding customer service. In five separate customer surveys,
Foothill Transit drivers have consistently received ratings above
average or greater by more than 805 of our customers. Customers also
rate Foothill Transit buses very highly on their cleanliness, comfort
and graffiti-free appearance.
Foothill Transit was initially established as a 3-year experiment
to operate 14 bus lines at least 25 percent more effectively than the
former Southern California Rapid Transit District (now Metro), with
those savings to be passed on to the community through increased
service and/or lower fares. A 3-year evaluation completed by Ernst &
Young in 1995 showed that Foothill Transit's public/private structure
resulted in cost savings of 43 percent per revenue hour over the
previous provider.
Recognized by Congress in 1996 as a ``national model,'' the
combination of public accountability and private sector efficiencies
has allowed Foothill Transit to hold costs constant since its inception
in 1987, while increasing ridership by 77 percent and more than
doubling the amount of service on the street.
Foothill Transit has no employees. All management and operation of
Foothill Transit service is provided through competitive procurement
practices. The Foothill Executive Board has retained my employer,
Veolia Transportation, to provide the day-to-day management and
administration of the agency. The management contractor oversees the
maintenance and operation contractors to ensure adherence to Foothill
Transit's strict quality standards. We currently have two operating
contracts, with First Transit at our Pomona facility, and MV
Transportation at our Arcadia/Irwindale facility.
Mr. Chairman, thank you for the opportunity to provide testimony
and for your consideration of this request. Please feel free to contact
me with any questions you may have or if I can be of any assistance.
______
Prepared Statement of the Illinois Department of Transportation
Madam Chairwoman and members of the subcommittee, we appreciate the
opportunity to submit testimony concerning the fiscal year 2009 U.S.
Department of Transportation (U.S. DOT) appropriations on behalf of the
Illinois Department of Transportation (IDOT) to the Senate
Appropriations Subcommittee on Transportation and Housing and Urban
Development, and Related Agencies. We thank Chairwoman Patty Murray and
the members of the subcommittee for their past support of a strong
Federal transportation program and for taking into consideration
Illinois' unique needs.
IDOT is responsible for the planning, construction, maintenance and
coordination of highways, public transit, aviation, intercity passenger
rail and freight rail systems in the State of Illinois. IDOT also
administers traffic safety programs. Our recommendations for overall
funding priorities and our requests for transportation funding for
projects of special interest to Illinois are discussed below.
HIGHWAY
Highway Obligation Limitation
IDOT urges the subcommittee to set the obligation limitation for
highway and highway safety programs at no less than the guaranteed
SAFETEA-LU level of $41.2 billion for fiscal year 2009--the same
funding level approved in fiscal year 2008. As you are aware, these
guarantees/funding levels were also approved in both the House and
Senate fiscal year 2009 budget resolutions. Moreover, IDOT continues to
support the SAFETEA-LU guarantees and funding firewalls as do other
transportation advocates such as the American Association of State
Highway and Transportation Officials (AASHTO) and the American Road and
Transportation Builders Association (ARTBA).
IDOT is aware of the implications of supporting increased
transportation funding when the long-term viability of the trust fund
is in question. However, IDOT is responsible for securing the Federal
funding that is needed to address the immediate highway and bridge
deficiencies in Illinois and to preserve Illinois' transportation
system for succeeding generations. To paraphrase the recent findings of
the National Surface Transportation Policy and Revenue Study
Commission, the consequences of inaction, at any level, will lead to
further deterioration of the Nation's transportation system assets.
Rescission of Unobligated Highway Apportionments
IDOT urges the subcommittee to suspend its practice of rescinding
unobligated highway apportionments. Since fiscal year 2002, Congress
has enacted language requiring Illinois to rescind a total of $466
million in unobligated apportionments. Rescissions undermine the
SAFETEA-LU principles of guaranteed funding and budgetary firewalls by
withdrawing promised Federal funding to offset increased non-
transportation funding in other areas of the budget. The accumulated
impact of numerous rescissions since fiscal year 2002 has exacted
burdensome programmatic consequences. With large-scale rescissions,
such as the one implemented in fiscal year 2008 for $3.15 billion,
States have less flexibility to shift funding toward unique State needs
and to meet individual highway program priorities. Moreover, State
transportation departments are being pressured by various
transportation interests to make rescissions based on that group's
particular preference.
Lastly, the members of the Senate Appropriations Committee should
be reminded that the $8.6 billion rescission enacted in SAFETEA-LU,
which becomes effective on the last day of the bill, represents a 22
percent reduction of the estimated $38.3 billion to be apportioned to
the States in fiscal year 2009. Illinois' share of the fiscal year 2009
rescission is estimated in the range of $285 million to $300 million.
Funding Requests for Meritorious Projects
If the subcommittee finds the flexibility to fund meritorious
projects in existing discretionary SAFETEA-LU categories or outside the
authorized categories, IDOT requests funding for the following projects
(noted throughout the testimony) for highway, Intelligent
Transportation Systems (ITS), transit and rail funding:
--Rehabilitation of Congress Parkway Bridge.--IDOT requests $20
million for rehabilitation and construction of the bridge,
which crosses the South Branch of the Chicago River, and is
currently classified as structurally deficient.
--New Mississippi River Bridge.--IDOT requests $9.6 million for the
land acquisition required for the construction of a new eight-
lane Mississippi River Bridge in the St. Louis, Missouri and
East St. Louis, Illinois area.
--Remote Control Bridge Monitoring for Des Plaines River.--IDOT
requests $6 million to provide automated remote monitoring and
control for a group of six movable bridges crossing the Des
Plaines River in the Joliet region.
Other IDOT Highway Priorities Include.--$20.5 million for expansion
of US 51 between Decatur and Centralia; $62.5 million for expansion of
US 67 between Macomb and Alton; $10 million for I-39/I-90 Interchange
Reconstruction in Rockford; and $12.6 million for development of an
east-west IL Route 120 Corridor.
Other IDOT ITS Priorities Include.--$6 million for a traffic
surveillance system for I-80; $2 million for dynamic message signs at
the I-39/I-80 Interchange; $1.5 million for I-270 fiber network and
other ITS devices; $6 million for a traffic surveillance system for I-
55; and $9 million for Vehicle Infrastructure Integration along Route
66.
TRANSIT
Transit Obligation Limitation
IDOT urges the subcommittee to set the obligation limitation for
transit programs at the guaranteed SAFETEA-LU level in fiscal year 2009
at $10.4 billion.
--Bus and Bus Facilities.--IDOT and the Illinois Public
Transportation Association jointly request a Federal earmark of
$30 million ($6.1 million for downstate bus and $23.9 million
for downstate facilities) in fiscal year 2009 section 5309 bus
capital funds for downstate Illinois.
The request will provide $6.1 million for downstate Illinois
transit systems to purchase up to 43 buses and paratransit vehicles to
replace overage vehicles and to comply with Federal mandates under the
Americans with Disabilities Act. All of the vehicles scheduled for
replacement are at or well beyond their design life. The request will
also provide $23.9 million to Illinois to undertake engineering, land
acquisition or construction for eight maintenance facilities and two
transfer facilities that will enhance efficient operation of transit
services.
Illinois transit systems need discretionary bus capital funds.
Regular formula funding is inadequate to meet all bus capital needs.
IDOT believes that Illinois' needs justify a much larger amount of
discretionary bus funds than the State has received in recent years.
Under SAFETEA-LU, Illinois is expected to receive approximately 6.5
percent of the needs-based formula funds but Illinois has only received
between 1 percent and 3 percent of appropriated bus capital funds in
the past.
New Systems and Extensions--Chicago Transit Authority (CTA)
IDOT supports the CTA's request for an earmark totaling $30.5
million in New Starts funding to assist in upgrading the Ravenswood
Brown Line. The match for these funds has been provided by IDOT.
The funding requested for upgrading the Ravenswood Brown Line would
continue construction to extend station platforms to handle longer
trains that are needed to serve the increasing demand along this line.
Lengthening all platforms to handle longer, 8-car trains, straightening
tight S-curves that slow operations and selected yard improvements will
increase capacity by 25 to 30 percent. The CTA is seeking $30.5 million
in New Starts funds for fiscal year 2009. A Full Funding Grant
Agreement for $245.5 million was executed in January 2004 for the
project.
New Systems and Extensions--MetroLink
IDOT supports the Bi-State Development Agency's request for a
Federal earmark of $50 million in fiscal year 2009 New Starts funding
for extending the MetroLink light rail system in St. Clair County from
Scott Air Force Base to MidAmerica Airport. The MetroLink system serves
the St. Louis region in both Illinois and Missouri. MetroLink service
has been a tremendous success and ridership has far exceeded
projections.
Formula Grants
IDOT urges the subcommittee to set appropriations for transit
formula grant programs at levels that will allow full use of the
anticipated Mass Transit Account revenues. IDOT also supports utilizing
general funds to supplement transit needs.
In Illinois, Urbanized Area formula funds (section 5307) are
distributed to the Regional Transportation Authority and its three
service boards which provide approximately 600 million passenger trips
per year. Downstate urbanized formula funds are distributed to 14
urbanized areas which provide approximately 30 million passenger trips
per year.
The Rural and Small Urban formula funds (section 5311) play a vital
role in meeting mobility needs in Illinois' small cities and rural
areas. IDOT urges the subcommittee to fully fund section 5311 at the
SAFETEA-LU authorized level. With section 5311 funding increases
already authorized in SAFETEA-LU, Illinois is in the process of
expanding service into 24 counties not currently served.
Any decrease in Federal funding below the SAFETEA-LU authorized
levels could jeopardize the much needed service expansion. In Illinois,
such systems operate in 60 counties and 11 small cities, carrying
approximately 2.9 million passengers annually.
RAIL
Amtrak Appropriation
IDOT supports Amtrak's grant request of $1.671 billion in funding
from general funds for fiscal year 2009 to cover capital, operating and
debt service costs. In addition, IDOT supports Amtrak's supplemental
request for $114 million to cover 60 percent of the labor settlement
amount (40 percent was funded within fiscal year 2008) determined by
the Presidential Emergency Board.
Amtrak needs the full amount of their request to maintain existing
nationwide operations. IDOT urges Congress to provide funds to continue
current service until it develops a new national rail passenger policy
and a clear plan for any changes to existing services as part of the
congressional reauthorization of Amtrak. Chicago is a hub for Amtrak
intercity service, and Amtrak operates 58 trains throughout Illinois as
part of the Nation's passenger rail system, serving approximately 3.6
million passengers annually. Of the total, Illinois subsidizes 28
State-sponsored trains which provide service in four corridors from
Chicago to Milwaukee, Quincy, St. Louis and Carbondale. Amtrak service
in key travel corridors is an important component of Illinois'
multimodal transportation network and continued Federal capital and
operating support is needed.
--CREATE Railroad Grand Crossing Connection.--IDOT requests $10
million in fiscal year 2009 for design and construction of a
railroad connection between the CN and Norfolk Southern
Railroads at 75th Street in Chicago--also know as the Grand
Crossing.
--Passenger Rail-Freight Congestion Relief.--IDOT requests $1 million
in fiscal year 2009 for engineering and capital improvements to
relieve passenger and freight train congestion/delays on the
three State-supported downstate corridors.
AVIATION
Airport Improvement Program Obligation Limitation
IDOT supports a fiscal year 2009 Airport Improvement Program (AIP)
obligation limitation of $3.9 billion, thereby continuing the 4-year
VISION-100 pattern of increasing the obligation limitation each year by
$100 million. This level of funding is supported by the American
Association of Airport Executives and the National Association of State
Aviation Officials.
Adequate AIP funding remains especially important for Small, Non-
Hub, Non-primary, General Aviation and Reliever airports. While most
Large/Medium Hub airports have been able to raise substantial amounts
of funding with Passenger Facility Charges, the smaller airports are
very dependent on the Federal AIP program. Airports must continue to
make infrastructure improvements to safely and efficiently serve
existing air traffic and the rapidly growing passenger demand.
Despite challenges that include high fuel prices and concerns about
the economy, U.S. commercial aviation is on track to carry one billion
passengers by 2016, as predicted by the Federal Aviation Administration
in a recently released forecast for the period 2008-2025. In addition,
the most recent National Plan of Integrated Airport Systems (NPIAS)
report identified $41.2 billion in airport development needs over a 5-
year period (2007-2011), an annual average of $8.2 billion. Lower AIP
obligation levels translate into less Federal funds for airport
projects, thereby exacerbating the existing capital project funding
shortfall.
Essential Air Service Program (EAS).--IDOT supports an EAS program
funded at a level that will enable the continuation of service at all
current Illinois EAS points. Several Illinois airports, Decatur,
Marion/Herrin and Quincy, currently receive annual EAS subsidies.
Small Community Air Service Program.--IDOT supports funding for the
Small Community Air Service Development Program in fiscal year 2009, at
a level of no less than at the full authorized fiscal year 2008 level
of $35 million. Illinois airports have received funding from this
program in the past.
Other IDOT Non-Modal Priorities
Resource Center for Disadvantaged Business/Minorities/Women.--IDOT
requests $450,000 for an IDOT resource center for disadvantaged,
minority and women owned businesses aimed at increasing participation
on all IDOT projects as well as CREATE.
Height Modernization.--IDOT requests $3.5 million to establish a
Height Modernization (HM) program in Illinois. This will be requested
through the Appropriations Subcommittee on Science, State, Justice,
Commerce and Related Agencies.
Finally, should Congress develop a second stimulus package IDOT
would support the inclusion of an infrastructure component. IDOT has
identified approximately 295 highway, transit, rail and aviation
projects at a value of $2.5 billion that would be ready-to-go in a
short timeframe to not only stimulate the economy by creating good
paying jobs, but provide long-term improvements to our transportation
infrastructure.
This concludes my testimony. I understand the difficulty you face
trying to provide needed increases in transportation funding. However,
an adequate and well-maintained transportation system is critical to
the Nation's economic prosperity and future growth. Your ongoing
recognition of that fact and your support for the Nation's
transportation needs are much appreciated. Again, thank you for the
opportunity to discuss Illinois' Federal transportation funding
concerns.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Alexander, Senator Lamar, U.S. Senator From Tennessee, Statement
of............................................................. 124
Allard, Senator Wayne, U.S. Senator From Colorado, Statements of56, 123
American Association of Service Coordinators (AASC), Prepared
Statement of the............................................... 215
Blunt, Paula, General Deputy Assistant Secretary, Office of
Public and Indian Housing, Department of Housing and Urban
Development.................................................... 53
Boardman, Hon. Joseph H., Administrator, Federal Railroad
Administration, Department of Transportation................... 155
Prepared Statement of........................................ 156
Bond, Senator Christopher S., U.S. Senator From Missouri, Opening
Statements of..............................................3, 59, 120
Bregon, Nelson R., General Deputy Assistant Secretary, Office of
Community Planning and Development, Department of Housing and
Urban Development.............................................. 53
Byrd, Senator Robert C., U.S. Senator From West Virginia,
Prepared Statement of.......................................... 10
Capital Metropolitan Transportation Authority, Austin, Texas,
Prepared Statement of the...................................... 203
City of San Marcos, Texas, Prepared Statement of the............. 197
Coalition of Northeastern Governors, Prepared Statement of the... 208
Council of Large Public Housing Authorities, Prepared Statement
of the......................................................... 212
Durbin, Senator Richard J., U.S. Senator From Illinois, Questions
Submitted by................................................... 99
Easter Seals, Prepared Statement of.............................. 218
Feinstein, Senator Dianne, U.S. Senator From California,
Questions Submitted by......................................... 45
Foothill Transit, Prepared Statement of.......................... 224
Illinois Department of Transportation, Prepared Statement of the. 225
Institute of Makers of Explosives, Prepared Statement of the..... 200
Jackson, Hon. Alphonso, Secretary, Office of the Secretary,
Department of Housing and Urban Development.................... 53
Prepared Statement of........................................ 65
Statement of................................................. 63
Kummant, Alex, President and Chief Executive Officer, Amtrak..... 164
Prepared Statement of........................................ 165
Questions Submitted to....................................... 195
Lautenberg, Senator Frank R., U.S. Senator From New Jersey,
Statements of.................................................. 7, 57
Leahy, Senator Patrick J., U.S. Senator From Vermont, Questions
Submitted by................................................... 43
McCaskie, John, Chief Engineer, Swank Associated Companies, on
Behalf of the Transportation Construction Coalition............ 130
Prepared Statement of........................................ 132
McLean, Donna, Chairman, Board of Directors, Amtrak.............. 157
Prepared Statement of........................................ 158
Millar, William W., President, American Public Transportation
Association.................................................... 136
Prepared Statement of........................................ 137
Montgomery, Brian, Commissioner, Federal Housing Administration,
Department of Housing and Urban Development.................... 53
Murray, Senator Patty, U.S. Senator From Washington:
Opening Statements of....................................1, 53, 117
Questions Submitted by............................36, 149, 151, 195
National Association of Housing and Redevelopment Officials,
Prepared Statement of the...................................... 89
National Association of Railroad Passengers, Prepared Statement
of the......................................................... 220
National Association of REALTORS, Prepared Statement of the..... 204
National Congress of American Indians, Prepared Statement of the. 210
Ozdinec, Milan M., Deputy Assistant Secretary for Public Housing
Investments, Department of Housing and Urban Development....... 53
Parker, Joel, International Vice President and Special Assistant
to the President, Transportation Communications International
Union.......................................................... 176
Prepared Statement of........................................ 179
Peters, Hon. Mary E., Secretary, Department of Transportation.... 1
Prepared Statement of........................................ 12
Statement of................................................. 11
Pinero, Hector, Before the Committee on Banking, Housing, and
Urban Development on Behalf of the National Leased Housing
Association, National Multi Housing Council, and the National
Apartment Association, Prepared Statement of................... 94
Railway Supply Institute, Inc., Prepared Statement of the........ 222
Ray, James D., Acting Administrator, Federal Highway
Administration, Department of Transportation................... 117
Questions Submitted to....................................... 151
Simpson, Hon. James S., Administrator, Federal Transit
Administration, Department of Transportation................... 117
Prepared Statement of........................................ 126
Questions Submitted to....................................... 149
Statement of................................................. 125
Specter, Senator Arlen, U.S. Senator From Pennsylvania:
Questions Submitted by....................................... 112
Statements of................................................ 9, 58
Stevens, Senator Ted, U.S. Senator From Alaska:
Prepared Statement of........................................ 8
Questions Submitted by....................................... 51
Statement of................................................. 8
Tornquist, David, Assistant Inspector General, Office of the
Inspector General, Department of Transportation................ 167
Prepared Statement of........................................ 168
University Corporation for Atmospheric Research (UCAR), Prepared
Statement of the............................................... 205
SUBJECT INDEX
----------
AMTRAK
Page
Additional Committee Questions................................... 194
Debt............................................................. 196
Defective Concrete Ties.......................................... 196
Health Insurance Costs........................................... 195
Intermodal Connections........................................... 163
Measuring Success at Amtrak...................................... 159
State Supported Services......................................... 195
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
ADDI............................................................. 79
Additional Committee Questions................................... 99
Administrative and Judicial Receiverships........................ 84
Continuing HUD's Improved Management and Performance............. 69
Ending Chronic Homelessness...................................... 69
Ensuring Housing Assistance...................................... 66
FHA Secure....................................................... 84
FHIP:
Funding...................................................... 101
Grants....................................................... 100
Fair Housing Laws................................................ 102
Family Unification Program....................................... 112
Fiscal Year 2009 Proposed Budget................................. 95
HOPWA............................................................ 108
Funding...................................................... 108
HUD:
Oversight....................................................80, 88
VA Supportive Housing Vouchers............................... 112
Homeless:
Assistance Funding........................................... 111
Facilities................................................... 86
Homelessness..................................................... 109
Hope VI.......................................................... 73
Housing:
Choice Vouchers.............................................. 97
Discrimination.............................................106, 113
Study.................................................... 99
Equity Conversion Mortgage (HECM)........................71, 72, 87
Miami-Dade Housing Agency........................................ 86
Moving to Work.................................................109, 112
Agreement.................................................... 109
Extension.................................................... 112
Permanent Supportive Housing..................................... 110
Philadelphia, PA/Universal Community Homes Dispute............... 74
Preserving and Promoting Homeownership........................... 67
Project-based Section 8.......................................... 95
Public Housing:
Capital Funds................................................ 72
Maintenance.................................................. 76
Operating Fund............................................... 73
RESPA............................................................ 79
Rapid Re-housing................................................. 111
Reducing Homelessness............................................ 111
Section 8........................................................ 83
Seller:
Down Payment Program.........................................70, 71
Financing.................................................... 78
Some Implications of Inadequate Funding of Project-based Section
8 Contracts.................................................... 98
Strengthening Communities by Sustaining Homeownership Gains...... 68
The Broader National Housing Crisis.............................. 98
DEPARTMENT OF TRANSPORTATION
Achieving Reliable On-time Performance Could Substantially
Improve Amtrak's Finances...................................... 174
ADA Compliance of Commercial Buses............................... 40
Amtrak........................................................... 22
Additional Committee Questions................................... 36
Air Traffic Controllers.......................................... 31
Airline:
Consumer:
Complaints............................................... 28
Rights................................................... 24
Customer Service............................................. 36
Service to Small and Rural Communities....................... 25
Airport Infrastructure Investment................................ 17
Alaska Flight Service Station Network............................ 51
Alcohol-related Fatalities....................................... 33
Available Contract Authority..................................... 20
Aviation Delays.................................................. 24
California Maritime Industry..................................... 48
Container Fees................................................... 50
Corporate Average Fuel Economy (CAFE) Standards.................. 46
Cross-border Trucking Pilot Program.............................. 34
Despite Recent Progress, Amtrak Still Faces Challenges........... 170
Essential Air Service............................................ 45
Federal:
Investment in Transportation................................. 42
Role in Transportation Funding............................... 26
Funding for:
Infrastructure Investments................................... 16
Pipeline Safety Office....................................... 41
Highway Tolling.................................................. 18
Infrastructure Maintenance.......................................43, 44
Motorcycle Fatalities............................................ 32
National Goods Movement Strategy................................. 49
Nationwide Differential Global Position System (NDGPS)........... 43
New Starts Pipeline.............................................. 37
Oversight of the Nation's Bridges................................ 38
Pipeline and Hazardous Materials Safety.......................... 52
Administration............................................... 42
Privatization of Public Transportation Facilities................ 29
Promotion of the New Starts Program.............................. 37
Reauthorization Remains Key to Amtrak's Long-term Outlook........ 176
Rural Area Road Safety........................................... 21
SAFETEA-LU Rescissions........................................... 19
Small:
Shipyards.................................................... 51
Starts....................................................... 45
Status of the Dulles Rail Project................................ 22
Support for S. 406............................................... 50
Urban Partnerships...............................................20, 21
Federal Highway Administration
Additional Committee Questions................................... 149
Appropriate Balance for the Highway Trust Fund................... 151
Excess Contract Authority........................................ 145
Federal:
Highway Budget Request....................................... 140
Transportation Oversight..................................... 152
Reimbursements When Shortfall.................................... 145
Revenue Aligned Budget Authority................................. 141
Tolling and Privatization........................................ 152
Federal Railroad Administration
Amtrak:
Capital Grants............................................... 157
Efficiency Grants............................................ 157
Intercity Passenger Rail Grant Program........................... 157
Rail Line Relocation and Improvement Program..................... 157
Federal Transit Administration
Additional Committee Questions................................... 149
Appropriate Balance for the Highway Trust Fund................... 149
Borrowing From the Transit Account............................... 150
Charter Bus Rule................................................. 148
Dulles Corridor Metrorail Project................................ 143
Federal:
Highway Administration....................................... 126
Transit Administration....................................... 127
Transportation Oversight..................................... 149
Future Surface Transportation Needs.............................. 129
Status of the Highway Trust Fund................................. 128
Tolling and Privatization........................................ 150
Transit:
Account Repayable Advance.................................... 147
Request Below SAFETEA-LU..................................... 142
Urban Partnership Agreements..................................... 144
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