JUNE 24, 2008

Good morning. I want to thank the National Governors’ Association Center for Best Practices for working with the Department of Transportation to organize this very important summit. I am thrilled with the participation we have here today – 38 different states are represented, and it is a great mix of people involved in transportation, but also in financing and policy.

And thank you, Governor Kaine, for those kind words. At the NGA meeting in February, I had the opportunity to sit down with Governor Kaine and with many of your governors and talk about the future of transportation policy and finance. I left with a couple of very strong impressions.

First, it is hard to think of a time when transportation has commanded so much attention on both political and public policy agendas. Almost every state is struggling to find ways to keep its current transportation infrastructure in good working order and to add capacity to keep metropolitan areas from being overwhelmed by congestion and to keep rural areas accessible.

States are doing so in an environment that is increasingly hostile to the idea of raising taxes for transportation. There is little appetite for heaping a new burden on families straining under four-dollar-a-gallon gasoline.

Even before the price at the pumps went into overdrive, poll after poll showed strong opposition to traditional fuel taxes. The Tax Foundation reported that the public today ranks gas taxes as among the least fair way to raise revenue at the federal, state, and local levels. They have even overtaken property taxes as the most despised tax.
That is because Americans are rightfully suspicious that higher taxes will translate into more efficient transportation systems.

Experience strongly suggests otherwise. We are spending almost twice as much on transportation as we did 10 years ago. Yet rush hours are longer; commutes are more unpredictable; and gridlock is spreading.

My father was a Marine Corps gunnery sergeant. One of the pearls of wisdom he used drill into me was, “When you’re in a hole, the first thing you need to do is stop digging.”

Relying on federal gasoline taxes has put just about every state in the country in a pretty deep hole when it comes to transportation – a problem only exacerbated as people change their driving patterns in the face of surging gas prices.

In the short term, people are relying more on transit and driving less – and the Highway Trust Fund is taking a hit. History shows Americans will be back on the road, driving more efficient vehicles, which means gas tax revenues are going to decline even further while congestion continues to grow.

So the last thing we ought to be talking about is increasing reliance on this increasingly unsustainable revenue source.

Fortunately, there are better options. But here in Washington – and even in your state capitols – most people have not yet fully grasped the unprecedented innovation taking place in transportation today.

From my perspective, I see states leading a quiet revolution in transportation financing and the way we build, maintain, and operate our infrastructure. Instead of raising taxes or waiting for the federal ship to bring boatloads of new funding, innovative governors are finding willing partners in the private sector.

Some are leasing existing facilities or “brownfield assets” like the Indiana Toll Road. Governor Daniels’ bold move brought in $3.85 billion to fund the capital projects in the state’s Major Moves program. Moreover, the private concern, Cintra, now has responsibility for upkeep of the 157-mile road, which was in need of costly maintenance and repairs.

In Pennsylvania, Governor Rendell recently received the largest bid for transportation infrastructure development investment in history – a $12.8 billion offer to lease the Pennsylvania Turnpike and invest the proceeds in the state’s transportation system. To put this amount into perspective, the turnpike bid represents over one-fourth of the federal government’s entire annual budget for highway construction.

Others have partnered with the private sector to finance, build, and operate new projects. Governor Kaine’s agreement with Transurban and Flour Enterprises for adding new HOT lanes to the Capital Beltway – one of the most congested highways in the nation – is a good example.

Texas also has been a leader in this area, notwithstanding the legislature’s two-year moratorium on private concessions for toll roads. Political attitudes seem to be lagging behind the public when it comes to tolling. A review of recent public opinion surveys found majority support for tolling and road pricing concepts in 56 percent of the surveys.

When people know how the funds will be used and the tangible benefits they can expect, support is higher still. In King County, Washington, residents favored using electronic tolls over gas taxes to fund replacement of the 520 Floating Bridge by a margin of 78 percent to 17 percent.

More and more Americans are seeing that these direct charges offer a better deal for taxpayers than increasing dependence on unstable sources like federal gasoline taxes.
And combining tolling with today’s powerful technology unlocks enormous new opportunities for communities both to attract new investment capital and to manage congestion through variable prices.

We can take full advantage of technology to help our congested highways operate at peak efficiency.

We can shift from reliance on regressive “flat fee” gas taxes in favor of a more equitable user fee system that charges drivers for when and where they drive.

And we can unleash the greatest new wave of investment in highways and transit this country has ever seen by tapping into the more than $400 billion in private-sector capital available right now for infrastructure.

To be clear, we stand at a crossroads. Either you will be in control of your state’s transportation future, or Washington will. And the direction is going to be decided in the coming debate over SAFETEA-LU’s successor.

Some already are talking about turning back the clock and clamping down on the flexibility states have to use tolling and take advantage of private-sector financing.

You can get caught up in the usual formula fights and feeding frenzies over earmarks, leaving your communities stuck with clogged roads, wasteful spending, and ineffective financing schemes. Or you can let Congress know that these options – and the flexibility to use them – are important to you. Governors need to send this message to Congress, or risk having their hands tied and their options dictated by Washington.

It is no secret that I am a strong believer in moving away from a system in which you need Washington’s permission to improve your highway network or invest in your transit system or determine the appropriate mix.

What I would like to see – and what we will propose for the next surface transportation bill –is a federal program designed to turn up the volume on the quiet revolution that is already taking place in so many states.

It will be a program that removes federal restrictions preventing tolling of Interstates and other major highways, encourages the expanded use of public-private partnerships, broadens the availability of TIFIA and credit assistance and private activity bonds, and allows greater flexibility to create and use state infrastructure banks.

Federal programs should focus on real national transportation interests, rather than trying to be all things to all people. We do not need 108 different programs and thousands of earmarks second-guessing your priorities.

We will propose giving Governors more direct control of federal resources, with flexibility to decide the best way to use them to improve the condition of their Interstates and major highways, relieve congestion, and improve safety.

Much as we did with welfare reform in the 1990s, it is time for transportation reform that encourages innovation, rather than stifling it. We must move the federal focus away from process oversight and instead demand accountability – defining success in terms of increased travel-time reliability, decreased delay hours, and improved condition of bridges and pavement.

America’s transportation system can be better, and my goal is to clear federal obstacles to innovation and investment so you can make that happen.

Thank you again for being here. And now, I would be happy to take your questions.

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