Thank you Chairman Warner, banking Senator Baucus, and members of the Subcommittee on Transportation and Infrastructure for inviting me to testify on the subject of innovative financing for national transportation projects in the reauthorization of the Intermodal Surface Transportation Efficiency Act. I commend this Subcommittee for recognizing the importance of creating public-private partnerships to attract investments by state, local and private interests in our nation's infrastructure.
America's economic future depends on our ability to find creative approaches to paying for our nation's infrastructure. We know that no local, state or federal government - - or even a combination of the three -- can afford to provide the funding needed to meet all of our current and future infrastructure needs. In fact, after these traditional sources of funds are released, our nation still faces an annual $30 billion to $80 billion funding shortfall to meet our infrastructure needs.
At the same time, we all recognize that we must increase our investment in our nation's schools, roads, mass transit, airports, ports, water and wastewater systems and other infrastructure facilities. Only then can businesses perform at full capacity and successfully compete in the global market.
Innovative financing can make it possible for our nation to afford the modern infrastructure it needs to be globally competitive. At the same time, it can create hundreds of thousands of new jobs. Innovative financing means more projects will be built with less of the American taxpayers' money. In many cases, one dollar of federal investment has the potential to provide a return of ten dollars or more from other public or private investment sources.
Other countries have already begun to use innovative financing mechanisms to solve their own infrastructure funding shortfalls. Already, ten percent of infrastructure in Asia is privately owned. By the year 2000, as much as thirty percent may be financed in this way.
In the United States, public-private partnerships are still in the earliest stages of development. We all have much work to do in educating our colleagues and the American public about how these partnerships can make better use of our nation's limited resources. We can not afford to fall behind in building the best, most economically productive infrastructure possible.
I would like to take the next few minutes to explain two of my bills which would create these lucrative public-private partnerships and could be included in the ISTEA reauthorization. These bills are called the "National Infrastructure Development Act" and the "State Infrastructure Bank Expansion Act."
The National Infrastructure Development Act creates a quasi- governmental corporation to invest in and insure infrastructure projects in order to reduce public and private investment risk. disk reduction is the key to attracting investments in infrastructure from non-traditional sources.
As projects begin to produce revenue through tolls, user fees, taxes, or other means, the corporation would be repaid with interest. Eventually, it would become a self-sustaining, privately controlled corporate financing mechanism much like the recently privatized US Enrichment Corporation. Over time, the taxpayers' initial $3 billion investment into the Corporation would be repaid. With this relatively small federal investment, the tools created by the National Infrastructure Development Act would not only significantly improve our nation's infrastructure, but also create 250,000 to 500,000 new jobs.
In the US, there are few opportunities for pension funds and other private entities to invest in infrastructure projects, and these important US funds are currently being invested overseas in markets such as Asia. My bill would enable public and private investors to invest in the building of schools, roads and airports here at home. The bill would authorize public and private infrastructure developers to offer bonds to pension funds for infrastructure development in the US. These bonds, called Public Benefit Bonds, would be attractive investments for pension funds because the bonds enable them to pass on tax benefits to their pensioners. These bonds would be revenue neutral, and studies show that they are actually likely to be revenue positive. Thus, the legislation would enable the pension community and other institutional investors to invest a portion of their $4.5 trillion assets in infrastructure projects at home.
The National Infrastructure Development Act is a "good government" bill that benefits every American.
-- American workers benefit through good jobs. Under my bill, every dollar in federal investment will result in ten dollars of construction. If we invest a billion federal dollars it will create 250,000 to 500,000 new jobs.
-- American businesses benefit from improved infrastructure. Businesses depend on airports, roads, wastewater treatment facilities, and clean-water projects. Stronger infrastructure will aid economic expansion.
-- American taxpayers benefit from better modes of transportation for fewer tax dollars, and better environmental quality.
-- Pension investors benefit because they can look for investment opportunities in the United States instead of overseas.
I am pleased that the Clinton Administration, through the U.S. Department of Transportation, has seen merit in innovative financing mechanisms, and I look forward to learning more about their proposals to advance these new tools.
My second piece of legislation would strengthen and expand the State Infrastructure Banks that were created through the 1991 ISTEA legislation. I am an ardent supporter of these state banks, which carry out functions similar to the National Infrastructure Corporation, but on a much smaller scale. However, unlike the national corporation which reduces the risk of investing in infrastructure, the primary function of the SIBs is to reduce the cost of these investments. I believe the SIBs can be strengthened in two ways: they need to be able to finance projects other than highway and mass transit projects such as schools, water and wastewater projects and airports; and, they need additional capital in order to reduce the risk of infrastructure investments.
I believe the SIBs have the potential to achieve many of the same results as a national financing corporation. For this reason, I introduced the State Infrastructure Bank Expansion Act to improve the effectiveness of the SIBs. This legislation is simply an inter-departmental study to determine if the SIBs can be used to finance projects outside the realm of transportation, and to investigate sources of capital to make the SIBs a more efficient financing tool. The study would be done in consultation with an industry advisory panel.
I urge this subcommittee to consider the financing tools created by the National Infrastructure Development Act and the State Infrastructure Bank Expansion Act. The American people are ready, willing and able to tackle the big challenges facing our country. I believe these bills are an important part of making that possible.
Thank you again for inviting me here to testify before you this morning.