Federal Highway Administrator Mary Peters
Excerpts from remarks as prepared for delivery
Canal Road Intermodal Connector Meeting
Tuesday, October 21, 2003, Gulfport, Mississippi

AN IMPORTANT PROJECT

Congratulations for bringing all the stakeholders together.

This is an important project.

• A much needed connection between Interstate 10 and the Port of Gulfport
  
  
• Project qualifies for regular federal aid, but it is an expensive one for MDOT to undertake.

There are a variety of people and programs that can help you get the resources you need. As you go through the process, our Mississippi Division office is one of them. Andrew Hughes, the division administrator, and Jeff Kolb, assistant division administrator, are here today. Suzanne Sale, senior financial advisor in our TIFIA Joint Program Office, and Jim Hatter, innovative finance specialist at our Resource Center in Atlanta, will discuss financing techniques a little later this morning.

PARTNERSHIPS ARE CRUCIAL

Federal, state, and local leaders must work together to get Canal Road and other projects funded and built. Partnerships are crucial.

Environmental approvals were completed in April.

• I'm told that took more than four years

Important to advance this project now, not years from now.

• Pressing need to secure right-of-way

Intermodal corridors are the key to future mobility.

• Need every mode, working together
  
  
Freight is heartbeat of our economy, can't let bottlenecks persist


• Sometimes you do need concrete, asphalt, and steel.

DESIGN-BUILD

I'm here to help you find the resources you need.

Over the past several years, we have been working with our public and private partners to explore and implement an array of innovative techniques and tools to finance surface transportation improvements. These tools include several leveraging mechanisms such as the TIFIA credit program and GARVEE bonds.

We now have a track record of successful application of these financing approaches that we will share with you. Over $26 billion in projects has been advanced to date using federal financing tools. SAFETEA, our bill to reauthorize TEA-21, builds on these successes.

Federal Highways believes that design-build will be one of the key components in a contracting agency's toolkit to speed the delivery of critical projects. By enabling us to start and to complete more transportation projects sooner, design-build contracting can save time and money for everyone involved -- taxpayers, industry, and all levels of government.

• Design-build assigns both design and construction responsibilities to one firm, allowing some construction work to begin before the design is completed.
  
  
• This often reduces a highway agency's administration and inspection costs and can reduce or eliminate change orders and claims.

Design-build gives contractors increased flexibility in selecting innovative designs, materials, and construction techniques. As required by the Transportation Equity Act for the 21st Century (TEA-21), we published a final rule for design-build last December. We believe that this policy is a strong incentive for state DOTs to consider the use of this project delivery technique. In addition to the traditional design-bid-build, contracting agencies can now use design-build as a regular project delivery system for Federal-aid projects.

As the former Director of Arizona DOT, I recognize the value of design- build to reduce the overall time it takes to deliver transportation projects.

• ADOT used design-build on several large reconstruction projects including Interstate 17 and State Route 68.
  
  
• The $80 million I-17 project involved widening a seven-mile section of freeway, reconstructing 24 ramps and two traffic interchanges, and 14 miles of frontage road.
  
  
• On State Route 68, 14 miles of roadways were reconstructed and new bridges and wildlife crossings were added.

The use of design-build provided Arizona DOT with both time and money savings and, just as important, the impact on travelers was greatly reduced.

Using design-build, the Utah Department of Transportation completed its $1.35 billion reconstruction of Interstate 15 under budget and three months ahead of schedule. The project was completed in 4 1/2 years . . . in time for the 2002 Winter Olympics.

Traditional contracting methods would have taken four years longer.

• Other agencies such as Florida DOT, are starting to rely on design-build to deliver an increasing share of their transportation program.
  
  
• Last year, Florida DOT awarded 49 design-build contracts worth approximately $500 million. Florida estimates design- build cuts about 30 percent off the time needed to deliver a project.

While we are still evaluating the lessons learned from the use of design-build, we are more than hopeful that it will be one of the most used "tools in the toolbox" in delivering needed transportation improvements for the American public.

PUBLIC PRIVATE PARTNERSHIPS

The Bush Administration, U.S. DOT Secretary Norman Mineta and FHWA support public-private partnerships.

• We want to make them easier -- much easier -- to do.

Resources, both public and private, are limited.

• We need to make the best use of our resources.

Public Private Partnerships apply to more than major construction projects involving tolls.

They also apply to operations, maintenance, and asset management.

In addition to supplementing public funding sources, other benefits of PPPs may include improved:

• Flexibility — Privatizing the design and construction of new roads, buildings and large projects allows the formation of a workforce tailored to the needs of the project, at each stage of the project.
  
  
• Speed — Privatized construction can be done on time and within budgets.
  
  
• Access to Expertise — People with the most experience and highest technical skills are better compensated in the private sector.
  
  
• Companies can provide career ladders for experts.
  
  
• When governments need specialized help, some options are only available through private contracting.

• Innovation — Competing private firms have greater freedom to innovate and more incentive to do so.
  
  
• Efficiency — A recent report notes that maintenance costs were reduced 15-20 percent under long-term asset management contracts.

SUCCESS STORIES

• The Route 895 Connector project -- the first capital project under the Virginia Public-Private Transportation Act of 1995. This legislation allows for innovative financing, including tax-free bond financing of projects on which private developers and the state collaborate.
  
  
• $1.2 billion International Arrivals Terminal building and associated facilities at J.F. Kennedy Airport. The project, opened in May, 2001, consists of a new 140,000-square-meter, three-level terminal plus ramps, roads, parking areas, and provisions for future light-rail transit system. This project represents one of the largest public-private joint ventures to be undertaken in the United States.
  
  
  • There are many examples of transit-oriented development around the country that provide both public and private benefits.
    
    
• Alameda Corridor rail partnership to ease movement of freight out of the ports of LA/Long Beach
  
  
• The 2003 Oregon Legislature passed the Oregon Innovative Partnerships Program within the Oregon Department of Transportation.
  
  
  • ODOT has broad authority to enter into contractual relationships in the form of partnerships with private sector firms and units of government.
    
    
  • This legislation removes barriers to formation of public-private partnerships for Oregon transportation projects and provides numerous tools to encourage partnership formation.
    
    
• At the recent AASHTO national meeting there was a session on innovative financing and tolling with states discussing what has and hasn't worked.

Despite notable successes in such projects as the Alameda Corridor and the groundbreaking of SR 125S near San Diego . . . public private partnerships are still viewed by many in transportation as unique and fraught with legal, financial, and administrative hurdles.

Abundant experience in the use of PPPs in other areas, and the growing experience in transportation illustrate that these hurdles can be overcome.

• We can lower costs and speed project completion.

In a time of funding shortages at all levels of government, it is particularly important that we look to opportunities for the private sector to participate in funding transportation infrastructure improvements.

SAFETEA & INNOVATIVE FINANCE

• Secretary Mineta, on behalf of President Bush, submitted SAFETEA to Congress in May.
  
  
  • Largest investment in history in our nation's surface transportation infrastructure
    
    
  • 19 percent increase in funding over TEA 21, without resorting to a fuel tax hike or taking general funds.
    
    
• Gives states more flexibility.
  
  
• Expedites needed highway improvements.
  
  
• The Bush Administration is strongly committed to a six-year bill, without new gasoline taxes.
  
  
  • Lack of certainty that reauthorization would provide limits the ability of our state and local partners to plan and coordinate transportation investments.
    
    
• Congress has yet to break from the starting gate on legislation.
  
  
• A temporary extension has been enacted through February 29.
  
  
• Congress MUST use this time to complete its work on the full reauthorization.
  
  
• We are working with the Congress to get the job done.
  
  
• It is critical that a full, six-year bill be completed – sooner, rather than later.

SAFETEA has several sections on innovative finance.

• We hope there will be additional funding for innovative finance in any reauthorized bill.

• Private activity bonds -- The purpose of this proposal is to encourage additional private participation on surface transportation infrastructure projects.
  
  
  • SAFETEA expands the types of projects eligible for exempt facility bonds and excludes certain facilities from volume caps. This allows additional private activity on the projects while maintaining the tax-exempt status of the bonds.
    
    
  • Exclusion from the volume cap is necessary to allow surface transportation infrastructure projects to be advanced without displacing other types of projects eligible for exempt facility bonds.
    
    
• State Infrastructure Banks — SAFETEA continues the State Infrastructure Bank (SIB) pilot program for transportation infrastructure projects.
  
  
  • SIBs are intended to complement the traditional Federal-aid highway and transit programs by supporting certain projects that can be financed in whole or in part with loans, or that can benefit from the provision of credit enhancements.
    
    
• TIFIA -- This program provides secured loans, loan guarantees, and lines of credit from the federal government for surface transportation infrastructure projects of national or regional significance.
  
  
• There is no better example of innovative government thinking than TIFIA, the Transportation Infrastructure Finance and Innovation Act of 1998, inspired by the federal experience in helping to finance the San Joaquin Hills and Foothill/Eastern toll roads in Orange County and the Alameda Corridor in Los Angeles.
  
  
• SAFETEA makes TIFIA financing accessible to more highway, transit and rail projects by lowering the eligibility threshold to $50 million.
  
  
• These projects can include intermodal facilities, border crossing infrastructure, expansion of multi-state highway trade corridors, and other investments with regional and national benefits.
  
  
• The program leverages federal funds by requiring private sector participation in project financing. A total of $780 million of contract authority over six years is provided to pay the estimated cost to the federal government of providing credit assistance under TIFIA.
  
  
• The contract authority can support annual credit assistance of up to $2.6 billion. Repayment of the Federal credit instruments is required to come from tolls, user fees, or other dedicated revenue sources.

The SR125 South project is another TIFIA success story that shows how innovative public investment can attract significant private investment.

• SR 125 South is a privately developed, 9.2-mile toll road advanced under California's pioneering AB 680 toll road demonstration program, enacted in 1989.
  
  
• The TIFIA credit program will fund 22 percent of project construction, with the remaining costs funded by private bank loans (51 percent), private equity (19 percent), and donated right-of-way (8 percent). This is the first TIFIA project with private bank debt and substantial private sector equity.
  

• Tolling — SAFETEA would modify tolling provisions for Federal-aid highways.
  
  
  • The Interstate System Rehabilitation and Reconstruction Pilot Program, established under TEA-21 to permit selected states to collect tolls on the Interstate for the purpose of reconstructing and rehabilitating Interstate highway corridors, is modified to ease the eligibility requirement for participation in the pilot program.
    
    
  • No longer would tolling have to be the only way to advance the project — it could be the most efficient and economical solution.
    
    
  • The Variable Toll Pricing program, for alleviating congestion and reducing emissions, mainstreams the value-pricing concept initiated in a pilot program under ISTEA and TEA-21.
    
    
• Privatization of rest areas -- Permits rest areas in the pilot projects to include commercial operations that provide goods, services, and information benefiting the traveling public and commercial motor carriers.

HIGHWAYS FOR LIFE

That principle of flexibility to address local problems with local solutions led us to create a new initiative to Congress called Highways for LIFE. L-I-F-E stands for Long Lasting, Innovative, Fast Construction, Efficient and Safe.

Highways for LIFE is an effort to fundamentally change the way we do business and serve our customers. We propose to dedicate a portion of our overall federal surface transportation program to motivate states to embrace innovation and creativity. Simply stated, we want to work with you and the entire transportation community -- again in partnership -- to build highways faster, make them last longer, and make them safer. We've all seen examples of excellence -- things being done faster, things being done better. Why can't we do that all the time, everywhere?

This important new initiative will be formally proposed to Congress soon. We feel that we can make it a reality only through a strong partnership with you, and the highway industry, to fully shape the proposal.

CLOSE

Our transportation system is indispensable to our quality of life and to our economy. There are tremendous benefits from getting projects completed quickly, once they have all the necessary approvals.

We are doing all we can to encourage innovative financing and we want to remove constraints that hinder projects. I urge you to decide on a direction and get the Canal Road Intermodal Connector moving forward.