Victor Mendez, Administrator, Federal Highway Administration
Bond Buyer 10th Annual Transportation Finance/P3 Conference
InterContinental Hotel, Dallas Texas
November 4, 2009
Thank you very much. It's a pleasure to be here. I appreciate everyone's flexibility in arranging schedules so I could speak with you. I promise not to delay the reception.
I've spent the last two days meeting with the people who head our FHWA division offices around the country. We got together in Washington for our Fall Business meeting to talk about where things are headed. There's no doubt these are very challenging times.
But Americans never back down from a challenge. We step up.
Which is why this is also a time for hope and a growing sense that we're headed in the right direction.
From Day One, President Obama has focused on getting our economy moving again. Eight-and-a-half months ago, he signed the American Recovery and Reinvestment Act to jump-start our economy, save and create jobs, and put a down payment on preparing our infrastructure for the 21st century.
That program reached a milestone just yesterday when we crossed the $20 billion mark in approved obligations to road, highway and bridge projects. That's 76 percent of the funds we have available under the Recovery Act, and it's been obligated to more than 8,400 projects.
We also saw another landmark event yesterday thanks to Warren Buffett. The transportation industry, and I'm sure the financial world, are still buzzing over the news about Berkshire Hathaway buying Burlington Northern Santa Fe. That's an expensive train set.
When a man like Warren Buffett makes a $34 billion statement like that, it gets your attention. I was really struck when he explained WHY he'd done it.
He called it "a bet on the country," and said it shows his belief that the economy is going to turn around.
With all the challenges we face, especially with people losing their jobs and struggling to get by, it's encouraging to see someone wager so many chips on the future of our economy.
Our highway projects are already starting to pay dividends. I mentioned that we'd obligated money to more than 8,400 projects. The really good news is that almost 4,900 of them are already underway, putting people back to work in towns and cities all across the country.
When you think where we were just over 8 months ago, with ZERO dollars and ZERO projects obligated, that $20 billion figure represents incredible progress.
I've visited some of those projects, from San Francisco to Minneapolis to rural Ohio. Those projects, and others like them, have created 30,000 jobs so far. And that doesn't count the ripple effect as suppliers are hired and paychecks get spent in local stores and businesses.
When I visit a job site, I like to talk to contractors. They tell the human story behind the numbers. Some tell me they were about to lay people off, but thanks to the Recovery Act they've been able to save jobs and create new ones.
Others had already let people go, and were able to call them back. You can only imagine the relief those families felt.
We've also seen tremendous interest in our TIGER grants. We got nearly 1,400 requests. These are longer-term projects, compared to the Recovery Act where there's a more immediate focus on jobs.
So there's plenty to be hopeful about. The President has said that a full, vibrant recovery is still months in the future. But, he also makes it clear that we're moving in the right direction.
TRANSITION/ HEALTH CARE
I've challenged my team to keep working hard to make sure we spend our Recovery Act money wisely and effectively. We're getting our economy back on track, and improving our infrastructure at the same time. But there's another area of the economy that we all need to be concerned about, and that's health care.
Rising health care costs are undermining our businesses, exploding our deficits, and costing our nation more jobs with each passing month.
We know that reforming our health insurance system will be a critical step in rebuilding our economy so that entrepreneurs – and all working families – can pursue the American dream once again.
We need Congress to pass sensible health reform legislation so we can get the economy back on track for everyone.
Let me bring you up to date on 3 very important and inter-related issues.
First, the Highway Trust Fund. The Trust Fund has served us well, but today we're spending more from the Fund than we're taking in. Twice in the last two years, Congress has had to put billions of dollars into the Fund to keep it solvent.
Let me assure you that the Administration and the Department are working closely with Congress to make sure the Trust Fund will not fail.
Second, SAFETEA-LU expired at the end of September. That law gave us the funding and authority to carry out our programs. It needs to be re-authorized. Almost everyone would like to see a long-term bill that allows us to set priorities for the 21st century.
But that kind of work takes and it may not happen as quickly as we'd like.
Secretary LaHood proposed last summer an 18-month extension coupled with sufficient funding. The two houses of Congress are considering extensions of varying lengths.
Finally, here's where we are today. We're currently operating under our second Continuing Resolution. It gives us money to operate and an extension of authority during the life of the CR.
But it's also important that we look beyond this immediate period to the longer-term.
Just like households and businesses all across the country, those of us in transportation have to find a way to close the gap between what we have and what we need.
I think we need to put all options on the table when it comes to funding improvements in our nation's infrastructure. Specifically, we should look to involve the PRIVATE sector, where appropriate, so we can make our scarce PUBLIC resources go further.
About one year ago, the Federal Highway Administration set up the Office of Innovative Program Delivery.
I think of it as a one-stop shop for states looking to explore new funding and financing options, including federally-backed loans, congestion pricing and tolling, and public-private partnerships.
The office has been very active in helping communities get loans through the Transportation Infrastructure Finance and Innovation Act, known as TIFIA.
Tomorrow, you'll hear from Duane Callender, who's the acting head of the TIFIA Joint Program Office. He'll give you an update on the program.
2009 has been a great year for TIFIA, and it's not over yet. So far this year, we've closed four project loans worth $1.8 billion, allowing more than $6.5 billion in infrastructure investment to move forward.
Along with the TIFIA investment, we've seen more than $1 billion of bank loans and the issuance of more than $2 billion of bonds.
These projects represent critical transportation solutions in the states where they're being implemented. And, they've put people to work!
The projects in the 2009 TIFIA portfolio show some new ways of doing business. Our two Florida deals, the express lanes on I-595 and the Port of Miami Tunnel, both use an availability payment model as the basis for their public-private partnership agreements.
In both cases, the private partner will finance, build, operate and maintain the project, and Florida will pay them based on successful delivery and operation.
On I-595, where tolls will be collected, Florida will set the rates and collect the fares, and assume the traffic risk.
P-3s based on availability payments offer transportation agencies a new tool to manage development risk, contain costs and leverage limited resources. I think we'll see more of these arrangements in the future.
Right now we're busy working to close two TIFIA loans here in the Dallas-Fort Worth Metroplex: I-635 and North Tarrant Expressway. These two projects represent almost $5 billion in transportation investment. And I-635 looks like it will feature the second-ever issuance of private activity bonds for highways, under the program authorized in SAFETEA-LU.
I understand some of you had the chance this afternoon to tour the area and learn about TxDOT's funding strategies for these managed-lane projects. Through partnering with the private sector, TxDOT will deliver both these massive and complex projects in one of the fastest growing areas in the country.
There's another TIFIA loan I'm particularly excited about that's scheduled to close later this year, and that's the TRANSBAY Terminal in San Francisco.
It's no secret that Secretary LaHood has made livability a focus for the Department. He wants to see us coordinate our investments in transit, housing, and commercial development.
The TRANSBAY financing shows a likely way forward. It's an example of tax increment financing and the broader concept of value capture.
Like highways, transit investments spur development. But finding project revenues to repay a transit loan is rarely as direct as charging a driver a toll. Tapping into the land owners who benefit from the new improvement makes sense to me. I think it's a great example of what Secretary LaHood would call "out of the box" thinking.
We want to participate in more value capture deals – the next times with co-investors from the debt and equity markets.
Let me use those examples to make a few points.
First, as you know, states need the authority to enter into partnerships with the private sector. More than half currently have it. When I was the head of A-DOT we didn't have P-3 authority, although it's been approved by the legislature since then.
Our Innovative Program Delivery office can help states that want to go in that direction.
Second, we put a premium on projects that meet the larger goals Secretary LaHood has set for the Department. Do they make communities more livable? Do they make our economy more competitive?
Third, it's our job at the Federal Highway Administration to always keep the public interest at the top of the agenda.
The financial benefits to the private sector partner must be appropriate to the risk they're assuming and the benefits they're creating.
And we absolutely have to be sure the public gets real value from the project and that people who have limited travel options are not disadvantaged.
And there's one other important thing to keep in mind. While I believe P-3s will be a significant option in the future, they're not a magic bullet that will solve all our funding challenges. Yes, they'll play a key role on certain types of projects. But, no, they shouldn't distract us from addressing the larger issues of funding priorities and revenue sources.
When resources are tight, we have to be smart about how we spend. It's not enough to do things right. We also need to do the right things. That's why we're keeping our attention focused on livability and safety.
Without a doubt, safety is the Number One priority of everyone at the Department. Last year, the number of traffic deaths in this country reached the lowest level in more than 45 years. But as encouraging as that is, we can't be satisfied.
The Secretary's recent summit on Distracted Driving focused on behavior behind the wheel, and the growing epidemic of people driving while texting or dialing their phone.
President Obama took an important step when he banned texting by federal employees while they drive on official business. I hope the government and business leaders here this evening will consider taking a similar step with their own employees.
In the years ahead, transportation is going to help transform this country into a more mobile, more competitive, greener and safer nation.
Warren Buffett thinks we're headed for a better future. So do I. And I think public-private partnerships will be an important tool in getting us there.
Let me close with a message that we can all support. Let's do everything possible to keep the men and women who build our roads and highways safe. And let's encourage the traveling public to buckle their seat belts, put down those cellphones and Blackberries, and drive carefully.
Thank you very much.