Jack Schenendorf

Of Counsel, Covington & Burling LLP

Vice Chair, NSTPRSC

Statutory Mandate

• Study current condition and future needs

– Federal-aid Highways and Bridges

– Transit

– Intercity Freight Rail

– Intercity Passenger Rail

• Federal, state, local, private sector roles

• Policy

• Financing

• 15-, 30-, and 50-year time horizons

• Report to Congress by January 1,20082

Field Hearings

• September 20-21, 2006 Dallas, TX

• October 27, 2006 Portland, OR

• November 15–16, 2006 New York, NYMemphis, TN

• February 21–22, 2007 Los Angeles, CAAtlanta, GA

• March 19, 2007 Washington, DC

• April 18–19, 2007 Chicago, ILMinneapolis, MN

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CommissionersMary Peters Secretary of Transportation — Chairperson

Jack Schenendorf Of Counsel, Covington & Burling LLP—Vice Chair

Frank Busalacchi Wisconsin Secretary of Transportation

Maria Cino Deputy Secretary of Transportation

Rick Geddes Director of Undergraduate Studies, Cornell University

Steve Heminger Executive Director, Metropolitan Transportation

Commission

Frank McArdle General Contractors Association of New York

Steve Odland Chairman and CEO, Office Depot

Patrick Quinn Chairman, American Trucking Association

Matt Rose CEO, Burlington Northern Santa Fe Railroad

Tom Skancke CEO, The Skancke Company

Paul Weyrich Chairman and CEO, Free Congress Foundation

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What’s Broken?

National Network Is At A Crossroads

• Aging System

• Inadequate Capacity

• Safety

• Global Competitiveness

• National Security/Defense

• Energy Security

• Climate Change

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Freight Transportation at the crossroads…

2020 Growth Projections

Population 338 million, 0.87% CAGR

Vehicle miles traveled 4.09 trillion, 8.13% CAGR

Rail gross ton miles 1.82 trillion, 1.94% CAGR

Truck ton miles 4.17 trillion, 1.96% CAGR

Port volume 58 million TEUs, 5.4% CAGR

Source: Global Insights, AASHTO, FHWA

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Transportation growth and capacity: The past 25 years (1980-2005)

Route Miles Growth

Rail -39% 65%GTM

Highway +7% 96% VMTs

Ports N/A 400% TEUs

9Source: Annual State of Logistics Report, Council of Supply Chain Management Professionals

Total Logistics Costs

Transportation Costs

Inventory /Admin. Costs

U.S. Logistics Costs as a Percent of GDP

Rail = 6.7% of U.S. Transportation Spend

What is the cost to the supply chain?

Federal Program Is Broken

• Loss of Mission/Focus– Donor/Donee– Earmarks

• Lack of Accountability

• Criticism– Pork– Bridge to Nowhere– Administration

• Project Delivery

Federal Financing Broken

• Inadequate Investment

• Loss of Purchasing Power

• Highway Trust Fund In Trouble

• Political Difficulty of Raising Gas Tax

• Long-Term Viability of Gas Tax

But Is It A Crisis?

Our Vision

• State of Good Repair

• Major Upgrading of Our Transportation Network– Intercity Freight Rail– Intercity Passenger Rail– Mass Transit– Non-Motorized Systems– Highways – Congestion Pricing

• Many Fewer Fatalities

• Less Reliance on Foreign Oil/Fossil Fuels

What Will It Cost To Address This Crisis?

$220 to $340 Billion Annually

Current: $87 Billion Annually

Cost of Doing Nothing Is Far Higher

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Recommendations

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No Easy Answers

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Major Recommendations

• A Bold National Initiative

• Federal Government A Full Partner

• Reform

• Increased Investment

Reform

• Major Program Reform

– Restore vision/sense of purpose

– Replace existing programs with 10 performance-driven, outcome-based, modally-neutral programs

– NASTRAC

• Fix Project Delivery

Reform (cont’d)

• Bring our existing surface transportation systems into a state-of-good-repair.

• Reduce fatalities by 50 percent by 2025

• Reduce congestion in major metropolitan areas by 20 percent by 2025

• Provide for smooth flow of freight to improve international competitiveness

• Provide access and mobility for rural areas and smaller cities

• Provide world-class intercity passenger rail in dense corridors (300-500 miles)

Reform (cont’d)

• Set Standards/Metrics

• Develop Plans

• Develop Cost Estimates

• Fund on Cost-to-Complete Basis

Financing

2323

2424

2525

Financing

• General Principles

– User Fee Financing

– No Diversion

– Pay-As-You-Go

– Protect Funding Guarantees

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How Will We Pay For It?

• Federal– Motor Fuels Tax

• 5 to 8 cents per year for five years• Indexed to inflation

– Freight Fee • E.g., Container fee, bill of lading tax

– Customs Fees (portion)– Ticket Tax on Transit and Intercity Passenger Rail– Cap-and-Trade Revenue (transportation-related)– Investment Tax Credit

– VMT (privacy, evasion, cost of collection must be addressed)

• State/Local– Tolling New Capacity on Interstate– Congestion Pricing on Existing Interstate– Private Tolling/Congestion Pricing

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“Our unity as a nation is sustained by free

communication of thought and by easy

transportation of people and goods...

Together the unifying forces of our

communication and transportation systems

are dynamic elements in the very name we

bear — United States. Without them, we

would be a mere alliance of many separate

parts.”

— Dwight D. Eisenhower, 1955

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Past Generations Gave Us The Preeminent Surface Transportation System In The World

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For More Information:

www.transportationfortomorrow.org

For More Information:

www.transportationfortomorrow.org2929