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Hearing Report

From: Squire Patton Boggs (US) LLP

Date: July 17, 2019

Subject: House Committee on Transportation and Infrastructure, Highways and Transit

Subcommittee Hearing -“Oversight of the Federal Transit Administration’s
Implementation of the Capital Investment Grant Program”

On Tuesday, July 16, the House Transportation and Infrastructure Committee’s Highways and Transit
Subcommittee held a hearing titled “Oversight of the Federal Transit Administration’s Implementation of
the Capital Investment Grant Program.” The purpose of the hearing was to discuss the Administration’s
implementation of the Capital Investment Grant (CIG) program, although Chair Eleanor Holmes Norton
and Ranking Member Rodney Davis also spent time discussing the Highway Trust Fund (HTF) and its
insolvency. Broadly, members focused on (i) delays in CIG project approvals; (ii) CIG project costs and
federal share; (iii) regulatory burdens; and (iv) rural concerns.

Witnesses:

Panel I:
 The Honorable K. Jane Williams, Acting Administrator, Federal Transit Administration

Panel II:

 Mr. Bob Alger, President and Chief Executive Officer, The Lane Construction Corporation, on
behalf of the American Road & Transportation Builders Association
 Mr. Tom Gerend, Executive Director, The Kansas City Streetcar Authority
 Mr. Paul P. Skoutelas, President and CEO, American Public Transportation Association

I. Member Opening Statements

Chair Eleanor Holmes Norton (D-DC) opened the hearing by noting the frustration of stakeholders with
the delays in projects advancing through the multi-year approval and funding milestones of the CIG
program. She explained that the CIG program has enjoyed bipartisan support from both the
Transportation and Infrastructure Committee and the House Appropriations Committee. Chair Norton
cited a 2018 Federal Transit Administration (FTA) “Dear Colleague” letter making changes in how the
agency implements the CIG program as a source of confusion and fear for transit agencies, and asked
whether the current concerns with the CIG program were due to deliberate slowdowns or “rank
inefficiency.”

Ranking Member Rodney Davis (R-IL) expressed concern about balancing urban interests with non-
urban interests when FTA makes public transportation grant decisions. In his prepared remarks, he

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expressed support for Acting Administrator Williams and the work she is doing to ensure FTA executes
the CIG program consistent with federal law, but noted that he looked forward to discussing possible
concerns other stakeholders may have with FTA changes under Ms. Williams’ leadership.

Full Committee Chairman Peter DeFazio (D-OR) stated that President Trump’s budget requests in
2018 and 2019 “slashed” infrastructure investment by eliminating new transit investments under the CIG
program. Chairman DeFazio announced the release of an analysis (attached) of the CIG program,
conducted in conjunction with Ranking Member Graves. According to the Chairman, the analysis found
(1) the number of days needed for project approval doubled under President Trump; (2) FTA actions since
2017 have resulted in $845 million in extra costs for transit agencies; (3) CIG cost share for New Starts
projects dramatically declined; and (4) FTA delayed the use of streamlining tools for CIG transit projects.
Chairman DeFazio closed by urging FTA, the U.S. Department of Transportation (DOT), and the White
House to “drop their hostility towards transit and follow the law.”

II. Witness Testimony

Panel I

Acting Administrator Jane Williams explained that FTA is working, consistent with the law, to
implement Secretary Chao’s three main priorities: safety, innovation, and infrastructure investment. She
noted that during her tenure, all 31 state safety oversight programs have been certified. Acting
Administrator Williams stated that the CIG program plays a “significant role” in modernizing and
expanding public transportation, adding that under Secretary Chao, FTA has advanced 25 projects
totaling $7.6 billion in funding. She noted that the FY2020 budget request includes $1.5 billion in
funding, including $500 million for new CIG projects. Acting Administrator Williams explained that CIG
projects are often delayed by local challenges, which impact the timing of FTA’s construction grant
awards.

Panel II

Mr. Bob Alger emphasized the need to fix the Highway Trust Fund, explaining that Congress’s “chronic
failure” to fix it threatens all federal surface transportation programs. He recommended that Congress
(1) raise the gas tax; (2) apply a freight-based user fee to heavy trucks; and (3) institute an electric vehicle
user fee. He advocated for federal loan programs to be counted as a local share of project costs. Mr. Alger
encouraged the use of dispute resolution boards as part of a contracting strategy.

Mr. Tom Gerend explained how $100 million in transportation investment has led to $3 billion in
economic activity in Kansas City, Missouri. He emphasized the importance of an adequately funded CIG
program and strong regional FTA support. Mr. Gerend stated his support for process streamlining, and the
reevaluation of CIG project thresholds and categories and costly project due-diligence requirements.

Mr. Paul Skoutelas noted the importance of CIG grants. He stated that the federal law, regulations, and
administrative guidance are burdensome for CIG project sponsors and affect local decision-making. Mr.
Skoutelas urged Congress to provide funding at or above enacted FY 2019 levels, as well as to reverse the
FTA’s “Dear Colleague” guidance letter. He also urged Congress to conduct a zero-based review of the
CIG program to assess all statutory, regulatory, and administrative requirements. He recommended that
Congress: (1) establish a CIG pipeline dashboard for FTA to report on progress; (2) codify a fixed federal
share to provide certainty for project sponsors; (3) clarify that Transportation Infrastructure Finance and
Innovation Act (TIFIA) loans constitute a local match; and (4) reverse the 2018 risk assessment changes.

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III. Question and Answer

i. Project Delays

Chair Holmes Norton stated that Acting Administrator Williams did not offer an example of a delay by
DOT, but rather placed the blame for project delays at the local level. Chair Holmes Norton noted that
DOT data shows that project approval times during Acting Administrator Williams’ tenure have doubled,
and Chair Holmes Norton questioned why the delays should be considered the fault of local agencies.
Acting Administrator Williams stated that FTA has completed more construction grant agreements worth
more money in the first two years of the Trump Administration than FTA completed during the first two
years of the Obama Administration.

Ranking Member Davis asked what Congressional actions are delaying projects. Acting Administrator
Williams noted that CIG agreements encompass billions of dollars, and streamlining of federal approvals
involving such large sums of taxpayer funding must be done correctly. She stated her willingness to work
with the Committee during the Fixing America’s Surface Transportation (FAST) Act reauthorization to
identify additional ways to streamline CIG approvals.

Rep. Alan Lowenthal (D-CA) asked about the impact of delays on project costs. Acting Administrator
Williams stated that FTA is not tracking this information, but is working hard to prevent delays.

ii. Project Costs and Funding

Chairman DeFazio stated his belief that White House Acting Chief of Staff Mick Mulvaney and his
“henchperson over at OMB” are hostile to transit. He asked about the origin of the changes in the risk
assessment process, noting that these changes result in additional costs. Chairman DeFazio explained that
transit agencies are reporting an unwillingness on the part of FTA to approve projects above 40 percent
federal share, and stated that to set such a threshold is more rigorous than what the law demands. Acting
Administrator Williams explained that the risk assessment process is an internal tool that does not add
cost to projects. After much back and forth with the Chairman, she agreed to look at projects over 40
percent up to the statutory cap.

In response to Rep. Rob Woodall’s (R-GA) question about FTA awarding grants comprising a smaller
share of overall project costs and deficit reduction, Acting Administrator Williams explained that any
savings from the increased risk assessment process are being reinvested in the CIG program to help fund
additional projects.

Rep. Malinowski (D-NJ) noted that FTA requires that all non-federal funds be committed to a project
before the agency will award a CIG grant; he then asked the Acting Administrator to define “committed
funding from a local partner.” Acting Administrator Williams explained that for funds to be considered
committed, no further action need be taken to access that funding.

Rep. Adriano Espaillat (D-NY) expressed concern with FTA’s increase in the required project cost
certainty from 50 percent to 65 percent. Acting Administrator Williams stated the increase in cost
certainty does not increase the cost of the project, but rather increases the probability that the project cost
will be correct.

Rep. Troy Balderson (R-OH) asked why DOT should encourage leveraging of local, state and private
contributions. Acting Administrator Williams noted that projects with state and local support have a
greater chance of success.

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 iii. Regulatory Burdens

Rep. Henry Johnson Jr. (D-GA) asked about rollbacks of the environmental review process for federal
infrastructure projects by the Trump Administration. Acting Administrator Williams stated that the CIG
program closely follows NEPA, and carefully considers environmental benefits in project justifications.

Rep. Angie Craig (D-MN) asked how FTA can ensure the application approval and grant making process
is simple and efficient for state and local partners. Acting Administrator Williams praised FTA staff and
noted that they help ensure grantees understand what is expected and needed. Rep. Brian Babin (R-TX)
asked how the Committee can help expedite CIG grant approval. Acting Administrator Williams
acknowledged concern with the geographic diversity criterion FTA considers in making CIG grant
decisions, but she noted that geographic diversity serves as a consideration rather than a barrier.

Rep. Carol Miller (R-WV) asked about project streamlining. Acting Administrator Williams explained
that streamlining is difficult due to the legal requirements of the program, and noted that FTA is working
to strike a balance.

Chair Holmes Norton asked about any regulatory requirements necessary to change the CIG risk
assessment or the TIFIA consideration. Mr. Skoutelas stated that there are none, and suggested that a
consultation by industry members would be appropriate. Chair Holmes Norton asked about the extensive
regulatory and administrative requirements of the CIG program. Mr. Skoutelas explained that the
“daunting” CIG requirements may keep localities from applying for CIG grants. Mr. Gerend stated that
the rigor of the CIG program is unlike any other federal transportation grant program, and he called these
requirements an impediment to progress.

iv. Rural Concerns

Ranking Member Davis asked how rural areas can take advantage of the CIG program. Acting
Administrator Williams explained that the program does not easily allow for rural projects to compete and
meet the legal requirements, but expressed her willingness to make the CIG program more amenable to
smaller rural areas.

In response to Rep. Doug LaMalfa’s (R-CA) question about incorporating mobility on demand projects
in rural areas into the CIG program, Acting Administrator Williams expressed a willingness to include
more rural-focused projects. Rep. Miller asked about public transportation modernization and the
expansion of service to rural communities. Acting Administrator Williams emphasized FTA’s work with
mobility on demand and paratransit services. She also explained developments in microtransit and first-
mile-last-mile partnerships.

v. Highway Trust Fund

Ranking Member Davis expressed concern about the FAST Act reauthorization, particularly for
Highway Trust Fund solvency. Mr. Alger noted that all transportation is interrelated, and explained that
without transit, roads will undergo additional wear and tear and congestion. Mr. Alger recommended
raising the gas tax. Chair Holmes Norton drew attention to the bipartisan desire to address the HTF’s
chronic funding shortfall. Ranking Member Davis asked how electric vehicles can contribute to the
HTF. Mr. Alger recommended an electric vehicle tax.

Ranking Member Davis emphasized the need to diversify revenue sources for the HTF. Mr. Alger
suggested alternatives to the motor fuels tax that would grow the sources of revenues. He noted that a

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similar concept to the air cargo tax could be imposed on surface transportation infrastructure. Rep.
Woodall expressed interest in finding a permanent funding stream for mass transit generally.

vi. Other Subjects Discussed

Chair Holmes asked why the Administration is proposing cuts to the CIG program when demand and
need is increasing. Acting Administrator Williams explained that predicted need determines funding level
requests. Rep. Salud Carbajal (D-CA) asked how the Administration determined the FY2020 budget
request amounts. Acting Administrator Williams explained that a technical team determines what projects
may be ready for funding in FY2020.

Rep. John Katko (R-NY) expressed concern about cybersecurity and the purchase of Chinese-made
subway systems. Acting Administrator Williams explained that FTA has no direct authority to require
transit agencies to buy from certain manufacturers. She noted that pending legislation exists to prevent the
purchase of Chinese railcars, and stated that the agency would be in support of that.

Rep. Miller asked about new technologies included in the integrated mobility innovation discretionary
grant program. Acting Administrator Williams stated that it includes fare integration payments and bus
automation. Rep. Daniel Webster (R-FL) asked about the impact of automated vehicles on efficiency
and cost. Acting Administrator Williams explained that automation can lead to maintenance cost
improvements for transit agencies, although she cautioned that bus automation is still “a ways off.”

Rep. Babin asked about FTA’s “Dear Colleague” letter. Acting Administrator Williams maintained that
none of the enumerated policies in the letter violated federal law and explained the purpose of the letter
was to communicate FTA’s expectations to the transit industry.

Acting Administrator Williams explained that letters of no prejudice are often leveraged by local transit
agencies to get investment, and as such, FTA conducts scrutiny to ensure any project receiving a letter
meets certain standards.

Rep. Donald Payne, Jr. (D-NJ) asked about media reports indicating Secretary Chao influenced the
award of DOT grant projects in Kentucky. Acting Administrator Williams stated that there are no CIG
projects in Kentucky.