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 1,2008 2

Field Hearings September 20-21, 2006 Dallas, TX October 27, 2006Portland, OR November 15 – 16, 2006 New York, NY Memphis, TN February 21 – 22, 2007Los Angeles, CA Atlanta, GA March 19, 2007 Washington, DC April 18 – 19, 2007Chicago, IL Minneapolis, MN 3

Commissioners Mary 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 4

What’s Broken?

National Network Is At A Crossroads Aging System Inadequate Capacity Safety Global Competitiveness National Security/Defense Energy Security Climate Change

January Analyst Draft 5 7 Freight Transportation at the crossroads… 2020 Growth Projections Population338 million, 0.87% CAGR Vehicle miles traveled4.09 trillion, 8.13% CAGR Rail gross ton miles1.82 trillion, 1.94% CAGR Truck ton miles4.17 trillion, 1.96% CAGR Port volume58 million TEUs, 5.4% CAGR Source: Global Insights, AASHTO, FHWA

8 Transportation growth and capacity: The past 25 years ( ) Route Miles Growth Rail -39% 65%GTM Highway +7% 96% VMTs Ports N/A 400% TEUs

9 Source: 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

16 Recommendations 16

17 No Easy Answers 17

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 ( miles)

Reform (cont’d) Set Standards/Metrics Develop Plans Develop Cost Estimates Fund on Cost-to-Complete Basis

Financing

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Financing General Principles –User Fee Financing –No Diversion –Pay-As-You-Go –Protect Funding Guarantees 26

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

28 “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, Past Generations Gave Us The Preeminent Surface Transportation System In The World

29 For More Information: 29