To transportation watchers, Governor Edward Rendell of Pennsylvania is a familiar face—and an unmistakeable voice. His raspy enthusiasm for the un-sexy world of infrastructure has been consistent and contagious. Two years ago, Rendell co-founded, with California Governor Arnold Schwarzenegger and New York Mayor Michael Bloomberg, Building America's Future, a bipartisan coalition of elected officials dedicated to "bringing about a new era of U.S. investment in infrastructure that enhances our nation's prosperity and quality of life."
In his eight years as Governor, Rendell showed a remarkably open mind when it came to financing infrastructure. He has repeatedly advocated for the indexing of the gas tax and recently suggested a profit tax on oil companies to pay for transportation. In 2007, he unsuccessfully sought permission from his state legislature to lease the Pennsylvania Turnpike to private operators. When the legislature declined, Rendell sought approval from the USDOT to add tolls to his state's stretch of Interstate 80. The federal government denied that plan—twice—because the applicable pilot program restricts the use of toll revenues to the tolled facility itself, and Rendell had a statewide investment program in mind.
Though he is a Democrat, Rendell's eagerness to promote privatization and the tolling of sacrosanct Interstates put him in step with unpopular stances taken by Secretary of Transportation Mary Peters during the Bush Administration. Those ideas remain alive under President Obama, and several former Rendell associates now occupy high places in the USDOT: his former Deputy Chief of Staff, Roy Kienitz, is now Undersecretary for Policy; and Polly Trottenberg, the former executive director of Building America's Future, is now Assistant Secretary for Transportation Policy.
Transportation Nation's Matt Dellinger interviewed Governor Rendell last week, and asked about the new political atmosphere in Washington, how it could affect transportation policy, and where Rendell is headed after he leaves his post in January.
Matt Dellinger: Since you're one of the most outspoken advocates for transportation investment, I wanted to get your thoughts on where we are as far as federal re-authorization.
Governor Ed Rendell : Well, it's difficult to say exactly with the change in Congress. I think the chances of a megabill like Congressman Oberstar had proposed are probably pretty remote, and
I say that regretfully because I think the nation is falling way behind, our infrastructure is in many ways crumbling, we're becoming less economically competitive because of our failure to invest, we're creating unsafe and hazardous conditions because our infrastructure is aging and we're not spending the right money to repair and revitalize it.
Dellinger: People often say infrastructure is a bipartisan issue, and you founded the Building America's Future Coalition with a Republican and an Independent, Governor Schwarzenegger and Mayor Bloomberg. But Democrats and Republicans, on the whole, tend to disagree about Federal leadership vs. state control and the relative importance of highways and transit. Do you see an ideological divide? And if this is truly a bipartisan issue, why would the Republican majority make a difference?
Rendell: Well, I think where Schwarzenegger, Bloomberg and I have credibility is each one of us have dramatically increased our own investment in infrastructure. I think there is some divide on things like public transit vs. highways and things like that, but I think generally infrastructure has, more than almost any issue, been bipartisan. I mean, Senator Jim Inhofe and I wrote a column for Politico about the need for increased infrastructure spending, and infrastructure has been an idea that Republicans have supported in the past. Senator Inhofe and Senator Boxer, two unlikely colleagues, fought to have the infrastructure part of the stimulus bill tripled and were beaten back.
So I think there's some significant Republican support for the concept of improving and revitalizing our infrastructure. The problem lies in how to fund it, and with the deficit looming large, with tax cuts—it looks like the majority of tax cuts are going to be continued with this anti-spending philosophy that sort of permeated in the last election—it's going to be difficult for Republicans and for many Democrats to stake out a significant spending plan.
Dellinger: It does seems like the funding part of things is what's holding up the re-authorization bill. Earlier we interviewed former Secretary Mary Peters, who of course under Bush was championing things like tolling interstates and privatization—
Rendell: I'm for both of those. I think we need to put every arrow in our quiver, and tolling interstates is a must. The federal government's got to remove the ban on tolling interstates and give the states the capacity to do that. I'll give you a perfect example. We're spending 90 million dollars a year to repair I-80. We had planned to toll it and up our spending to $200 million a year, which it really needs. ...It's a free passageway from the Atlantic Coast to the Midwest and we're just not going to be able to keep up. So tolling interstates is one way, is one arrow in the quiver.
Privatization and getting private dollars, through an infrastructure bank, invested into infrastructure, is another way. Lifting the cap on Private Activity Bonds, increasing dramatically the TIFIA Loan Program, Building America Bonds—there are so many ways to get private dollars into infrastructure and that's crucially important, particularly for new expanded projects, for projects of regional significance. But anyone who thinks that we can solve our problems just by getting private dollars into the system is wrong because the average bridge in this country has no capacity to be tolled. Even if you did toll it, there's no potential return on investment attractive to private investors. The average bridge, the ordinary roads, those things are going to have to be repaired and maintained by the government, and state government is obviously going to do its share but they need federal help.
I think Mary Peters is right, that you bring every arrow into the quiver. Building America bonds are great because it helps the state move forward. The state could sell more bonds because the federal government is absorbing a share of the interest rate.
Dellinger: As you were exploring different funding options, obviously you were trying to figure out what was financially sustainable and what was politically palatable. But did you think at all about what was fair? The gas tax, however flimsy it now is, had the advantage of seeming to people like a direct user fee. As you engineer more complicated financing of these projects, do you get farther and farther away from that feeling, that users are paying for what they're getting and getting what they're paying for?
Rendell: The good thing about tolling is it's a user fee. And tolling is the way that you finance most of the private investment. That's where you get the return on the investment. Fairness and appropriateness? We lost about $500 million a year when the Federal Government wouldn't let us toll I-80. One of the things I was proposing was just adjusting all of our motor vehicle fees and our gas tax for inflation, meaning taking the last time they were raised and adjusting them for inflation. So with the gas tax it would have meant, in Pennsylvania, a 4 ½ cent increase. For drivers license it would go from $7 to $12 or something like that. In any event, we did a study and found for the average driver in Pennsylvania drives twelve thousand miles a year. It would cost them 77 cents a week for a half a billion dollars to put into our roads and bridges.
Dellinger: And yet raising the gas tax feels like the third rail.
Rendell: It does, and yet it's interesting: Building America's Future took a poll and although 60% of the public is against raising the gas tax, 61% believe that its indexed to inflation and goes up every year. That's how little people understand about the gas tax.
Dellinger: A few years ago I interviewed the head of American operations for a large international toll operator, and he described the attitude in America in an interesting way. He said we had inherited a house built by our grandparents, and now the roof was leaking and needed to be replaced, but we were so disconnected from the cost of our infrastructure that we were having a hard time dealing with the notion that we had to pay to maintain it. How do we overcome that?
Rendell: I try to tell our folks a very simple thing. I said if you put a lot of your savings into buying a new car and spend 30 thousand dollars for a new car, would you then turn around and not put one dime into its maintenance and if you didn't put a dime into its maintenance, after 3 or 4 years what would happen to the car? It would stop running. Infrastructure is no different.
Dellinger: Congressman Oberstar, the chairman of the House Transportation Committee, was no fan of privatization or tolling. How would you handicap all of these different funding mechanisms now that the Republicans have taken control of the House?
Rendell: I think you'll see much more. You'll see it made much easier for private dollars to come in. I think you'll see tolling of Interstates. I think you'll see a lot of different things. But I think what you won't see is adequate level of federal funding, and you won't see what I believe still is the long term answer to this private plan for not just transportation infrastructure but for all infrastructure, and that's a federal capital budget.
Dellinger: It makes things like high speed rail which require a long term vision and federal leadership makes them seem less likely. Would you agree?
Rendell: Without a capital budget you're not going to be able to do certainly any real significant new projects.
Dellinger: Do you believe in earmarks or are Republicans right about earmarks?
Rendell: I agree with the Republicans. I think earmarks usually are a waste of money and often they never get done because Congressman Jones gets a $9 million dollar earmark for the Central Susquehanna Freeway, and that's great, and he comes home and has a press conference. But the freeway costs $220 million, and the state doesn't have the money to even come close to finishing that project. So that $9 million sits and hardly gets spent.
I think that there should be a competitive process, in fact, I think that's one of the tasks you can give to the infrastructure bank. I think generally the infrastructure bank should be for projects of regional and national significance. Generally it shouldn't compete with the basic funding grants that go to the states for ordinary maintenance, etc. In terms of earmarks I think there should be—just like in the TIGER grants—competition for earmarks. Any congressman or senator should be able to apply to the infrastructure bank for a grant for a project, but it would have to be done on a competitive basis and on a cost-benefit and merit analysis.
Dellinger: Do you think that the ARC tunnel under the Hudson River would have been a great candidate for the infrastructure bank?
Rendell: Absolutely. Perfect example.
Dellinger: But I guess it's probably very difficult to weld on private funding at this point.
Rendell: Very hard.
Dellinger: You only have a month or two left in your term as governor. I'm wondering what your plans are going forward?
Rendell: I don't know much of my plans yet, but I do know that I intend to carry on as one of the co-chairs of Building America's Future. I think it's vital to this country's economic competitiveness, it's a safety and quality of life issue, and it's the best job creator we have for well-paying jobs and also to help American manufacturing. I think right now in many ways it's the most important challenge we have, and I want to continue to help lead the fight.
Dellinger: Do you think you'd be most effective doing that in the public or private sector?
Rendell: I don't think it matters. I mean, obviously in the private. If I were in the government it would be difficult because you'd be—I think you need outside pressure.
Dellinger: Mary Peters went into private consulting, and I think especially if we see more privatization there could be a lot of work for you out there.
Rendell: Yeah, I hope the lion's share of the money I earn next year doesn't come from anything having to do with transportation. I just want to be a nonprofit voice, an advocacy voice. I wouldn't try to get in and do part of deals. I think that might in some ways hurt a little bit of my credibility on this issue. When I was mayor I was head of Rebuild America, but Rebuild America fell, because all of the funding agencies had a stake in the venture. They would make money if infrastructure spending was increased, and that made Rebuild America, I think, a little less effective as a voice.
Dellinger: You know I don't know if I've ever heard you explain why you care so much about infrastructure. Is this something where you had an epiphany—?
Rendell: No, it's vitally needed for the three reasons I said—economic competitiveness, public safety, quality of life—but I also think it's the single best producer of good paying jobs that will support American manufacturing as well as the construction industry and I think it's crucial.
Dellinger: Were there any big lessons you learned as mayor that led to your outlook now?
Rendell: As mayor of a big city you're very much tuned to the needs of mass transit, for instance.
Dellinger: And then you took over a state that's largely rural and, as you say, has major shipping routes.
Rendell: So I try to balance. We've made significant investments in our mass transit systems around the state as well as in roads and highways.
Dellinger: And striking that same balance is exactly what we need to do nationwide it seems.
Rendell: There’s no question.