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Ralph R. Peterson, Chairman, Construction Industry Round Table
(December 3, 1998)
Testimony: Mr. Peterson noted that while a federal capital budget
presents challenges in areas such as "scoring" and depreciation, a federal
capital budget represents an approach that has merit and potential value.
For this reason, Mr. Peterson urged the Commission "not to state in
its final report that it does not endorse or support 'capital budgeting,'
instead that it recommends aspects of the capital budgeting approach that
would improve current budget practices.
CIRT believes a capital budgeting approach should not require all capital
or investment expenditures to be financed by borrowing, but rather an approach
that permits or allows for borrowing. CIRT believes a capital budget
approach has great potential merit because it:
Resolves Overstatement of Capital Project Costs: Currently, the
consolidated federal budget overstates the cost of an individual capital
infrastructure project for a given budget year by requiring the entire
expense of a project, which typically has decades long life span of utility,
to be taken or "scored" in a single year (particularly for the construction
Diminishes Uncertainly: The current consolidated federal budget
approach to capital infrastructure projects increases uncertainty in the
system from feasibility planning to construction. Given the overstated
nature of the expense any single federal budget year must assume to move
to construction, many projects that are ready to proceed are limited, withdrawn,
or delayed in order to await adequate funding appropriations.
Enhances the Ability to Meet Capital Project Needs: The present
approach to capital infrastructure funding is critically short of the levels
necessary to both maintain and expand to meet basic infrastructure needs
in the United States. CIRT strongly agrees with the proposed draft report's
summary statement that "the current process shortchanges the maintenance
of existing assets."
To demonstrate the lack of adequate funding for capital infrastructure
in the U.S., CIRT referred to a recent report prepared by the American
Society of Civil Engineers (ASCE). This report found significant backlogs
of funding needs for maintaining or improving the Nation's infrastructure,
including roads and bridges, mass transit, aviation/airports, schools,
drinking water, wastewater, and hazardous waste.
In concluding remarks, CIRT urged that at a minimum, the Commission
should strongly endorse a two-year approach to developing budget needs
(with establishment of a Capital Acquisition Fund), within the framework
of a five-year strategy to reach stated and measurable objectives. CIRT
believes moving toward a federal capital infrastructure budget type approach
would be an important first step in ensuring proper funding for the infrastructure
needs facing the nation.
Questions from the Commissioners: Mr. Peterson did not testify
before the Commission.