The Department of Transportation will develop criteria to protect the national interests for future public-private partnership deals entered into by states and localities to finance improvements to the nation's highway network, Transportation Secretary Mary Peters told a House panel yesterday.

"We will go ahead and start working on that and consult with you," Peters said to members of the House Transportation and Infrastructure Committee at a hearing on rewriting the current transportation funding law, which expires Sept. 30, 2009.

Her comments came after the Government Accountability Office published a report last week that called on Congress to direct the DOT to develop guidelines - together with input from the transportation and finance industries - to identify and protect the public interests for future P3 highway deals.

"I think [the GAO report] gives us a good basis to move forward with some parameters to establish what is in the federal and the public interest," said Peters, who headed the Arizona DOT between 1998 and 2001.

Peters argued that the federal government should have a reduced role in transportation decisions and that state and local governments should have a larger role. She opposes increasing the federal gas tax, which is the primary federal funding mechanism, and instead is pushing for increased use of tolling and P3s.

A reduced federal role, she believes, would allow federal dollars to be spent on transportation projects that reduce congestion instead of projects funded through earmarks by lawmakers. Peters cited the GAO report, which said: "We believe the federal government can play a more targeted, not necessarily more expansive, role."

Areas of federal interest in P3s deals, she said, include making sure that roads are constructed to the proper standard, connect to other parts of the network, and facilitate interstate commerce.

Peters was critical of a report released last month by the National Surface Transportation Policy and Revenue Study Commission, a congressionally mandated panel charged with making a raft of funding and policy recommendations. Peters was the chairman of the panel, but wrote a minority report dissenting from the proposals made by the majority of commissioners.

In the report, the commission called for increased private sector investment through P3s, but said that Congress should put restrictions on the deals, such as prohibiting so-called non-compete clauses in deals where states or localities lease a road to a private party for a number of years. Non-compete clauses prevent the government from building or improving roads that would compete with the leased road.

The commission also said that Congress should limit increases in tolls to inflation, require that private entities share revenue beyond a certain level with the public entities, and limit the length of concession agreements.

"My concern with the majority commission report is that they place numerous restrictions on [P3s] beyond what I thought was prudent to do, in my opinion, and substituted their judgment for state and local officials," Peter said.

But Democratic leaders on the committee support increasing the gas tax and believe that P3s and tolling can provide only a small part of transportation funding.

"The advocacy of privatization, tolling and rationing as solutions to the nation's transportation crisis is a narrow, myopic, uninspired and presentational approach," said committee chairman James L. Oberstar, D-Minn. "It does not rise to the merit of being called policy."

Oberstar warned that unbridled state and local government use of P3s would result in a national transportation system of varying quality from region to region.

"I will not preside over total dismantling of our cherished integrated system," he said. "We recognize the role these tools can and do play in the nation's intermodal transportation network; however, this role is limited and must be part of a comprehensive, multifaceted approach to the development and operation of the intermodal surface transportation network." q

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