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61st Annual Meeting of the Southern Legislative Conference

July 14-18, 2007 | Williamsburg, Virginia

Chair's Reports

CHAIR'S REPORT
ECONOMIC DEVELOPMENT, TRANSPORTATION & CULTURAL AFFAIRS COMMITEE

TO:      Members of the Executive Committee

FR:      Senator Mark Norris , Tennessee, Chair, Economic Development, Transportation & Cultural Affairs Committee

RE:      Report of Activities of the Economic Development, Transportation & Cultural Affairs Committee at the 61st Annual Meeting of the Southern Legislative Conference in Williamsburg , Virginia , July 14-18, 2007

            The Economic Development, Transportation & Cultural Affairs Committee convened once on Monday, July 16 and twice on Tuesday, July 17.  The following is a synopsis of the presentations made to the Committee on both days.  An attendance list is attached.

Program Session, July 16, 2007

I.          Public-Private Partnerships and Initiatives in Dealing with Transportation Challenges and the Move Toward Toll Roads

Pierce Homer, Secretary, Department of Transportation, Virginia
Representative Lois Kolkhorst, Texas

Background
            The movement toward toll roads is an important development currently occurring in a number of states.  Two SLC states, Texas and Virginia , have a great deal of experience in this rapidly expanding trend.

Secretary Homer’s Presentation

            Secretary Homer began his presentation by noting that transportation has been one of the most complex and challenging issues dealt with by the state of Virginia in recent years.  While there have been profound changes transforming the entire transportation sector in the United States, the issue has risen to the forefront among all the public policy issues confronting the state of Virginia, he noted.

            According to Secretary Homer, Virginia has been very pro-active on transportation some 12 years ago in enacting the Public-Private Partnership Act of 1995 (PPTA), an effort to deal innovatively with the many challenges on this front, jointly utilizing the resources of the public and private sectors.  In fact, even before this legislation, he stated, Virginia had a 100 percent, privately funded toll road, the Dulles Greenway, which opened in the late 1980s and is regulated by the state’s corporate commission.  The impetus behind the surging interest in public-private partnerships  projects in Virginia and around the country, he noted, involves the tight state revenue inflows amidst rising demand for transportation services.  Hence, the opportunity to bring in much needed private capital, in order to share the financial burden and risks associated with these major transportation projects and provide improved transportation services to consumers, remains the major driving force behind these recent efforts, according to Secretary Homer.

            Along with the possibility of securing private-sector capital, Secretary Homer also stressed another major advantage of these P3 projects: the ability to have a fixed price contract over a number of years into the future.  Constantly escalating transportation costs are a common feature in publicly financed transportation projects and agreements such as those secured under Virginia ’s PPTA permit fixed-price contracts, he added.   In addition to the private sector capital, Virginia also has two major transportation funds that can be accessed to embark on these P3 projects, Secretary Homer indicated.

            Secretary Homer emphasized that state transportation programs should not be based solely on P3 projects, but where there is genuine risk and cost sharing along with clear benefits to consumers and the state, P3 projects remain very effective in an overall transportation network.  He listed several P3 projects in Virginia, including the Pocahontas Parkway (a 100 percent toll-financed project that was not financially viable at first but where a new P3 agreement transformed it into a successful entity); the 100 percent publicly financed Route 58 highway project; the 25-mile Dulles Rail Project, financed by a combination of tolls, a special tax and private sector input; a toll project in the Hampton Roads area; the Midtown Tunnel project; and the Capital Beltway project.  He elaborated on the latter project, a highway bordering Washington , D.C. , that is among the most congested in the country, and highlighted it as a prime example of an innovative P3 effort.  A private entity approached the state to secure the right to introduce an additional, dedicated high-occupancy toll lane to the Capital Beltway.  According to Secretary Homer, unless a vehicle has three occupants, the toll charged to use this lane is higher; also, a higher toll would be assessed during certain peak travel times, if the vehicle has fewer than three occupants.  He cited this as an innovative tolling technique that generates additional revenue, manages congestion through tolling and encourages mass transit (buses and high occupancy vehicles).

           According to Secretary Homer, P3 projects do not work all the time, and he stressed several key elements for the implementation of a successful P3 project.  In his perspective, based on Virginia ’s experience, there are several key elements:

  • Transparency:  It is critical for the entire process to be completely transparent.  In addition, in Virginia , the PPTA legislation requires an extremely high threshold of scrutiny.  Involving the local governments and residents also are important requirements.

  • Business Considerations:  The entire cost-benefit analysis for implementing a P3 project has to be driven by business considerations with the requisite level of financial discipline.  The level of risk that is to be shared by the private and public sectors has to be clearly identified.

  • Staffing:  Securing competent and highly skilled public sector staff in all the related disciplines (financial, engineering, traffic patterns) remains of the highest importance.  Negotiating with large multinational corporations with sophisticated capabilities requires an equal or even greater level of competence on the public sector side.  In Virginia , it has taken several years to build up the team that currently is in place.

  • Customers:  Respect for the customer/consumer of these projects, i.e., the individual that will be paying the toll is very important as well.  He stressed that states should not divert revenue secured from one toll project to another transportation project in the state if this causes a worsening in the level of service provided to the consumer.

Representative Kolkhorst’s Presentation

            Representative Kolkhorst noted that toll roads initiated in partnership with private equity will play an increasing role in the transportation plans of both Texas and America in the coming years.  She indicated that her presentation would cover events in Texas in recent years with regard to this topic and attempt to describe how “ Texas went from 0 to 100 m.p.h. in one second” on the private equity toll road issue.

            According to Representative Kolkhorst, in 2003, a very large omnibus bill (H.B. 3588) was passed by the Texas Legislature that, among many other things, included a provision for private equity (and toll roads) in building the Trans-Texas Corridor.  During the 2005 legislative session, she indicated, the Legislature “cleaned” this bill up further but it was in the recently concluded 2007 session that 70 bills were filed seeking to “either stop, drastically change or alter” the provisions contained in the original 2003 legislation.  She noted that it was this profusion of bills, along with her own concerns about the legislation, that led her to join a freshman member of the Senate (and former Texas Transportation Commissioner), Senator Robert Nichols, to co-sponsor legislation placing a temporary moratorium on private equity in the building of toll roads in Texas.

            Representative Kolkhorst commended the state of Virginia in their approach to private equity and toll roads and indicated that Texas did not follow many of the recommendations of Secretary Homer.  For instance, Representative Kolkhorst noted that the Texas Department of Transportation (TxDOT) was not transparent in its negotiations regarding the role of private equity in the agreements being pursued, “neither the Legislature nor the public had any idea regarding what was contained in the agreements.”  Even though the state attorney general had ruled that these discussions and agreements had to be public, TxDOT opted to maintain a level of secrecy that led to a huge public outcry.

In Texas , Representative Kolkhorst stated, unlike in Virginia where private equity played a role in a limited number of highways, the plan was to construct the massive Trans-Texas Corridor, also dubbed the NAFTA/CAFTA Corridor.  This concept, Representative Kolkhorst maintained, resulted in raising political concerns in many segments of the state and even outside Texas .  The magnitude of the project, she noted, was immense: a 1,200 foot wide corridor that would envelope 146 acres per mile of highway across the state.  Urban centers like Dallas also were concerned that the Corridor passed some 200 miles away, a distance that would not generate economic impacts.

            In Representative Kolkhorst’s view, there were a number of elements in the negotiations between private equity and TxDOT on this project, including the following that warranted concern:

  • Non-compete Clause:   While the agreement did not prohibit the construction of a highway in the vicinity of the P3 project, it did require the state to pay the private company for the potential loss of revenue.  The Dallas/Fort Worth and Houston areas, which already had their own toll authorities, would be in a bind here, she noted.  In addition, no new highways could be built within a radius of 200 miles of the toll road constructed by the P3 project.

  • Buyout Clause:  In the event that the state wished to buy out the private company, the state would be responsible for reimbursing expenses incurred by the private company and all future revenue.

  • Contract Length:  While the contract term (50 years) was less than the Chicago Skyway project (99 years), “it was still a long time,” she stated.  Representative Kolkhorst posed the question as to whether legislators now would have liked to have been constrained by contracts entered into by lawmakers in their states in 1957?

  • Profits:  Representative Kolkhorst posed the question “[W]here would the profits flowing from the toll project be invested?  In Spain , Australia or Wall Street?”  The point being, she indicated, that there was no assurance that the profits would be invested in Texas so that the state could benefit from these investments.

  • Number of Proposals:  The original 2003 legislation operated on the premise that Texas would entertain between one and four P3 projects related to the Trans-Texas Corridor; however, according to Representative Kolkhorst, as many as 24 private equity highways may have been considered.  Some of these proposals were adjacent to one of the most successful toll authorities in Texas , the one in Harris County ( Houston ).

            Many legislators supported the moratorium according to Representative Kolkhorst,  a report from the Texas State Auditor in February 2007 that noted that “ Texas stood to gain some $300 billion in revenue over 50 years if the state built and operated the Trans-Texas Corridor toll authority.”  Given the fact that Texas has ample bonding authority, she added, a number of legislators and Texans agreed that it was time for a further review of the private equity proposals being considered.

            Representative Kolkhorst indicated that the Legislature had diverted 36 percent of the state gas tax fund to other uses, placing undue financial pressures on the DOT.  In addition, the federal government had significantly cut back on the transportation funds forwarded to Texas , a situation that resulted in Texas continuing as a transportation “donor” state.  The federal government also had been encouraging states and agencies like TxDOT to embark on P3 projects.  Notwithstanding all these measures, she noted, the public outcry was heard by the Legislature in 2007, which resulted in the moratorium.

            In closing, Representative Kolkhorst exhorted the legislators present to debate and disagree with the executive branch when appropriate—even if they belong to the same party—because that is “an essential element of a healthy democracy.”

II.        Financing Public-Private Partnership Projects

Deborah Brown, Director, Innovative Finance and Revenue Operations, Department of Transportation, Virginia
Ron Tillett, Managing Director for Public Finance, Morgan Keegan, Virginia

Background
A number of states have either leased or are considering leasing major state-owned assets for one-time windfalls that have reaped or could reap tens of billions of dollars.  As expected, this strategy has both fiscal pros and cons along with other calculations.

Ms. Brown’s Presentation

            According to Ms. Brown, her presentation would provide the rationale for public-private partnerships (P3) in Virginia, a legislative overview of P3 in the state, details on the Virginia Department of transportation’s (VDOT) P3 program, information on the Pocahontas Parkway concession (one of the state’s major P3 projects) and some of the lessons learned from these projects.

            The impetus for P3 in Virginia , Ms. Brown noted, sprang from the fact that even though VDOT managed the third largest highway system in the country (115,000 lane miles),  prior to the 2007 General Assembly session, there had been no sustainable state revenue increase for transportation since 1986.  In addition, purchasing power from the Federal Highway Trust Fund allocations had shrunk by 50 percent during this period with the state being forced to increasingly rely on bonds and other federal funding for maintaining existing transportation capacity.  There also was very limited funding for urgently needed new transportation construction.  In this environment of tremendous financial constraints, Ms. Brown noted, Virginia had to pursue P3 projects as a mechanism to raise funds to undertake essential transportation expenditures.

            Over a decade ago, Ms. Brown noted, the General Assembly passed the Public Private Transportation Act of 1995 (PPTA) which authorized “private entities to develop and/or operate qualifying transportation facilities.”  The legislation also provided for both solicited and unsolicited proposals from the private sector.  There was a series of revisions and amendments to the 1995 legislation in 2001, 2002, 2005 (substantive) and 2006.  The 1995 P3 legislation, according to Ms. Brown, was based on several goals and principles such as addressing the needs identified by state, regional and local policies and plans; pursuing multimodal solutions; heeding national environmental concerns; promoting private investment, risk-sharing and funding; ensuring transparency and accountability; and encouraging competition for private sector innovation and investment.

            In providing a quick summary of P3 projects in Virginia to date, Ms. Brown stated that there were 48 unsolicited proposals, five solicited proposals, five active projects under contract, three active proposals, two candidate projects, five completed contracts and one concession.  She further noted that the value of all the projects amounted to $6 billion; the value of the completed projects stood at $767 million; the value of the active projects was more than $5 billion; the value of active proposals amounted to about $1.5 billion; and the value of the concessions granted amounted to $520 million.

            Ms. Brown highlighted the Pocahontas Parkway as a noteworthy example of a P3 project in Virginia .  While this was the first new construction project under the PPTA, the project’s original financing involved $353 million in toll revenue bonds, $18 million in a State Infrastructure Bank (SIB) loan and $9 million in federal funding.  When the toll-funded parkway opened in 2002, usage fell so far short of projections that the project's financial viability was immediately cast in doubt.  In fact, anticipating the possibility of a financial collapse, national rating agencies Moody’s and Standard & Poor’s downgraded Pocahontas bonds to junk status.  Then, according to Ms. Brown, stepped in a consortium comprising Transurban of Melbourne, Australia, and its bank, DEPFA Bank of Dublin , Ireland (eager to establish a foothold in the U.S. market) making an unsolicited proposal to VDOT to acquire the right to collect tolls and to operate and manage the Pocahontas Parkway for profit.  Negotiations with the foreign consortium began under former Governor Warner’s administration and were finalized under current Governor Kaine’s tenure.  The June 2006 agreement, according to Ms. Brown, included details on the rights and obligations of both parties during the 99-year lease term.

            In highlighting some of the lessons learned, Ms. Brown mentioned that there are a number of public policy concerns related to P3 projects like the Pocahontas Parkway including excessive toll rate increases; excessive returns to private partners; relinquishing the potential up-side of toll revenues; and failing to coordinate with other elements of the state’s transportation network and potentially competing facilities.  Furthermore, she encouraged other states considering P3 projects to heed the following lessons learned by Virginia :

  • Learn from others;

  • Project financing is the key challenge in a successful P3 project;

  • Make it a business decision;

  • Set specific programmatic and policy goals;

  • Maintain focus on uniqueness of projects, as terms of each agreement can become precedent for the next agreement;

  • Develop expertise and then supplement this expertise with input from attorneys, financial advisors and traffic modelers;

  • Solicit proposals but maintain control; and

  • Secure significant time commitments to work on projects from both public and private partners.

            In closing, Ms. Brown indicated that she foresaw the increasing use of P3 projects in Virginia and across the country.  She also predicted that there would be increasing international participation in these P3 procurements.  Finally, she cautioned states that the “P3 option is not appropriate for all projects and that it should be a single tool in a range of procurement options.”

Mr. Tillett’s Presentation

            According to Mr. Tillett, there were a number of factors driving the demand for alternate financing tools at the state level.  He listed population growth (including the increased number of vehicles and increased miles driven per year); serious traffic congestion in major metropolitan areas; inadequate maintenance and the need to expand state road networks to keep pace with growth, aging infrastructure, increasing cost of roadway construction, reductions in gas tax revenues as a result of increasing use of fuel-efficient vehicles, and diminished gasoline consumption; long-term erosion of transportation revenue at the state and federal level ($4.6 billion estimated deficit by 2009); and the limited political will to raise taxes.

            In this context, Mr. Tillett noted, alternate financing mechanisms were promoted as early as in the 1990s (such as shadow tolls, borrowing against future grants, and the creation of non-profit corporations to operate highways) but states realized that they were not “the panacea they were made out to be.”  He also added that improved federal laws on tolling, expanded federal loan programs and some $15 billion in available private equity set the stage for “a paradigm shift in financing new highways and bridges with greater involvement by the private sector.”  Another important trend was the interest of overseas investors looking to the United States as an opportunity to expand their investments.  As a result of this, Mr. Tillett stated, public private partnerships (P3) have generated a great deal of interest as a creative way to address these state transportation and infrastructure demands.

            Mr. Tillett defined P3 “as a contractual agreement formed between a public agency and a private sector entity that allows for greater private sector participation in the delivery of infrastructure-related projects.”  Notwithstanding the significant policy and political debate on the appropriate use and structure of P3, Mr. Tillett indicated that the primary reasons for creating these P3 arrangements were accelerating the implementation of high priority projects by packaging and procuring services in new ways; creating specialized management capacity for large and complex programs; enabling the delivery of new technology developed by private entities; accessing and organizing the widest range of private sector financial resources; encouraging private entrepreneurial development, ownership, and operation of highways and/or related assets; and allowing (potentially) for the reduction in the size of the public agency and the substitution of private sector resources and personnel.

          He listed several forms of P3 projects including:

  • Design-Bid-Build:  The Hiawatha Light Rail Transit, a 12-mile light-rail corridor that extends from downtown Minneapolis to the southern suburb of Bloomington , connecting to the Minneapolis-St. Paul International Airport , the Mall of America and other destinations. The corridor’s cost is expected to total $715 million with $424 million coming from the federal government.

  • Operations and Maintenance Contract Fee Services:  Anton Anderson Memorial Tunnel, located in Alaska , is the second longest highway tunnel and longest combined rail and highway tunnel in North America . Originally completed in 1943, the tunnel was converted into the existing one-lane combination highway and railway tunnel.

  • Private Contract Fee Services:  The Louisiana Transportation Infrastructure Model for Economic Development (TIMED) is a $4 billion transportation infrastructure program designed to increase economic development in Louisiana by investing in transportation improvement projects.

  • Design-Build:  The E-470 Tollway, financed through tolls, was opened for traffic in 2003.  The 47-mile limited-access tollway travels through the eastern portion of the Denver-Aurora Metropolitan Area in Colorado .

  • Build-Operate-Transfer/Design-Build-Operate-Maintain:  The Hudson-Bergen Light Rail, with an eventual overall cost of approximately $2.2 billion, is one of the largest public works projects ever in New Jersey .  The project is being funded by a mixture of state and federal funds.  The Federal Transit Administration is contributing 41 percent of the $1.2 billion cost of extension projects through 2008.

  • Long-Term Lease Agreements:  The Chicago Skyway is a 7.8-mile long tollway bridging I-90 at the Dan Ryan Expressway on the west end and the Indiana Toll Road on the east end.  Cintra Concessions, which assumed operations on the Skyway, signed a 99-year operating lease for $1.8 billion.

  • Design-Build-Finance and Operate (DBFO) Real Toll Franchise:  The Dulles Greenway is a 12-mile privately owned toll road in Northern Virginia .  The road was privately built and is not a public asset.  In 2005, the Australian firm Macquarie Infrastructure Group announced that they paid $533 million to acquire 86.7 percent ownership of the Greenway.

  • Design-Build-Finance and Operate (DBFO) Shadow Toll Concession:  The A-1 Darrington to Dishforth motorway in the United Kingdom is a 53-kilometer motorway connecting the two cities.  It is a 33-year concession period project with work costs in excess of 245 million British Pounds.

  • Design-Build-Finance and Operate (DBFO) 63-20 Public Benefit Corporation Models:  Virginia Route 895 ( Pocahontas Parkway ), which connects the junction of I-95 and Route 150 in Chesterfield County with I-295 near Richmond International Airport , was built without the use of toll revenue bonds through an innovative P3.  In May of 2006, investors agreed to acquire a 99-year concession on the Parkway for a total cost of $611 million.

  • Build-Own-Operate (BOO):  The Foley Beach Express, a 13.5 mile limited access four-lane route from the city of Foley to Orange Beach , Gulf Shores and Perdido Key in Alabama was built in two sections in 2000.  There is one 7.5-mile publicly financed stretch and a 6-mile privately financed stretch.

  • Other Innovative PPP Options:  The Heartland Corridor, a joint venture between the Norfolk Southern Railway and the Federal Highway Administration, is a $150 million plan that will facilitate more efficient travel on the rail lines between the Norfolk , Virginia , port region and Chicago , Illinois .

            According to Mr. Tillett, the primary benefit of a P3 project is that it allocates responsibilities to the party, either public or private, that is best positioned to control the activity that will produce the desired result.  He maintained that the benefits of recent P3 transportation projects include the fact that it is tolls not taxes; private equity versus private debt; expedited completion compared to conventional project delivery methods; projected cost savings; improved quality and system performance from the use of innovative materials and management techniques; substitution of private resources and personnel for constrained public resources; and access to new sources of private capital.”

            Mr. Tillett indicated, that there were a number of concerns with the increasing use of the P3 approach, including the lack of in-house expertise in the public sector to negotiate these complex P3 agreements; P3 toll facilities may not be regulated sufficiently to protect the public from unreasonably high toll rates or excessive profits; non-compete clauses should not unnecessarily hamper the state or local government’s ability to meet mobility and safety needs of the traveling public; length of the terms of agreements should be as short as economically possible; comprehensive model legislation should be promulgated with best practices and lessons learned from existing transactions; the role of the federal government in approval processes for various types of projects should be further defined; solicited or unsolicited P3 projects should fit within the government’s transportation planning processes; negotiations with the private sector should be as transparent as possible; and policies should be developed on the use of any up-front payments or revenue sharing.

            Mr. Tillett also provided details on financing and ownership options for these P3 projects along with insights into the rating agency responses to states embarking on these P3 projects.  He also addressed long-term leases, also known as monetization, privatization or toll concessions, a financing mechanism that helps unlock some of the inherent value in toll roads that may be lost under government ownership.

            In closing, Mr. Tillett noted that public transportation needs remain significant and are growing faster than traditional revenue streams.  At the same time, he indicated, rising congestion levels cost the American public billions of dollars every year and choke the nation’s metropolitan centers.  P3 projects, he added, are an important development that have surfaced in response to this situation recently, and they offer state and local governments a strategy in terms of addressing long-term needs.  He stated that long-term leases and concession agreements that a number of state and local governments have entered into currently stem from the reality that our transportation needs far outstrip the resources that are available from traditional sources.  He stressed that the Federal Highway Administration should continue to explore, analyze, and promote best financial practices for maintaining and expanding the transportation network.  Finally, he emphasized that the P3 debate should continue, current transactions should continue to be analyzed and improvements should be communicated.

III.       Virginia Sesquicentennial of the American Civil War Commission

President Pro Tem John H. Chichester, Virginia
Speaker William J. Howell, Virginia

Background
The 2006 General Assembly passed House Bill 1440, creating the Virginia Sesquicentennial of the American Civil War Commission for the purpose of preparing for and commemorating the 150th anniversary of Virginia 's role in the American Civil War.

Speaker Howell and President Pro Tem Chichester’s Joint Presentation

            In their joint presentation, Virginia ’s legislative presiding officers noted that the Virginia Sesquicentennial of the American Civil War Commission was established in the legislative branch of state government to prepare for and commemorate the sesquicentennial of Virginia 's participation in the American Civil War.  They indicated that the Commission has a total of 13 members, comprising 10 legislative members, two non-legislative citizen members, and one ex-officio member.  They added that the president and chief executive officer of the Virginia Historical Society (or his designee) would serve as the ex-officio member with non-voting privileges.  The enabling legislation also established a fund to meet the various expenses associated with the activities of the Commission.

            According to the presiding officers, the Commission’s powers and duties will include the following:

  • Plan, develop, and carry out programs and activities appropriate to commemorate the sesquicentennial of the American Civil War;

  • Encourage the interdisciplinary examination of the American Civil War;

  • Facilitate balanced activities related to the American Civil War throughout Virginia ;

  • Encourage civic, historical, educational, economic, and other organizations throughout Virginia to organize and participate in activities to expand the understanding and appreciation of the significance of the American Civil War;

  • Provide technical assistance to localities and nonprofit organizations to further the commemoration of the sesquicentennial of the American Civil War;

  • Develop programs and facilities to ensure that the sesquicentennial commemoration of the American Civil War results in a positive legacy and long-term public benefit;

  • Encourage the development of and conduct programs designed to involve all citizens in activities that commemorate the American Civil War; and

  • Submit to the General Assembly and the governor an annual report.

Business Session, July 17, 2007

I.          Canada’s Importance to the SLC State Economies

Roy Norton, Minister, Canadian Embassy, Washington , D.C.

Background
Canada plays a critical role as the United States ’ largest trading partner and also is the most important trading partner for a majority of the SLC states, a trend that has become more pronounced in recent years.

Mr. Norton’s Presentation

            Mr. Norton began his presentation by describing the economic climate in Canada .  Canada ’s economy is in good shape according to Mr. Norton and, currently, Canada has the lowest net debt burden of the G-7 industrialized countries.  In addition, he stated, employment performance is the best it has been in 30 years, while Canada is experiencing its ninth consecutive federal budget surplus alongside 12 of the 13 provinces and territories recording balanced budgets or surpluses in 2005-2006.  Mr. Norton stated that Canada remains on target to be debt free by 2021 and noted that Prime Minister Harper has set out a long-term economic plan that calls for reducing taxes and for establishing the lowest tax rate on new business investment in the G-7.

            In terms of the Canada–U.S. trade overview, he stated that the United States exported $177 billion in goods and services to Canada in 2006, more than the combined American exports to Japan , China , Germany and the United Kingdom , while trade with Canada supported 7.1 million American jobs.  A review of two-way trade between Canada and key trading partners indicated the importance of the SLC region: in 2006, only trade to the United States exceeded two-way trade between Canada and the SLC states as a whole.  Several SLC states ( Texas , Tennessee and Kentucky ) ranked among Canada ’s top 10 two-way trading partners, he added.

            Mr. Norton further elaborated that in 2006, there was $116.5 billion in trade between the SLC states and Canada ; the SLC states exported $62.5 billion to Canada and Canada exported $54 billion to the SLC states.  He added that for 12 of the 16 SLC states, Canada remains their number one trading partner, while 36 U.S. states export more to Canada than to any other country; each SLC state, on average, experienced a 6.9 percent increase in its two-way trade with Canada in 2006 (over 2005); 2.61 million jobs in the SLC region are supported by trade with Canada (amounting to a 40 percent increase since 2001); for nine SLC states, exports to and imports from Canada were in exactly the same sector; and, finally, SLC exports to Canada are overwhelmingly manufactured goods.  Mr. Norton also commented on tourism between Canada and the SLC states.  Specifically, he noted that for the most recent year, 5.4 million Canadians traveled to the SLC region spending $2.89 billion; similarly, for the same time period, 2.2 million visitors from the SLC region traveled to Canada spending $1.37 billion.

            In terms of foreign direct investment, Mr. Norton indicated that Canadian firms have invested $197 billion in the United States ; 5,482 Canadian-owned companies operate in the SLC region; Canadian-owned companies in the SLC region employ 163,136 people; and U.S. firms invested $243 billion in Canada .  Florida has the greatest number of Canadian companies in the SLC region (965 with 22,504 employees).  North Carolina (899 companies with 19,274 employees) and Texas (886 companies with 30,954 employees) also ranked high under this criteria.

            Mr. Norton indicated that Canada ’s energy sector plays an important role in the U.S. economy.  He stated that Canada is the largest—and most secure—supplier of natural gas, electricity, uranium and oil to the United States .  He added that not only does Canada have 179 billion barrels of proven oil reserves—second only to Saudi Arabia —in 2006, Canada supplied 11 percent of total U.S. oil consumption, an amount that is likely to grow to 19 percent this year.

            Mr. Norton mentioned that cross-border commerce between the two countries totaled $1.6 billion a day.  He indicated that more than 70 percent of the trade between the two countries is transported by truck and that, on average, 25 trucks cross the border every minute.  He also mentioned Canada ’s many contributions to North American security and that Canada had invested over $10 billion since 9/11 in border security and infrastructure.

            Mr. Norton’s final comments related to the Western Hemisphere Travel Initiative (WHTI), the U.S. government mandate that Canadians traveling to the United States and Americans re-entering the United States from Canada carry a passport or approved, alternate documents.  While the federal government seeks to fully implement land and sea WHTI provisions by summer 2008, Mr. Norton noted that the surge in passport demand suggests that more time may be required.  He suggested that one possible WHTI solution may be Enhanced Driver’s Licenses.  According to Mr. Norton, a U.S. industry coalition has estimated that implementation of the WHTI will cost the U.S. economy $800 million.

II.        Nominating Committee Report

            The Nominating Committee, comprising Representative Tommy Woods, Mississippi ; Representative Frank McDaniel, Alabama ; and Senator Jennie Forehand, Maryland , presented its recommendations for Committee chair and vice chair for 2007/2008.  Representative Woods announced that there was a single name submitted for chair and a single name submitted for vice chair.  Consequently, Senator Mark Norris , Tennessee , was re-elected chair, and Representative Bill Daughtridge, North Carolina , was re-elected vice chair for the upcoming year.

Technical Tour, July 17, 2007

Virginia Port Authority

            Committee members, other SLC legislators and legislative staff toured the Virginia Port Authority (VPA), an agency of the Commonwealth of Virginia , which reports to the state’s secretary of transportation.  The Authority is the state's leading agency for international transportation and maritime commerce, charged with operating and marketing the marine terminal facilities through which the shipping trade takes place.  To accomplish this mandate, the authority owns four general cargo terminals—Norfolk International Terminal, Portsmouth Marine Terminal, Newport News Marine Terminal, and the Virginia Inland Port in Front Royal—which are operated by its affiliate, Virginia International Terminals, Inc.

            According to VPA officials, Virginia 's strategic mid-Atlantic location and unparalleled transportation infrastructure offer steamship lines and shippers unique access to two-thirds of the U.S. population, with more than 75 international shipping lines and one of the most frequent direct sailing schedules of any port.  VPA authorities maintain that they have the best natural deepwater harbor on the U.S. east coast with 50-foot deep, unobstructed channels providing access and maneuvering room for the largest of today's container ships.  Proximity to the Atlantic Ocean (just 18 miles) is another added advantage enjoyed by Virginia ’s ports along with the year-round, ice-free harbor.

            According to the VPA, the Authority transports more inter-modal containers to more cities faster and more efficiently than any other port in the United States .  As the largest inter-modal facility on the U.S. Atlantic coast, Virginia provides six direct-service trains to 28 major cities each day; more than 50 motor-carrier companies with full freight-handling and load-consolidation services; and a modern network of interstate and local highways permitting fast, direct inland motor-freight transportation to any point in the United States.

Southern Legislative Conference Fall Conference

San Antonio Texas , October 26-29, 2007

            The SLC will meet for its 2007 Fall Conference October 26-29 at the Westin Riverwalk, San Antonio , Texas , for discussions on how states are focusing their policies to encourage the development of existing businesses and foster the growth of new industries.  Members will share their experiences and hear from leading experts on how communities and regions succeed or fail, and learn about innovative ways to achieve collaborative success for economic development.  In keeping with the wishes of the SLC presiding officers, please note that meeting notification does not authorize travel.

SLC Staff Contact:   If you have any questions regarding this report or the 2007 SLC Fall Conference, please contact Sujit CanagaRetna in our Atlanta office at (404) 633-1866 or scanagaretna@csg.org.


Attendance List
Southern Legislative Conference 61st Annual Meeting
Economic Development, Transportation & Cultural Affairs Committee
July 14 – 18, 2007
Williamsburg, Virginia

Alabama
Senator Ted Little
Representative Steve Clouse
Representative Bill Dukes
Representative H. Mac Gipson
Representative Jody Letson
Representative Frank McDaniel        
Representative Howard Sanderford  
Representative Henry White
Jerry Bassett, Legislative Reference Service
Frank Caskey, Legislative Reference Service
Kirk Fulford, Legislative Fiscal Office
Jason Isbell, Legislative Fiscal Office

Arkansas
Senator Kim Hendren
Representative Sharon Dobbins
Representative Eddie Hawkins
Representative Johnny Hoyt
Representative Lance Reynolds
Representative Robbie Wills
Tom Parker, American Petroleum Institute
Estella Smith, Bureau of Legislative Research

Canada
Claude Bachand, Member of Parliament
Daniel Charbonneau, U.S.-Canada Interparliamentary Group
Neelam Chawla, Embassy of Canada
June Dewetering, U.S.-Canada Interparliamentary Group
John Maloney, Member of Parliament
Jenniffer McIntyre, Embassy of Canada
Roy Norton, Embassy of Canada
Brad Trost, Member of Parliament
Corina Versteegh, Embassy of Canada

Georgia
Representative John Burns
Representative David Casas
Representative Allen Freeman
Representative Harry Geisinger
Representative Jeff May
Representative Butch Paris
Representative Carl Rogers
Representative Donna Sheldon         
Representative Vance Smith, Jr.
Sujit CanagaRetna , Southern Legislative Conference
Gerri Combs, Southern Arts Federation
Judith Costello, Canadian Consulate General’s Office
Mike Kumpf, BP America
Clint Mueller, Association of County Commissioners of Georgia
Michele NeSmith, Association of County Commissioners of Georgia
Bob Snyder, UPS
Rayman White , Georgia Public Strategies

Illinois
Chris Olsen, Tate & Lyle

Kentucky
Senate President David L. Williams
Senator Tom Buford
Senator Dan Kelly
Senator Dick Roeding           
Speaker Pro Tempore Larry Clark
Representative Tom Burch
Representative Dwight Butler
Representative Mike Cherry
Representative Jim DeCesare
Representative Joni Jenkins
Representative Tom McKee  
Representative Charles Miller
Representative Tom Riner
Representative Arnold Simpson
Representative Addia Wuchner
Representative Brent Yonts
Stacy Bassett, Office of the Governor
Dr. Keon Chi , The Council of State Governments
Mary Duesenberry, The Council of State Governments
Geri Grigsby, Senate Staff
Nancy Hubler, Beverly Enterprises, Inc.
David Kaplan, Office of the Speaker
Sharon Newman, Senate Staff
Kim Phelps, Office of the Senate President
Rachel L. Phelps, Government Strategies
Mike Robinson , The Council of State Governments
Dan Sprague , The Council of State Governments

Louisiana
James Purpera, House Budget Staff

Maryland
Senator Jennie Forehand
Senator Verna Jones
Delegate Ruth Kirk
Delegate Roger Manno

Mississippi
Senator Hillman Frazier
Representative Bill Miles
Representative David Gibbs
Representative Billy Broomfield
Representative Sara Thomas
Representative Tommy Woods
Jerry Barham , House Legislative Services Office

North Carolina
Representative J. Curtis Blackwood
Representative Nelson Cole
Representative Bill Daughtridge
Representative W. Robert Grady
Representative William C. McGee
Representative Louis Pate, Jr.            
Representative Fred Steen     
Representative Thom Tillis
Representative Michael Wray
Beverly Adams, Legislative Services Office
Jonas Monast, Center for Responsible Lending

North Dakota
Representative Kim Koppelman

Oklahoma
Senator Cliff Aldridge
Senator Mary Easley
Senator Ron Justice
Senator Debbie Leftwich
Senator Owen Laughlin
Representative Weldon Watson
South Carolina
Representative Rex Rice

Tennessee
Senator Joe Haynes
Senator Mark Norris
Liz Alvey, Majority Leader’s Office
Cathy Higgins, Legislative Budget Analysis
John Morgan, Office of the Comptroller
Gary Selvey, National Federation of Independent Businesses
Charlie Sorrells, Eastman Chemical

Texas
Senator Jeff Wentworth
Representative Lois Kolkhorst
Representative Edmund Kuempel

Virginia
Senate President Pro Tem John Chichester
Senator Charles Colgan
Senator R. Creigh Deeds
Senator John Edwards
Senator Yvonne Miller
Senator Walter Stosch
Senator John Watkins
Speaker William J. Howell
Delegate Frank Hall
Delegate Lynwood W. Lewis
Delegate Kenneth R. Plum
Delegate Robert Tata
Delegate Leo Wardrup
Hudaidah Bhimdi, Division of Legislative Services
Deborah Brown, Virginia Department of Transportation
John Garka, Division of Legislative Services
Julia Hammond, National Federation of Independent Businesses
Dick Hickman, Senate Finance Committee
James Hixon, Norfolk Southern Corporation
Pierce Homer, Virginia Department of Transportation
Cheryl Jackson, Division of Legislative Services
Lane Kneedles
E.M. Miller, Division of Legislative Services
Ron Tillett, Morgan Keegan
Mark Vucci, Division of Legislative Services
Bruce Wingo, Norfolk Southern Corporation

West Virginia
Senator John R. Unger II
Aaron Allred, Legislative Services
Harvey Burke, Legislative Services
Joseph Jones, AEP-Appalachian Power
David Langford, AEP-Appalachian Power
Steve Stewart, AEP-Appalachian Power
John Homburg, Legislative Services

Washington, D.C.
Dave Anderson, The Washington Center
Jim Brown , The Council of State Governments
Kristi Guillory , The Council of State Governments
Mike Smith, The Council of State Governments

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