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Reason Foundation

Surface Transportation Innovations #16

Topics include: the reauthorization bills, PPPs, managed lanes, and other breaking news stories.

Robert Poole
May 1, 2004

In this issue:

Is the Reauthorization Glass Half-Empty or Half-Full?

I've been pretty critical of the shortcomings of the surface transportation reauthorization bills passed by the House and Senate, now awaiting the appointment of a conference committee. But before returning to that subject, I'd like to pause a moment to look at the positive side.

As I point out in an opinion piece in the current issue of Forbes, both houses have taken historic steps toward a new paradigm in which highway users can choose between unpriced 20th century highway lanes and 21st-century priced lanes that give them higher-quality mobility. That's because both bills (1) liberalize federal permission to convert car-pool (HOV) lanes into high-occupancy toll (HOT) lanes nationwide, without limit, and (2) permit all states, without limit, to add priced, electronically tolled lanes to congested Interstates. These are two huge, positive steps that will assuredly survive the horse-trading of the conference committee.

Unfortunately, in a last-minute change, the House voted to accept Rep. Mark Kennedy's FAST lanes amendment as a substitute for, rather than an addition to, the bill's other pricing provisions (except HOV to HOT conversions). That wiped out any successor to the highly successful Value Pricing Pilot Program and continuation of the tolled Interstate reconstruction pilot program, both included in the Senate bill. It also would permit only temporary tolling on new lanes, unlike the Senate's FAST provision. And a last-minute battle over the inclusion of Davis-Bacon provisions killed the House version of private activity bonds, also included in the Senate bill.

For these reasons, at least three different coalitions with which I've been working have all agreed that the Senate bill's pricing provisions are a much better starting point for the conference committee's work than those of the House bill. One such coalition, which includes Reason, Environmental Defense, and a number of state and metro-area transportation agencies, is sending a consensus letter to House and Senate transportation leadership along these lines. The International Bridge, Tunnel, and Turnpike Association sent an excellent letter to House Transportation & Infrastructure Committee chairman Don Young on April 13th, suggesting improvements to make the conference committee bill "friendly to more widespread use of tolling and road pricing."

So what most needs fixing when the conference committee begins its work? First, the Senate version of FAST lanes must prevail over the short-sighted House version. To put temporary tolls on new congestion-relief lanes is a fraud on the traveling public, and ignores everything we've learned about the power of value pricing to manage traffic flow. When tolls were removed once the bonds were paid off, these "congestion relief" lanes would be flooded with additional traffic, producing instant gridlock. That's no way to provide sustainable congestion relief.

Second, with the burgeoning interest in public-private partnerships to develop and operate new tolled facilities (see below), it's essential that Congress end the tax-code discrimination against private providers of needed highway infrastructure. That means creating a level playing field for toll revenue bonds between the public sector and the private sector. And that means allowing private partners to issue tax-exempt toll revenue bonds on the same basis as public-sector agencies. That's what the Administration proposed in SAFETEA and the Senate passed. Yes, I'm aware that if Davis-Bacon provisions are attached, this will needlessly drive up labor costs on some projects. But face reality, folks: many of the large toll projects that will take advantage of these bonds are either (1) already in states with their own version of Davis-Bacon, like California, or (2) likely to have some degree of federal support (e.g., a TIFIA loan) which subjects them to Davis-Bacon in any case. If some PPP projects would not be able to take advantage of the new bonds, isn't it still better that many will be able to do so?

Next in my book is the issue of Toll Truckways. The disappointing House provision does not explicitly call for toll funding, but it provides no new money for its Dedicated Truck Lanes, either; they would have to fight for a slice of the highway pie, just like every other project. Such lanes could be built as toll lanes under the FAST lanes provision. But there is still the problem of getting truckers to use them. Reason's extensive research has shown the one sure-fire way to make it worth truckers' while to pay tolls: let them haul a lot more payload. That means selective exemptions from the 1991 federal freeze on truck sizes and weights, only for FAST lanes designed and operated as Dedicated Truck Lanes. Such a provision should be added by the conferees.

There's a bunch of clean-up needed, such as clearly stating that revenues from new tolled lanes must be used first for debt service, return on investment, and maintenance of the tolled lanes and only then, if there are surplus revenues, made available for other transportation purposes. The coalitions noted previously are all in agreement on this. And foolish politically correct ideas like letting hybrid cars into HOV and HOT lanes should also be deleted. (My April 14 op-ed piece on this from the Los Angeles Times is attached.)

If these fixes can be made, we'll all really have something to celebrate.


Bad Timing: GAO Misses the Boat on Public-Private Partnerships

Last issue I made a brief mention of a just-issued report from the General Accounting Office on the nation's experience thus far with private financing and public-private partnerships for large-scale transportation infrastructure. After finding only a handful of projects that had been financed and put under construction during the past decade, the GAO researchers concluded that "private sponsorship seems best able to advance a small number of projects, but seems unlikely to stimulate significant increases in funding for highways and transit."

While competently done, the GAO report is a victim of bad timing. For within a month of its release, no less than three billion-dollar-scale unsolicited proposals were put forth by the private sector, in three states:

These new proposals are in addition to Fluor's $700 million proposal to add HOT lanes to the Washington Beltway (I-495) and the STAR Solutions $7 billion proposal for tolled truck lanes on I-81 over 325 miles. Together with the three new projects, we're already at nearly $11 billion of new PPP projects.

And a lot more such projects are in the planning stages. Maryland's State Highway Authority last month issued a request for information to the private sector about financing, building, and operating Express Toll Lanes on all of its major highways, including both the Capital and Baltimore Beltways plus I-95, and I-270. Minnesota Gov. Tim Pawlenty has proposed a network of FAST lanes in the Twin Cities, to be developed and operated as PPP projects. And the new long-range transportation plan from the Southern California Association of Governments calls for a $16 billion toll truckways project, linking the twin ports of Los Angeles and Long Beach with the Inland Empire and Barstow. SCAG has drafted enabling legislation that would permit some or all of this network to be developed and operated on a PPP basis.

So, contrary to GAO's pessimistic conclusion, we appear to be on the verge of a new era of large-scale toll-funded public-private partnerships. Which makes it all the more important for Congress to include private activity bonds in the pending reauthorization bill.


"Managed Lanes" Gaining Serious Attention

Since the Texas Transportation Institute introduced the term in 2000, "managed lanes" has rapidly become an important transportation concept. It's intended as a broad term for lanes on a freeway, expressway, or tollway that are other than general-purpose lanes. Such lanes may be managed by using pricing, eligibility requirements, or access controls (or some combination). Hence, the term encompasses HOV, HOT, bus-only, cars-only, truck-only, truck toll, and other specialized lanes. This is an important development, for at least two reasons. First, it focuses attention on the many new options that are available to achieve higher performance from our highway system. Second, it should help pricing advocates open the eyes of those wedded solely to HOV lanes, explaining to them that there are other options that may produce more transportation value, especially when it comes to deciding how best to spend new investment dollars.

Managed Lanes took a huge step forward last November when the Federal Highway Administration and the Transportation Research Board held a two-day workshop on Managed and Priced Lanes. It took place just prior to the TRB/OECD international road pricing conference in Key Biscayne, Florida. I'm pleased to tell you that a summary of the workshop is now available on-line from FHWA. You can find it here.


How Well Does Your State Manage Its Highways?

I'm a bit late in reporting the publication of the 13th annual review of the performance of all 50 state transportation departments, which came out in February. Produced by David Hartgen at the University of North Carolina at Charlotte, the report always manages to raise eyebrows and ruffle feathers. No matter what kind of measurements you devise, conditions are always different from one state to another, such that a state DOT scoring lower than it would like feels mistreated.

Be that as it may, I'm all for such performance measures, and my suggestion to those DOTs that don't score very high is (1) suggest improved measures to Prof. Hartgen, and (2) use the existing results to educate your governor and state legislatures on the factors leading to the low score and what they need to do to boost your performance in subsequent years.

You can find the report on the web-site of the John Locke Foundation, www.johnlocke.org. Look under Policy Reports. If you can't wait, I can give you a few tidbits. In terms of overall cost-effectiveness (i.e., getting the most out of the resources they have to work with), the top-scoring states are North Dakota, Wyoming, Georgia, Nevada, and Oregon. Fast-growing Texas ranked #8 (up from #13 last year) and Virginia #17 (up from #18). But Florida dropped two points to #40 and California likewise dropped by two to #46.


New On-Line Resource

I'm very pleased to announce that the Reason Public Policy Institute has picked up and put on-line a widely read and very well-done monthly digest of transportation research. Produced by John Semmens of the Arizona DOT, it was sent out by mail for many years, but fell victim to budget cutbacks last year, depriving me and many other transportation wonks of John's excellent abstracts.

But now it's back and you can find it at www.reason.org/transportation/index.shtml.

Go there and click on Transportation Research Digest. Happy browsing!


Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


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